Monday, June 28, 2010
Being Strangled By Government
Being Strangled By Government
A cab ride in Washington, DC on a weekday afternoon in June gives you a feeling of the national mood. It’s oppressively hot and humid and the traffic is horrible. By the time you reach your destination, you feel strangled and oppressed and just want relief.
Amidst the current lethargic economic recovery, with unemployment still just under 10%, the one growth stock remains government. Washington, DC is a boom town today as the answer our current administration proposes for every single problem and challenge facing us is more government.
Government spending is now 25% of our GDP. This is five percentage points higher than the average of the last fifty years.
A new Wall Street Journal/NBC poll reflects the nation’s nasty mood. Sixty two percent now say the country is “on the wrong track,” compared to 43% saying this a year and a half ago.
A fascinating online dynamic map display, called “The Decline: The Geography of a Recession” (you can easily find by googling), shows color coded unemployment levels county by county throughout the country. Areas where unemployment is 4-6% are orange and red. Areas of 7-10% unemployment are purple.
The map display starts in January 2007 when national unemployment was 4.6%. It shows a sea of orange and red across the nation. You then click, and it changes by month, getting increasingly purple, until ending in March 2010 with national unemployment at 9.7%.
Looking at this picture of the whole nation swathed with the purple color of high unemployment, you can’t miss the tiny island of orange and red in the midst of all this. It’s, of course, the region of our nation’s capital.
Another bold graphic of our dismal state of affairs is an outstanding series of charts on the nation’s fiscal situation put together by Brian Riedl of the Heritage Foundation. You just can’t get a clearer picture of the cliff we are about to drive over.
Total government spending (federal, state, and local) per American household is now $47,000. This is almost triple what government spending per household was in 1965.
But consider further that this $47,000 government spending per household is almost equal to the nation’s median household income – about $51,000.
In 1970 government spending per household was about half of median household income.
Needless to say, all of this would be just fine if there was a shred of evidence that government spending us into oblivion made us better off. Not only is there no such evidence, but the proof in the pudding is the opposite.
Look around the world. The economies that are the most free are the ones that are the most prosperous. Those with the largest encroachments of government are the ones that perform the worst.
A study released a few weeks ago by three professors at Harvard Business School boldly challenged common perceptions about the benefits of government spending.
Incumbent members of Congress, particularly if they are powerful committee chairmen, often tout their value to their districts by the amount of federal money they bring home.
According to this new study, it turns out that this isn’t such good news. The government money simply displaces the private sector. According to the study, “the average firm in the chairman’s state did not benefit at all from the increase in spending.” Rather, “firms significantly cut physical and R&D spending, reduce employment, and experience lower sales.”
Economics, the joke goes, is common sense made difficult.
It just takes common sense to appreciate that our economy is not recovering because it is being strangled by government.
This will continue until we start going in the other direction. Cutting back government – spending and taxes – and unleashing again private American citizens to work and live free.
Posted by Brett at 9:51 AM