Unintended Consequences: How Government Gets Everything Wrong

My left-liberal (as opposed to classical liberal) friends tell me to shut up when I harp on how Government can’t do anything right.  They tell me it’s a worn out cliche.  It’s a cliche for a reason.  It’s true.  Think about it. I’ll bet you can’t name a single thing that the government gets right.  And by “right” I mean it does it as well or better than the alternative – which is of course free human beings making their own decisions ( a sneaky way of saying “free markets”).   Go ahead – name one. I’m waiting…..

Remember it wasn’t so long ago that Congress preferenced Ethanol and caused a net increase in fossil fuel usage and disruptions in food markets.  Surprise! They did it again.  Here’s a post on the always informative  DownSizeDC.org  that points out unintended negative consequences of Congress meddling in energy markets via tax preferences. 

Prior to Congress deciding it could use tax policy to re-engineer America’s energy use from on-high, the paper industry had been 70% fueled by something called black liquor, a natural by-product of the paper making process. In other words, the paper industry was inherently energy efficient, until Congress got involved.
The Energy Policy Act of 2005 authorized a 50-cent per gallon tax credit for mixing gasoline or diesel with an alternative fuel. To get the credit, paper companies began to mix diesel with their black liquor. In other words . . .

  • The government is paying the paper industry to use a less efficient, environmentally-destructive fuel!
  • The cost of this scam could reach $8 billion this year. [Source: The Nation]
  • Even the New York Times reports conclusive evidence.  Of course The Times doesn’t see it as evidence of Government incompetence.   The Times  acquired it’s new office space by getting government to take it by force from small businesses via eminent domain.   I’m not surprised they are reluctant to bite the hand that feeds them. Cozy arrangement.

    Check out this Times post with comments by Doug Tatum, co-founder and chairman emeritus of Tatum, an Atlanta-based consulting and executive search firm that specializes in helping growing companies with finance issues.

     Entrepreneurs have a limited amount of bandwidth, and they have to quit wasting their time chasing the impossible. They need to think about how they can change their business model to become profitable. That’s where the capital to grow will come from

    Finance growth with profits?  What?  That’s so pre-Obama.   That would mean something like cutting taxes would be better for the economy than massive stimulus packages.   But of course few in Government have ever turned a profit in the free market so they wouldn’t know about that.   Bam has of course made millions from his book sales. But profiting on his Presidential campaign isn’t really that close to a free market activity in today’s two flavors of one party system.   Also cutting taxes would mean that regular working people and entrepreneurs would make the decisions about where the money got spent and that would mean Government can’t determine the winners and the losers.   Quaint notion.

    Tatum continues:

    Banks have become cautious about what they have on their balance sheets. They still don’t know what their portfolios are worth. That means they’re waiting for the next shoe to drop, which could be the commercial markets. I talked to the C.E.O. of a community bank who told me that they have the regulators telling them when and where they can lend money. So while you might have politicians saying, ’Lend, lend, lend,’ the regulators are holding the banks back.

    Banks becoming cautious and refusing to lend when Congress tells them to?  Didn’t Congress tell them to lend to sub-prime home buyers and sell the paper to Fannie Mae?  How did that work out for them?  But it’s OK because the banks aren’t THAT stupid – well not any more.  They can ignore Congress because the regulators make them.  So Congress can continue to pander and not worry that the banks will actually take their disastrous advice – again.

    It’s amazing to me that people can continue to cling to the idea that Government decisions can ever outperform free market decisions.  But most people don’t know much economic history or economic principles.   And the history and principles they do know are fed to them by the Government propaganda machine – organizations like the New York Times.

    The truth is out there for anyone who wants to learn it.   If you don’t know – here are two great places to start :  www.Mises.org  and www.independent.org  .

    Do NOT follow this link or you will be banned from the site!