Government Solutions Inefficient & Uncreative

by Jason Ivey

Polling data, as well as anecdotal evidence suggests two things: Liberals especially and even some who are loosely conservative and/or those who are economically near-illiterate, assume A) money grows on trees; and B) anything the government does can only be done by the government.

I often think for a group of people (the Left) who pride themselves on their intelligence, their solutions are always predictably simplistic and uncreative. How difficult is it, really, to identify a problem, and then always resort to the exact same “solution”: more spending of money; or rather, more transferring of money from one place to another?

Social Security is a prime example. If the federal government did not administer Social Security, would we suddenly see American streets filled with starving, destitute elderly people? Would they simply wither away and die without this precious life-saving entitlement from the federal government? This assumes there would be a need within the economy no one would think to fill.

If the federal government stopped providing this service, would it no longer exist, or would enterprising financial institutions fill the void? It’s not far-fetched to imagine you could set up a very similar insurance system with a banking institution, taking money paid into it to use as savings, loaning it back out and investing it, much like the way annuities work. Call it a mandatory annuity.

The bank would obviously know who paid in what, and at a certain age those individuals would receive the incremental payback, with interest. Even if the federal government made this mandatory, the money paid in would be better invested because the bank has an interest in making a return profit, while the federal government has no such interest. For those who fear a banking collapse, these payments could even be federally insured. This would be a much more efficient and creative system than the Ponzi scheme that is Social Security. The political odds, however, are stacked high against such a system, at least until a financial Day of Reckoning is upon us.

Similarly, conservative proposals for salvaging Medicare from the red involve giving the money directly to the consumer to spend as they choose. This way, the inefficiency of the federal government as middleman is removed, administrative costs are lowered, and rationing and price controls would no longer be a part of the equation.

Defenders of government involvement in market matters usually point to the Depression Era to argue A) government can create REAL jobs! and B) those jobs resulted in useful things, like dams, roads, power lines, etc.

It’s true some of the make-work projects of this era resulted in useful things, but at what cost? The government, during this period, made itself a monopoly in whatever industry it got involved in. Rarely do we hear discussed the cost of that project vs. what it would have cost had it been left to private industry to fill. While it may be true no private industry would have found it profitable to run power lines through remote rural areas, this discounts the likely possibility people living in remote areas would have found other ways to create or receive power.

If the government had a make-work project 30 or 40 years ago to run cable TV out to the most rural areas, at an astonishing cost, then it’s less likely DirecTV would ever have been created and invested in.

A few years ago, local and state governments were investing huge amounts of taxpayer money in wiring cities for wi-fi. They didn’t see consumer demand was pushing the telecommunications industry toward phone-company based wireless, high-speed internet service. Again, inefficiency at work, because the government has no vested interest in fulfilling true consumer demand, only in making certain constituents happy, as well as rewarding those companies that were doing the work on their behalf, and in return rewarding their government benefactors.

The same problem applies to charity. The government crowds out the market on charity, because they can both make laws or regulations giving themselves a monopoly, and they can make it too expensive for competitors to get into the game.

By taxing us more, they take more of our income otherwise going to private charitable causes. And many of us accept some of this money we pay in taxes must be going somewhere good, so …

As we pro-market types continue to push some of this thinking forward, we need to do more than identify the problems. Part of rejecting the premises of the Left must be showing how their government-led solutions lead to greater inefficiency, as well as depriving private industry of opportunities to fill demand efficiently. Individuals, acting alone or as a company or corporation, have a great track record in free societies of filling needs and finding solutions to problems, increasing efficiency along the way.

In most ways, our economy has not evolved and progressed to where it is now because of increasing amounts of government regulation, but because our industries have learned over the years, the economy has become more complex, and efficiency has increased. We, like the innovators who drive our economy forward, are the ones thinking outside the box. Government-led solutions, for all the harm they do, are also just not very creative.


Email this to a friend | Print | Share on Facebook | | Bookmark and Share

Tags:
Posted Jul 20th 2011 at 8:24 am in Economics | 60 Comments