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The First Shall Be Last | I like koalas.
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The First Shall Be Last

Posted by on March 17, 2009

[This post was originally written for my employer’s blog, Show-Me Daily.]

According to this New York Times article, a number of states were competing for the honor of “first to spend federal stimulus money on infrastructure,” and, by some accounts, Missouri won.

Even die-hard free-marketers will likely agree that once the federal government decides to spend a certain amount on stimulus, the taxes that pay for the program are “gone” in a long-term accounting sense. So, obeying proper economics and ignoring sunk-costs, the question is “why not try to get as much stimulus money as possible?” Someone is going to get it and invest in their infrastructure, why not us?

I am interested in readers’ thoughts on the matter, but I will start with what I think.

Even if we assume that our state government will more efficiently allocate the funds than our neighbors will, it is still dangerous to accept and spend federal funds. Government bureaucracies have a long history of taking every opportunity to ratchet up their budgets, resisting pressure to cut costs. We’ve blogged before about benefits of governments cutting spending in the face of budget pressures. If you already agree that government spends money on things that perhaps it shouldn’t, then take note that stimulus funds will certainly not encourage them to reduce spending. Indeed, before the promise of federal funding, our governor and General Assembly were facing a harrowing budget crisis, and seemed poised to make deep cuts from which Missourians would benefit for years to come. No longer is this the case. The story for the past several weeks has been giddy excitement at new spending opportunities.

Other states will certainly invest in their infrastructures if we don’t. The opportunity we are missing is a chance to discontinue some useless state spending, and trust that the people who will foot the bill for the stimulus package will be wise enough to find their way out of our current economic doldrums without ramped-up state spending.

Only tangentially related, but highly recommended, is this video about the bailout/stimulus from under-appreciated reporter John Stossel. The rest of the program can be found here.

Please weigh in with your thoughts about accepting federal stimulus, tax-funded bailouts, and whether John Stossel is as evil as they say.

2 Responses to The First Shall Be Last

  1. Sarah Brodsky

    Great post. We don’t want to race to become the state with the most rent-seeking. Let other states have that honor.

  2. vroman

    spend away. its all deck chair rearranging at this point.

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