Saturday, July 19, 2014

(Re-post): This applies to virtually all government spending

Chris Edwards, blogging at Cato At Liberty, identifies five important reasons why federal government expenditures on the nation's infrastructure are doomed to failure.  And while his post is both interesting and spot-on, I'd like to suggest that his reasons are applicable to virtually any area of governmental spending.  Here are the first two; see what you think:

Unfortunately, the current administration’s infrastructure policy has been mainly focused on increasing spending on misguided activities such as high-speed rail. But here are some of the problems with such a federal-led approach to infrastructure:
  • Investment is misallocated. Federal investments are often based on political pork-barrel factors rather than actual marketplace demands. Amtrak investment, for example, has long been spread around to low-population areas where passenger rail makes little economic sense. Most of Amtrak’s financial losses come from long-distance routes through rural areas that account for only a small fraction of all riders. Every lawmaker wants an Amtrak route through their state, so investment gets misallocated away from where it is really needed, such as the Northeast corridor.
  • Infrastructure is utilized inefficiently. Government infrastructure is often utilized inefficiently because supply and demand are not balanced by market prices. The vast water infrastructure operated by the Bureau of Reclamation, for example, greatly underprices irrigation water in western United States. The result is wasted resources, harm to the environment, and a looming water crisis in many areas in the West.
See what I mean? You can substitute almost any government expenditure initiative for infrastructure above and Edward's points will still be valid.  Read the rest of the article and see if you think I'm right.