Why the Federal Government Fails
August 18, 2015
A recent report by the Cato Institute analyzes the endemic failure of the federal government. The report finds causes to be deeply structural, and not to be solved with more competent officials or a different party. Americans, deeply unhappy with Washington, agree better governance is needed. The only way to achieve it is to greatly cut the federal government's size and scope. Here are five reasons for its failure:
First, policies rely on top-down planning and coercion, which creates winners and losers, unlike the mutually beneficial markets. It also means federal policies are based on guesswork because there is no price system to guide decision-making. Further, failed policies are not weeded out because they are funded by taxes, which are compulsory and not contingent on performance.
Second, the government lacks knowledge about our complex society. Markets gather knowledge from the bottom up and are rooted in individual preferences, the government\'s actions destroy knowledge and squelch diversity.
Third, legislators act counter to the general public interest. They use debt, an opaque tax system, and other techniques to hide the full costs of programs. Furthermore, they use logrolling to pass harmful policies that do not have broad public support.
Fourth, civil servants act within a bureaucratic system that rewards inertia, not the creation of value. Many have tried to fix the bureaucracy, but the incentives that generate poor performance are deeply entrenched in the executive branch.
Fifth, the federal government has grown enormous in size and scope. Each increment of spending has produced less value but rising taxpayer costs. Failure has increased as legislators are overloaded with a vast array of programs. Today's federal budget is 100 times larger than the average state budget, and it is far too large to adequately oversee.
Source: Chris Edwards, "Why the Federal Government Fails," Cato Institute, July 27, 2015.
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