Sorry, Economists! Governments are not Businesses. They are Nonprofits!

Citizen Wealth Financial Justice

New Orleans       When someone from the very conservative, totally pro-business American Enterprise Institute feels it is necessary to remind people that a simple cost-benefit analysis was not necessarily appropriate when evaluating social programs, we have to wonder whether something is terribly amiss or at the least totally topsy-turvy.  Nonetheless, there it was in the Wall Street Journal of all places with the AEI’s director of economic policy studies, saying, “There are things where a marginal dollar might not have a large return on investment but are extremely important.”

What the frick is going on here?  We recently talked about a couple of curious economic research reports that came to the bizarre conclusion that when looking at the impact of evictions on people who were already poor they concluded that they were only a bit poorer after the eviction, seemingly making the point that it was significant, but not cataclysmic.  Now we’re looking at another group of economists from Harvard reporting on their deep dive into the numbers of 133 different policy initiatives in the US over fifty years.  This time they wanted to apply a standard on which of these social expenditures in things like welfare, food stamps. Medicare, and the like “made the government money, generally in the form of beneficiaries who needed less assistance over time or who became more productive and paid more taxes,” according to the Journal.  Restraining our disgust with the basic proposition for a minute, the topline conclusion from these economists was that the best investments were in children’s programs like education, health, and college, where the government gets back forty-seven cents for every buck, as opposed to the government programs for adults where they argue it costs an extra sixty cents for every dollar the government paid.

This is carrying neoliberal values imposed on public authorities to a disturbing and disgusting levels.  Sure, it’s interesting.  Sure, kids count, so let’s do everything we can there, and in fact let’s double down, but that’s not the point. The very assumptions seem whack.  Governments are not the same as Wall Street moguls.  Governments have responsibilities for their citizens, all their citizens.  Governmental expenditures in serving and providing for its people are in fact categorically NOT INVESTMENTS in the business sense of the word.  Perverting the role of government expenditures in social programs or anything else including defense as relevantly measured by a standard of whether it yields a profit is simply obscene.  In his own elegant way, that seemed to be a gentle reminder even from AEI guy for goodness sakes.

When their results were charted, money losers included housing vouchers, nutrition, welfare payments, adult health like Medicare, where damned if those pesky old people didn’t keep on getting sick and dying, so the government lost money.  At the bottom of the list was unemployment insurance as a big loser, but, hey fellas, workers pay a huge chunk of that as insurance, chump, not as an investment.

All of this was done under the rubric of the Raj Chetty and his Opportunity Insights outfit at Harvard.  According to his profile in The New Yorker, he and his team are hoping all their work influences the 2020 election.

Wow!  I’m starting to hope that is definitely NOT the case.  His earlier study showed the dim prospects of making it anywhere but on the coasts, and concluded that we should pretty much give up on rural areas entirely having any opportunity.  Now this study wants to turn government into business, expenditures into investments, and bring us into some corporatist cost-benefit worldview.

Yikes!  We need to step back and take another look at this project because it might should be named Opportunity Insults rather than Opportunity Insights.


Please enjoy Human Touch by Jackson Browne & Leslie Mendelson.

Thanks to KABF.