How Government Grows

Government is stuck in a positive reinforcing loop, which means that just about anything is used to justify more government.

Consider the attempted terrorist attack on the Detroit flight.  We will likely be told that we need to fix it so that won’t happen again and that will mean more government.

Or, think about the mortgage crisis, which occurred due to large part to government intervention (though most people don’t recognize this).  The crisis is incorrectly considered a market failure that must be mitigated with more government.

How about health care?  As with mortgage crisis, the market for health care has been heavily damaged from government intervention.  Again, this damage is incorrectly attributed to a market failure.  Naturally, we need more government to fix it.

In all three cases above, the pattern is the same.  Something bad happens, be it viewed as a government or market failure and more government is proposed to fix it.

Global warming was sold as a problem, even though it doesn’t appear that the certainty of mankind’s influence on it is as clear cut as the believers have stated.  Either way, more government is sold as the answer.   Even if it’s not clear, “we don’t want to take any chances.”

It doesn’t just happen with bad things.  Even in good times government grows.  There’s always some perceived inequity that someone thinks needs fixing through government. Plus, if everybody’s doing well, who notices if the government has gotten a little bigger?

Consider US government spending from 1994 – 2000, arguably a pretty good time.  Federal government spending increased by 26% while inflation increased by 16%.  During this time, we also reduced military spending and entitlement spending.  Without these reductions, government would have even grown faster.

Or how about 2001 – 2006,  another time frame with good times.  Federal government spending increased by 44% while inflation increased by 14%.

Intuitively, I don’t buy that government is a good way to solve our problems.  The problem is that government activities are judged based on their intentions, not their results.

This Econtalk podcast, Wrinston on Market Failure Government Failure, supports my intuition.  Clifford Wrinston, of the Brookings Institution, took a look at a wide body of research on government in his book, Market Failure versus Government Failure (available for free online).  I highly recommend the podcast.  I will be reading the book over the coming weeks.

Make no mistake.  I know there are failures in the market too.  Neither the government or market is perfect.   However, failures in the market are like cancers that have their blood supply choked off – they die off.  Failures in government work the opposite.  Those cancer cells attract more blood supply and keep growing.

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