Multiplier effects to no effect

Patrick Gibbons

*If focusing on jobs and spending was the smart thing to do, then we should hire people to dig ditches and fill them in again. But what does a ditch filled with dirt do for the economy?

If there was any doubt that government’s primary focus (whether conscious or subconscious) is on growing itself rather than on serving taxpayers, last week’s Interim Finance Committee meeting should lay those doubts to rest.

At least four times during the meeting, the term “multiplier effects” was mentioned. Multiplier effects are like ripples in the economy. Someone spends money and someone else gets the money to spend on something else, and on and on.

Senator Bob Coffin, Nevada System of Higher Education Chancellor Dan Klaich and Clark County School District Superintendent Walt Rulffes all worried that cutting jobs would have a devastating impact on Nevada’s economy. Eliminating those jobs would mean those people would not be able to spend money in other areas of the economy.

But this raises a question: From whom did the government take the money in the first place, and what are the negative multiplier effects that resulted from that loss of money?

Only Rulffes gave any indication he was on the right track on that issue. Rulffes argued that if the state took Clark County’s bond revenue to avoid laying off teachers, then the effect would be a need to lay off construction workers.

But he still didn’t go far enough. In order to pay back that bond revenue, the Clark County School District relies on special taxes. Every dollar spent by the district on school construction is a dollar that citizens can’t spend in the private sector on things they need.

This brings us to the major problem with focusing on spending and multiplier effects: production. Coffin, Rulffes and Klaich believe that cutting government jobs would be the worst possible thing for Nevada to do. Yet they believe this only because they’ve apparently forgotten where the money came from in the first place.

The only way their assertion could be true is if the money were used more productively by the government than it would have been by those who originally earned it.

Quite frankly, they’d have a hard time proving that. Today, the Clark and Washoe county school districts employ one adult for every eight students. Yet the results, as measured by quality of education, have been stagnant. And higher education does no better. The Nevada System of Higher Education saw its funding increase at a rate of 7.9 percent per year from 2001 to 2008, yet the quality did not improve. Fewer than half of all students at UNR and UNLV graduate after six years.

At the very best, funneling loads of money into education has done nothing for our economy. It certainly has done nothing for the quality of education. But since the government’s confiscation of that money means people in the private sector have less to invest in goods and services that improve their lives, it is most certainly the case that the increases in education spending have damaged Nevada economically.