Taxes never get spent wisely. There is little incentive to do so, and a lot of incentive to do otherwise.

That quote is not correct actually. It would be better to say, people will always look to government where you can earn more for doing less and often nothing.

Sometimes you have to build flood control structures, roads, telephones lines, electrical grid, and sewer/water lines. But, you try to hire low bid contractors in that case.

Aside from the obvious problems of corruption, there is simply no way for government officials to decide the best allocation of resources in building these things. The incentive is for those in charge of each project to simply spend the highest amount that they can possibly justify to their superiors. Without a profit and loss test, it is very difficult to determine if the end users of the project in question value the final outcome as much as it cost to build. Combine these two and it's not hard to see that the taxpayers are going to overpay for all of these projects.

Sure its great to have flood control structures, roads, telephones lines, electrical grid, and sewer/water lines. That is what people see. What they don't see how much of their money went to building these things, and how they could have gotten more or better of the same for less money.

They do try to pick the best option for the lowest cost. You have your land and then there is public land. The role of government is the public land. Most of the land should be public.

So I'm guessing Obama wasn't paying much attention to Bernanke...another trillion dollar deficit for next year...

Really don't want to hijack, but are you arguing the government doesn't conduct cost/benefit analysis? That's just plain wrong.

One of my profs is Argentinian and he says official Argentine figures on inflation are the most rigged thing ever. Hyperinflation is probably a stretch but it is at least 30%. One hilarious story was that the government forced McDonalds to price the Big Mac at a fraction of everything else on the menu so the peso didn't appear overvalued in The Economist's Big Mac Index

I'm arguing they have no basis to do so correctly. They can't value the opportunity costs or the benefits, which are subjective and highly dispersed. They also have no incentive to do so correctly. For example, who would give their boss a cost/benefit analysis recommending that the project they are in charge of be scrapped?

This is why they hire independent economists.

http://www.zerohedge.com/news/ecb-ha...%E2%80%99s-box

Thoughts on this?

A bunch of hysteria driven nonsense?

In summary, I think it means the debt is less valuable. I would not buy U.S. debt or Euro debt unless it paid 10% interest.

That doesn't solve either problem.

A team of independent economists being paid to conduct a cost/benefit analysis, who could care less whether the project is approved or not, have no incentive to do their job correctly? I would love to hear you say that to some of the guys I know who have worked on the exact thing we are talking about.

They may be doing their best to be unbiased, but if they didn't accept the government's paradigm, they wouldn't have gotten the job in the first place (and probably would not have even tried).

Now you're arguing no government project proposal has ever been rejected after failing a cost/benefit analysis. That's incorrect.