Sunday, April 14, 2013

Why Spend Public Money?

"Dog Gone" has posted an interesting, though long case for spending "public money".  I agreed in my comments that it does create jobs, however I noted that I believe it rarely increases the wealth of the USA.  See this link for our discussions.

MPP Missing the point on why we spend public money

Thoughts?

12 comments:

Anonymous said...

Ah, yes, the old "public works" argument. For that tiny, tiny fraction of government spending that goes to roads and bridges that everyone can drive on, or to public school buildings (no Taj Mahal, please) that all children can attend (whether they learn anything is another matter entirely), it is entirely appropriate spending of public money because there is something of value created. The jobs are not created because of the public spending, but because there is something that the public wishes to buy. It is exactly the same for every other job in the world. That is, it would not exist unless there was something of value produced that some other person valued more highly than the currency they used to buy it.

Therefore, for the vast majority of public spending, any "job" produced is a drain on the economy because it returns absolutely nothing. A chief administrator in a welfare office, for example, may be highly compensated, work hard and be highly competent, but all they produce is the expenditure of more tax dollars. Given the choice, very few of us would choose to spend our dollars to create this "job." Interestingly enough, notice that the jobs created for public works projects are NOT government jobs, but jobs with private contractors who engage in competitive bidding to do the work.

J. Ewing

Anonymous said...

In terms of creation of wealth, are the property values of a town with a school higher than one without? Is a city more valuable when it has streets? I confess, I am baffled by this argument that certain kinds of expenditures cannot create wealth, just because of who it is who is engaging in them.

==Hiram

Anonymous said...

"Given the choice, very few of us would choose to spend our dollars to create this "job." Interestingly enough, notice that the jobs created for public works projects are NOT government jobs, but jobs with private contractors who engage in competitive bidding to do the work."

The argument here seems to be whether or not value is created is dependent on an technical classification. For all economic purposes, a contract worker is a de facto public employee. The value created isn't dependent on whether his compensation comes directly or indirectly from the government.

==Hiram

John said...

I think we all agree that some government spending is invaluable to our community, state and country. Maintaining law and order, personal property rights, national defense, an effective infrastucture, an effective education system, etc, etc, etc...

The challenge is that this is such a small part of our government's spend. Most of the spend goes far beyond these core functions of government. In those areas it seems that wealth transfer is the primary goal, which us conservative believe should not be a key role of the government...

Then their are the capital expenditures that seem to have little value, except to the localized special interest that lobby for them. MPR MN Bonding Look at all the fluff that had to be included to get this passed.

And the reality is we are passing this bill on to our children in the name of jobs today. Seems kind of selfish.

John said...

For your reference, here is a rough view of where the total gov't spends our money.
USA Total Spending by Category

And the state of MN details, though these seem a bit low for some reason.
MN State Spending

Anonymous said...

It is the classic divide between a capital expenditure and an expense. Expenditures of public funds for "public goods" like roads, for which we normally issue bonds, are capital expenses. It is intended that the increased economic activity generated (not of the jobs, but by use of the road) will eventually pay for the capital cost. (BTW, absolutely UNTRUE about light rail projects)

Public spending on non-capital items, however, like HHS and in large measure education, are money "down the rathole" because they return nothing to the economy. The argument is often made that keeping a person healthy is a good public investment because that person will go back to work, but that isn't the reality of government-paid health care. They get the care because they are NOT working, and lose it if they take a job. Similarly, a good public education would add to the economic wealth of a nation, but what happens if the education is NOT good, and costs more than it should? Some of those dollars are stolen from taxpayers and then wasted.

J. Ewing

Anonymous said...

Most of the spend goes far beyond these core functions of government.

I think a lot of government spending, in effect, frees up the private sector to focus on other things. Here is a link to a conservative source that vividly makes a point I have often made, that the state spends big money on two things, education and health and human services. It played no role in the creation of either one but both are needed and both must be paid for by someone.

http://www.looktruenorth.com/limited-government/taxation/21357-where-are-your-state-tax-dollars-going.html

==Hiram

Anonymous said...

Public spending on non-capital items, however, like HHS and in large measure education, are money "down the rathole" because they return nothing to the economy.

Is spending on non-capital items "down the rathole", or just when it's public expenses. I would point out that many capital expenditures are wasteful and that many short term expenses are not. We need to eat, but we don't need a Vikings Stadium. And the necessity of either isn't affected by categorizing it as government v. non government expenditure.

--Hiram

Anonymous said...

I would agree that many government funded capital projects are wasteful, no question about it. I like to consider whether each is a "public good" or not, but that definition probably only helps me. What I mean is something that helps EVERYBODY in the area from which the funding is pulled. The stadium fails that test; public education does not (setting aside for the moment its lack of effectiveness).

It isn't a matter of what is necessary. It's a matter of how best to deliver necessary goods and services (and capital projects) to those that need them. With government, those expenditures are not based on the need of those making the decision nor on the means of those paying the bills, and are therefore made with (almost always) gross inefficiency.

J. Ewing

John said...

FYI, Dog Gone left us a comment at the end of the G2A Continuum Post

"There is actually a considerable body of scholarly work on this topic that is more scientific, imho, than a blog post."

I replied with "I was just looking to get a common jargon defined amongst my readers. Please post a link if you have something better."

John said...

Here's Hiram's link.

Look True North: Where are the State Tax Dollars Going

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