No return on government investments
US government spending on things like education and health care has been largely ineffective over the past 40 years.
The news was good Thursday. Investors heard that Europe had its problems under control. Then, Obama told them that he was going to give the economy a jolt.
Investors breathed a little easier. The feds were on the case.
The Dow rose 183 points. Meanwhile, bonds went down, with the yield on the 10-year note rising to almost 2%. Oil rose too, and ended the day trading over $80. Even gold went up — $11.
Here’s The New York Times’ report on Obama’s press conference:
In perhaps his most sober remarks about the economy this year, President Obama on Thursday described the weakening economy as “an emergency” and made the case for his jobs bill as “an insurance policy against a possible double-dip recession.”
“Our economy really needs a jolt right now,” Mr. Obama said…
“This is not the time for the usual political gridlock,” the president added. “The problems Europe is having today could have a very real effect on our economy at a time when it’s already fragile.”
Mr. Obama proposes to spend $447 billion to reduce joblessness. He doesn’t have $447 billion, of course. So the money has to come from elsewhere.
Remind us how that works. You take $447 billion from people who are investing and spending…so you can give to other people. Why? So they can invest and spend! We must be missing something.
Wait! Here is it…the NYT continues…
To allay the concerns of Senate Democrats, Mr. Obama said that he could support their proposal to pay for the jobs plan by imposing a 5.6 percent surtax on individual taxpayers’ income above $1 million.
Oh…that must be it. The millionaires don’t need the money. They don’t spend it. But don’t they invest it? Of course they do.
The Obama plan is just another redistribution scam. You take money from one group of people and you give it to another group. Corrupt, degenerate and ineffective, right? Wrong. It’s actually worse. Because government is a notoriously bad spender. It takes resources and wastes them. Its wars…its welfare programs…its prisons…its education…its subsidies and boondoggles — more often than not, these investments of capital are not just stupid and larcenous. They also destroy wealth. You put a dollar in. You get 50 cents back, if you’re lucky.
Federal spending on education has soared over the last 40 years. Guess how much higher test scores have gone. Go ahead, take a guess. Well…the answer is zero. Billions and billions invested. No return. Nada. Zilch.
You’re probably thinking…well…it may not pay off overall, but at least it pays for the student, right? Wrong. Guess how much the typical college graduate’s income has gone up in real terms over the last 40 years. Go ahead, take a guess. Zero!
Or how about spending money to fight drugs? Guess how effective that has been. Never mind…you know the answer.
Or take spending on health care. The US spends far more on health care — both in terms of raw numbers and in terms of its GDP — than anywhere else. Compared to a nation such as Chile, for example, it spends more than twice as much. But do Americans live twice as long as Chileans? Nope. The Chileans live longer than Americans. What’s the rate of return on all those extra billions we spend? Zero.
Well, there’s always national defense and police protection. That’s where government knows what it is doing. “Political power comes out of the barrel of a gun,” said Mao. So they must know what they’re doing with guns, right? That’s where we get our money’s worth…a good return on our investment, right?
Are you kidding, dear reader? We spend about as much as the entire rest of the world combined… but are we safer? Not a bit. At home, our crime rates are as high as almost any other country you care to look at — even though we keep a far larger percentage of our population behind bars. As for being protected from terrorism, US military spending probably brings a negative return; terrorists are more likely to target Americans because the Pentagon sticks its nose into everybody’s business all over the planet.
In short, government spending kills capital. It makes a nation poorer. It doesn’t matter whether the money is taxed from the rich…or from the poor, the result is the same. Resources…real things of real value…are destroyed, used up, consumed…with little or no pay back.
You ask…why is the US economy growing so slowly? Why can’t it recover? Why do we seem to lurch from one crisis to another?
Here’s an answer: because more and more of the economy’s resources are controlled — mismanaged…and misallocated — by the government.
Some are directly misallocated — spent by the government itself.
Others are indirectly misallocated — tricked into bad investments by the Fed’s low interest rates, tax policies, regulations and subsidies. (For example, there has been an explosion in student debt since the crisis of ’07-’09 began — up 300%. The government invests in a lot more “education.” What is the return on investment?)
Result: the economy stalls. The middle class is gradually ruined. The empire stumbles toward its eventual collapse.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on dailyreckoning.com.