Potomac River Blindness - Barrons.com

Editorial Commentary | SATURDAY, JULY 14, 2012 Potomac River Blindness By JAMES BOVARD | MORE ARTICLES BY AUTHOR Government waste goes unseen in Washington. It is only a question of time: Washington soon will be convulsed by the next federal budget crisis. Unfortunately, neither presidential candidate is offering substantive proposals to curb soaring federal outlays. One side offers high taxation and high borrowing; the other offers lower taxation and high borrowing. Washington seems inherently unable to recognize the true threat to Americans' future posed by government spending. Proposals to scrutinize government spending routinely evoke cries of horror. After President Obama promised in 2009 that his stimulus plan "cannot and will not be an excuse for waste and abuse," the Washington Post published an indignant protest headlined "The Case for Waste." In it, George Washington University law professor Steven Schooner was quoted perfectly expressing the local conventional wisdom: "Are we capable of grasping the concept that in a struggling economy, it's more important to throw money at the problem, even if it's possibly inefficient and possibly inaccurate?" The notion of leaving money in private pockets is never considered—perhaps because it would be an unnatural act. Source of Prosperity It was a common saying in the countryside in the 1930s that "we cannot squander our way to prosperity." But in the capital city it was and is unimaginable that the government could be dragging down the national economy. The evidence of the benefit of government spending could not be more obvious to Washingtonians: the booming local economy, the lofty real-estate values, the ample opportunities for those with college degrees and a willingness to spend their lives writing unread briefs, memos, and reports. Further back in history, President Grover Cleveland declared in 1893 that "the waste of public money is a crime against the citizen." But today's Washington experts take a different view of floundering programs: They can be redeemed with a few more years of trial and more billions of dollars. For instance, the National Academy of Public Administration declared in 1994 that if HUD were not operating "in an effective, accountable manner" within five years, "the President and Congress should seriously consider dismantling the department and moving its programs elsewhere." HUD, of course, remains the prize flounder. At a hearing last year, current and former inspectors general recounted story after story of HUD's having no clue where its money went. Washingtonians view each billion dollars of government spending as magic beans that automatically sow blessings across the nation, thanks to the multiplier. Obama administration officials claimed that the 2009 stimulus would produce $1.57 in economic activity for each dollar spent, that Food Stamps generate $1.84 in economic activity per dollar of handouts, and that each dollar of unemployment benefits produces $2 in economic activity. Unintended Consequences Washington refuses to recognize the collateral damage from federal programs. Subsidized loans allow colleges to gouge students with higher tuition; agricultural subsidies inflate farmland prices and price out young farmers; training programs often provide young people with the illusion that they have marketable skills. Even when subsidies, such as those for ethanol, boost smog, damage Americans' car engines, and drive millions of Third World poor to the edge of starvation with inflated food prices, it is hard to find anyone in D.C. who will consider ending the programs. The government is unable to recognize federal failures in part because the political concept of waste is diametrically opposed to the economic concept. In economics, if a company produces something that people will pay for, it can thrive. In politics, if a program provides something people won't pay for, it garners votes, campaign contributions, or power. The more money a program spends, the more gratitude its beneficiaries show to politicians. The beneficiaries of wasteful programs are often the most grateful. Regardless of the severity of the next budget crisis, we will see more charades like last year's "historic" budget deal, when Democratic and Republican congressional leaders proudly claimed to have cut federal spending by $38 billion—out of $3.8 trillion. The Congressional Budget Office later revealed that the actual amount saved was only $352 million in the current fiscal year. Unfortunately, a 99% sham rate is about par for spending cuts. Congressmen will always prefer imaginary budget cuts, as long as government spending gives them real power to send money back home. Regardless of the government's own record, the nation's capital presumes that it knows best. Recent gargantuan deficits haven't deterred the Treasury Department from lecturing Americans about how to manage their personal finances. (Get a laugh at http://www.mymoney.gov/.) Costs of Citizenship Governments don't throw away money in a vacuum. With spending come futile attempts to curb "fraud, waste, and abuse." The more of an economy that is subject to political command and control, the greater will be the lost business opportunities and the harder it will be to create private prosperity. A billion dollars taxed away pre-empts the equivalent of 5,000 families from buying starter homes, or a million people from taking a summer vacation, or citizens from buying 40 million new books or 70 million cases of beer. Any of these private expenditures would create more jobs and more job security than a stimulus program. If congressmen have a right to seize and squander other people's money, citizens are nothing more than beasts of burden for political ambition. Until politicians feel an electoral knife at their throats, it will be business as usual—with a little rhetoric thrown in to delude people that problems are being solved. We cannot expect politicians and bureaucrats to reduce the power of political spending on their own; we must stop rewarding them with our votes. JAMES BOVARD is the author of Attention Deficit Democracy (Palgrave, 2006), Lost Rights (St. Martin's, 1994), and seven other books. Editorial page editor THOMAS G. DONLAN receives e-mail at tg.donlan@barrons.com