Lessons for Americans from Sochi Olympics

Dreaming of their legacies? Putin usually looks bored to death in his pix w/Obama. HT: CBS News via http://www.kmov.com

Does public spending boost economies?

Public spending is tax payer money – either from the present: income and other current taxes, or the future: public debt.

The argument for everything from sports stadiums, to convention hotels, to urban renewal, centers is the notion that spending your money now in the form of bonded debt (that pays interest to bondholders like union pension funds, etc.) will pay off in higher tax payments in the future. That has turned out to be wrong in 99.9 % of all cases.

Maybe it works for Communist or Socialist countries? Wouldn’t they know how to do it well, given their vast experience, failures they could have learned from, and their good intentions?

Maybe not.

Here’s the money quote from an excellent article in the Christian Science Monitor:

Alla Anashkina, an accountant who works with small businesses in Moscow, says that thousands of otherwise viable enterprises are dying each year because of heavy taxation, over- regulation, and crippling interest rates – which average about 20 percent on bank loans.

“Putin talks a lot about supporting small businesses, but in fact they’re being destroyed,” she says. “You can’t say it’s because of the Olympics, but it’s because state policies are making it simply impossible to survive.”

Putin is trying to burnish his legacy, the article says, without a detectable trace of irony.

What if all that spending – $55 billion!!! – helps “the poor?” Wouldn’t it be worth it? You know, “If it saves one kid, it’s worth it.”

Well, no. It doesn’t. It hurts them. CSMonitor again:

The seaside city of Sochi, once the USSR’s main subtropical resort for working-class vacationers, has seen most of its big health spas close down and replaced by luxury hotels the average Russian can ill afford.

Let’s stop repeating those mistakes. Let’s be willing to give up our government-supplied goodies in exchange for the abolition of other GSGs. Seriously. We’d ALL be better off.

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About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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