Government: Nothing bad ever goes away

Will Rogers wryly observed, "Thank heavens we don't get all the government we pay for." It just goes to show you how times have changed.

Those were the days when we paid our way. Now we get more and more government employees, and we can't even pay for them. (Just think of all the unsustainable legacy costs of state and local governments.) And then to add to our grief, all that unaffordable bureaucracy at the federal, state and local levels spends us into oblivion.

This is a weary topic that has been visited and revisited by scholars, but avoided by big government progressives. Because spending and deficits are out of control, putting the "limited" back into government is an idea whose time has come once more, and might be the most painless way to return to fiscal sanity. Why? Because a freeze on spending is politically difficult, what with earmarks, left-leaning constituents and all. (Interestingly, President Barack Obama now agrees with John McCain's campaign promise to freeze nonessential spending.)

Those with big company management experience will follow this: If a large organization has a robust compliment of talented people in staff positions at the highest levels, these people come up with ideas - programs - which influence line management. These people are in high positions because they are of superior ability and highly motivated. Rolling out these programs takes time, money and people. They may be good ideas, but they do influence local management to redefine their strategies and often require additional staffing, which at some point requires additional supervisory people - perhaps project managers. Then we have the usual reporting requirements, and all too often this new program takes on a life and costs of its own.

There is an analogy with government bureaucracies that virtually dominate the economy. The feds alone have 250,000 bureaucrats whose function is to write and enforce regulations. Some are talented people. Plenty of ideas that translate into government programs. But the pivotal difference is that government programs, unlike those in the private sector, cost us our money. Government doesn't make money in the first place for it to spend (except for the Federal Reserve).

In responding to bad economic conditions and a lack of profitability, the private sector will often retrench, eliminate jobs, and/or reorganize. A less draconian solution would be to have a hiring freeze or take attrition. A lot depends on the seriousness of the problem.

Governments seem to react just the opposite - because they don't have to worry about profits. When things go south they will often increase staff, seemingly because they are there to help us. Federal, state and local governments don't need to concern themselves with losing "market share" to competition. So why not downsize? (It might be a blessing if their presence is diminished.) Albert Einstein said, "Any fool can make things bigger, more complex ... It takes a touch of genius and a lot of courage to move in the opposite direction." Little did Einstein realize his observation could be a mission statement for Congress and our bureaucrats.

So if government at all levels simply committed to a hiring freeze, and taking attrition, we would be taking a modest step in the right direction. This commitment would require legislators and bureaucrats to not enact laws or regulate in such a manner as to require additional staff. For example, the IRS now requires tax preparers to take a competency test. (Since IRS regulations are four times the length of the tax code which itself is seven times the length of the Bible at seven million words, they defy comprehension.) It takes about one million paid professionals to prepare our returns for us, so now the IRS says it needs additional staff to administer the tests. This was my point earlier about talented people in staff positions coming up with ideas to justify their positions, and in the process the need to hire more people.

This is an example of government being too large to maximize economic growth. Government can be an impediment. Big is not better. The bigger it is, the more it spends. Maybe good things do come in small packages after all. To maximize GDP growth, most experts agree that the government sector should not be larger than 25 percent of GDP. The average government sector for OECD countries now exceeds 41 percent of GDP. What is alarming is that the size of the U.S. government has been steadily increasing up to the size of governments in Europe, ostensibly to stimulate the economy, whereas it may be having just the opposite effect and retarding job creation.

The Economist recently reported that "Britain ... went on a splurge: The state's share of GDP has risen from 37 percent in 2000 to 48 percent in 2008 to 52 percent now." In some areas, "the state now accounts for a bigger share of the economy than it did in communist countries in the old eastern bloc ... " (Give big government progressive liberals a little more time and the U.S. will get there, too.)

I am always fascinated by Alexis de Tocqueville, a classical liberal and French political thinker, who came over to the U.S. as a 26-year-old kid in the 1830s, wrote his observations in the now famous Democracy in America, and exhibited unusual common sense and prescience about a country which was then in its toddling years.

One of his observations from his notes suffers a little in translation from French, but is on the mark today: "The most important care of a good government should be to get people used little by little to managing without it." What made him think this way in an era when our federal government was the size of a postage stamp and bureaucracy was non-existent?

We should be so lucky now.