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This Column Will Pay For Itself!

The notion that a dollar of government spending can yield more than a dollar in savings, "paying for itself," is absurd.

The Dutch love their bicycles, if we are to believe what we read in The New York Times. A quarter of all trips are made by bicycle, the paper reports, "and the federal government has been building up the country's bike infrastructure over the last decade."

This is very nice, but also: So what?

Here's what: "The yearly investment of roughly 500 million euros, or about $600 million, pays for itself, proponents say, by reducing health, social and other costs."

Mirabile dictu! A $600 million expenditure that doesn't cost a thing. If only America could import this magical method of financing government initiatives!

Apparently it can. According to the Center for Immigration Studies, President Donald Trump's border wall needs to stop as little as 9 percent of illegal immigrants to pay for itself. How? Ostensibly, it will save government expenditures on education, welfare, and things such as "police, fire, highways, parks, and similar services."

Hmmmm. It makes sense to say adding unlawful border-crossers could impose higher costs on the public schools. But it's laughable to claim America will have to build more highways because of them. And when is the last time your local government representatives said they had to raise your taxes because the parks are overrun with illegal immigrants?

Then there's "similar services" — a phrase that, like "social and other costs," does much work without saying much at all. It's the kind of vague terminology you're supposed to skim over without further thought.

You know what else supposedly would pay for itself? An $8 billion government program to provide child care in Canada. And how would it do that? Well, Canada has about 150,000 stay-at-home moms, and if every one entered the workforce, that would boost Canada's GDP about 2 percent, which would generate $8 billion in taxes. Ta-da!

Economic growth is not good just for child care. It's a miracle elixir that makes many proposals pay for themselves.

When he pitched Trump's tax-cutting proposal, for instance, Treasury Secretary Steven Mnuchin promised that "the plan will pay for itself with growth." Economists chortled.

It's the same story for a proposed $73 million baseball stadium for the Pawtucket, R.I., Red Sox. Rhode Island Public Radio reports that "supporters say the stadium would spur additional development in Pawtucket and more than pay for itself over 30 years."

The same apparently goes for, yes, a lacrosse stadium in the Ohio village of Obetz (pop. 4,500). The Columbus Dispatch notes that village administrator Rod Davisson expects "the facility will essentially pay for itself by generating its own revenue, attracting business, creating jobs and increasing the community's overall value and appeal."

Sure it will. They said the same thing about the new stadium for the Braves in Gwinnett, Georgia: "Commissioners assured residents the stadium would pay for itself and spark economic development nearby," the Atlanta Journal-Constitution noted five years ago. But "the county is still struggling to find money to pay the stadium debt." In an update this January, the paper wrote that the county is refinancing the debt, which it hopes will allow it to end the practice of diverting "hundreds of thousands of dollars in hotel-motel tax money to help cover payments."

In fact, just about every new stadium financed with public funds is justified on the grounds that it will pay for itself through spin-off development and, um, social and other benefits. In just about every case, it's bunk.

High-cost early childhood education? That will earn you a return of 13 percent a year and therefore "beats the stock market hands-down," according to NPR. Likewise, a study several years ago purported to show that an $847 million "investment" in pre-K in Virginia would pay for itself in 11 years. Why, with those kinds of return, you can't afford not to invest.

A $2.5 billion waterfront trolley system in New York City? It will pay for itself, Mayor Bill DeBlasio claims, through new development and higher real estate values. More subsidies for the visual-effects industry in L.A.? That, too, will pay for itself, claims Los Angeles mayor Eric Garcetti.

Granted, the pays-for-itself claim can have a rational basis. Spending money to fix roads might, indeed, reduce vehicle repair costs, to cite just one example. Anti-smoking campaigns can prevent health-care spending that could be needed otherwise. And it would be absurd to suggest that America would be better off if the country spent zero dollars on educating the young. But the claim that every dollar spent saves more than a dollar elsewhere is equally absurd. Were that so, then a government that spent 100 percent of GDP would not have to spend anything at all.

In some cases, it might be true that spending money actually saves money. But in all of them?

This column originally appeared at the Richmond Times-Dispatch.

Photo Credit: ToGa Wanderings/flickr

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  • Rich||

    the facility will essentially pay for itself by generating its own revenue

    "If you build it, they will come."

  • CE||

    And yet, private investors aren't lined up to print that money.

  • Get To Da Chippah||

    And yet zoning ordinances just won't let everyone build lacrosse stadiums in their backyards. Why, if they did, think of the enormous economic development they would collectively stimulate!

  • Jerryskids||

    I always liked Sean Hannity's ads for the tankless water heater that he assured me would "literally pay for itself" - always wanted to get one installed and then tell the contractor to send the bill to the water heater.

    And as far as stuff "paying for itself", they always trot out the savings to society at large if we only spend our money on this, that, and the other without ever mentioning that the costs are borne by one group and the savings are reaped by some other group, it's not *our* money, it's not *our* children or *our* schools or *our* hospitals or *our* whatever, and it's not as if you have a choice between taxing the money away from the idle rich or seeing it flushed down the toilet, there are alternative uses for the money and it's a damn good bet the guy who earned it would put it to better use than the government.

  • BearOdinson||

    THIS.

    It is one of the primary fallacies with this whole line of thinking. Kind of like telling someone what a waste it is to spend X Billion on afterschool programs, and he says "would you rather spend it on jails for these kids?"

  • Hardfloor||

    well the trick is to take more money from those who've got more than they know what to do with, and give it to those who know what xactly what they'd do with it. Simple.

  • Enjoy Every Sandwich||

    Taking a dollar from me and giving it to somebody else benefits that somebody else, but that's not an investment; that's a transfer of wealth.

  • plusafdotcom||

    Spot on, but...

    You forgot to mention the bureaucratic "overhead" costs in MOVING your dollar to 'the other guy'?
    Yeah... THAT'll make money for all of us, right?

    Sad that so many sheeple think that'll work...

  • Don't look at me.||

    Politicians that make claims like this have never run a real business that turns a profit.

  • CE||

    You know what else would pay for itself?
    Give every high school graduate a free case of cigarettes.
    Get 'em hooked early so they don't live as long and don't burden Social Security and Medicare.

  • Rat on a train||

    You need a significant war to reduce your excess population.

  • What about Sloopy's mom?||

    Wars kill off people too young.

  • CE||

    How about the bullet train in California?
    That thing will pay for itself by 2050.
    No wait, the US and California taxpayers will pay for it.

  • Mike Laursen||

    Actually, it will end up as a bunch of unused tracks in the Central Valley that won't pay for themselves in any way. Sigh.

  • Cloudbuster||

    Hmmmm. It makes sense to say adding unlawful border-crossers could impose higher costs on the public schools. But it's laughable to claim America will have to build more highways because of them. And when is the last time your local government representatives said they had to raise your taxes because the parks are overrun with illegal immigrants?

    I don't get this paragraph at all. Anything that contributes to highway congestion can lead to the necessity of more highway spending and increased taxes for park maintenance are surely a thing, so anything that leads to increased park and city facility usage will also be a driver for higher expenditures.

    Of course they're not going to say "because of illegal immigration," they're just going to say "because of heavier usage and/or increased costs."

  • Get To Da Chippah||

    Unpossible! Everyone knows that illegal immigrants have the ability to levitate, and float wherever they want to go.

  • Get To Da Chippah||

    It's only once they get their American citizenship that the American Law of Gravity applies to them, and they then walk and drive on the ground like civilized folk.

  • Rat on a train||

    That is why a border wall won't work.

  • ||

    Everyone knows that illegal immigrants have the ability to levitate, and float wherever they want to go.

    So *that's* how my elementary school's ESL classes pay for themselves!

  • ||

    Er, elementary schools' ESL classes.

  • Cloudbuster||

    A new lock on my door may cost me $40 bucks, but it surely may pay for itself in deterring burglary. Or is Hinkle seriously proposing that I can save myself $40 by not putting a lock on my door?

    By his measure, all spending on prevention is a net loss.

    Obviously, with government, this argument is made all the time for things that will not "pay for themselves." And bureaucrats specialize in coming up with specious future projections to justify increased current expenditures. The trick isn't to deny that things sometimes pay for themselves, but to figure out which things really will.

  • Mike Laursen||

    Going with your analogy, even if the lock deters burglars successfully, you are still out a $40 expenditure for home security. The lock didn't "pay for itself".

  • Inigo Montoya||

    Hinkle isn't proposing that nothing ever pays for itself, just that it's usually a bullshit proposition when it's some politician or bureaucrat making such a claim.

    For normal people, some things do indeed pay for themselves. For example, last fall I spent about $40 getting heavy duty plastic to put over the windows in my apartment (changing them is not an option since I don't own the place). The power bill went down by about that much, and we were more comfortable all winter. That was money well spent.

    Government can't do that and never has. They have no incentive (it's not their money they spend), and they are incompetent and/or corrupt when it comes to purchasing things. If a government official were charged with buying window plastic, he'd pay 10 times what I paid, and probably prop some windows open all winter "just because." We are taking about dishonest idiots, after all.

  • Leo Kovalensky||

    It's not so much that it pays for itself, it's that it provides value to you that may or may not exceed the sale price. Those kinds of decisions are made on every economic transaction. It's ok to argue that the benefit to society of a government program is worth the cost of the program (I guess), but the point is that it's disingenuous to claim that all of these things literally pay for themselves. That's bogus marketing lingo.

  • Shakes||

    GI bill?

  • C. S. P. Schofield||

    The "It pays for itself" meme is necessary for Statists, as it allows them to pretend they aren't doing exactly what Monarchs throughout history have done; taking money from the weak to pay for their amusements.

  • C. S. P. Schofield||

    Further thought; The key to this delusion is the assumption that the things that the primary expenditure supposedly addresses were necessarily going to HAVE to have money spent on them at some point. "We're building bicycle infrastructure, and it will save money on health expenditures!" Well, why are you assuming that money HAS to be spent on the health of the kind of people who bicycle?

  • Mike Laursen||

    According to the Center for Immigration Studies, President Donald Trump's border wall needs to stop as little as 9 percent of illegal immigrants to pay for itself.

    Even if this were true, there's the little problem that a border wall isn't going to work.

  • C. S. P. Schofield||

    The people who assert that t isn't going to work are saying it won't completely stop illegal immigration, which is undoubtedly true. It will certainly raise the difficulty, which will stop SOME. Will it stop 9% or more? Who knows? And if it DOES stop 9%, will the prediction that that will 'pay' for the wall be true?

    Frankly, I have my. OTOH, I find it instructive that the people arguing against it always make the 'It won't stop them all, so it's no good' argument. It's almost as if they feared it would stop enough to make a difference, and that this is so plain that they dare not deal in more realistic estimates.

  • CE||

    Won't it cost us twice, once to build and once for GDP loss from the people being excluded?

  • Paul E||

    You do know that GDP doesn't stand for numbers of people right? Importing more minimally productive people is not a net benefit. Economics and stuff...

  • macsnafu||

    "And it would be absurd to suggest that America would be better off if the country spent zero dollars on educating the young."

    But, but, if we privatized education and allowed the market to handle it, we could save huge amounts of money on the taxes that currently support education. In other words, privatizing education would pay for itself! ;-)

    More importantly, most of these 'pay for itself' ideas suffer from economic flaws, as the 'paying for itself' part only covers future expenses, and not current expenses. And when it comes to government programs, those savings aren't really payments to the taxpayers in any clear or obvious form.

  • Leo Kovalensky||

    "But, but, if we privatized education and allowed the market to handle it, we could save huge amounts of money on the taxes that currently support education. In other words, privatizing education would pay for itself! ;-)"

    Isn't the point that private education does necessarily "pay for itself" in that there is no government subsidy?

    Just like a private investor in a sports stadium should theoretically make money on his investment. If he doesn't then it's his loss, not the public's.

    The point is that taxes never go down as a result in government "investments". There is no accumulation of wealth from the government from the supposed increased economic revenue the government gets from these stadiums. Instead any additional revenue that might happen to come from these "investments" is simply squandered on the next pet project.

    The "pays for itself" slogan is merely political marketing speak for a politician's pet project of the day.

  • ||

    And when it comes to government programs, those savings aren't really payments to the taxpayers in any clear or obvious form.

    Especially given our current debt situation.

  • CE||

    Privatizing education would pay for itself (and improve quality), just not for everyone.

  • macsnafu||

    My apologies if I was misunderstood here. I'm all for private education and getting rid of public education.

  • damikesc||

    If a dollar of government spending led to more than a dollar in savings, we'd have the largest surplus anybody could fathom.

  • ||

    It's called exceptionalism and that's what all these leftists are really trying to do is just make America great again.

  • tkc||

    I wonder if the savings or riding bikes in Demark includes the cost of gasoline and car registrations. From a previous article at Reason.com

    "In addition, Danes pay $6.47 per gallon for gasoline, whereas Americans pay about $2.57 per gallon. It is true that Danes ride their bicycles everywhere and tend to take public transportation. After all, they must pay a vehicle registration tax of 180 percent of the value of their automobile. Perhaps this accounts for part of the difference in vehicles per capita; in Denmark the rate 480 per 1,000 and in the U.S. it is 809 per 1,000."

    I'd save money on gas by biking more if gas was $6/gallon and I had to pay enormous registration fees for my car. This isn't so much a 'saving' as it is an economically enforced outcome.

  • scJazz||

    If it is any consolation after they have decided to divest themselves of their own productive oil fields they intend to drop the vehicle registration rate to 100% to 120%.

  • scJazz||

    Bicycles, Walls, and then a ton of Sports Arenas... uhhh what the heck was the Author's point? I feel like I just read 3 different articles all of them too short to make a clear point.

  • Uncle Jay||

    RE: This Column Will Pay For Itself!
    The notion that a dollar of government spending can yield more than a dollar in savings, "paying for itself," is absurd.

    No, it is not absurd to believe spending can yield more than a dollar in spending.
    Just ask any member of the Soviet Union's Politburo circa 1990.

  • Martin Owens||

    Government expenditures paying for themselves?

    That's like the story of the two drunks walking down a country road. One had a big jug of wine, the other had a dollar bill.

    So every time one of them got thirsty he'd hand over the dollar to the other and get the jug in return. And down the road they went, all afternoon, trading the same dollar back and forth for a jug that got lighter and lighter.

    By sundown they were both hammered, and crawled into a haystack by the road to sleep it off. And they told each other "we'll have a headache in the morning, sure, but with business so brisk, we're sure to be rich !"

  • Martin Owens||

    Government expenditures paying for themselves?

    That's like the story of the two drunks walking down a country road. One had a big jug of wine, the other had a dollar bill.

    So every time one of them got thirsty he'd hand over the dollar to the other and get the jug in return. And down the road they went, all afternoon, trading the same dollar back and forth for a jug that got lighter and lighter.

    By sundown they were both hammered, and crawled into a haystack by the road to sleep it off. And they told each other "we'll have a headache in the morning, sure, but with business so brisk, we're sure to be rich !"

  • ||

    Free education will pay for itself because all those educated students will have jobs and no debt!

  • Mark22||

    Ostensibly, it will save government expenditures on education, welfare, and things such as "police, fire, highways, parks, and similar services."

    How about simply not giving education and welfare to illegals, and to arrest any illegal migrant who comes in contact with police, the fire department, the DMV, etc.?

    It's, you know, what civilized countries do.

  • Finrod||

    The new Braves stadium is in Cobb, not Gwinnett. I wish it was in Gwinnett, then I wouldn't have to worry about the damned stadium traffic.

  • mpercy||

    Gwinnet Braves (minor league) built a new stadium there a few years ago too--Coolray Field. They sold that the same way.

  • mpercy||

    The reference was 5 years old, which is the time when the Gwinnet Braves were building their new stadium. The Cobb Country Atlanta Braves stadium was just build last year.

  • Lester224||

    I'm equally cynical about tax cuts that will "pay for themselves" through . Not all tax-cutting strategies are equally effective. The efficient strategy is to have a limited tax scheme that encourages competition while discouraging monopolies and rent-seeking. The present situation with very high corporate profits on large multi-nationals who are not increasing hiring, with small business struggling is a result of huge amounts of market power leveraged by a few businesses. I just read a great article in the FT, which may is probably not accessible to all.

    The author refers to shifting tax burdens to monopoly profits and away from normal competitive profits. There are ways to do this by trimming exceptions strategically while allowing some rate cuts.

  • Lester224||

    Excuse the spelling (exemptions).

  • mpercy||

    "If government robbing Peter to pay Paul was all that was needed for economic growth, socialism would be a worldwide success story instead of a lingering migraine constrained to third-world economies."

    -----------

    It's worse than paying for itself, Nancy Pelosi and her ilk truly believe that spending $1 of government money confiscated from the economy on her favored recipients will generate 1.6, 2.3 or more times the original $1 in the economy!

    "At a press conference in her home town of San Francisco, Pelosi explained that the program's multiplier effect –the amount of money generated in the local economy as the result of the subsidy– far exceeds the nearly $60 billion spent this year by the federal government and is a sure-fire way to stimulate the economy. For every dollar a person receives in food stamps, Pelosi said that $1.79 is put back into the economy. The U.S. Department of Agriculture cites an even higher figure of $1.84.

    "It is the biggest bang for the buck when you do food stamps and unemployment insurance. The biggest bang for the buck," she said.

    In that case Nancy, we should pay everyone unemployment and foodstamp dollars! Think of the growth we can have. Hell, why scrimp? We can pay everyone 5x unemployment benefits and REALLY grow the economy.

  • swampwiz||

    I don't have a problem with increased funding for border enforcement; even if the recovered value were 0, it would still be worth it as a necessary implementation of the rule-of-law. The problem I have is that there already is a wall (in most spots), that combine with agents and technology is very effective. It would be far better to finish that wall through the difficult terrain than to simply have a more imposing wall.

    All this said, I would be in favor of such an imposing wall, where it does not cost much, if it were part of a solar panel installation, with the necessary power lines to wherever. I consider any project that helps to save the Earth as being worth heavy spending.

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