Tag: downsizing government

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • The U.S. Postal Service’s “automation refugees.”
  • Earmarks: Just because the federal bureaucracy does an abysmal job of spending taxpayer money, it doesn’t mean lawmakers would do any better.
  • Ground hasn’t been broken for California’s high-speed rail system, but it’s already a boondoggle.
  • Hop aboard the Liberty Bus!
  • Al Capone would have loved Medicare.

State Fiscal Reforms

The Federal Reserve Bank of St. Louis recently held a conference on state and local government finances. I presented a paper discussing four reforms for state and local governments to consider: abolishing corporate income taxes, privatizing government activities, cutting public-sector compensation, and reforming public-sector labor laws.

Those may seem like disparate policy ideas, but the common theme is that governments need to be smaller, more efficient, and more flexible if America is to prosper in an age of intense global competition.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • You wouldn’t know it based on comments from members of Congress, but the U.S. Postal Service has a serious union problem.
  • Food stamp cost and usage are at record highs. And no, it’s not good for the economy.
  • When it comes to Fannie Mae and Freddie Mac, President Obama has amnesia.
  • The federal government has more food subsidy programs than Tiger Woods had girlfriends.
  • There’s not much difference between Sen. Kent Conrad’s budget proposal and the president’s. Both would continue the massive spending, deficits, and debt that are bankrupting the country.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • In the short-lived Depression of 1920-21, federal spending was dramatically reduced and prosperity followed.
  • The Congressional Budget Office’s long-term budget projections show that unless Washington changes course, the interest on the debt alone will consume 30 percent of the economy by 2080.
  • Federal spending on K-12 education has been a failure. It’s well past time to abolish the Department of Education.
  • There’s nothing happy about Tax Day.
  • If the exploding debt is to be brought under control, policymakers are going to have to rein in entitlement spending.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • The U.S. Postal Service wants to drop Saturday mail delivery to save money. Here’s a better idea: give Americans the freedom to choose the mail services they want by repealing the USPS monopoly.
  • Obama’s latest mortgage bailout plan will expose the Federal Housing Administration to more risk.
  • Unemployed college grads are using food stamps to purchase organic food at high-end grocers like Whole Foods.
  • Obama’s crackdown on improper payments made by government programs probably won’t help taxpayers.
  • Congress needs more legislators like William Proxmire who was willing to stand up to his colleagues and special interests when it came to cutting wasteful programs.

Precedents in Government Growth

As an opponent of government growth, I’m interested in what we can learn from history to help us reverse the trend going forward. We need to understand the mechanisms of government growth if we are to combat the disease.

In a new Federal Reserve Bank of St. Louis article, Thomas Garrett and coauthors provide a useful overview of explanations for the federal government’s historical growth. They note that while the economic depression of the 1930s helped boost the size of the government, the severe recession of the 1890s did not do so. What was the difference between the 1890s and the 1930s?

The authors identify a number of factors that paved the way for sustained federal growth beginning in the 1930s:

  • Path Dependency. Governments have inertia such that once a program is in place it is difficult to remove. When new programs are added during crises, they take root and aren’t cancelled when the crisis passes. Thus, government programs tend to accumulate over time.
  • Tax Bases. The addition of new tax bases provides the means of government expansion. The best example is the addition of the federal income tax in 1913, which fueled huge government growth in subsequent decades. This can be called “feeding the beast.”
  • Ideology. The rise of populism and progressivism during the late 19th and early 20th century broke down the traditional American resistance to big government. 

I would add an additional cause of growth: legislative precedent. Politicians push the envelope on their allowable powers, and they build on the power grabs of prior policymakers. This is evident, for example, when you look at the steady destruction of federalism over the last century due to the growth in federal aid to the states.

In the 19th century, presidents routinely vetoed legislation that provided subsidies to state and local governments. But subsidy advocates started gaining traction in the 1910s with the enactment of a series of new aid programs. The 1916 Federal Aid Roads Act, for example, was an early “matching” grant, whereby the federal government gave states higher subsidies the more they spent.

What started as a trickle became a flood as federal politicians found that they could use state aid to cater to an array of special interest groups that they previously had no access to, such as teachers. The matching idea was copied in dozens of other aid programs, and it has helped to propel Medicaid spending through the stratosphere.  

The health care bill being pushed through Congress contains a number of dangerous legislative precedents, such as the mandate to purchase health insurance. I’m astounded that members of Congress think it’s OK to use government power to force Americans to buy a certain product, or else face stiff fines. Where did they get such an outrageous idea? Well, from the precedent set by Mitt Romney’s Massachusetts health bill of 2006.

If the current health legislation passes, we can sadly expect politicians to pursue the mandate approach further. Will mandatory broadband be next? That sounds crazy, but with the Treasury empty, politicians are looking for ways other than spending to impose their will on the people.

With the health care mandate, Congress is crossing the Rubicon, breaking another traditional restraint on government and ramping up its war on individual rights.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • Another day, another cost overrun at the Pentagon. This time it’s the Joint Strike Fighter.
  • Office of Personnel Management director John Berry has a hissy fit over Cato shining a light on excessive wages and benefits for government employees at a time when the private sector is bleeding jobs.
  • Nationalizing federal higher education subsidies is still a loser for taxpayers.  The best solution is to get rid of them altogether.
  • Sugar subsidies aren’t so sweet for consumers and manufacturers who use it in their products.
  • The only way to stop ACORN from getting taxpayer money is to kill the programs that fund it.
  • Greece is turning to privatization to help solve its debt problems. The U.S. should do the same.