Wednesday, February 23, 2011

How to Make $200 Million Disappear

The local paper is predictably liberal in editorial and news coverage, yet they noted a particular Federal Program was a total failure, with almost nothing to show for $200 million. The idea was to create programs and grants to replicate successful poverty-fighting projects in North Minneapolis (the poor part of town), they started with "listening sessions'' to hear directly from folks about their priorities. A strategic plan was hammered out to "reduce poverty and create wealth through community investment, resident engagement and business support." But then as one insider said: "I would get calls from people [at nonprofits] asking, 'What's going on?'' The paper reports basically nothing happened.

The successes included these wonders: leadership training to more than 100,000 people in 283 communities and a new business incubator for chefs, caterers and other food industries called Kindred Kitchen. It's rather amazing that so much money can disappear like that, but given the Department of Education spends $60B and the CIA spends $28B on nothing I am aware of, I guess one should never underestimate the ability of a bureaucracy to spend.

But, hope springs eternal. Recently Minnesota qualified for:
$40 million over five years to develop programs that help aged or disabled people move from care institutions into the community.

Developing programs to do something seems like a reasonable first step, but it's quite different than actually doing something. When participants don't have a goal that's really sustainable, as when private investors try to build a business, the result is nothing.


J said...

It did not disappear. It was invested in hope.

pce said...

"When participants don't have a goal that's really sustainable, as when private investors try to build a business, the result is nothing."

Oh yes, the IT bubble was 100% private investors building sustainable businesses!

Let's face it, good and bad ideas can come from either public or the private sector. That's the point of evolution in economies: generate variation and select.

Anonymous said...

I agree and I want to hear more about "when private investors try to build a business" - I think that might be underappreciated and hopefully you have some examples.

Eric Falkenstein said...

Many businesses fail, and their investors suffer capital losses. When government fails, those in charge are mainly congratulated on how much they 'did' (note Gore's key vote in creating the ethanol debacle, or Sargent Shriver's peace core--still sainted, but zero if not negative results).

But on average industry has expanded, and is the essence of productivity growth, why we are so much wealthier than our grandparents. Government, meanwhile, is subject to Gammon's black holes, where bureaucracies actually become less productive the larger they become on an absolute level.

Anonymous said...

having worked in a government agency id say I share you bafflement as to how the money gets spent. I suspect a lot gets spend on temporary staff, contractors and consultants who rarely quote competitive prices. It is definably not the civil servants who are enjoying the money (the talented, hardworking ones are horribly paid) as I would hear them quote $2 million as if it were a bar tab while driving to work in a 20 year old civic.

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