by George Leef
Here is the other sharp letter in today’s WSJ. The writer makes the astute observation that federal spending doesn’t make us better off unless it does more to raise the production of valued goods than if we had left the money in the hands of firms and individuals. That is, he wants to focus on the opportunity costs of government, a point that’s often ignored. The letter:
You make a simple but profound observation that “Federal spending increases growth and national wealth only if its uses are more productive than how the money would be deployed by businesses or individuals.”
You have thus acknowledged that the GDP is seriously flawed as the central measure of our economic performance. It is a giant step forward for economic “science,” and it goes a long way toward explaining why most government spending doesn’t stimulate the economy. All of the private-sector costs incurred to comply with government regulations are counted in the GDP as economic gains (their costs are included in the prices we pay for goods and services), whereas these costs are really a drag on the economy.
John S. Thomas