So many federal programs, and so much duplication

Filed under: Contributed Column,Print | Tags:

When it comes to government and spending, two quotes from history capture the central problem.

John Randolph, a Virginian and early 19th-century member of Congress, observed: “The most delicious of all privileges — spending other people’s money.”

Calvin Coolidge, president from 1923-29, added: “Nothing is easier than spending the public money. It does not appear to belong to anybody. The temptation is overwhelmingly to bestow it upon somebody.”

The impulse to throw around other people’s money apparently has never been so strong, nor has such spending been so easy to execute, than over the past three-plus years.

Given the profligate history of the federal government, that’s saying something. But when federal outlays jump from $2.72 trillion in fiscal year 2007 to an expected $3.83 trillion in the current budget year, how is any other conclusion possible? After all, that’s a whopping 41 percent increase in just four years.

In effect, our federal elected officials, with President Barack Obama playing the starring role, have argued that vast increases in government spending are just what the economy needs. Given the depth of recession that began in December 2007, lasting until the middle of 2009, and the subsequent pathetic recovery, that’s a pretty hard argument to accept. Unfortunately, more than a few economists and many politicians forget that in order for government to have dollars to spend, those resources must be drained away from the private sector, whether through borrowing or taxation.

And are we really supposed to believe that politicians and their government appointees are going to spend dollars more wisely than the individuals and businesses that earned those resources?

If you have any doubts about the incompetence and inefficiencies of government spending, consider a new report from the Government Accountability Office.

In January of last year, U.S. Sen. Tom Coburn (R-Okla.) offered an amendment to a debt limit vote directing the GAO to look at duplication in the federal government. The amendment passed 94 to 0.

Among the report’s findings, 15 different agencies administer at least 30 food-related laws. The result, according to the GAO, is that “fragmented federal oversight of food safety has caused inconsistent oversight, ineffective coordination and inefficient use of resources.”

What about “economic development” programs? Government planning and spending in the name of economic development is a dubious proposition in itself. Add in that the GAO identified 80 of these programs at four agencies — the Departments of Commerce, Housing and Urban Development and Agriculture, plus the Small Business Administration — and found “that the design of each of these fragmented programs appears to overlap with that of at least one other program.”

A staggering 52 programs fund “entrepreneurial efforts” that aid “businesses to develop business plans and identify funding sources.” An overarching question raises doubts about each of these endeavors: Isn’t the private sector capable of guiding entrepreneurs through the processes of writing business plans and raising capital?

Finally, there is great irony in the federal government’s running financial literacy programs. The GAO found that more than 20 different federal agencies operate 56 financial literacy programs. These “cover a number of topics (such as saving for retirement and avoiding fraudulent practices), target a range of audiences (such as schoolchildren, prospective homeowners and investors), and include a variety of delivery mechanisms (such as classroom curricula, print materials, Web sites, broadcast media and individual counseling).”

As the GAO pointed out, “There are numerous funding streams and little good data on the amount of federal funds devoted to financial literacy.” In fact, “there is no estimate of overall federal spending for financial literacy and education, according to the Department of the Treasury.” As I said, ironic.

How could reducing federal spending, thereby freeing up resources for use by the private sector, possibly be bad for the economy? Of course, it can’t. Nonetheless, many lawmakers on Capitol Hill assert that less government spending will hurt the economy. Apparently, financial literacy programs are lacking for federal officials.

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, can be reached at rkeating@sbecouncil.org.