Government As Venture Capitalist

In January 2009, the administration claimed that if Congress passed a rush stimulus bill, the United States would be saved from economic catastrophe that was threatening to send unemployment figures above 8%. Government stimulus was the answer, and if we cared about our country, we would set aside our reservations and do what needed to be done to pass the bill. Congress passed the bill. Unemployment continued to go up and has been well over 8% ever since. (In fact, economist John Williams of ShadowStats finds unemployment to be closer to 23% using traditional methodology.) Yet some are claiming the first stimulus worked and all we need to bring back prosperity is more government stimulus.

Stimulus might appear to work for some people for a short time. It worked for a short time for Solyndra. For a time, they could pretend to be engaging in productive activities that would help the economy. For a time, unemployment was 1,100 people less. But the recent bankruptcy of Solyndra shows that the government is a terrible venture capitalist. This charade cost the American people over half a billion dollars they could not afford, yet there is no mea culpa. The administration is not questioning its calculations, or how they could have been so wrong on their unemployment predictions in the wake of the last stimulus.

Instead, they want more money. Once again, we are hearing the cry that if we care about our country, we will approve more spending and more taxes and that will create more jobs. They promise.

Yes, you could have gone to the Solyndra factory and you would have seen jobs. What you could not have seen were the productive jobs that were never created. Real venture capitalists make decisions based not on politics and photo opportunities, but on complex economic estimations of risk and reward. They don’t simply throw piles of other people’s money at a factory and expect magic to happen. The uncreated jobs you can’t see might still be around. Instead, we have more government debt, which will lead to more inflation and more taxes. These, in addition to an already hostile regulatory environment, only add to the burden and risk of job creation in the private economy.

It has been said that when all you have is a hammer, everything is a nail. Our government is full of people who sincerely believe big government and more spending is the answer to every problem. They automatically look to government for every solution. Government is their hammer, and all they know to do is to keep hammering. When government “solutions” still don’t solve the problems, they are unfazed. They keep calling for more government, more laws and more programs. Americans are tired of being treated like nails.

This government-centric mind-set is the root of the problem. People who think this way are naturally drawn to politics and government. To them, the Constitution is an annoying roadblock, something to get around, or ignore.

We must become interested in real, lasting, productive jobs — careers that allow families to build up a solid foundation of prosperity and economic security — not pretend make-work government jobs that waste resources and vanish overnight. We have to choose one or the other.


Ron Paul

The Daily Reckoning