Major League Spending

The people most certain they had nothing to learn were other Major League Baseball teams.  But of course they didn’t!  They weren’t a business, they were a Club.    – Michael Lewis, Moneyball

Government operations need overhaul

In 2017, we entered the 15th consecutive year of a federal budget deficit. During the same time period, total public debt has increased from 55% of GDP to about 105% of GDP.[1] In other terms, it’s over $58,000 for every man, woman, and child in the U.S.  Also take into account the U.S. paid roughly $225 billion in interest in 2015, about 6% of the total federal budget.  This payment is a result of historically low global interest rates.  Payment will rise substantially with future increases in interest rates.

fredgraph-2

Contention is present among economists over the consequences of the national debt. The typical neo-Keynesian view is that deficit spending can increase aggregate demand in the economy and boost output. Neo-classical economists (currently the most popular in academia) believe deficits and debt hurt private investment and may hurt future generations through inflation or higher taxes.

Whatever your view, the staggering increase in debt over the past 10+ years should be cause for concern.  Unfortunately the newly elected congress doesn’t seem to share the same concern.  Their newly proposed budget is projected to increase the national debt by 9.7 trillion over the next ten years.  It is unclear whether it will pass.

Money can’t solve everything

Consensus in congress seems to believe throwing money at issues will solve them.  Since 2002, federal spending has increased roughly 89%, the majority being financed by debt.[2]

fredgraph-3

Education is one system where more money doesn’t cut it.  The Pew Research Center reports that the U.S. spends the fifth most on education per capita, yet ranked 35th in math and 27th in science in the Program for International Student Assessment (one of the largest cross national tests).  Younger Americans fared much better on the cross national exams, but results were not quite proportional to spending.[4]

Disproportionate results signify systemic issues that cannot be resolved with more funding.

Enter moneyball

The novel Moneyball goes beyond baseball.  It is about a clash of knowledge.  The Oakland Athletics in the early 2000’s payed substantially less per win than their competition, while achieving much success.  This was enabled by their general manager’s devotion to statistical analysis as opposed to the gut feeling of baseball insiders, referred to by the author as “the club”.

The Oakland Athletics revolutionized how the game could be managed.  They showed that challenging conventional operations can yield great results.  Yet the club felt their method was being threatened, and ignored the opportunity to learn.  Refer back to the initial quote of this article and the analogy should be evident.

The private sector innovates and finds efficient ways to produce whatever good or service they specialize in.  The public sector does not share this affinity for efficiency.  After all, they can simply raise taxes, issue more debt, or print money to increase funding.  Imagine a private company running a significant deficit for 15 straight years, all while dramatically increasing their debt.  They would have been out of business long ago.  Its unsustainable.

Full Circle

I write not in the belief that the government should operate as a business, but a shift in that direction is warranted.

It doesn’t seem to matter who controls congress, the prevailing consensus is the same:  spend.

I don’t have any specific solutions in mind, but my hope in writing this is that you contemplate how the spend first mentality can be challenged.

Complacency stymies results.  Innovative thinking produces them.  The answer should never be to throw more money at problems.  Rather, focus should be on getting the absolute best results — and if that requires overhaul to expose systemic shortcomings, we shouldn’t shy away.

Your hard earned tax dollars are at stake.

[1] Federal Reserve Economic Research (FRED), https://fred.stlouisfed.org

[2] FRED

[3] https://www.americanactionforum.org/insight/administrations-regulatory-freeze-halts-181-billion-pending-rules/

[4] http://www.pewresearch.org/fact-tank/2015/02/02/u-s-students-improving-slowly-in-math-and-science-but-still-lagging-internationally/


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