History shows government programs make things worse, not better

Victor Joecks

Recently, Nevada and federal government officials have failed epically with their green-tax-break scheme.

Does the problem lie with our current batch of politicians â’€ or, as Jon Ralston calls them, our “collection of irredeemable nincompoops, borderline criminals and self-interested cowards” â’€­ or is it that government regularly produces poor results when it attempts to pick the winners and losers in an economy?

Dr. Burt Folsom provides strong evidence that problems normally arise when politicians, whether virtuous or of the “nincompoop” variety, stray from the proper role of government.

For example, the first government subsidy in U. S. history was when President George Washington supported the funding of a government-operated fur company in the American Northwest. Its purpose was to allow the U. S. to trade furs with the Indians, earn their loyalty, and keep the British fur traders away from the Mississippi River. What happened? Just the opposite. The government fur company was incompetently managed; Indians mocked it because it sold farm equipment and jews harps instead of cheap and useful blankets, guns, and axes. The British, therefore, flagrantly expanded their fur trading deep into American territory.

In the 1860s, the U. S. began building transcontinental railroads to pull our nation together and give passengers cheap railroad fares across the country. What happened? Again, just the opposite. The country became more divided because (1) some states were left out of the transcontinental building, (2) the first transcontinentals were so poorly built they never provided cheap transportation, and parts of those roads had to be rebuilt later after bankruptcy hearings, and (3) the Irish on the Union Pacific fought with the Chinese on the Central Pacific, which sparked ethnic tensions nationwide. Furthermore, the costs of transportation were not so cheap because the transcontinentals went into receivership often, and their rates became highly regulated. Only when James J. Hill built a transcontinental road (the Great Northern) with no federal subsidy did the U. S. emerge with a competitive and unifying railroad.

As a final example, in 1971 President Nixon instituted wage and price controls to halt inflation. When the price controls were lifted a couple of years later, inflation skyrocketed, and remained in the double digit range for the rest of the decade.

All of these examples need to be discussed and debated to gain insight in how to make public policy. Let’s study a more recent example. The Brits and the Canadians instituted national health care with the goal of providing cheaper medical care for their middle-and-lower income citizens. What happened? The demand for health care skyrocketed, and the physicians in those countries had long lines of patients, some of whom died waiting for surgeries that never occurred. Wealthy citizens had the option of going to the U. S. for surgery, or using local surgeons during off-hours. However, the middle-and-lower income citizens, many of whom would have gladly paid for medical care, waited in lines and hoped to be treated as soon as possible.

Dr. Folsom’s findings confirm NPRI’s own research on tax dollar performance. Results decrease as Nevada spends more.