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Too Big to Fail?

Here are some facts about the US government (and its component parts):

  • A new study by the OECD shows that the federal US government spends 141% more more per person than the average of the OECD countries, and only Norway spends more.

What does this spending get us? Consider the major criticisms of the US – that its life expectancy falls below the OECD average and that 46 million Americans are uninsured. Plus Medicaid is bankrupting states and Medicare is bankrupting the federal government. Note that I do not worry about the life expectancy outcome, I just wanted to cite the common criticism.

  • Public schools around the country (in which 90% of students enroll) spent, in 2007-08, $11,950 per student. My home state in New York came in “second” in spending at $18,073 per student (as a point of reference, my Catholic school, which gets the same outcomes as our local public, spends one-third of this amount). The OECD average expenditures on HIGH SCHOOL education? Try $8,271. So the US spends at least 144% more than their OECD counterparts. Only Switzerland, Norway and Luxemborg spend more.

What does this spending get us? According to the USA Today, and researchers on both the left and the right, not much. It is widely known that our children perform worse on standardized tests than children from other countries (again, a fact I actually care little about, but I merely present it to show you the common criticisms). Here is the USA Today reporting: “Out of 34 countries, the U.S. ranked 14th in reading, 17th in science and 25th in math.” See here for the US Department of Education’s report on the same data.

  • The US government has a monopoly on the production and distribution of first-class mail. You know, we have this because otherwise some poor soul in central Kansas would never have any information sent to him or be able to send any information from him unless we had this monopoly.

What do we get for this? A postal service that runs an $8.5 billion loss in the most recent year.  It is hard to imagine how one can lose this kind of money. So, we get decent mail service and lose tons of money, and still it costs 44 cents to send a letter somewhere – that is little less  than it costs to get a Kiwi from New Zealand to New York. My store sells them for 50 cents each.

  • The most profitable “corporation” in the world last year was the Fed. It sent a check to the taxpayers for over $79 billion.

The Fed also has a monopoly on the production of base money – so you and I are forced to deal with the risk of inflation diminishing the value of our money. Did I also remind you that the Fed right now is leveraged more highly than Bear Strearns was before it went under? Yeah, so making $80 billion is quite easy when you are leveraged at 76.3 to 1. Who’s on the hook if the AIG deal, the Bear Deal, the Toxic Asset Purchases, go south?

  • In less than 2 years and with the stroke of a pen, federal spending as a share of GDP rose from 20.5% to 25.5%. Then, in an effort to reduce this amount by 0.4% we nearly had “government armageddon” (i.e. a shutdown).

If government has gotten so big and unwieldy that shutting it down for even a few days threatens all of the Apple Pie and Fireworks that America is supposedly all about, is it not the case, especially given some of the information I cited above, that it has indeed grown too large and too big? How can we endorse a problem with “Too Big to Fail” for our financial sector, but not also one on the boys with the bazookas? And seriously, given all of this hand-wringing, I return to an earlier point I have made, and will make until my very last breath of air is enjoyed: collectively the government spends nearly $6 trillion, more than the entire country of the next richest country in the world, and “we” cannot even get our kids to read and write, or manage to encourage people to purchase sensible health insurance. It’s not a spending problem.

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