Posted on 05/27/2010 8:21:26 AM PDT by dalight
Here is a mechanistic thought for you: one, the people who get rewarded for who they know over what they know tend to reward others for knowing them rather than what they know. This means the projects are mis-managed or less effectively managed than they would be if the market driven mechanisms for distributing capital were in play.
Two, government money floods distort labor, real estate and other local market factors, increasing costs to other businesses in the vicinity. Those businesses respond be either cutting back or moving their activities to more cost effective locations. Because the government projects are poorly managed and have poor economic return for the resources consumed, the local economy is diminished.
Too often we confuse money (the means) with economic activity (the ends). Money is supposed to smooth transactions so that mutually beneficial trades occur to increase productivity and increase the standard of living. Just because more money is in the system doesn’t means the best trades are happening. When that money is being used to consume productive resources to create unproductive resources that do not improve the standard of living then economic activity is naturally reduced.
This comes close to an insight, but you are still thinking Macro. This effect is Micro. The concept that Government money runs up property values and drives out real business just doesn't hold. Successful private business does the same, runs up property values.
The money paid in Salaries is spent by consumers who buy what they buy not based on Government concerns but on their own wants and desires.. competitively.
The effect of Government money killing the immediate community where it is spent is vexing because you can perhaps make an argument about inefficiencies for the Country as a whole but that doesn't focus the damage on the locality of the expenditure.
Frankly, I like where Pollster1 was going. Its about the impact on the People in the district as they look for more government largess rather than their own means that is the cause of the downward spiral. It simply is an addiction that is damaging to the economy of the recipient if they grow dependent on it.
The districts of the Committee chairs who alternate between being the minority chair and the majority chair get fed a steady stream of Government money to keep the good times flowing and this replaces the economy of excellence and independence to an economy of cronies and political fealty. Meanwhile, the surrounding districts are free to fail and fight and win, and win they do. The districts with the Government money elect more socialists as their local leadership and taxation and regulation are the words of the day and more business and jobs depart.. making the district even more dependent on the Government teat. This process has to take years but it takes years for a Representative to establish and win the Chairmanship so the process spirals down as the lawmaker gets ever more powerful.
I think there is a strong point in there about the cultural effects of government spending on the attitudes of the local populous. I would add to the welfare mentality the effect of working in an environment fueled entirely by political payoff.
I suspect the difference between making/watching effective spending decisions in private industry versus politics driven spending effects personal decision making and would be curious to see how similarly paid public and private employees fare in net worth. I expect those government paid salaries would not be spent as effectively for wealth building of the individual and that would have an impact on the net economic benefit to the community.
I saw it in my grandfather who spent his whole career at the post office, most of it in management. He took for granted a system that prompted managers to request 2x what they could possibly need expecting whatever they request to automatically be cut in half and then rushing to spend every last dime before the end of the year so the budget wouldn’t be cut for next year. He would do anything for a friend and I loved him as a grandfather, but he wasn’t any good with money.
Let me throw this into the mix. If you don’t earn it, you don’t value it as highly. You don’t treat something cheap as seriously as something dear. In stead of investing it carefully and soberly you merely spend it. And you start treating your own money that way too.
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