In addition to yesterday’s sturm und drang in New Hampshire, another storm was brewing: the release of President Obama’s 2017 budget proposal. Politico calls it “a clarion call for Democratic progressivism”; House Speaker Paul Ryan called it “a manual for the progressive Left's vision—higher taxes, more debt, & bigger government.” (My colleague Patrice has also commented on the budget.)

Unsurprisingly, a number of the President’s proposals under “investing in American Innovation” call for federal involvement in issues that are better left to the private sector.

For example:

  • There’s $7.7 billion in clean energy spending, a 20 percent increase over 2016… you know, because the feds’ track record with picking winners and losers in companies like Solyndra was so terrific, right?! Private investors and energy companies have shown tremendous willingness to invest in clean energy projects that show promise – and have steered away from projects that are risky or seem unlikely to succeed. It’s arrogant for the federal government to assume they possess the wisdom that experts in the field do not have – and it’s foolhardy to do so with taxpayer dollars.
  • There’s $33.1 billion to support biomedical research at the National Institutes of Health… which seems all well and good until you realize the public choice problem that federal funding of science creates. The Cato Institute’s Center for the Study of Science was created to study this problem, asking “Are there incentives in Washington, where there is intense competition for federal monies, to exaggerate various problems and issues? What effect does this have upon the scientific literature, which is the modern canon of knowledge?” Pharmaceutical and medical device companies willingly invest billions of dollars and dozens of years on research and development to bring new treatments to market – again, why does the federal government need to involve themselves in this process?
  • There’s $5 billion from the federal government (and a call for $5 billion from the private sector) to create a Scale-Up Manufacturing Investment Fund that will “help emerging American-made advanced manufacturing technologies reach commercial-scale production.” Again, why on earth do taxpayers need to come up with this money? Hasn’t the President ever seen an episode of Shark Tank, or heard of the venture capital industry? There are people whose whole careers are dedicated to identifying and investing in these projects!

Correct me if I’m wrong, but I don’t remember the section of the Constitution that references this kind of activity.

Federal investment in innovation is unnecessary; individuals and companies will make these investments on their own because they want to turn a profit. They’ll fund projects that are promising, and they’ll steer away from ones that are bad. That’s called market discipline, and it provides accountability. When the government gets involved in these kind of “investments,” it doesn’t really matter if they make a good decision or a bad decision, because it’s NOT THEIR MONEY. They don’t have skin in the game. There’s a great Milton Friedman quote about this:

“There are four ways in which you can spend money.  You can spend your own money on yourself.  When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.  Then you can spend your own money on somebody else.  For example, I buy a birthday present for someone.  Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.  Then, I can spend somebody else’s money on myself.  And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!  Finally, I can spend somebody else’s money on somebody else.  And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.  And that’s government.  And that’s close to 40% of our national income.”

I’ll be going through a number of the President’s budget proposal ideas over the next few days, so I suggest you make a run to the pharmacy today to buy ibuprofen. There’s bound to be a lot of banging your head into the wall.