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The Daily Wildcat

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The Daily Wildcat

The Daily Wildcat


    “More government, more economic problems”

    Over the past few weeks, conservative media pundits, economists and business leaders alike have lamented the rise of “”Obamanomics”” and the demise of “”Reaganomics”” (I’m not sure which one is considered “”voodoo”” these days). Essentially, the debate over the government’s role in the lives of our citizenry has shifted from the abject illusion of self-sufficiency to an equally unpalatable return of the paternalistic welfare state.

    Government is back, whether we get bailed out or not, and “”investment”” or “”spending”” (who cares about this trite difference?) has met its ideological crescendo with the passage of the American Recovery and Reinvestment Act. If actions define our reality, then for us, government is the solution and not the problem, government is an arbiter and not a mediator, and lastly, government is now more regulator than referee. Now that we have either poisoned the stew or spiced things up, let’s take a long look at exactly what more government gets us.

    Although we all want better health care, better schools and the continuation of Social Security, the wants we have for these government-endorsed expenditures are all part of a larger pie we refer to as gross domestic product, or GDP. GDP, a supposed all-encompassing metric for a nation’s wealth, is what’s at stake when it comes to government spending. Whether in the short-term or the long-term, and regardless of political ideology, we have to acknowledge the coming “”crowding out”” or redistributive economic phenomenon that will occur.For those with actual lives right now, the “”crowding out effect”” is a transfer of wealth or piece of the GDP pie from the private sector (consumption and investment) to the governmen.

    In the short term, this doesn’t sound so bad. Government nationalizes my bank, my savings remain intact, and I get $13 more on my paycheck. In the long run, however, more government has empirically been shown to be stifling toward capital formation via lower investment, crippling towards innovation as a result of this lower investment, and in aggregate (let’s say supply) our economy doesn’t rocket forward, it snails.

    The irony of this all is that with less government, the tax revenues to pay for the programs we want to invest in are potentially larger than more government would allow us. More government means more DMV employees, more committees to oversee committees (C-SPAN action), and more jobs that pay less than the private sector.

    This is something we will all have to get used to, especially since government has long been chided for its inefficiencies, un-American 40-hour work week (if not in furlough) and last but not least, propensity to do nothing. All things we laughed at about just a year ago, however to some pessimists, represent the prophetic future of “”Atlas Shrugged.””

    But wait: Maybe the overly simplistic and fictitious world despised by Ayn Rand and her profit-maximizing minions doesn’t differentiate between what type of government we do and don’t need. To start with, although unemployment has just popped a Viagra, we need to calm down and realistically differentiate between our wants and needs in our expanded government.

    We need to ask why we need a “”czar”” overseeing every uncompetitive and failing industry in America. Why do we need F-22 Raptors collecting dust when the aliens haven’t attacked yet? Or even, why do we need to imagine or create out of thin air “”shovel-ready”” projects? The latter consideration especially, since if we needed more infrastructure before the crisis we would have already invested accordingly. The reality is we don’t and likewise, the creation of jobs that fill party “”wants”” are not necessarily what the American people need or are demanding.

    If government is back, we don’t need elaborate new titles, more bureaucracy or even more panels to chastise a failed private sector. The problem is not that government was too small or regulation too lax in the past, but rather that government spending was out of step with the values and real needs of our country.

    It’s true, the private sector screwed up, and we have therefore effectively lost trust in the benevolence of corporate America. But many of our regulatory bodies, such as the SEC, failed because they lacked a checkbook, not because of incompetent Americans.

    If we are going to implement more government, we have to ask how it will be implemented, what it will entail, and whether it will solve our problems. If we can’t honestly answer these questions, then the deficits we amass for future generations will have been fruitless.

    -ÿPaul Cervantes is an accounting and business economics senior. He can be reached at

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