Saturday, July 30, 2005

The cost of our politics

Both houses of Congress have now passed and agreed on an Energy Bill and a Transportation Bill. In both cases, mega-bucks go to large numbers of projects that could not pass a benefit-cost test nor could many of them pass any sensible federal role test. The motivations of the Congressional reps involved is self-aggrandizement and re-election. Business as usual in an atmosphere of stunning rational ignorance and/or superficial due diligence from voters.

Yet, we manage 3.4% quarterly GDP growth (probably to be revised upward), even while oil prices top $60/barrel, more than one costly war engages us (here and abroad), most urban public schools remain dysfunctional, unfunded liabilities are practically ignored in the face of the cold demographic facts of life, bizzare tort settlements abound, etc. One wonders, how rich would we be if our politics could generate just a few common sense policies?

We will never know but researchers have often benefited from cross-sectional studies of the 50 states. For example, the Fraser Institute's Economic Freedom of North America: 2005 Annual Report points to an answer. More economic freedom means greater prosperity -- and they tell us how much: "... a one-point improvement [on a scale of ten] in economic freedom on an all-government index increases per capita GDP by US$ 5,907 ..."

As near to a free lunch as we will ever get? Back in the real world, members of Congress are now flying home to bask in their accomplishments.