Inefficacies of Government Spending

The numbers are in for the government’s 2009 fiscal year, and it’s not a pretty picture. The 2009 deficit was $1,417,121, which is nearly $1T more than last year’s deficit! Although 3.5 of those months were technically still part of the Bush administration, a great bulk of that spending can easily be attributed to the Obama administration. This is important to realize, especially considering that yesterday was the one-year anniversary of the stimulus package. Ron Paul wrote an article highlighting that classic Reagan quote of “Government is not the solution; it’s the problem.” I wholeheartedly agree with Congressman Paul when he says that we have a loose monetary policy, and the Obama administration is living proof of that. Stimulus packages, company bailouts, Cash for Clunkers--these are all programs that have directly caused this rising debt, sluggish economic recovery, as well as unemployment rates that would make Europeans blush. 

The argument that there is some form of utopian governmental power structure that works more efficiently than the private sector is a myth.  You hear this from Communist apologists all the time.  "Well, Mao's Great Leap Forward was a bit off, but if he did it in such and such a way, it would have been a paradise."  I have news for proponents of Big Government--anything can work in theory because when scenarios are put in theoretical situations, factors can be manipulated to make the ideology work.  The biggest obstacle for those enamored with Big Government is reality.  People think that government can have a multiplier effect that is greater than one are severely misguided because history proves the contrary.  When we give our money to the government, the multiplier effect is always considerably less than one.  Social Security is a fine example because solvency issues arise.  The Social Security Administration already predicted the collapse of Social Security by 2042 if nothing is done.  The only active options the government would have are raise taxes or lower benefits, neither of which would be viable, especially if you're a politician worrying about votes.  Giving Americans the choice to put it in low-risk bonds, which would provide approximately a 5.5% rate of return, is much better than what the government offers.  Let's say someone came up to you and said they had two investment options.  The first one would most likely give you a negative rate of return, although there's a slight chance that the rate of return would be 0%.  The second option is low-risk, "play it safe," but it still provides you with a solid 5.5% rate of return.  Anyone who is sane enough to choose the retirement nest egg that would provide with more money would choose the second one [i.e., private investment].  The reason why we don't do that is because government coerces us to choose the less viable option. 

Government and environmentalism is no better.  Although I don't give into global warming hysteria, let's say for argument's sake that they are right.  When government interferes with a carbon tax, it provides two cents of social benefit, which is just another way of saying that the government has a multiplier effect of 0.2!  I can go on and on with example of government inefficiencies, but it's safe to say that they exist.  The only way that government can come even close to competing with the private sector is to either enact such ridiculous legislation where the private sector cannot do its job or take so much taxpayer dollars to fallaciously inflate their success rate.  Why is it that every time you go to the DMV, the person you deal with at the counter is a miserable human being?  Because they have no incentive to provide good service.  For starters, in many sectors, such as the DMV, government has a monopoly.  Monopolies have no incentive to improve their businesses because there is no competition.  A lack of competition stifles innovation and progress.  That is why from a greater historical perspective, government creates problems rather than solves them.  This was something that our Founding Fathers realized over two centuries ago.  If a bunch of "ignorant, slave-holding, racists WASP's" [notice the sarcasm!] can figure out this simple principle, I think we can do it as well.