No return on government investments
US government spending on things like education and health care has been largely ineffective over the past 40 years.
President Barack Obama gestures during a news conference in the East Room of the White House in Washington.
Susan Walsh/AP
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 鈥� $11.
贬别谤别鈥檚 The New York Times鈥� report on Obama鈥檚 press conference:
In perhaps his most sober remarks about the economy this year, President Obama on Thursday described the weakening economy as 鈥渁n emergency鈥� and made the case for his jobs bill as 鈥渁n insurance policy against a possible double-dip recession.鈥�
鈥淥ur economy really needs a jolt right now,鈥� Mr. Obama said鈥�
鈥淭his is not the time for the usual political gridlock,鈥� the president added. 鈥淭he problems Europe is having today could have a very real effect on our economy at a time when it鈥檚 already fragile.鈥�
Mr. Obama proposes to spend $447 billion to reduce joblessness. He doesn鈥檛 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鈥o you can give to other people. Why? So they can invest and spend! We must be missing something.
Wait! Here is it鈥he NYT 肠辞苍迟颈苍耻别蝉鈥�
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鈥� income above $1 million.
Oh鈥hat must be it. The millionaires don鈥檛 need the money. They don鈥檛 spend it. But don鈥檛 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鈥檚 actually worse. Because government is a notoriously bad spender. It takes resources and wastes them. Its wars鈥ts welfare programs鈥ts prisons鈥ts education鈥ts subsidies and boondoggles 鈥� 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鈥檙e 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鈥he answer is zero. Billions and billions invested. No return. Nada. Zilch.
You鈥檙e probably thinking鈥ell鈥t may not pay off overall, but at least it pays for the student, right? Wrong. Guess how much the typical college graduate鈥檚 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鈥ou know the answer.
Or take spending on health care. The US spends far more on health care 鈥� both in terms of raw numbers and in terms of its GDP 鈥� 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鈥檚 the rate of return on all those extra billions we spend? Zero.
Well, there鈥檚 always national defense and police protection. That鈥檚 where government knows what it is doing. 鈥淧olitical power comes out of the barrel of a gun,鈥� said Mao. So they must know what they鈥檙e doing with guns, right? That鈥檚 where we get our money鈥檚 worth鈥 good return on our investment, right?
Are you kidding, dear reader? We spend about as much as the entire rest of the world combined鈥� 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 鈥� 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鈥檚 business all over the planet.
In short, government spending kills capital. It makes a nation poorer. It doesn鈥檛 matter whether the money is taxed from the rich鈥r from the poor, the result is the same. Resources鈥eal things of real value鈥re destroyed, used up, consumed鈥ith little or no pay back.
You ask鈥hy is the US economy growing so slowly? Why can鈥檛 it recover? Why do we seem to lurch from one crisis to another?
贬别谤别鈥檚 an answer: because more and more of the economy鈥檚 resources are controlled 鈥� mismanaged鈥nd misallocated 鈥� by the government.
Some are directly misallocated 鈥� spent by the government itself.
Others are indirectly misallocated 鈥� tricked into bad investments by the Fed鈥檚 low interest rates, tax policies, regulations and subsidies. (For example, there has been an explosion in student debt since the crisis of 鈥�07-鈥�09 began 鈥� up 300%. The government invests in a lot more 鈥渆ducation.鈥� What is the return on investment?)
Result: the economy stalls. The middle class is gradually ruined. The empire stumbles toward its eventual collapse.
Bill Bonner