Why Government Shouldn’t Try to Pick Winners

Whenever the government meddles about in any given market, trying to designate its preferred winner or outcome, it invariably fails.  Right now, the Exalted One is involved in doing just this on a number of fronts; the auto industry, the energy industry, the medical industry, the financial industry and so on.  In the auto industry, The One gives us the Chevy Volt:

Not a bad looking car.  But you can get a non-hybrid counterpart from Chevy for about $25,000 less.  Chevy had more or less mothballed the Volt until the government bought 61% of them and ordered the Volt to be brought to market.  Obama, you see, knows what we want better than we know what we want.  Prediction:  neither the Volt nor its lower-cost counterpart (the Cruze?).  See, that’s how I know it won’t sell.  I can’t even remember the name of the car.  But, because O wants to see “green” stuff (let alone the fact that there isn’t anything significantly more green about the Volt), the Volt gets built.  It’s suits his political purposes.  Sometime in November, O is going to force GM to go public and it has little to do with whether or not it makes good business sense.  It will happen because it suits O’s political purposes.

For decades, government has mucked about in the housing industry.  Mortgage interest deductions, Fannie and Freddie doing their thing with the sub-prime stuff, flood insurance and so on.  Here is proof that all this centralized planning (and that is what it is) has failed.  18 months and billions of dollars and the Moron in Chief still thinks that throwing another $50 billion or so at the economy will somehow magically cure it.  Here is an open letter to the President by Dr. Jeffrey Harding, an economics blogger that tells him exactly what the problems are and how to address them.  The blogger is right on every point.  (BTW, any time you read an econ blog you must read the accompanying comments.  They are frequently better and more informative than the original post.)  From ZeroHedge:

“Here are some guiding principles for "what works":

1. Economies can repair themselves without a lot of government help. History has proven this time and again.
2. Government interference in the repair process can hinder recovery or even make things worse.
3. Government spending is very inefficient.
4. Individuals can make better choices about what to do with their money than the government.
5. Economic growth only comes from private enterprise. The corollary of this is that government can only spend money, not make money.
6. Since government produces nothing, then real growth and real jobs can only come from private enterprise.
7. If government spending is inefficient and if economic growth comes only from the private sector, then taking vast amounts of money out of private hands and putting it into government hands will hinder growth.
8. Government spending to revive an economy has failed wherever and whenever it has been tried.
9. More legislation increases uncertainty for businesses, making them reluctant to expand (called "regime uncertainty" in economic terms).”

As noted in the comments, this viewpoint and the accompanying advice will be ignored.  It doesn’t fit with O’s worldview.

This just in and related to this post.  Austan Goolsbee is on the Prez’s Council of Economic Advisers and may be up next to replace the horribly inept Christina Romer.  This admittedly wonky piece basically sums up what I have been trying to say here.  So-called “targeted” spending or incentives don’t work, and Goolsbee based his doctoral thesis on this finding.  Now, he has to dance around his own work.  Should be fun.

Finally, here is what happens when a politician goes off the deep end when it comes to spending money based on his own preferences.  Learn about Russia’s Chess City, built in 1998 on the whim of a politician.  Why, he likes chess so everybody must like chess just as much! 

Chess City is crumbling, by the way, and largely uninhabited.  So, what color Volt are you gonna buy?