The negative economic impact of government education projects

Statists never abandon their attempts to justify various government projects: welfare, employment and education are the big three—all subsidized with taxes and removing vast amounts of money from the productive private economy.

A recent Wilmington StarNews article by Phil Fuhrer illustrates this folly with a self-serving report about the “powerful financial relationship” between the University of North Carolina-Wilmington and the Cape Fear Community College. Spending by these government organizations during FY 2012-2013 “generated $1.2 billion in regional income,” according to Mr. Fuhrer’s report.

Most of the article involved interviews with college officials bragging about their cozy relationships and programs. Vague references were made to “thousands” of former students being employed in a three-county area; “better quality of life for our region”; “higher paying jobs”; and “a stronger economic climate….”

Of course, nothing was noted as to where all this spending money comes from—who benefits and who loses. Not surprising, a look at the Economic Modeling Specialists International website revealed why I call this a self-serving report.

EMSI “clients” include “higher education.” The EMSI “products” involve “measuring the benefits of further and higher education.” Its mission includes “helping universities understand their local communities by using our data and tools, so that they can be even more focused on their goals….” One staff member’s biography states that he has “a keen interest in embedding and using economic rigour in understanding the development needs of organisations.”

Can we assume that our university system spenders use taxpayer’s money for this self-promotional service? Probably.

Even worse, this propaganda misleads the public about the real, and negative, impact on our economic system. Economics writer Henry Hazlitt in his little paperback book titled, “Economics in One Lesson,” identifies the fallacy illustrated here:

Everything we get, outside of the free gifts of nature, must in some way be paid for. The world is full of so-called economists who in turn are full of schemes for getting something for nothing. They tell us that the government can spend and spend without taxing at all; that it can continue to pile up debt without ever paying it off….

Hazlitt explains that money spent on public projects deprives taxpayers from having it to spend on things they most need. Every dollar spent by government is a dollar taken away from personal productive use. We can see the result of government spending; for example, driving up or down College Road we notice a lovely landscaped campus with large brick buildings, athletic fields and parking lots. What we can’t see is fewer jobs for productive workers and wealth not created because the money has been diverted to this public project.

Finally, the late great economist Milton Friedman describes in his book, “Capitalism and Freedom” a fundamental economic fallacy with funding higher education:

The subsidization of institutions rather than of people has led to an indiscriminate subsidization of all activities (interesting to) such institutions, rather of the activities appropriate for the state to subsidize.

Examples of this right here in River City are the construction of a multi-million dollar arts and culture building on the rapidly expanding  downtown Cape Fear Community College campus and the entrepreneurial program spending at UNC-Wilmington—resulting in more unnecessary, wasteful debt and taxes for the local citizens.

And what are we getting for all this spending by Big Ed?


About R. E. Smith Jr.

Mr. Smith writes essays and commentary on politics, American history, environment, higher education and culture. He's been published in print media and at blog sites for about 25 years. Smith's formal education includes B.S. and M.S. degrees from the State University of New York and Syracuse University. He has earned a 21-credit hour Certificate in Professional Writing from the University of North Carolina-Wilmington. Training/work experience: NYS Ranger School; U. S. Army, Corp of Engineers; soil scientist and forester with USDA; Assoc. Professor at SUNY; real estate agent; small business owner.
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