Can the Government 'Invest' Its Way Out of Debt?
In his State of the Union speech last night, President Obama raised further doubts about his newfound commitment to fiscal responsibility by offering this analogy:
Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't….
Let's invest in our people without leaving them a mountain of debt.
How many cash-strapped families are able to spend 40 percent more than their income by borrowing the rest? The federal government is decidedly not like a cash-strapped family because it has the power to commandeer the resources not only of current taxpayers but of future taxpayers who are too young to vote or have not been born yet (which is how it will ultimately have to repay the money it borrows). Since it spends other people's money, the government does not have much incentive to "invest" wisely, which is one reason to take a skeptical view of Obama's promises that the spending he advocates will pay dividends in the future. Here is another reason:
I know that there are those who disagree with the overwhelming scientific evidence on climate change. But here's the thing: Even if you doubt the evidence, providing incentives for energy efficiency and clean energy [is] the right thing to do for our future, because the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation.
Here Obama is going beyond his claim that the benefits of carbon reduction will outweigh the costs because it will avert environmental catastrophe (a claim that is open to question on several grounds). He is saying that even if there were no reason to worry about global warming, these costs would still be worth paying. But it's not clear why he think so. If the payoff from energy efficiency were big enough to justify the investment necessary to achieve it, there would be no need for government-rigged "incentives." Maybe Obama is saying that, as long as other countries think that global warming is a serious problem that can be cost-effectively averted by reducing carbon dioxide emissions, there will be money to be made selling them the requisite technology—even if that belief turns out to be wrong. But again, why would profit-driven businesses need to be enticed by subsidies to take advantage of this huge opportunity?
I honestly don't know what Obama's reasoning is, and I'm not sure he does. But I am pretty sure I would not trust him to invest my money. Fortunately for him, he does not need my permission.
More on Obama's green snake oil here.
