You Earn It; They Tax and Waste it

Based on the myriad of reports over the years, the Federal government is wasteful, inefficient and lacks the incentives to act differently.  The news reports of waste, overpayment and abuse are so common and often run in the billions of dollars. 

For example, one report looked at about 100 examples of government projects that produced little benefit to society, but came at a $30 billion price tag for taxpayers.  The General Accountability Office found over 30 areas of duplication between agencies, costing tens of billions of dollars.  The state Department lost $6 billion and has no idea where it disappeared to.  Why isn’t there a desire to fix these problems, to make government more efficient and to downsize the bureaucracy at hand? 

The late Senator Patrick Moynihan nicely summarized the problem:

“For governments inherently, routinely, automatically favor creatures of government. They know no other way. They recognize the legitimacy of no other institution.”

The belief that government can do it better is not credible.  Looking at the economics literature, it has been long considered and supported by empirical evidence that government provision of private goods comes at twice the cost!  Studies have shown this to be true for many markets — such as electricity, ship repair, ambulatory care, trash pick-up, airlines, and other markets that were studied.  More recently, empirical evidence finds that government owned-municipal broadband networks too often come at twice the costs. 

Consumers see government as wasteful and inefficient.  According to a Reason-Rupp poll, consumers believed that the federal government wastes fifty cents on every dollar it spends.  

The opportunity to save is evident, but the urgency to do something is absent.  The Stimulus Act was largely regarded as a $800 billion waste of taxpayers’ dollars, a payback to friends, and an ineffective creator of economic growth and jobs.  The cost to repay that stimulus now weighs on the backs of taxpayers, who need to eventually pay it back, which actually works to reduce spending and (not create) jobs.

The Congressional Budget Office and the Joint Committee on Taxation estimated the Affordability Care Act to “net” $1.5 trillion in costs over the next 10 years, or about $150 billion in present dollars each year.  At mid-year of 2012, CNN reported that 16.3% of Americans did not have health insurance.  With 120 million households in the U.S., that means that roughly 19.6 million households are uninsured.  Given those statistics, it would have been cheaper for the federal government to pay each uninsured household $7,500 for health insurance each year.  Instead, American’s are facing rising premiums that they are on the hook to pay, rationed medical services, and inferior outcomes, and despite all of this — many, many consumers will remain uninsured.  The new legislation would never pass a cost/benefit analysis, which raises the real question — why pay government do what the private sector can do at lower costs?  If the goal was to reduce private sector costs and increase private enrollment, why not start with improving the current system, rather than destroying it?

The reports on government waste are rampant.  There is the $100,000 outhouse, the State Department’s $5 million bill for exquisite crystal stemware and barware, the Department of Veterans Affairs purchase of artwork form $562,000, or many other wasteful purchases identified by the Heritage Foundation.  The acceleration of federal spending at the close of each fiscal year – sometimes referred to as use it or lose it – provides ample evidence that these funds should be eliminated.

The bottom line is that the current bureaucracy cannot be trusted to fix itself.  The impetus for radical change begins with voters.

Steve Pociask is president of the American Consumer Institute Center for Citizen Research

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