You know the old saying, "the customer is always right?" Shhh, don't tell that to the politicians who seem to operate with a decidedly, "the customer is always wrong, or at least irrelevant" kind of philosophy. Three big money stories making news this month prove that.
Let's start with the way things are supposed to work. Even if the buyer and/or the seller is the government, the market should be driven by the laws of supply and demand. And that's what happened late last week when Japan's Defense Ministry announced it's buying three Boeing KC-46A air refueling tankers for its air force. At $173 million a pop, that's more than a half billion dollar deal and the first time Boeing has sold these air tankers to someone other than the U.S. government. Why is there a demand for this product? It's because Chinese and North Korean military build ups and other aggressive moves have democratic Asian nations like Japan and South Korea on edge. It's not a happy kind of demand, but it's real demand and there will be more deals with Asian nations like this in the near future for Boeing and the other U.S. defense contractors.
But so ends the portion of this column that contains examples of the state acting appropriately in response to the normal laws of supply and demand. Because at this moment we're also witnessing two of the most egregious examples of false demand created by politicians for political gain.
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Example number one is just starting to enter the consciousness of politically savvy Americans across the country. It's the growing alarm over California's high speed train project. Governor Jerry Brown and his cohorts continue to insist the people in the Golden State are just clamoring for that train, and so the project must go on despite its many challenges. Now I have no doubt suffering California drivers would love to have more options for getting to and from work. But I'm not sure an expensive, north-south, high speed train is what the people want. And they certainly don't want it at any price.
Well, too bad. Because the politicians are probably about to make their insistent voices even louder in hopes of drowning out the people who are becoming more and more familiar with reality. That familiarity is growing thanks to this weekend's in-depth investigative report in the Los Angeles Times filled with damning facts about the bullet train. They include the inconvenient truths that the plan is already behind schedule, faces incredible engineering challenges not previously disclosed, and of course the $68 billion project is likely to go 100% over budget. And every time the projected price tag goes up, whatever public demand there ever really was for the rail line in California goes down in poll after poll. The funny thing is that as the price goes up and the delays drag on, the demand from the politicians goes up. That's because they've invested more and more of their time and clout on the project. And while having to pay more is not something the taxpayers want, the politicians get to respond to their failure by getting even more of our cash to dole out to their old or new political cronies. Heads they win, tails we lose.
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I hate making predictions, but it's looking more and more like this entire high speed rail project will never be completed and the best the people who actually did want the train will get is an abbreviated route that will end up costing between twice and ten times the initial projected cost of the un-abbreviated line.
But I'm saving the worst for last. Because there's probably no better example of government failing at the job of creating demand than Obamacare. And as bad a boondoggle as the California high speed train project is likely to be, the actual difference between what the government said would be the demand for the Affordable Care Act and what's really turning out to be the case could end up crashing the country's entire health care system.
CNBC.com's Dan Mangan pointed out the woeful numbers earlier this month. The number of people enrolled in ACA-created state insurance exchanges in the coming year is now projected to be about 10 million. That's half the 20 million number last projected for 2016. But even that number is woefully smaller than those 30 million, 40 million, or 50 million Americans who were just clamoring for health insurance that Democrats running for office from 1980-2008 swore to us were really out there. It turns out they're not there. And worse, the crucial younger and healthier portion of the population is really not all that interested in the program and they're the ones the Obamacare model desperately needs to overpay for their coverage to meet the rest of the population's costs.
I explained a big part of this problem more than a year and a half ago. People, especially young and inexperienced people, are just not likely to pay for health insurance even if it is a good deal. Not getting some level of coverage is really stupid. But I don't blame young and healthy people for rejecting the overpriced plans the ACA offers them. They have turned out to be a predictable bust, no matter what the 20-something guy in the plaid "footie pajamas" says. Honest economists and market researchers have been trying to warn the Obama administration about this failure for years, but in response the government has more than doubled down on the failure. Not only has more and more money been spent on ads in hopes of inducing more demand, but President Obama allowed himself to be mocked and truly debased his office appearing on "Between two Ferns" and other silly Internet broadcasts aimed at younger people. Each time, traffic to the national ACA website did spike, but fell back to its usual very low levels soon after. In other words, the government can't stoke demand even when it literally makes a fool out of itself.
Those on the Right and the Left who think this demand failure will lead to either a single payer system or the complete repeal of Obamacare just haven't been paying attention. The failure will only spur the politicians who supported and crafted the ACA to double and triple down on the program and its costs. And those supporters are likely to number just enough elected members of Congress and bureaucrats to keep its key components alive no matter who wins Congressional majorities and the White House in the years to come. In this way, it's best to look at Obamacare like a road or train project that's running over budget and way beneath its promises. At some point the money will run out and the cost will become too much for even the politicians to push it further. But that won't happen until they find a convenient time to declare victory and go home.
Demand is a tricky thing. Private sector businesses have known for a long time that it can be very hard to create and sustain it over time. But the government doesn't need to care about that very much; it gets our money whether it's meeting demand or not. The political class in both of our major parties knows this and is exploiting this more and more even as our debt grows and the long term sustainability of government programs becomes more and more impossible.
Being in government means never having to say you're sorry.