Wednesday, March 19, 2008

Using your money to buy their consensus 

Craig Westover points to the flaw in thinking about the bonding bill.
The emphasis is on �How much CAN we spend?� not �How much MUST we spend?�
I spoke this morning to a group of about fifty bankers, social workers, financial counselors and others on strengthening financial stability. In the process of doing this I was looking at materials we use to teach economics to kids in K-6 and 7-12 education. (My strategy is to reach the parents through the kids.) There were worksheets on how much of what we spend is discretionary versus mandatory, how much is fixed versus variable, etc. This is all pretty standard fare for teaching financial literacy. (I grabbed most of what I used from the Fed's education site.)

Now what about that logic applied to government? Craig's right -- we have both sides of the political debate agreed to borrow -- to "put on the credit card" -- 3% of what government takes from us. And we will be expected to pay the bill on that credit card. All that we teach in getting new families, families in financial distress, about financial literacy is contradicted by what their government does. Imagine if an employer were to take a share of your labor; he has signs around the plant announcing that you should be willing to pay more for a better Minnetaxco, Inc. He then announces that he is borrowing and additional 3% of what he has taken from you to "make investments" in Minnetaxco. To repay that loan, he will have to take a slightly larger share of your labor. There's interest to pay. But no worries, he is allocating those borrowed funds to help you produce more (which, of course, he can get a share of.)

Government doesn't calculate investment returns. At best, if it followed Craig's advice, it would do a cost-benefit analysis. But it has so many decisions to make about who's benefits count, and whose costs count. You cannot expect a government to calculate investment when it has no conception of risk of loss. It bears no risk. You do.

Craig continues:
If the bonding bill at that point is a mere $600 million, then that�s the appropriate and legitimate level of state bonding. If indeed everything on the list is both constitutional and necessary and the total is $1 billion, well, then we have to look for other sources of revenue � first eliminating extra-constitutional or unnecessary expenditures elsewhere in the budget.

To say we must know how much we have to spend before crafting a bill is simply indicative of the political division of spoils that is the bonding bill.

And that really is the issue here. The 3% is not a fund for investment in infrastructure; infrastructure is the vehicle to which we attach a spoils system that sees you as the source of the spoils. It only uses roads and bridges as a means of keeping you acquiecent.

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