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One of the primary “accomplishments” of President Obama’s first 100

days in office was the Recovery and Reinvestment Act of 2009 being

passed. According to <a target="_blank" href="

“http://recovery.gov/”>recovery.gov, “In the face of an

economic crisis, the magnitude of which we have not seen since the

Great Depression, the American Recovery and Reinvestment Act

represents a strategic — and significant — investment in our

country’s future.”

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With a price tag of $787 billion, calling it a significant

investment is an understatement. The entire federal budget in 2007

came with a price tag of $2,963 billion dollars, so the stimulus

package represents a nearly 25 percent increase in federal

spending.

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Investment is “The investing of money or capital in order to gain

profitable returns, as interest, income, or appreciation in value,”

according to Dictionary.com.

The idea is that by giving up something now, you will receive

something better in the future. People invest all the time. For

example, people invest their money in banks, real estate and the

stock market with the intention of receiving more money at a later

time.

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Most of you reading this right now are probably investing your

money, as well as a great deal of your time, on an education at

Iowa State. Presumably, by attending college you hope to get a

better paying, more desirable job after college as a result of your

investment.

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Entrepreneurs invest their time and money into businesses, with the

hopes of making that money back, plus more in the future. Even

dating can be seen as an investment of your time and money in

another person.

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Since the purpose of The Recovery and Reinvestment Act is to

“…[invest] in our country’s future,” we can reasonably assume that

our government expects — or at the very least expects us to believe

— that the $787 billion that it spends will yield a net positive

result of more than $787 billion.

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However, something else that needs to be considered is what’s known

as opportunity cost. 

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Opportunity cost is “The cost of an alternative that must be

forgone in order to pursue a certain action. Put another way, the

benefits you could have received by taking an alternative action,”

according to <a href=

“http://Dictionary.com”>Dictionary.com.

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As I mentioned earlier, people invest all the time. So the real

question is will the $787 billion spent yield, not more than $787

billion, but more than it would have had it been spent by the

people instead?

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Some of this money will come through increasing taxes on the rich.

This is because, according to the Fiscal Year 2010 Budget Overview,

“For the better part of three decades, a disproportionate share of

the Nation’s wealth has been accumulated by the very wealthy.” 

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I can’t help but point out that some of your tax dollars actually

went towards paying someone to determine that wealthy people have

more wealth.

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Some of the money will also come from you through inflation,

whether or not you are considered rich. This is because, as

Economist and Senior Fellow at the Hoover Institution of Stanford

University Thomas Sowell says, “Inflation also means that all the

talk about how higher taxes will be confined to “the rich” is

nonsense. Inflation is a hidden tax that takes away the value of

money held by everyone at every income level.”

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That is also why the Chinese have begun to sell their U.S.

government bonds. As Sowell said, “The Chinese are no fools. They

know that all this unbridled spending — even when it is called

‘investment’ — means that inflation is coming. That in turn means

that the dollars with which U.S. government bonds will be paid off

will be worth a lot less than the dollars with which the bonds were

bought.”

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And of course, some of it will be borrowed and paid for later with

interest. In 2007, the total cost of interest on treasury debt

securities was $430 billion.

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The Fiscal Year 2010 Budget Overview explains that, “[The] lack of

investment in the future is most glaring in the area of clean

energy.” The resulting priorities are doing things such as slowing

global warming, doubling renewable energy generating capacity and

developing low-carbon emission technologies.

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One might think that during “…an economic crisis, the magnitude of

which we have not seen since the Great Depression…” our priorities

wouldn’t have so much to do with clean energy as it would with

cheap energy.

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The reason that this is not the case is because of differences in

incentives. If you were to keep your own money and invest it, you

would undoubtedly invest it in what seemed the most profitable

fashion, likely after a thorough investigation of the financial

implications of your options.

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This is especially true for the rich. They tend to make good

investments — that’s why they’re rich. Which does make it

questionable as to whether taking a disproportionately high amount

of their money is really a good decision.

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Politicians also invest their money in what seems to them the most

profitable fashion. But the thing is, what is profitable for a

politician is whatever gets them reelected and pleases the special

interests who give them donations. This is true for all

politicians, regardless of party — because the ones whose politics

weren’t aimed at getting them elected were probably never elected

in the first place. That is the unfortunate nature of politics.

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The problem with allowing politicians to invest your money for you

is that they rarely have a better idea of what is best for you than

you do. And even if they do, it is not necessarily what is best for

them, which is what really matters.

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The solution is simply to vote for politicians whose personal

interests are to let you keep your own money, otherwise known as

fiscal conservatives. Since their support tends to come from groups

who also want to keep their money, it is in these politicians’ best

interests to refrain from making “investments” on your behalf.

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 — Blake Hasenmiller is a senior in industrial engineering and

economics from De Witt.