Why Big Government Doesn't Save. They Steal!

Monday, April 20, 2009

At least 280,000 people showed up to protest big government on April 15th. The progressive left lashed out against the movement in a knee-jerk defense of their favorite President. However, no matter how much you want to believe or hope, the truth is this: big government does not work. You can call government spending “investing” as much as you want, but it is private entrepreneurship that has made this country great and big government had nothing to do with it.


Let’s look at the example of the House’s leading spender, none other than progressive John Murtha. In a recent article the Washington Post took a closer look at one of his most favorite pet projects is the John Murtha Airport. Thanks to tax payer money, this airport is state of the art. It has top notch security (six guards) to watch the 15 people per day that use the airport. The center is truly impressive as far as size and capability including a high-tech radar that rivals international airports. That radar is unmanned. $800,000 of the stimulus was diverted to repave a backup runway.


Can you remember Obama defending the stimulus spending? Government spending is “what…stimulus is.” Sure people received jobs, but where is the sustainability? Certainly, this airport would not exist without tax payer support. What will happen if John Murtha is unable to secure continued funding or John Murtha leaves office? The money used becomes even more of a complete waste and people are laid off.


It would seem the only purpose for the airport is for the personal use of John Murtha himself, who readily uses the airport (most flights are to DC). This isn’t really anything new. There are several New York State legislators who want to connect Buffalo, Rochester, Syracuse and Albany with a high speed rail (using stimulus money). I’m all for rail (mostly for shipping though). However, no one but state politicians are going to use this as passenger travel.


Being an economist, I love to look at the world through graphs. For all you who disagree with me, here is the official economics graph that depicts government spending and government waste in a best case scenario (please excuse the “loaves” reference on the graph. It was the first picture of the graph I came across).



For those not used to reading graphs here is the explanation. Efficiency occurs when marginal social benefit and marginal social cost are furthest apart. This is denoted by the “}” section labeled TSB-TSC. This is the most efficient possibility since you are getting the highest social benefit for the lowest social cost. It also happens to be where private enterprise naturally operates. However, government never operates at this point. It operates where the TSC (total social cost) and TSB (total social benefit) lines intersect. The bubble created by the lines TSC and TSB and their intersection represents government waste for the area inside the bubble to the right of the perpendicular TSB-TSC line.


As I pointed out, this graph is a best case scenario. It has a few assumptions such as the idea that government is actually rating and enacting programs for the highest social benefit for the lowest cost. It also, assumes to some degree that the government is fiscally responsible and is not running a deficit. This can be inferred by the fact that if you are running a deficit, then there is no true incentive to ensure that total cost does not exceed total benefit. It also does not account for corruption. This means that politicians are not spending dollars on their own pet projects and are picking the issues that really do bring about the highest total benefit. So for this graph to work the John Murtha Airport scenario would need to be impossible. In 2004, I gave a presentation at the NYS Economics Association regarding the factors holding back developing nations. Out of the largest factors we found corruption was very significant.


Progressives love to argue that the rich derive their wealth from the exploitation of the working class. Though this is not true in the private market place, it does ring true between the government and free markets. Every dollar wasted in government programs is capital that could be used efficiently. John Murtha’s airport is supporting dozens of jobs that would have otherwise have been possible. However, that capital in the free market place would likely have created thousands of sustainable jobs instead. What do think would occur on an even larger scale? We are worried over 8.5% unemployment in this economic downturn. In Europe, big government has created persistent 10% unemployment rates.


So what’s the alternative? We can and should unshackle the economy and let capitalism loose. Time and time again, those with the freedom to use their capital as they seem fit have found the most efficient ways to do so. It is private entrepreneurs that brought about the industrial revolution, the automobile, electricity, and the medical wonders that have doubled our life expectancy. Our government cannot boast of these achievements and they never will.

12 comments

Devrim said...

A wise man once said " there is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens' spending and investment to the full extent of its quantity ". Unfortunately he was born in the same country as Hitler, so we just close our ears and sing la la la I can't hear you.

Now, as dastardly as he is Keynes is a Brit ally. He can't betray us can he ?

April 21, 2009 at 1:47 AM
Obama Nation said...

Really great post, it really helped me understand our situation so much better.

April 21, 2009 at 10:24 AM
The Law said...

I don't think anyone would disagree with you. I'm a captialism guy, and a private enterprise guy. There is a big difference between earmarks and stimulus. I have argued that I'm looking for big projects... road, bridge, tunnel, and rail connstruction; the revamping of the education system; the overhauling of the healthcare system; and a new energy and information grid.

Earmarks is a different breed all together, and I do not agree with most of them. If there was one thing John McCain said that I agree with, earmarks need serious reform. (well he called for the removal of earmarks, to be more accurate). John Murtha's airport is a waste. He could've built that through investments from venture captialists. However, an earmark for say volcanic research, disasters, and prevention is a good idea... that info can be used to better prepare ourselves for another Katrina.

Obama, and most sensible progressives would not disagree with the necessity for private enterprise to play the major role in providing jobs and investments and such, but only the government has the capacity to provide large infrastruture changes (think landlines and broadband). It was through the initial government investment in landline and broadband technology, that private enterprise could lay the framework for wireless, cellular, and fiber optic technology.

Where is the sustainability in the stimulus plan? Private enterprise! The stimulus does just that... stimulate. Once the ball gets rolling, the private sector takes over again. It is not, and never was a permanent solution to the economic problem.

April 21, 2009 at 8:10 PM

Devrim,

I actually don't have a problem with Keynes. Today's politicians don't actually follow Keynes, they just bring him out whenever they want to look like they are doing something for the economy.

O Nation,

Thanks!

tL,

I see you missed the part where Murtha had the second runway repaved with stimulus money. Government waste is not limited to anyone program. Yes, I chose earmarks to illustrate and they are the biggest waste when it comes to government spending. However, all government spending is wasteful. I've already given you an example for stimulus waste. TARP overpaid $40 billion for bank stock during Bush. GE got TARP funds under Obama and they aren't even a bank. Omnibus...no need to give an example. Health care and education? I'm sorry they are going to go the way of every other government program. Programs that currently choke the system such as today's education, social security, medicaid, medicare and so on.

These are just the obvious one's. I understand that you will still make an argument that they can or should be efficient. However, in light of Diane Feinstein and the Murtha article, at least admit that there is a serious corruption problem. One I wish Obama or at least someone would take serious. I think next to the economy, cleaning up Washington is the next most important task.

April 21, 2009 at 10:20 PM
The Law said...

Well, any sane person knows the level of corruption in politcis is high... thats why no one trusts politicians.

But ALL gov't spending is wasteful?? seriously? so I assume you'd rather have private military corporations like Xe instead of the armed services?

Something I just dont get about the conservative thought is, what the heck is the point of a federal government? It seems like you'd prefer your town to be a coporatist sovereign state or something.

The problem is not that the federal government spends too much. It spends inefficently, and it adheres to outdated principles. Conservatives are shell shocked by Obama, because for the first time a president is pushing change in the right way... push a massive agenda, and let it get chizzled into shape, rather than push a chizzled agenda, only for it to get further chizzled to the point of ineffectiveness.

Furthermore, let's say that education was privatized all across the board. What happen if a comapny fails, children can't go to school anymore? Whats wrong with having the OPTION to have money taken out your paycheck for healthcare? There are some, myself included, that would gladly take a little out of my check to ensure I can get medical help if I need it. I mean if the federal government is that bad, why not just go back to colonial days? I don't get it, and I look forward to hearing the alternative to a federal government, or what its role is suppsoed to be.

April 22, 2009 at 2:32 AM

tL,

You certainly are a credit to progressive thought. You can at least conceptualize the tenants of conservative thoughts as opposed to just saying, "I don't get it, so instead of debating you I'll call you racist." LOL

Look, I've post one half of economic thought. The other is normative economics which is the idea of what should be. Theoretically, I can post a graph that shows maximum efficiency if I own everything and everyone else owns nothing. It's efficient, but it's not fair.

Now I've opened up a big door here, which you are going to probably try and fit a Mack truck threw. However, my point is if government spending is the most inefficient method for spending, then we should not be using it as a solution for everything. I'm not trying to say government spending is inefficient so politicians should not try to spend more on education. However, where is the effort to clean up other inefficient spending?

I believe that if Obama wants to pass and spend more on health care and education, then he should be making hard choices to other programs and cutting. That means more than just ideologically cutting the military. I'm talking cuts across the board. Smart cuts that clean up a lot of this waste.

I'm tired of seeing politicians reform by spending and never trying to reform by reforming. You cannot deny that we already are spending more on education than anyone else in the world. It's obvious that there are certain practices and pillars in education that are bleeding the system. I'd like to see politicians clean those up before throwing more money at it. That's how any business would have to operate if they wanted to stay in business.

I've said it before, I would like to see congress make good use of the $2 trillion that they already receive in revenues before I see them spend more of our money. However, what happens is we have Bush's agenda which involves increases in spending. Then Obama's agenda which involves increases in spending. Then someone else's agenda which involves increases in spending. Tell me when we ought to hold these guys accountable?

So let's back everything up a bit. Let me show you that I understand where you are coming from. You really believe in the area's of Obama's agenda. Let's just assume that it is a great agenda. Better than any other agenda in the world. The problem is that fiscally this country is standing on the ledge of a very deep canyon. I've posted on it in the past and have really heard you disagree. What Obama needs to do is back the truck up to make room for what he wants to do. It's that simple, but because it's hard and backing the truck up might cost political capital, you don't want to do it. However, the alternative is driving off of the cliff. If we do that, it won't matter how great Obama's agenda is from the conceptual standpoint.

I think some of the other things that you said may require a separate post to cover. We could go a hundred rounds just talking about education.

To answer your question. I'm not looking to go back to colonial days. At the moment, I'd just be happy to go back to where government revenues is equal to government spending. I'm also looking for the federal government to get out of every single little issue that people can think up. There is a reason we have state and local governments. Focusing everything in the national government is only fanning the flames of irresponsibility.

April 22, 2009 at 3:09 AM

* I meant, I haven't heard you disagree that we are fiscally standing on the ledge of a canyon.

April 22, 2009 at 3:12 AM
The Law said...

"I believe that if Obama wants to pass and spend more on health care and education, then he should be making hard choices to other programs and cutting."

Something we can agree on =)

And something he said he would do. And if his recent actions are any indication, Obama has been faithful to all the campaign promises he has made. I think he is fronting the money to solve the immediate problem, and we will see as we continue along that he is constantly evaluating other programs and will be making the very cuts you suggest.

April 22, 2009 at 5:32 AM
Devrim said...

The Law :

"...then he should be making hard choices to other programs and cutting", I am looking at the budget for the next 10 years and I don't see a single item (apart from the war in Iraq) being cut.

My town hall is a 5 minute walk, if there is an issue at hand, I can walk over (or drive my Suburban as I please) and put a word in before something becomes a law. On the other hand, D.C. is a whole 2-3 day trip, even than if you aren't contributing gazillions into their campaigns your voice falls onto deaf ears. As far as government is involved, small is beautiful.

The problem is not that the federal government spends too much. It spends inefficiently, and it adheres to outdated principles.That is exactly why I do not want them spending MY money. Say the feds are building a bridge, they need 5 workers, 2 foreman, 1 engineer, 1 budget adviser, 1 quality control board , 1 congressional oversight committee... If you let me build that bridge, I would just need an engineer and 3 workers, and do the rest myself, and probably end up with a better quality product. Don't believe me, look up "Big Dig (Boston, Massachusetts)" on Wikipedia.

April 22, 2009 at 10:29 AM

Devrim,

You left out the long and ardous process of choosing a bid. You have all the work in the bid committee to come to a recommendation and the hearings to vote up or down and the recommendation.

April 22, 2009 at 10:42 AM
Devrim said...

CG, that is why I ended the sentence with "...", I am quite sure I missed more than just the bidding process like the environmental impact study.

April 22, 2009 at 1:38 PM

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