Government Spending

Governments (local, State, or Federal) spend money for all sorts of purposes.  Since they are composed of people, a large part of government spending is simply for salaries, benefits, and pensions.  But why should governments spend anyways?

The answer should be that governments spend (pass out money) if the money has been “pre-accumulated” or the money is a “targeted investment”.  In the first case, money is collected from tax payers on the promise that it will be paid back at some time in the future.  Social security is an example.  In the second case, the government makes investments in “things” like roads, bridges, tanks, ships etc or programs like education, R&D, or aid to troubled sectors (like farming, housing, banks, etc).  If the government does its job well, these “things” or programs will produce a return, for example, allow citizens to work better, prosper and return to the government in taxes an amount equal to or greater than the original investment.

If there is a basis for seeking to reduce the size of government, one would reason that it would come from three perspectives.

• The actual government spending does not produce any return or the return is just too small.  Such an argument has been made for the war in Iraq and the anti-missile missile (star wars) program.  Farm subsidies and certain aid to education also have been criticized as low or no return spending.
• The cost to distribute government money (that is the Federal payroll) at time dwarfs the amount actually spent as well as the return.  Home Land Security is currently coming under this type of criticism.
• The political process coupled with inherent opportunity for graft and corruption often syphons off so much money that the tax payer’s sensibilities are disturbed.  Programs can be criticized if tax payers think there is favoritism regardless of whether the expenditures made sense or not.  Ear marks are the current example.

It would be very refreshing to see the expected Tea Party/Republican assault on government spending taking a tact like I have outlined.  Common sense would still be required since federal employees are tax payers and real people.  Wholesale firing would produce large hardships.  Federal workers are also voters and repercussions should be expected.

Most likely this method of cutting government spending will be slow and in some cases, may produce negligible results.  Tax increases will certainly be necessary.  Just the same, asking the questions (1) where are we spending money, and (2) what is the return, would be enlightening.

 

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Tags: balanced budget, congress, ear marks, government spending, tea party

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