| Mouth-Offs | Finacial outlookFor some reason it is widely believed that big government spending projects help the economy. This myth persists despite ample evidence to the contrary.
Big government spending programs became popular during the depression. In the 1930’s US president FDR started many big spending programs to help the economy recover from the depression. Despite these massive spending programs implemented over 8 years, the economy remained in the doldrums. The US finally exited the depression during WWII in the early 40’s.
More recently Japan showed another example of government spending doing nothing for the economy. Two years ago with the economy shitting the bed, everyone got excited because the government introduced big spending programs to boost the economy. Now two years later, the economy is no better off, except the government is now deep in debt.
On the other side of the coin, New Zealand is a country that has cut government spending dramatically to reduce debt and has consequently seen its economy take off.
A little common sense shows why government spending is a drag on the economy. If you have one dollar and you spend it, you will buy something you want making yourself immediately happy. In addition, you will be giving your money to an organization or person who is apparently capable of delivering valuable services. When you give one dollar to the government, you don’t get as much value because the government is pretty bad in delivering its services. Then the government takes your money and gives it to some bureaucrat that isn’t doing anything productive either.
Government spending is a drag on the economy because it only creates more activity in one of the least efficient organizations on the planet.