Failure is not a (government) option

At his press conference on the debt ceiling negotiations, President Obama lamented that he’d rather “be talking about stuff that everybody welcomes, like new [government] programs.” The president’s statement reveals a lot about his attitude toward government spending — one which many other politicians share — and demonstrates just how we got into the current debt crisis.

It also reveals a much more startling truth. He didn’t say that he’d rather be fighting poverty or combating pollution. Instead, the president essentially said that he wants to grow the size of government for its own sake.

The trouble for the president is that Americans want less government spending, not more. A June 2011 CNN poll reported that 63 percent of those surveyed thought that government was too involved in our economy. In other words, nearly two-thirds of the American people want government to leave individuals and businesses to make their own decisions.

There’s a good reason for that — government has tried spending to gin up the economy, without success. The $823 billion stimulus, the largest spending bill in history, led to 6.5 million fewer jobs than advertised, and has been followed by the slowest economic recovery since the Great Depression.

It’s no wonder the public doesn’t trust Congress and the president to fix the economy — they can’t. The only tool government has is to take money out of the economy and put it back in somewhere else. That’s a zero-sum proposition. Add in the transaction costs and political favoritism, and the stimulus is a losing deal by its very nature.

But the costs of government spending are not just about dollars and cents lost through waste and opportunity costs. Government consistently rewards itself with more money and resources every time it fails, turning incentives on their head. To a businessman, failure means liquidation. To a bureaucrat, failure means a bigger budget and an expanded mission.

Rewarding failure only causes more of it. Take the Department of Education as an example. Test scores have barely budged in 40 years, despite a tripling of federal spending on K-12 education over that time. Test scores didn’t go up? Spend some more money!

Rewarding outright reckless behavior is even worse, yet that is exactly what the federal government did in the wake of the financial crisis. After the government-sponsored entities Fannie Mae and Freddie Mac helped create the subprime mortgage disaster, the U.S. Treasury didn’t punish them. Instead, it removed each of their $200 billion funding caps and offered them unlimited support through 2012.

President Obama ignores a long history of government failure when he wishes for more programs and more spending, as well as the will of a majority of the American people. Fortunately, the debt ceiling debate is forcing congressional Democrats and even the president to put some of their sacred cow programs on the table. They should continue cutting spending even after the debt ceiling battle has ended.

Matthew Melchiorre is a Research Associate at the Competitive Enterprise Institute.

  • Gridmark

    The problem is that we lost all and any stimulus we had. A reflection of our Great Depression? And there is little way of getting out of this mess.

    As we see all the globalists praising free trade, and that includes both democrats and republicans, along with Obama and the fed, we see what they are doing and it is all too comical. The democrats are spending in the wrong areas to create jobs, the republicans want more tax cuts on top of the Bush tax cuts for jobs, the fed is printing money for low interest rates and a low dollar so that we can export more with 1/3 less manufacturing, and the states wants casinos for jobs. All the while we keep sending our jobs overseas.

    The phenomenon that we are seeing is something we have not seen in our lifetimes. After communism fell, some 2 billion cheap laborers have entered our workforce, add to that automation and more loss of jobs, lean principles and more loss of jobs, and mergers and consolidation and more loss of jobs. So our middle class is being attacked for…… well…… being middle class.

    So today, you cannot have more tax cuts if we already had tax cuts all these years and watching our jobs go overseas. As our private sector is failing us, it only leaves the government to step in, because if we ignore the potential of a depression, we will never get out of it. We need to create a demand. While democrats answer with a reaction, I would propose to invest in our country, in our people, and in the future which has not been done for the past two or three decades.

    But what got us here was the “guns and butter” economics of Bush. You cannot run a country on borrowed money for tax cuts, borrowed money for war, our jobs going overseas, and the neglect of our infrastructure. Not in a million years can this ever work out. Not for households, business, or government. Yeah, I was speaking about this years ago and wondered why republicans were not responsible. And the only response was from Bush “stay the course” and from Cheney “deficits don’t matter.” And the Hannitys and Limbaughs were either silent or backing Bush and Cheney.

  • RobertE

    About ten years ago, I heard Ralph Nader make a presentation at Bergen Community College, Paramus NJ. After an hour plus of his bashing multi-nationals came a Q&A session. One young man (old for a student, young for faculty) asked Nader to comment on the War on Drugs. Nader’s reply, “The problem with government enterprises is there is no failing grade.”

    • johno413

      Wow, Nader must have been having a really bad day. Mr. “Gov’t needs to regulate everything”, suggesting that there is a problem with government as it existed then? Or was even the most ardent regulatory advocate realizing that government only works when it is NOT one-way (money in, no questions)?

  • johno413

    Good points. The problem is endemic as you describe it. For many in Washington, not limited to liberals, the solution is always tied to more money, regardless of the problem. Just as many liberals cry that the stimulus has been way too small, so do many believe that the only solution to our becoming highly noncompetitive globally in education is more money. Call it “new programs” or “improved programs”, it always requires more money.

    And for those in the media who are so desperately trying to paint Obama as a centrist, his words disprove them every single time. Of course his focus is on new ways to spend more money. Very few can believe the opposite storyline, except for those who must or want to, in order to maintain Democrat executive control. To others, especially non-partisans, it just comes across as silly and makes those who push the story a joke.

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