By DAVID MOON, Moon Capital Managment
December 5, 2004
On the front page of last Monday's News Sentinel there was a nice story about
a $500,000 federal grant for the Museum of Appalachia. The founder of the
pioneer life museum, John Rice Irwin, is a fine and fascinating man. He
will spend the money wisely. An already outstanding tribute to rural
Appalachia will be improved. Our entire area will benefit.
The $500,000 grant was part of a $388 billion spending package recently
passed by congress and signed by the president.
In a similar story a week earlier, the Bowling Green Daily News lauded a $2.3
million grant earmarked from the same federal spending package to establish an
animal waste management research lab in Bowling Green. At our house, we
leave the animal waste where it drops unless we need to shovel something off the
driveway. We would be glad to study the process for only a million
In a somewhat related subject, a recent Huntsville Times (Alabama) story
about the same $388 billion federal spending bill bragged about a $4 million
grant for a Muscle Shoals fertilizer development center.
I wonder why we couldn't have gotten the fertilizer people and the animal
poop people together and saved $6.3 million? Because one man's pork is
another man's pet.
How do you react to learn that only days after congress increased the federal
debt limit to $8.18 trillion, this same $388 billion spending package included a
$350,000 'education grant' to the Rock and Roll Hall of Fame? Can't people
in Cleveland learn about music by listening to the radio or buying 8 track tapes
like you and I did? But how do you think people in Ohio would react to the
notion that a museum in Norris needs a half-million dollars to help teach
redneck east Tennesseans about country living?
The effects of this type of spending are larger than you might imagine.
Assume that some rich uncle (Uncle Sam, perhaps) swooped into town and gave you
a debt-free $4 million house in a swanky neighborhood. Pretty sweet,
huh? Except now you have all sorts of costs associated with a house you
can't afford. Besides, you're living in a house someone else paid for.
'But wait,' you protest. 'That $500,000 Museum of Appalachia grant is
our money. I want some of my tax dollars spent in my town, too.'
Never underestimate the willingness of people to be bribed with their own
money. Their own borrowed money at that.
Assume Mr. Smith really wants a plasma television for Christmas, but his wife
is deaf and blind and couldn't care less about HDTV. So when Mr. Smith
buys himself the TV set, he also gets his wife an expensive fur coat, so she can
also enjoy some of their money.
But the Smiths have to put their groceries on their VISA card and they are
four months behind on rent. They don't make enough money to pay their
bills, but they do have a nice coat and fancy television.
Is there any wonder why we had to increase the federal debt
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).