The Cost of Inaction

This is a recent quote from Presdient Obama. Let us play a quick game and guess the next line of the quote.

This plan will require significant resources from the federal government… but while the cost of action will be great, I can assure you that the cost of inaction will be greater. For it could result in:

• A) a generation of Americans deprived of their opportunity to take part in the American dream, which is why we must invest in the future of America by fully funding the education of our children today.
• B) a world torn apart by the ravages of climate change – but if we act now, we can preserve our lands and our oceans for the generations to come, and bequeath to the future a world at least as whole as that which we have inherited.
• C) an economy that sputters along for not months or years but perhaps a decade. That would be worse for our deficit, worse for business, worse for you, and worse for the next generation.
• D) a generation of Americans whose poor fail to receive adequate health care, which will end up costing all of us in the long run, and I believe… that the greatest of nations can and must provide care for its neediest citizens.

As you can see, this line of reasoning can easily be applied – and often is applied – to all kinds of government spending. Its basis is the belief that by doing something the government can prevent something else that is worse. Never does it allow for that quintessentially Reaganesque idea that things are likely to get better when the government stops doing things.

The problem that seems to creep in, is the belief that the future is a known quantity. If we don’t increase spending in this area, the situation will deteriorate or stagnate. If we do increase spending, this area will improve.

Having taken the decision to spend the money, we are only left with the future where we spend the money. There is no opportunity to compare it to the unknowable future we would have experienced had the government not taxed, printed, and borrowed the money necessary for spending. If this potential future is considered at all, it is only in the narrow aspect of the spending, and it is always assumed that spending is beneficial.

For this reason it is asked, “How much will education improve when we spend this extra money?” and neither “How much might we harm education by spending this money?” nor the unfathomable, “How might we be changing the future, and what might happen if we leave the citizens with more of their own money, and borrow less?”

Since government spending could improve the situation or make it worse, or do nothing at all (except increase spending), the government should take a cautious approach to spending any money. The results of spending cannot be known, and neither can the results of not spending be known. Yet, for those who feel that doing something is the solution to problems,  instead of the much more difficult not doing something, they are already locked in.

This is why debates in Washington center around whether government programs will significantly improve the situation based on how much money is required for the program. But where is the one to step forward and suggest that even though he believes the program will work, that it still shouldn’t be done because it isn’t in the pervue of the federal government?

We should all be against these bailouts (C was the correct answer), but not necessarily because it will not work, but because we do not know whether it will work, and it is not the job of the federal government to “keep the economy strong” in the first place. At least we can know that we do not know if bailouts and stimulus packages will help the economy. Even if the economy improves, we would have to be skeptical of the reasons it improved to maintain intellectual integrity.

But for Obama, he believes that spending money on education, health care, “reducing carbon emissions”, and “stimulus packages” will improve education, health care, the climate, and the economy. If after spending money, the situation improves he will confirm his belief that it was because he spent the money. If the situation gets worse as with the bailouts and stimulus to date, it appears he will only conclude that the government simply hasn’t spent enough. He is entirely locked into viewing the situation from a framework which – while potentially valid – can never be accurately assessed.

Can President Obama truly “assure us that the cost of inaction is greater”, as he says? Of course not. He too, does not know the future, but he doesn’t even know that he does not know.