Government: too big to succeed

As the recent shutdown threat shows, governments — by their nature — are doomed to fail.

by Julian Switala

The U.S. federal government came minutes away from shutting down Friday night. Too bad; hopefully a government shutdown wouldâÄôve disseminated the message that government is most definitely not the answer to social and economic woes.

As is characteristic of political compromise, the final outcome was undesirable to both Democrats and Republicans. The final version cuts only $38 billion dollars from future spending, a mere 2.5 percent of the entire deficit. And because the deficit is increasing at an average of more than $4 billion each day, that percentage will keep getting smaller. Most legislators donâÄôt even know whatâÄôs in the final deal, having to vote on it sight unseen.

All of the politicking in the last week has made the budget cut debate less about the budget and more about politics as usual: people arguing over issues on which no one will change their mind. IsnâÄôt that what politics is all about? Perhaps itâÄôs time to cut government programs and embrace grassroots citizen initiatives (the private market).

As individuals we make decisions each day impacting our budget. Oftentimes, we choose goods based on whether theyâÄôre necessary or expendable. Government must make similar decisions about programs.

Since individuals are adept at making such decisions, thereâÄôs little reason to outsource our decision-making power to people living in a city disconnected from the real world: Washington, D.C., is a horde of isolated Ivy League graduates with law degrees. Are they really more qualified to decide how you should live your life than, say, you are? Doubtful.

But letâÄôs say the government does actually provide a useful service which many people love and use. Well, luckily if itâÄôs cut, thereâÄôs probably demand for such a service. This demand will result in a fellow citizen willingly providing said service.

Of course, this service will be provided for a price, but at least youâÄôd be able to choose if you wanted to pay. You wouldnâÄôt be forced to pay for a service, through taxation, which you may never use. This is the major difference between the government and private businesses: The government can obtain a virtually unlimited amount of funds through taxes.

In the words of Murray Rothbard, who holds a doctorate in economics from Columbia University and is one of the most influential 20th century economists, private firms can get funds “only from people who value and buy their services and from investors who are willing to risk investment of their saved funds in anticipation of profit.” Government doesnâÄôt operate according to this principle, as it can rack up debt and need not use resources efficiently.

And if the consumers of a service arenâÄôt wealthy enough to afford it, like many of the clients of Planned Parenthood, then charity can subsidize it. According to the Center on Philanthropy, U.S. charitable donations exceeded $300 billion in 2008 amidst the worst economic climate since the Great Depression.

In all other cases, though, markets are the primary tool for the provision of goods and services since âÄî when they function properly âÄî theyâÄôre highly efficient. Of course, markets may not be able to provide all goods efficiently, thereby necessitating the creation of governments to provide these goods in whole or in part. Examples include defense, public infrastructure like roads and sewers, and basic services like education and mail.

Yet even these goods donâÄôt require the state, and many people prefer their private equivalent. Bouncers, security guards, private schools and even mail come to mind. FedEx and UPS, two global companies generating massive profits âÄîthat is to say, using limited resources efficiently âÄî are receiving money only from consenting consumers.

The U.S. Postal Service, on the other hand, operates at a loss for which we ultimately pay. According to the USPS and the U.S. Government Accountability Office, the USPSâÄôs outstanding debt as of 2010 is $12 billion and is expected to operate at a loss of $6.4 billion in 2011. No business, restaurant, music venue or co-op food store could ever exist under these conditions. Why? Since itâÄôd be an absurdly large waste no one would rationally incur.

Maybe we should just accept governments for what they are. Governments have no incentive to be efficient, so why should we demand that they be? The skills of politicians are anything but economic or productive. They master a different set of skills: political skills. These include how to persuade millions of people without a well-informed opinion, how to brownnose superiors, how to force people to do things and how to endlessly bicker, among other praiseworthy traits.

Politicians ultimately decide where our money goes, not us. Since thereâÄôs no requirement for meeting a profit-and-loss test, and since the government continues to get funds even if consumers of its services are dissatisfied, there is effectively no check on government. We canâÄôt choose not to pay for services we may not like because weâÄôd go to jail. Wal-Mart doesnâÄôt even do that.

Finally, imagine youâÄôre at a government-run institution requesting better service or asking to speak to the manager. Good luck. Even McDonaldâÄôs has better service, and I only give them a few dollars when I feel like it, not thousands of dollars unwillingly.

The deficit represents much more than wasted taxes. If government operations are the best means of providing goods, then it should outcompete all challengers and pay its operational costs by charging its consenting customers a fee. The only way to find out is if we cut our governmental consumption.


Julian Switala welcomes comments at [email protected].