Government’s Self-Interest

Much of our public discourse on the proper role of government centers around a misconception–that government is a disinterested party to the discussion.  We often argue about how large a role government should take as if government were somehow a neutral extension of us as individuals.

For example, welfare is a mechanism by which we help the needy.  As government takes on the job of helping the poor, though, it also creates its own “self” interest.  People who administer welfare programs earn a living doing so.

Government has little reason to be efficient or to kill obsolete programs.  Since money is confiscated from taxpayers rather than being provided by the people who earned it, the only incentive is to grow, grow, grow.  The link between resource allocation and the ends desired is severed.  It’s existence and growth supplant any other objective.

Take the war on drugs.  No argument against either will hold much sway with someone who earns his/her living fighting this dubious battle.  It is reminiscent of the Roman Emperor Claudius, who is said to have favored dismantling the Praetorian Guard and reinstating the old Republic after the assassination of his nephew Caligula.  A Chief of the Guards remarked to the new Emperor that having 3000 highly skilled military men wandering about Rome with nothing to do might be a bad idea.

Not that we should live in fear of an armed uprising by DEA agents yet.  Political influence suffices to hold us hostage–no weapons are needed.  Public sector unions are quite enough to deter any half-hearted attempts at reducing the size of government.  Politicians are too beholden to them for support.

If a private business were to promise pensions and benefits that it clearly could not deliver, one would immediately suspect fraud.  No sane business that expected to survive long-term would promise such.  If it did, you can bet that someone in the executive suite was delusional or crooked.

With public sector pensions, we have a different problem.  States have promised things they have no hope of delivering.  But states do not go out of business (at least not yet).  So who is on the hook for delivering on wacky promises?  Bingo!  You and me.  And given the choice between our mortgages and their retirement pay, well…

So here is the crux of the matter.  Public employees are not going to get what they were promised, period.  The public will not tolerate taxes high enough to pay them.  States cannot print money.  If the Federal Government steps in with the printing presses, inflation will ensure that getting paid is a Pyrrhic victory.  And in the meantime?  Just look at Europe.  When the cuts come, a few idle Guards may look like a welcome alternative.











About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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