ACCUMULATING PERIPHERALS


Bankers can waste money faster than bureaucrats by mattsteinglass
January 23, 2009, 1:32 pm
Filed under: Economics

Megan McArdle asks:

How come progressives opposed to TARP II are very, very worried about the cost to the taxpayer, but not worried at all by the cost to the taxpayer of a massive fiscal stimulus, a lot of which is nearly guaranteed to be wasted by virtue of the speed with which the money must fly out the Treasury’s door?

It’s a fair question. Two responses come to mind. The first is that the spending contemplated in the fiscal stimulus bill largely consists of programs that progressives have been demanding, on their own merits, for many, many years now. That includes everything from increased spending on transportation infrastructure to expanding SCHIP. Conservatives may think these programs are wasteful, but progressives don’t, so that’s why they’re not so worried about wasting the money.

The second response is that TARP I has made it clear that financial institutions appear to be able to waste money at an astronomical pace that simply dwarfs the excesses of any government bureaucracy (except perhaps the Pentagon). $350 billion is literally (and by that I mean “figuratively”) enough money to fully fund every single proposal made by any wild-eyed progressive since 1992. That may be a bit off, but not by much. And we’ve thrown that money into Wall Street in just 3 months, and Wall Street is now largely unable and certainly unwilling to account for it; it is not clear that the money is being used for anything apart from propping up a few banks that ought to have failed. If we spend $350 billion on infrastructure, the American people will have bought a lot of infrastructure. Some may be useless, but most won’t. Instead we dumped it into financial institutions, and because the equity situation remains unclear, it’s not clear whether the American people bought anything. It appears that when you sign over large amounts of taxpayer money to Wall Street, one of the things that can happen to it is that it can simply cease to exist. As inefficient as some government agencies are, they can’t make money disappear that fast without any results.

The attitude shift here comes on top of what happened during the Iraq War, when it was revealed that while spending an extra couple of billion dollars a year to send every poor American kid to preschool was wasteful and unaffordable, we could easily come up with a trillion dollars for a rather useless war. At that point, a lot of progressives who had internalized valid conservative points about budgetary constraints and bureaucratic inefficiency decided to, well, de-internalize those points.

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[…] Steinglass at Accumulating Peripherals compares bankers to bureaucrats. He notes, “financial institutions appear to be able to waste money at an astronomical pace […]

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