The Sequestration Boondoggle

First Published: 2013-03-02

Originally posted at Laissez Faire Club, this article re-posted here with the kind permission of the author. Visit his archives.

Illegal immigrants will flood in! You will be stuck in security lines for hours! Children will go hungry! Planes will fall from the sky!

No, this isn’t a recap of the nightmare scenarios concocted by Y2K maniacs some 13 years ago. Instead, this is what the White House itself has said about puny and largely mythical cuts that will occur with the deadly plague known as “sequestration.”

It’s nothing short of a “devastating list of horribles” — something even worse than being subjected to another 40,000 “Harlem Shake” videos going viral on YouTube.

What’s funny (to me) is that most people could not care less. This is what The Associated Press reports, based on an analysis of Google search trends and polls: “You can only cry wolf so many times before people just stop paying attention.

The White House is determined to change that, using the automatic cuts to show us all how much we truly need the government to be as big as possible and how even the smallest cuts will wreak havoc on our lives.

Just how much of a myth is alive here? The Heritage Foundation sums it up. In the last 10 years, federal spending has gone from $2 trillion to $3.5 trillion. In the next 10, the budget will grow to $6 trillion. That’s a devastating cut as far as D.C. is concerned.

When a private business needs to cut expenses, managers try to make sure that the customer feels it as little as possible. Government does the opposite. It uses the occasion to make you and me as miserable as possible.

Within the Beltway, this is known as the Washington Monument Ploy. It’s the most popular attraction in the nation’s capital. The White House loves to close it up at the smallest excuse, leaving people who have traveled for days stuck in long lines. The goal is to impart this lesson: Pay your taxes and shut up, else we will take from you lots of things you love.

The thing ought to be sold to a restaurant franchise or maybe Walgreens or CVS so that we could get 24/7 service, as we do in the private sector. Instead, they will keep it as a way to continue the public blackmail of taxpayers. Everything government does is useful for that purpose.

To be fair, however, there’s more than malice at work here. Government does have a serious problem in dealing with any cutbacks, something the private sector doesn’t face. In a private business, you have metrics to know the most and least profitable lines of production. These data inform managers what is most important and what is least important. In this way, you can know how to cut in a manner that is least socially harmful.

This is the rational approach made possible by the balance sheet, the glorious invention of double-entry accounting, and the profit-and-loss system. These tools provide to business a kind of GPS for dealing with austerity. The people who pay are the managers, not the consumers.

For this reason, bankruptcies in the private sector can come as a surprise to people. One day you are happily shopping at Kmart, and the next day the thing is belly up, seemingly without warning. A closer look reveals years of austerity, but consumers didn’t really feel it. That’s the brilliance of the private sector at work. It makes the customer king as long as possible.

Government has a completely different approach. It’s no one’s fault. It’s just built into the system. Government gets its money by taking it from you and me. Then it spends it on what it wants. Its accounting system merely tries to keep up with the comings and goings, with no relationship between the two. The “consumers” of government’s goods and services are not really the payers of those goods and services. The payers may or may not get anything in return.

Why not just cut “waste and abuse”? Sounds reasonable. The trouble is that no one knows for sure what is waste from an economic point of view. As for abuse, that’s the whole system.

In other words, the whole system is set up on an arbitrary method of accounting. It doesn’t reveal what is socially desirable. It doesn’t reveal what, if anything, is actually profitable. In this system, in fact, there is nothing we can call profit or loss. It is just a system of take and give, nothing more. What makes it even more egregious is that the people who are taken from have no choice in the matter, so government has absolutely no incentive to cut anything, ever.

The system of sequestration — blunt cuts to anything and everything — is the most horrible and economically irrational system, except for every other system. In government, there is no rational way to cut the budget in a manner that makes any economic sense. This is because no one really knows what is or isn’t valuable. It is the complete opposite of the private sector in this respect.

Here’s the secret to understanding this problem. You know how systemwide socialism is a total mess, doesn’t work, creates economic chaos and poverty, disincentivizes production, and generally leads to massive stagnation, to heck with the population? Well, government bureaucracy is a smaller version of the same. And it fails for the same reason.

Mises, writing in his 1922 book Socialism, sums it up: “For all its officiousness, such a bureaucracy offers a classic example of human indolence. Nothing stirs when no external stimulus is present.”

Whatever else is wrong with sequestration, at least it is some external stimulus, some outside influence on the hallowed walls of control and stagnation.

My prediction is that no one will notice these cuts for a while. But after a week or two, government is going to get annoyed that no one cares that it suffered a tiny wound. Then things are going to get rough. The passport offices will cut back their hours. The customs lines are going to get long. School districts will not be getting their checks. TSA lines are going to lengthen. Payment processing will slow to a crawl.

These functions are tiny compared with the overall budget. What’s important is that they are things people rely on, and therefore, they will take the hit. It’s intimidation with the attempt to manipulate public opinion. They have all the power and you have none. That’s how they will get away with this.

Then the finger-pointing will begin. And guess who will bear the brunt? It will be the Republicans, not the Democrats. It will be Congress, not the White House. Public opinion will shift and people will start screaming. The budget cutters will get scared. They will back down. Taxes could be raised yet again, another blow right in the middle of the great economic stagnation.

Look for it. I hope I’m wrong, of course. We shall see.

It all comes down to this: There is no economically rational way to cut the budget of a bureaucracy. Lacking that, government will do what it does best, which is to make you suffer as much as possible.

Visit Mr. Tucker’s archives.

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