published Monday, February 7th, 2011

A disturbing comparison

When it is operating properly, government's role in our free-enterprise system is mainly to act as a check on those who would defraud, coerce or otherwise harm others.

But beyond those basic functions, government should mostly keep out of the way of the economy. Government does not produce jobs and economic growth. With the right policies, however, it can foster the conditions -- such as the rule of law and respect for private property -- that allow the free market to generate prosperity through the voluntary production, sale and purchase of goods and services.

So it is troubling that President Barack Obama recently suggested that government -- not the free market -- is the source of American advancement.

In his State of the Union speech, he went on the attack against Republicans who want to make serious cuts in spending to begin bringing down our crippling $14 trillion debt. Opposing major cuts in government spending, he offered this analogy:

"Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine."

Now think about that for a moment.

The president of the United States, which became the richest nation in history on the strength of free-enterprise values, believes that government spending is the "engine" of innovation and education.

Where is the evidence of that?

Look, for instance, at the tens of billions of tax dollars that have been funneled through the federal government into alternative energy such as wind and solar power. Have those subsidies made wind and solar energy affordable and practical? Certainly not. Many alternative energy projects would simply dry up for lack of market demand if the subsidies were shut off.

As for education, we see no evidence that vast amounts of federal money have significantly improved academic achievement among America's students. Consider the federally funded Head Start program for children from low-income families. A study by the U.S. Department of Health and Human Services concluded that whatever academic or social benefits pupils supposedly gained from Head Start almost completely disappeared by the end of the first grade. In other words, the well-intended program is a failure. Yet our country continues to pour billions of dollars into Head Start annually.

Rather than boost accomplishment, what federal spending on education has done is give Washington enormous control over local school districts, even though state and local governments still provide the bulk of school funding.

You'll notice that the president refers to the spending of your tax dollars and of trillions more borrowed dollars as "investments." That is a serious misuse of that word.

"Investing" is what private individuals and businesses voluntarily do with their own money in hopes of getting a return by meeting market demand for a good or service. That is the kind of economic activity that built America. Investing is not what government does with taxpayers' money to promote certain favored industries or companies with government funds. If $14 trillion in cumulative federal deficit spending is an "investment," then where are the "returns"?

The president has it backward if he truly believes that government spending is the source of America's success.

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fairmon said...

The only return on government investments whether labeled as investments, grants, programs, subsidies etc. is to the government in the form of higher taxes or other mislabeled revenue sources.

February 7, 2011 at 8:32 a.m.

I completely agree with this TFP piece. I believe Americans have often succeeded inspite of the government and it's desire to control. After all, the government is composed of people, obviously, who can be greedy and power hungry.

It often seems that President Obama thinks he's playing with fake money, Monopoly money. There needs to be more respect shown to taxpayers given that our tax dollars are the governments primary source of revenue.

It think both political parties need to remember that.

February 7, 2011 at 8:56 a.m.
charivara said...

“Government does not produce jobs and economic growth.” That statement shows either a remarkable ignorance of facts or a willful misrepresentation for ideological purposes.

The “free enterprise” system to which this editorial writer alludes does not exist. The privately owned transcontinental railroads were built in this country with the generous financial help of the federal government. Privately owned oil companies today get generous tax breaks from the federal government. Huge privately owned agriculture businesses get subsidies from the federal government. Investors can band together to form corporations for their financial benefit but workers employed by those corporations are prevented from banding together for their financial benefit. When I send Christmas cards I pay full postage, when mail order houses send catalogs they pay reduced postage. Free enterprise?

It was “free enterprise” that led to the dismantling of banking regulations but it was the tax payers who paid for the results of that policy. What conservatives mean by “free enterprise” is a system which privatizes gain and socializes loss. When bankers make money, they keep it; when they lose money, the taxpayers pay. Free enterprise?

The conservative “free enterprise” system of the last thirty years has seen the increase in disparity between the rich and the poor that has not been seen since the Gilded Age, it has led to the export of millions of well-paying manufacturing jobs overseas which has decimated the middle class, and it is rapidly demolishing the public sector which has been the basis of middle class wealth and security.

Conservatives want the middle class and poor to pay the $14 trillion dollar debt racked up by the actions of the wealthy and powerful. The only conservative policy that has been successful is the policy of making the American middle class believe that conservatism is good for them.

February 7, 2011 at 3:38 p.m.
fairmon said...

The so called bail out was to companies whether deserving or not would be able to pay back the "loan". That continues to happen with the government (tax payer) making a profit. An exception is the poorly run government programs called Fannie Mae and Freddie Mac. They have for years been pawns and tools of manipulation by congress at tax payers expense.

Subsidies, grants, deductions and reductions should all be abolished and the corporate and business tax rates reduced to a reasonable job creating level for all businesses instead of a favored few. There is a major difference in loans that are repaid such as happened with the rail systems and gifts called subsidies, grants, deductions etc.

Obama's view of redoing the business tax system and non-additive regulation will help reduce unemployment and at worse be tax revenue neutral. His intent is to increase exports by enabling U.S. businesses to be more competitive. Businesses have over two trillion in cash they could invest if demand increased. Increased demand via exports means hiring and American jobs which reduces the need for individual tax reductions and reduces the growing dependent sector of society.

February 7, 2011 at 6:32 p.m.
frettfull said...

The GOP, with a little help from some friends on the other side, took a budget surplus in 2000 and turned it into a massive deficit by 2008. The GOP trashed the tax-rates so that their already-rich contributors could wallow in more wealth. The GOP's romp with borrow and spend didn't end until this country elected a president who had the (expletive deleted) gall to suggest that everyone deserved the same access to medical care, whether rich or penniless. If those "American People" the GOP's spin-doctors have sucked in were any good at math and recent American history, the streets of DC would make Cairo look like a Boy Scout Camporee. The government ought not "interfere," as your facebook question says. The government ought to protect it's citizens from threats abroad and at home. That includes terrorists wielding bombs and wealthy congressmen beholden to more wealthy contributors wielding legislation to enrich the rich under the guise of free enterprise.

February 7, 2011 at 10:44 p.m.
holdout said...

The last president who actually had no deficit was Andrew Jackson and no one in this country would be willing to do what he did to get it. Pointing at the GOP as wasting a surplus is silly. Yes they spent too much money and no one will ever convince me that invading Iraq was a good idea. But the fact exists that the country was attacked and the response in Afghanistan was needed and should have been prosecuted harder and should have been over by now. But the fact is both parties spent way too much for way too long and the bill is coming due. Stop spending money that doesn't exist and cut spending programs. It is going to hurt a lot of people and I am sorry for that. If it isn't done then a whole lot more are going to be hurt a whole lot worse. Our way of life is changing. Accept it.

February 8, 2011 at 9:25 a.m.
carlB said...

Username: charivara | On: February 7, 2011 at 3:38 p.m.

Reply to charivara: You are telling it like it is.

What would the Republicans have done in saving this Republic from another great depression if they had been reelected. Judging from the Republicans actions against President Obama, they would have kept the Government out of the picture and let the private financial enterprises take care of getting us out of the 2007 deep recession after their bail out from the fraud. That means the Republicans would have done "nothing" to create manufacturing jobs here and In my opinion that would put this Republic right in the middle of another great depression, but the Republicans did not win the election in 2008.
President Obama is having too many problems from his opponents now in trying to prevent another great depression without any help from them. It would not be good for this Republic to be in another great depression because of the uncertainly of what the conditions would bring and what the possible development would turn into during the unknown length of time a great depression would last. We have to correct the conditions which actually caused the 2007 deep recession and we can do it by getting our manufacturing base jobs back and balancing the trade deficit. But the $12.0 trillion dollars of total National Debt passed onto Obama is not making it easy for getting the global corporate monopolies to reinvest into manufacturing here. Therefore, if this Republic had continued to fall, how much farther would the Nation had fallen before bottoming out? Everything would have continued shutting down all of a sudden without anytime given for the people to adjust? Of course the question is, to what would the people have to adjust?
What would be the plans of the Republicans for getting out of another depression? Hopefully, the conditions are now more stable and we have continue getting the manufacturing jobs back.

February 11, 2011 at 11:10 p.m.
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