Most of my work on government stimulus focuses on economic theory and evidence.
But every so often it’s a good idea to remind ourselves of the ridiculous ways that government wastes money.
Here are some details from a boondoggle in West Virginia.
Nobody told Hurricane librarian Rebecca Elliot that the $22,600 Internet router in the branch library’s storage closet was powerful enough to serve an entire college campus. Nobody told Elliot how much the router cost or who paid for it. Workers just showed up and installed the device. They left behind no instructions, no user manual. The high-end router serves four public computer terminals at the small library in Putnam County. …The state of West Virginia is using $24 million in federal economic stimulus money to put high-powered Internet computer routers in small libraries, elementary schools and health clinics, even though the pricey equipment is designed to serve major research universities, medical centers and large corporations, a Gazette-Mail investigation has found. …The Cisco 3945 series routers, which cost $22,600 each, are built to serve “tens of thousands” of users or device connections, according to a Cisco sales agent. The routers are designed to serve a minimum of 500 users. Yet state broadband project officials directed the installation of the stimulus-funded Cisco routers in West Virginia schools with fewer than a dozen computers and libraries that have only a single terminal for patrons.
Sounds like the government could have bought every user a laptop and squandered less money.
It’s important to realize that this type of boondoggle is the rule, not the exception. Every so often, we see stories about absurd waste, such as the $423,000 study to find out that men don’t like to wear condoms, the Pentagon spending $900 on a $7 control switch, or a $100,000 library grant to a city without a library.
We should get upset about these examples. But remember that the second cartoon in this post is exactly right. The waste, fraud, and pork that we find out about is dwarfed by what remains hidden.
[…] not be too hard on clueless bureaucrats. Maybe they just don’t understand high tech. After all, moronic government officials paid more than $22,000 each for big institutional Internet routers hooked up to just a handful of […]
[…] be too hard on clueless bureaucrats. Maybe they just don’t understand high tech. After all, moronic government officials paid more than $22,000 each for big institutional Internet routers hooked up to just a handful of […]
Government spending doesn’t multiply anything. Government takes resources from taxpayers and applies them to government projects. We get a bridge or some paperwork; that is it.
The Myth of the Economic Multiplier
The “multiplier” from government taxes and spending is less than 1. The government wastes resources collecting more tax, and the citizen wastes resources trying to minimize his tax. Then, the government spends the tax revenue wastefully, achieving less production of useful goods and services than the citizen would have created through careful purchases and investment.
A “spending multiplier” is absurd. If government spending of $100 creates $150 in wealth, then why doesn’t this apply to ALL spending? The $50 you spend for groceries should produce $75 in wealth. In fact, all money spent each day should produce wealth of 1.5 times the current day’s spending, sometime in the near future. This would lead to a wealth explosion, as total wealth increased by 50% every few months. Heck, even if it increased by 5% every few months.
There is no spending wealth multiplier greater than 1. If there were, we would all be living in Aruba by now, on the beach, sipping cool drinks.