Wednesday, February 10, 2010

Shovel Ready Project: The Government of the United States of America

Okay, granted, it's snowshovel ready, but have any of our readers noticed that our protector and nurturer, our coddler and milkteat known as the Federal Government has been shut down for 3 straight days? Is anyone else here afraid to go to sleep at night? Cynicism aside, I can't help but question what the director of the Office of Personnel Management (OPM) told NPR about the shut down:
You know, it's an opportunity cost of - we put a rough ballpark on this of about $100 million.
First of all, this was from a story yesterday so the DOPM's estimate may have only been for two days, thus making today's "lost opportunity cost" more like $150M. Second, I thought it worthwhile to get a definition of "opportunity cost" and found this one from "The Economist" (seems that they might have at least a ballpark idea of it):
The true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits (UTILITY) that you did without because you bought (or did) that particular something and thus can no longer buy (or do) something else. For example, the opportunity cost of choosing to train as a lawyer is not merely the tuition fees, PRICE of books, and so on, but also the fact that you are no longer able to spend your time holding down a salaried job or developing your skills as a footballer. These lost opportunities may represent a significant loss of utility. Going for a walk may appear to cost nothing, until you consider the opportunity forgone to use that time earning money. Everything you do has an opportunity cost. ECONOMICS is primarily about the efficient use of scarce resources, and the notion of opportunity cost plays a crucial part in ensuring that resources are indeed being used efficiently.

Okay, so now knowing enough about that to be dangerous, one might ask, "Well, then, what did the USG give up, in deciding to shut down most of its snow-covered area of operations?"

A lot of people are fond of saying that the US Government produces NOTHING. That is patently untrue. What the US Government has been producing extremely well for many, many years is staggering debt. And it is clearly undergoing a major reorganization to ramp up that production dramatically under the current Administration.

So taking the numbers from Office of Management and Budget's copy of the FY10 Budget, we see a predicted Debt Held by the Public of $9.882T (or $9,882,000,000,000) which was an increase of $1.351T from the year before). Because we are talking about spending FY10 dollars, let us just suppose then that the US Government this year is producing $1.351T of Debt Held by the Public while executing this budget. That equates to somewhere around $3.701B of Debt Held by the Public produced by the US Government each day (that gave credit to the government for working on weekends which they generally do not).
Now, it wouldn't be fair, or accurate, to assess that the government has been shut down 100%, so production continues, but to a lesser degree than normal. For example, the cost of the government continues (that is always paid for right off the top--self preservation) and, the relative handful of "essential" government employees are still reporting to work. And of course, the entire USG doesn't reside under two feet or more of snow at the moment. So let's conservatively, since we are largely conservatives here, assess the contribution of the shutdown USG offices to the production of publicly-held debt to be on the order of 2%. That drops the production of three days worth of shutdown to $74M/day X 3 days = $222M.

So would I be incorrect to suggest to DOPM that maybe the real "opportunity cost" of shutting down the Government for 3 days has been more like $150M - $222M = -$72M? And that the opportunity cost continues to decrease (or increase in the negative direction) with each day the contribution of the DC Metro area Feds stop producing debt?

Sounds like a White Christmas came early to us taxpaying debtholders this year.

4 comments:

  1. Krauthammer said last night the ChiComs only hold 2% of the debt, so quit the hystrionics over their sabre rattling and empty threats, call their bluff, and tell them to piss off....just as we've always done. They've got just as much at stake in our economy as we.

    ReplyDelete
  2. Go get 'em Mudge. You are right on as usual. You're Ok with me, I don't give a damn if you are ex-Navy.

    ReplyDelete
  3. Hello Everybody,
    My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.

    BORROWERS APPLICATION DETAILS


    1. Name Of Applicant in Full:……..
    2. Telephone Numbers:……….
    3. Address and Location:…….
    4. Amount in request………..
    5. Repayment Period:………..
    6. Purpose Of Loan………….
    7. country…………………
    8. phone…………………..
    9. occupation………………
    10.age/sex…………………
    11.Monthly Income…………..
    12.Email……………..

    Regards.
    Managements
    Email Kindly Contact: urgentloan22@gmail.com

    ReplyDelete