Government Spending and Economic Growth

                       

There is a major difference between a dollar “invested” by government and a dollar invested by private industry.

                       

Too many politicians believe that it’s better if government makes the decision to spend. Or as they often say, “invest,” as opposed to private enterprise doing the function.

                                       

The government allocation is made by a political decision. That is often subject to pressures which have nothing to do with supply and demand. Rationing and corruption are bound to follow. The other, privately imposed decision is, however, more likely to conform to what the public wants.

                       

Moreover, private industry investment has a multiplier effect, while government spending usually does not.

Government jobs have no leverage impact on the economy. Their purpose often has political, social and environmental intentions. Governments do not innovate and create new companies and multiples of jobs. Nor do they enervate the needed psychology of a booming economy. Psychological effect is most important. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)