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:
- The Department of Homeland Security is a mismanaged mess.
- Federal aid to the states is too popular.
- It’s time to privatize the U.S. Postal Service Monopoly.
- Transportation Secretary Ray LaHood likes to give the gift of other people’s money. Ho, ho, oh no!
- Charles Krauthammer gets nostalgic about the socialist mail monopolist.
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:
- The two most recent first quarter deficits have been about $100 billion higher than the average annual deficits run from 2002 to 2008.
- Utah legislators call for fiscal federalism.
- Small businesses are citing government as the problem, but the media ignores the story.
- Fannie Mae and Freddie Mac should be put in the budget, and then privatized.
- The Economic Development Administration, National Association of Development Organizations, and the Appropriations Committees aren’t exactly taxpayer-friendly.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- The food stamp price tag is rising.
- Will the government remove the crutches supporting the housing market?
- HUD wants to bring Portland’s “smart growth” planning to the rest of the country.
- The decennial census may have a constitutional basis, but it’s still a costly, wasteful government activity.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Will Obama’s deficits turn out to be as low-balled as Bush’s?
- Obama blames Bush for his problems, but his new budget is worse.
- Obama’s budget would kill the Constellation program, but his budget still goes to the moon.
- The Federal Housing Administration bailout watch continues.
- There’s nothing “fiscally responsible” about Sen. Kent Conrad.
- The government is creating jobs — federal government jobs.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- It’s time to end the federal government’s bias toward homeownership.
- Federal agriculture subsidies make it difficult to find Pepsi or Coke with real sugar in it.
- Government job creation efforts are a loser for taxpayers, employers, and employees.
- The Department of Health and Human Services is not up to the task of handling the additional responsibilities pending health care legislation would give it.
- The latest on cost overrun incompetence at the Department of Energy.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Central Michigan defeated Troy in the “Bailout Bowl,” but taxpayers are the biggest losers.
- The 2010 census will pave the way for subsidies to state and local governments.
- Secure property rights and government support help make U.S. farmland a good investment. But what about the property rights of taxpayers?
- The federal government’s IT budget increases by $5 billion while Uncle Sam’s private sector counterparts make do with less.
- New York’s fraud-ridden Medicaid program is a prime example why government involvement in healthcare is part of the problem, not the solution.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Remember what happened when the government decided the “underserved” needed access to “affordable” housing? Now it says the “underbanked” need access to more “affordable” credit. Uh-oh.
- Congressional logrolling — literally.
- President Obama plans to spend our way into more debt.
- Another day brings another example of federal health care fraud.
- “The government has become an elite island of overcompensated administrators immune from the competitive job realities of average families.”
The Week in Government Failure
Over at Downsizing Government, we focused on failures in the following departments and agencies this week:
- Export-Import Bank: Call it the “Boeing Bank”
- HUD: Federal Housing Administration woes continue and housing subsidies for the dead
- Transportation: High-speed rail lobbyists squabble over taxpayer loot
Also, in addition to losing more money, Fannie Mae and Freddie Mac lose their inspector general.
The Week in Government Failure
Over at Downsizing Government, we focused on failures in the following departments this week:
- Commerce: corporate welfare in Ohio
- Defense: cost overruns in the Pentagon’s space programs
- Energy: central planners gamble with taxpayer money
- HUD: subsidizing private firms to operate public housing isn’t a solution
Also, dubious stimulus projects point to a need to return to fiscal federalism.
Feds Giveth Jobs & Cars, Then Taketh Away Again
The bad news this morning on the impact of both the federal stimulus and the Cash for Clunkers program should not come as a surprise to anyone who has paid attention to the history of government intervention in the economy.
New data that the jobs created by the stimulus have been overstated by thousands is compelling, but it’s really a secondary issue. The primary issue is that the government cannot “create” anything without hurting something else. To “create” jobs, the government must first extract wealth from the economy via taxation, or raise the money by issuing debt. Regardless of whether the burden is borne by present or future taxpayers, the result is the same: job creation and economic growth are inhibited.
At the same time the government is taking undeserved credit for “creating jobs,” a new analysis of the Cash for Clunkers program by Edmunds.com shows that most cars bought with taxpayer help would have been purchased anyhow. The same analysis finds the post-Clunker car sales would have been higher in the absence of the program, which proves that the program merely altered the timing of auto purchases.
Once again, the government claims to have “created” economic growth, but the reality is that Cash for Clunkers had no positive long-term effect and actually destroyed wealth in the process.
Right now businesses and entrepreneurs are hesitant to make investments or add new workers because they’re worried about what Washington’s interventions could mean for their bottom lines. The potential for higher taxes, health care mandates, and costly climate change legislation are all being cited by businesspeople as reasons why further investment or hiring is on hold. Unless this “regime uncertainty” subsides, the U.S. economy could be in for sluggish growth for a long time to come.
For more on the topic of regime uncertainty and economic growth, please see the Downsizing Government blog.
Cato Launches New Web Site Exposing Wasteful Government Spending
Did you know that the average American family spends $1,000 each year on the U.S. Department of Agriculture, whether or not it consumes that agency’s services? Or that the federal government annually spends $1,500 per household on net interest costs alone?
In an ongoing effort to shed light on runaway government spending and expose wasteful government programs, Cato launched a new Web site today that examines the federal budget department-by-department to see which agencies can be reformed or terminated. DownsizingGovernment.org describes which programs are wasteful, damaging and obsolete in an era of trillion-dollar deficits.
The research exposes that many public outlays—though vigorously defended by the politicians who created them and the constituencies they purport to help—are remarkably ineffective at achieving their core aims.
Here are just a few examples:
- Though the Department of Education’s annual budget has more than tripled in real dollars since 1970, that period has not been marked by any tangible improvement in student performance.
- The Department of Housing and Urban Development operates a rural subsidies program even though hundreds of other federal programs benefiting rural constituencies already exist.
- HUD has been characterized by scandalous graft and cronyism under both Republican and Democratic presidents for three decades. The rate at which senior HUD officials have been investigated or prosecuted is chilling, and government watchdogs have found dozens of instances where officials’ private-sector contacts were showered with public money for projects.
Appearing on CNBC Monday, DownsizingGovernment.com editor Chris Edwards explained more about the site:
Plus, keep track of where your tax dollars are going by following DownsizingGovernment.com on Twitter (@DownsizeTheFeds) and Facebook.
Cato on Facebook
Cato on Twitter
Cato on YouTube
Cato Tweets