Government spending
Government spending can rarely do short term good. Usually it does long term bad.
~ Aristotle Sabouni
Created: 2019-07-02 |
So net net?
- Government spending fails more than it succeeds
- Even when it succeeds, it generally succeeds by less than it would have if it was done/managed privately with profit motives
- And when it succeeds, it generally does in the short term -- then it is politicized, decays and does more harm in the long term than benefit in the short term
Why does it fail?[edit | edit source]
Obama's stimulus was sold as "infrastructure".... something like 6% of the total spending went to infrastructure. It turns out that politicians lie.
And the individual spending by government is less efficient than spending by private sector (as far as output per dollar, and so on).
Mostly, it's about time. Spending doesn't usually happen fast enough to be useful for what it's advocated for. Helping a recession requires immediate spending, not stuff that's going to happen over 5, 10 or 40 years. This is why if you want to "stimulate", a tax cut has been MUCH faster and more effectively than government spending -- as history has played out. Which choice will have the more immediate impact over the next 1-3 years?:
- (a) government is going to stimulate by building roads & brides, so they start the studies on which need it the most, and 3 years later they're ready to break ground on something that will take 4 years to complete
- (b) all companies that invest in communications infrastructure or facilities improvement will get a tax credit for that amount for the next 3 years.
It's not malice or partisan, it's just logic and math.
You may hate the Military industrial complex, and that's fine. And war machinery isn't horribly good at adding value to an economy (it has some abstract value in security/stability/confidence). Even there, accidentally creating a fuckton of information workers (computer programmers, engineers, etc), helped empower the dot-com boom, Silicon Valley, and other innovations. Of course if you look at the other side, imagine if you'd spent that trillions on information infrastructure that we can all use, instead of just weapons system that have less value to society? So it was a net loss compared to what the private sector would have done with the money. But it was a net win compared to just social spending or Obama type spending.
I just sum up government spending with the real world example of New Jersey and the Economist: For each $1.00 New Jersey gets back from the fed, they have to give the fed $1.64, they have to pay $.18 in compliance costs, and the government borrows about $.81 of that buck, and leaves New Jersey with the debt obligation. Progressives see the $1.00 as a net win. The taxpayers see that they paid about $2.63 to get <$1.00 in value, to build something they may or may not need -- and even then they only got that $1.00 back with all sorts of stipulations (politics) on how it would be spent (whether it made sense for their state or not). Yes, the $1.00 is better than nothing and occasionally does some good, and progressives love to crow about the occasional good things. But the point is that it never does nearly as much as much good as if the state/community had kept the $2.63 they had in the first place.
So government does good. Just historically it tends to produce less, for more money, than the alternative.
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Tags: Economics Keynes Government R&D Spending
