There was, the money was taken to spend on Government expenditures, rather than private sector ones.
Government crowds out credit markets leaving less for the private sector to borrow for itself; incidentally not just for us, but for people in other nations as well.
Pretty sure if someone was interested in finding bonds to park their money in, and T-bills weren’t available, they’d look for something else.
It wastes portions of the money in transactional costs and paying off interest; the returning money is never 1:1, and never has been.
Time value of money is also in play; waiting for the Government to spend it, means there was less opportunity in that same time for the private sector to use it. In the meantime, the value of that money decreases.
Then there are again the false signals the Gov’t spending creates.
Many Government projects are the equivalent of seeing the circus come to town, restaurants nearby expanding to meet the new flush of demand… only to see all that new demand disappear once the circus leaves, and the restaurants having gone into debt for nothing.
Government spending creates micro-recessions, where labor and capital have to be relocated to somewhere else where demand is more permanent.
Private sector was building roads before the Government, and still builds them today. I take E-470 everyday to work.
What it doesn’t do is build them in the middle of no where, or **over**build them.
The Former is a case of transfer payments from more developed portions of the country, to less developed portions, and the latter… let’s just go with Detroit as the poster child of what is wrong there.
A city that brags about all the highways they have, and continues to build more… despite traffic on their road decreasing year after year.
Oh, and as to Dams? We have seriously built too many. The Bureau of Reclamation, didn’t know how to control itself, and has basically caused mini-droughts all over the country because of it.
Most dams not pay for themselves; they’re simply white elephant infrastructure we didn’t need.
The private sector built dams before too, but they couldn’t compete with how the Bureau did things.
The biggest example would be TARP, it created dozens of these moments, and failed to so much as create $1 worth of activity for each one it spent. Much less the multiplier it was premised on.
So no, consumption is not made equal. Market are better allocators of consumption, as they know better when to stop when they aren’t creating wealth.
But since Government is answerable first to political incentives, not markets, it’s far less sensitive to when it wastes resources.
Half the reason Detroit keeps building roads, is simply so it can continue to take advantage of Federal grants that will keep portions of their workforce employed building roads that… hardly anyone uses.
In addition, these roads end up becoming one giant liability they won’t be able to maintain going forward.
And what do you call averaging 1% growth all this time?
What do you call being in last place among developed Asian economies, nearly all of whom had double the performance?
It’s because of that latter point that we know this isn’t due to convergence; Japan has mishandled itself, and the debt internalization policy is largely to blame. They are essentially a slow-motion version of what is happening in Greece, and they’ve hollowed out their household savings rate in the process.
In Japan, wages are far less sticky. They decline wages, so people end up working more, for less pay, without being let go.
It’s similiar to the Russians right now; their economy was cut in half, but unemployment has remained relatively stable.