Tags: federal | government | spending | interstate

So Can the Government Get Anything Right?

By    |   Wednesday, 03 July 2013 07:55 AM EDT

My last few articles have shown the limitations of federal government spending, in particular fiscal policy, the targeted spending inspired by Keynesian Economic Theory. Many of my readers have asked, "But is there no room at all for government purchases? Are you saying Washington can't get anything right?"

No I am not. There are legitimate functions of the federal government that require it to spend trillions of dollars per year — trillions that have a major impact on our economic performance and role in the world.

Consider national defense and our military posture in Europe, Asia and here at home. National defense is exclusively a government function. We do not brook private armies in the United States. More specifically, it is delegated exclusively to the federal government — states are forbidden to wage their own private wars, sign treaties or tinker in foreign affairs. When our government uses these elucidated powers, as we did in the World Wars and the Cold War, the economy benefits.

Don't think you need State Department hacks or pompous university professors to explain this to you. The reason is simple: resources are being allocated in a way that generates economic benefits — aggressors are deterred or destroyed.

Everyone understands how a bully makes learning and recreation difficult in public schools. It is the same in world affairs. America's navy, enforcing freedom of the seas that cover 71 percent of the earth's surface, is directly responsible for U.S. exports and trillions of dollars of world trade.

Or consider government spending, which is motivated by the need to provide public goods. Several months ago, I highlighted the interstate highway system. How does this benefit us? Again: first, building "post offices and post roads" is a specific federal government power under Section 8 Clause 7 of the U.S. Constitution. Believe it or not, there was a time when the Post Office provided a valuable service. In our day of email and private package express, not so much.

Similarly, while most roads and highways are best maintained and financed at the state or local level, the need for a national highway system was crucial in the post World War II baby boom expansion. Low cost interstate travel — without the hassle of tollbooths or worse, "toss a coin in " toll plazas — was directly responsible for the development of mass-market retailing and escape from the oppression of inner cities. Both processes generated trillions of dollars of wealth in the past five decades.

Compare this with the rat hole of mass transit or bullet trains. What is the difference? The latter two are designed to benefit a very narrowly defined group of wealthy suburban commuters. A desirable function? Perhaps. But not a federal one; thus, a waste of federal government funds.

In contrast, interstates serve the entire nation: huge stretches are in rural areas as well as populated ones. They serve everything from a Prius to tractor-trailers (even us cyclists are allowed from time to time). They do not favor one type of traveler versus another.

In addition, consider the justice system. While private negotiation resolves countless civil disputes, we still feel civil law and all criminal law to be a government function. Yet look at how cumbersome this process tends to be. "Don't make a federal case of it!" is a plea we all make when a simple situation spirals out of control more than we could have ever imagined.

Even so, the need for the federal government to provide some goods and services can evolve. For decades we looked to NASA to take us into space. Now private firms like SpaceX are seizing the initiative.

Returning briefly to the interstate system, it was originally designed to be toll-free. Now that cameras and computer technology can scan vehicles and speeders, expect user fees to more accurately reflect those drivers who place greater burdens on the system.

In those few circumstances where politicians can spend money more efficiently than the private sector can, government purchases act as an economic stimulus. Otherwise government is a deadweight, a burden on business, workers, taxpayers and even aid recipients.

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My last few articles have shown the limitations of federal government spending. Many of my readers have asked, "But is there no room at all for government purchases? Are you saying Washington can't get anything right?"
Wednesday, 03 July 2013 07:55 AM
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