PrintApril 24, 2010
Government's Compulsive Spending Disorder
There are hundreds of thousands of examples of wasteful government spending, and the numbers continue to multiply faster than anyone can keep track of them: six-figure retirement packages for state workers, 28 separate security offices at the State University of New York, multi-million-dollar turtle crossings, and alleged misuse of homeland security funds in California and other states.
In a series of exposés, the Milwaukee Journal Sentinel reported extensive abuse within the state's $350-million child-care program. The program offered so many opportunities for fraud that it even lured organized crime families into the child-care business.
In Tennessee, retiring Democratic Governor Bredesen has sprung an eleventh-hour surprise on the state legislature: a proposed increase in the state sales tax. Tennessee already has some of the highest unrestricted sales taxes in the country. How much sales tax can the state collect before residents start shopping out of state?
When asked why he has proposed a sales tax increase rather than spending cuts, Bredesen stated that it would otherwise be necessary to cut the salaries of state workers by 5%. That response -- the old "raise taxes or all hell's going to break out" ploy -- overlooks the fact that even in a conservative state like Tennessee, there exist hundreds of separate programs that could be cut altogether. These include make-work jobs programs, arts and education boondoggles, green power "initiatives," and even a program designed to expose inner-city kids to golf. Now that we know what Tiger was up to, do we really want to fund a new generation of Tiger Woodses at public expense?
In perennially profligate California, Los Angeles funds the Mayor's Office on Gang Reduction and Youth Development, a program that pays former gang members to serve as "interventionists" in gang disputes. Among the duties of these city employees has been to assist with "Hood Days" parties in Los Angeles parks. One of the problems with Hood Days is that rival gang members tend to show up with automatic weapons. Interventionists persuade them to join in the sack races and partake of Jell-O salad.
The simple fact is that governments refuse to cut programs because once established, every program takes on a life of its own, with its own advocates, lobbyists, and segment of voter support. It is expedient to continue funding unnecessary programs via debt or new taxes rather than deal with the bad press of eliminating "opportunities" for kids, single moms, recovering addicts, and the homeless. Once the fraud and abuse are exposed, a task force composed of other politicians is formed -- as one recently was by President Obama -- to "tackle" fraud and abuse. Fraud and abuse continue unabated.
Government would have us believe that it is impossible to curtail spending because spending has already been "cut to the bone." But how lean is government, really? As a graduate student with a family of three living on $3,000 per year, I knew what it was like to cut spending to the bone. Most of the time, in fact, there was no bone, only pasta. But has our government cut spending to the point that it is living on pasta? Has it cut spending at all?
Despite the efforts of politicians to mislead the public into thinking that they have cut spending, the numbers are there for all to see. Since he became president, Obama has increased discretionary spending by 22%. At the same time, not only has he made no effort to cut non-discretionary spending (yes, non-discretionary spending actually can be cut), but he has helped pass the largest non-discretionary spending program in American history.
State and local budgets have similarly ballooned in recent years to the point where combined government spending now consumes 44.6 % of GDP. If these budgets now face a crisis, it is because the states spent lavishly during the Bush economic expansion and now refuse to cut from those higher levels of spending. Those politicians who refuse to cut state and local budgets should be replaced by representatives who will balance budgets in the same way that the voters must balance their own. The obvious solution for government at all levels is to spend only what it can afford.
Politicians like to pretend that they are funding "vital services," none of which can be cut. I can think of very few services other than national defense and public safety that could not be eliminated or privatized with no damage to the public.
The incredible expansion of government since the 1960s, especially since the election of Barack Obama, has created unprecedented opportunities for fraud and abuse, and leaders of both parties have gorged themselves at taxpayer expense. The federal government now spends $3.55 trillion annually, yet it furnishes almost nothing that could not be better provided by the free market. Even the "minor leagues" of excessive spending -- state and local governments -- tack on another $3.24 trillion, only 9% of which goes to the essential service of public protection.
According to the most conservative estimates, those of the Government Accounting Office, 6.26% of government stimulus spending has been lost to fraud. Extrapolated to government spending altogether, that would come to $409 billion per year, but that figure would not include spending influenced by the questionable contributions of lobbyists, special interests, and pay-to-play schemes. This much larger amount would match practically the entire budget of government at all levels.
Since politicians are clearly incapable of acting in a responsible manner, it may be that bankruptcy is the only solution. Bankruptcy in California, bankruptcy in New York, and ultimately, bankruptcy of the nation are not beyond the realm of possibility. The credit agonies that have downgraded California's debt and placed America's credit rating on warning certainly point in that direction.
The consequences of a major bankruptcy would be devastating. The national economy would be thrown into a protracted depression. Jobs would disappear, and retirement accounts would shrink to almost nothing. Social Security and Medicare would be cut, as would the retirement benefits of government workers. Once government suffered default, it would be impossible, at least in the short run, to borrow money to fund existing programs. It is a bleak scenario, but it is exactly what our elected officials are risking.
Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan. He has published many books and articles on American culture and politics.
