Tag: downsizing government

This Week in Government Failure

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

  • Six reasons to downsize Washington.
  • The chances of a taxpayer bailout for the FHA are probably larger than it wants to admit.
  • The same people that say Fannie Mae and Freddie Mac shouldn’t be on the government’s books are often the same people who once dismissed concerns that the two companies were headed toward financial ruin.
  • Here’s a shocker: the private sector does a better job of fighting fraud than the government.
  • Bailing out state and local governments creates a disincentive for state and local policymakers to implement necessary reforms to get their budgets and future liabilities under control.

This Week in Government Failure

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

Six Reasons to Downsize the Federal Government

1. Additional federal spending transfers resources from the more productive private sector to the less productive public sector of the economy. The bulk of federal spending goes toward subsidies and benefit payments, which generally do not enhance economic productivity. With lower productivity, average American incomes will fall.

2. As federal spending rises, it creates pressure to raise taxes now and in the future. Higher taxes reduce incentives for productive activities such as working, saving, investing, and starting businesses. Higher taxes also increase incentives to engage in unproductive activities such as tax avoidance.

3. Much federal spending is wasteful and many federal programs are mismanaged. Cost overruns, fraud and abuse, and other bureaucratic failures are endemic in many agencies. It’s true that failures also occur in the private sector, but they are weeded out by competition, bankruptcy, and other market forces. We need to similarly weed out government failures.

4. Federal programs often benefit special interest groups while harming the broader interests of the general public. How is that possible in a democracy? The answer is that logrolling or horse-trading in Congress allows programs to be enacted even though they are only favored by minorities of legislators and voters. One solution is to impose a legal or constitutional cap on the overall federal budget to force politicians to make spending trade-offs.

5. Many federal programs cause active damage to society, in addition to the damage caused by the higher taxes needed to fund them. Programs usually distort markets and they sometimes cause social and environmental damage. Some examples are housing subsidies that helped to cause the financial crises, welfare programs that have created dependency, and farm subsidies that have harmed the environment.

6. The expansion of the federal government in recent decades runs counter to the American tradition of federalism. Federal functions should be “few and defined” in James Madison’s words, with most government activities left to the states. The explosion in federal aid to the states since the 1960s has strangled diversity and innovation in state governments because aid has been accompanied by a mass of one-size-fits-all regulations.

For more, see DownsizingGovernment.org.

This Week in Government Failure

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

This Week in Government Failure

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

This Week in Government Failure

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

This Week in Government Failure

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