Commentary: Why Government Is Essential, Yet Inefficient

Aaron Johnson

Monday, July 1st, 2013

My motivation for this post stemmed from a funny analogy made by Thomas Sowell, whose simple, yet outrageous example, speaks to the inefficiency of government.

Suppose a governmental agency has only two tasks:

  1. Build a statue of Benedict Arnold.
  2. Provide vaccinations for children.

When budget cuts are imposed, they decide to do away with child vaccinations, rather than stop building statues of a man reviled in U.S. history.  Why would they do that?  Because that will make it more likely that the budget cuts will be reversed because the general public will demand the vaccinations be reinstated.

How does that relate to today’s politics?  With the sequester imposed on March 1, we learned that the Department of Homeland Security has released a number of illegal aliens due to lack of funding from the spending cuts.  We can also look forward to cuts to educational grants to disabled children and low-income school districts.  While there is waste within all federal agencies that could be cut, those inefficiencies are hard to eliminate due to lack of competition. Additionally, these appropriations may be a drag on economic growth by drawing tax dollars away from more productive activities, such as freeing up more income toward investment spending.  However, they do provide more social stability and relief to the vagaries of poverty.

We live in a dangerous world where there are vast disparities in wealth between nations.  With the advent of YouTube and various social media outlets, it is much easier for people to compare and contrast their way of life with others.  This creates envy, anger, and frustration that can result in dangerous associations aimed at disrupting the lives of the more affluent.  Religious fanaticism and grinding poverty can lead people to resort to extreme measures and even death to lash out at what they believe are unfair outcomes.  That is where the Department of Homeland Security and our military forces come in to protect the general public from acts of terrorism.

Then let us transition to poverty where health care and lack of jobs are barriers to advancement.  Even though most people might believe that anti-poverty programs are limited to only its recipients, there are external benefits to society.  Providing access to preventive health care services to the impoverished can minimize the burden on emergency care facilities that must treat all individuals, regardless of their ability to pay.  If this can be reversed, then this should theoretically lower insurance premiums because private insurance companies would no longer need to shift the cost of uncompensated care to middle-income and high-income individuals.  Other factors, such as lack of resources toward education and workforce training, contribute to large disparities in wages.  In an economy that places more value on intellectual skill, rather than manual labor, there is great frustration and discouragement that leads to unproductive behavior, such as crime and immoral behavior.  If workforce skills are enhanced and job marketability increases, then criminal and immoral activity from the poor will be less attractive and that will bring relief to everyone else.

Even though the $85 billion is an infinitesimal portion of annual government spending, its cuts will be from discretionary spending, rather than mandatory spending.  This is an important distinction because the federal budget primarily consists of mandatory spending, such as Social Security, Medicare, and Medicaid.  Neither will be touched with the sequester.  Since these cuts will cover a smaller portion of federal spending, its impact will be potentially larger.  Most of the negative impact will go to national defense where there will be cuts approximating 9%, while other federal agencies will see their budgets slashed by 5%.

When one asks why the sequester did not allow more flexibility to make cuts to government, it is because both political parties value government in different ways.  While Republicans value national security where business interests are protected abroad and our citizens are shielded from terrorism, Democrats favor a compassionate government that promotes social mobility and provides an adequate safety net for the rigors of life.  The policymakers thought that this process will lead to compromise and common ground where both sides gave a little.  Of course, we found out how inflexible and rigid both parties were.

Over the next few months, it is my suspicion that both sides will recognize the important role that government plays in our overall well-being.  It will just be for different reasons.

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About Aaron Johnson

Aaron Johnson is the assistant professor of economics at Darton College in Albany. In addition to his teaching duties at Darton College, he is also a board member for the Albany-Dougherty Economic Development Commission and the Albany Dougherty Planning Commission.