All Government Spending Ain't Good Spending

7/26/2010
By Charles Payne, CEO and Principal Analyst

On Monday, July 19 on "Varney & Co." on the Fox Business Network I asked Pennsylvania Governor Ed Rendell, who stated each dollar of unemployment creates $1.80 in the general economy, why we just don't lay everyone off and pump out unemployment checks. He cracked a knowing smile and I segued into a different question. The point is those that believe any spending is good government spending seem more out of touch than ever. Yet, this continues to be the prevailing wisdom in Washington even as there have been overtures about the need for the private sector to lead the way. They don't really believe that in the Administration, they understand poll numbers and the need to placate the public.

This brings me to that amazing statue in Senegal that has gotten very little press in the United States. The statue, completed this year, of a man, woman and child is a wonder. At 164 feet, it's one foot taller than the Statue of Liberty. President Abdoulaye Wade says the statue speaks to the nation's freedom from slavery and colonialism. Political opponents in Senegal say the statue is designed to represent Wade, and is the "foundation of dynastic reign." I can understand the pride associated with the 50th anniversary of independence but this is a seriously poor nation that needed to exploit its resources in a wiser manner. It's no surprise Wade is a Democrat and has stated he is entitled to 35% of any revenue associated with tourism generated by the statue.
Last September, the United States awarded Senegal $540.0 million to encourage and reward good governance. As a democracy, the African nation stands as a model of stability. It also stands as an example of how even a democracy can go wrong. President Wade won election a decade ago, wrestling the nation from 40 years of rule by the Socialist rule. The former French colony has tried all kinds of things, including cutting the value of its currency and pegging it to the Euro. Massive government spending on ill-conceived projects has not helped the economy.

Per capita GDP of $1,600 ranks the nation 196th in the world, while unemployment stood at 48% in 2007.

Here's the kicker, the country is like Cuba of Africa where scores of young men (and occasionally women) brave the rough ocean and sea waters to escape on barely seaworthy boats. Yet, the country cut a deal with North Korea to build the monument. At $27.0 million, the cost of the statue (along with land given to the North Korean government) could have been invested in way to help lift the nation out of poverty. I understand the thinking behind such a spectacle; it's what drove my friends to go tag (draw graffiti) subway cars and buildings when I was in high school. (Yes, I went along once, but it was too dangerous and felt wrong.) People with nothing want to scream to the world..."hey we're here and we want to be heard."

But...

At the opening ceremonies the Rev. Jesse Jackson stated "This renaissance statue is a powerful idea from a powerful mind...this is dedicated to the journey of our ancestors, enslaved but not slaves." Well, massive government spending on anything, even prideful things, ultimately propels that nation into a different kind of slavery, bondage to foreign note holders and cycles of despair and poverty. I respect Governor Rendell as he is a smart cookie so he tries to hedge when he's selling the company line of spend baby spend by talking about it being temporary. Hey, maybe they're just trying to build a monument to rival them all, but instead of copper figures it's just stacks of IOUs that certainly tower over any 164 foot structure. Even a rich nation can be reminded that any old government spending isn't smart.

It's a magnificent monument, and maybe one day I will get to see it in person. But I admit I'm not in a rush to visit any nation where half the population is unemployed. Last year I scratched Spain off a list of places I wanted to see when its unemployment rate tickled 20%.

Charles Payne
Wall Street Strategies

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