Why Government is the Problem

Bureaucracies & Non-Tax-payer lobbyists all support the tax quo. Copies of both of these articles can also be found on the TEA party Issues page of this website.

“Why Congress Can’t Kick the Tax & Spend Habit” by James L. Payne first appeared in the free Hillsdale publication in May, 1991.

A survey of 776 Washington interest group spokesmen by Robert Salisbury and Paul Johnson found that 55 percent had held some kind of government position—29 percent in the federal executive branch, 17 percent in Congress, and nine percent in state and local government. Ordinary Americans rarely come to Washington to ask for government spending programs. The spokesmen for “private” interests are highly specialized officials with long service in and around government—who are thoroughly socialized to a pro-government worldview.

A second feature of the purportedly private groups is that they are funded to some degree by the federal government. In Destroying Democracy, James Bennett and Thomas DiLorenzo have tabulated the literally hundreds of well-known, supposedly private organizations that depend on governmental contracts and grants for part of their funding: the National Council of Churches, the National Education Association, People United to Save Humanity, the Gray Panthers, the League of Women Voters, the Sierra Club, the National Wildlife Federation; the list goes on and on. These are really “semi-governmental” entities, and their input on spending questions reflects this budgetary connection.

Another group that plays a role in spending are the consultants whom the government hires to study its programs. Program evaluation is a huge industry these days, costing the federal government about two billion dollars a year, and providing employment and profits for scores of “Beltway bandits.” In theory, these firms are supposed to provide objective evaluations of spending programs. But in practice, they are profoundly biased in favor of the programs that they evaluate. The reason for this partisanship is simple: the agencies hire their own evaluators!

The point is that the actions that serve self-interest are very different in the private sphere than they are in the public sphere. The bottom line is different. If a group of people start an enterprise in the private sphere, it may be a success or it may be a failure. Most new enterprises are failures. If the enterprise were an obvious success, it would probably already be in existence. If the enterprise is a failure, that means it loses money. The people who own it have a very clear bottom line. To keep it going, they would have to dig into their own pockets. They are reluctant to do that, so they have a strong incentive either to make the enterprise work or to shut it down. Suppose the same group of people have the same idea, start the same enterprise in the government sector, and the initial results are the same. It is a failure; it does not work. They have a very different bottom line. Nobody likes to admit that he has made a mistake, and they do not have to. They can argue that the initial failure was only because the enterprise was not on a large enough scale. More important, they have a much different and deeper pocket to draw on. With the best intentions in the world, they can try to persuade the people who hold the purse strings to finance the enterprise on a larger scale, to dig deeper into the pockets of the taxpayers in order to keep it going. That explains what is a very general rule: if a private enterprise is a failure, it is closed down—unless it can get a government subsidy to keep it going; if a government enterprise is a failure, it is expanded. I challenge you to find exceptions.

 The second article, “Why Government is the Problem” is actually a transcript of a Wriston lecture given by Milton Friedman in 1991. 

 The point is that the actions that serve self-interest are very different in the private sphere than they are in the public sphere. The bottom line is different. If a group of people start an enterprise in the private sphere, it may be a success or it may be a failure. Most new enterprises are failures. If the enterprise were an obvious success, it would probably already be in existence. If the enterprise is a failure, that means it loses money. The people who own it have a very clear bottom line. To keep it going, they would have to dig into their own pockets. They are reluctant to do that, so they have a strong incentive either to make the enterprise work or to shut it down. Suppose the same group of people have the same idea, start the same enterprise in the government sector, and the initial results are the same. It is a failure; it does not work. They have a very different bottom line. Nobody likes to admit that he has made a mistake, and they do not have to. They can argue that the initial failure was only because the enterprise was not on a large enough scale. More important, they have a much different and deeper pocket to draw on. With the best intentions in the world, they can try to persuade the people who hold the purse strings to finance the enterprise on a larger scale, to dig deeper into the pockets of the taxpayers in order to keep it going. That explains what is a very general rule: if a private enterprise is a failure, it is closed down—unless it can get a government subsidy to keep it going; if a government enterprise is a failure, it is expanded. I challenge you to find exceptions.

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Posted on June 25, 2010, in Commentary, Deficit, Free Markets, Housing Boom & Bust, Limited Government. Bookmark the permalink. Leave a comment.

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