The fallacy comes when you assume that since such spending *can* result in economic growth that it will *always* do so.
This fallacy also works in your paradigm of investing funds. I can rattle of a list of failed companies that received private investment too, generally these companies effect much more than just the people investing too.
Yes. Key point being "failed companies". What I'm trying to get you to see is that when the private market invests poorly, it fails. Companies which invest well, succeed. When a private employer hires someone and that person produces more value for him than it costs to hire him, the business succeeds. When he hires someone who costs him more than he's getting, the business fails (or has to lay off workers).
The private market provides a mechanism by which we can determine if what we're doing is creating more economic value than it costs, or not. While we can (and sometimes do) step in to adjust those outcomes, we always at least know when something isn't working. The public sector has no such mechanism. There is no immediate way to tell if we're overpaying the guy working the counter at the DMV, or if subsidies for "green energy" are costing us more than the benefits of the result.
That's why the idea of "investing" by spending more money with the government is questionable at best. In the private market, you know if your investment fails. In the public arena, it's much harder to tell. And frankly, since the government doesn't have to earn its money by producing greater value than it consumes, it can always cover for its failures by consuming more from the taxpayers. This results in even worse economic outcomes as we take from those parts which are successful (by definition, since we tax profits) and spend it on things which are almost certainly not.
Case in point the collapse of the Banking system in the US caused massive foreclosures, bankruptcies, massive layoffs, which resulted in an seemingly unending spiral of job loss, and the worst economic downturn since the 30's.
This was entirely the fault of the investment practices of the banking sector, and those who preformed those acts. (investment bankers, and private investors).
I think at least a little fault has to lie with the government programs in place which created those investments, set up the loan requirements, funneled them through the GSE's ***** and freddie, then covered up the problems with those loans when questions started to be raised. Absent government intervention, the private market would *never* have created mortgage backed securities, and certainly would not have used the sort of bundling system that the government created, and absolutely would not have pushed ever more sub prime customers into the mix.
Want to know why? Because the private market is profit driven. The government is not. The problem arises when the government manipulates the market (like it did here) to make it social agenda appear to be profitable in the short term. That's when you get big collapses like we saw with the financial markets.
I would love for you to provide an example of a government (public funded) investment (or as you call it spending) that has resulted in any where close to the same type of catastrophic collapse that private investment has caused recently, and numerous times in the past.
Um... The stimulus bills. Specifically Obama's recovery act? That has done massively greater harm to our economic outlook than the economic downturn which was used as the excuse to pass it in the first place. He certainly used the "investment" label many times in relation to that spending. It was a monumental waste of money, which has slowed economic recovery IMO.
So there's your example. Of course, as I mentioned earlier, we could also talk about the "investment" in housing by the government as a core cause of the initial financial meltdown in the first place.
The government has the power to provide benefits directly to investment opportunities, it is why the tech boom was so great in the late 90's early 00's, the major governments around the world provided large benefits to people exploring these new areas, and as such employment in these fields sky rocketed.
Huh? Government providing seed grants for R&D is one thing, but direct investment? There was very very little of that during that time period, and it had very very little to do with the tech boom. Do you think that the US government was behind the rise of Microsoft, home computers, or the internet? It helped by creating an environment in which those things could happen (more directly in the case of the internet of course), but the explosion happened when government got the **** out of the way.
It is why Clinton had an unemployment rate of under 5% and a surplus at the end of his term. Bush decided that regulation should be dropped on these companies, and then we had the nortells, and enrons and subsequently the 2008 sh*tstorm.
Um... That's not remotely what happened. Clinton's economy did benefit from the tech boom of the late 90s, but that had nearly nothing to do with Clinton era policies. It did create a bit of a bubble though, but that's a slightly different subject. Certainly, there was no guiding hand of the government leading all of that.
Government investment will always be more stable, because the government can manipulate markets when ever it needs to adjust the balance.
This is what the Keynesian economic theorists tell themselves (and anyone else who'll listen). And while many of their theories do accurately predict outcomes, they don't actually allow for the sort of proactive control that the advocates try to claim. The problem is that those theories are based on "natural" market forces. The second you start using the government to manipulate things, those predictions stop working.
It's why the Obama administration predicted that summer 2010 would be the "summer of recovery", but it wasn't. They were looking at very consistent stable data sets which said that 2 years from the delta point on the unemployment line during an economic bubble crash, the unemployment numbers will turn around and recovery will be realized. His economic team could easily look at the factors in the economy and make that prediction. The problem is that they assumed this would happen *because* of their interaction, and didn't realize that their interaction (like the before mentioned stimulus bills) actually affected the economic reality and changed the result.
It's why we're still sitting nearly 2 years later waiting for recovery to happen. They use predictions which assume that you don't mess with the economy to justify messing with the economy, and then stand around confused when things don't work out the way they thought they would. Meanwhile, us silly uneducated conservatives tell them that it wont work, then when it doesn't work, we remind them that we told them it wouldn't work. Yet somehow we get ignored in all of this. Cause it's the liberals who know what they're doing, right?
Government is not the solution. Government is the problem.