Background
A colleague and I have been exchanging ideas on this topic.
He’s more liberal than me (no surprise), so it’s an interesting exercise.
We’re starting to find some common ground and develop testable hypotheses.
Here’s one of our initial observations.
Chime in, please … would love your input on this and subsequent reveals.
The big shift in government’s “mission”
Long ago, say 40 or 50 years, the central government mission was to provide essential common services … such as military defense and national infrastructure (aka. “Transportation”).
That mission has become more “mixed” over time (see chart below).
Spending on the original essential common services – while still substantial — are proportionately decreased.
For example, military defense was almost 30% of Federal spending in 1970 … it’s less than 15% in 2012.
Some additional layers of spending – consistent with the original mission of essential common services – have been added.
For example, Homeland Security (aka. “Protection”) has been substantially ramped up.
But, the bulk of additional spending over time is attributable to health & welfare entitlements, public employee pensions, education (mostly new Federal programs and administration).
Time bomb warning: Note that “Interest” on the public debt has remained proportionately constant over the 40 year period.
But, of course, the components are very different.
In 1970, there was relatively low debt but high interest rates.
In 2012, we have very high debt with historically low interest rates.
The obvious uh-oh: what happens when interest rates jump up to more “normal” levels?
In other words, spending trends seem to validate the observation that the implicit “government” mission has expanded from a relatively sharp focus on providing essential common services by (1) expanding the scope of declared “essential common services (think DOE and Dept. of Education) and (2) re-missioning to become increasingly a transfer payment hub for “safety net” entitlements.
Ergo the rub.
More to come.
Your views?
Tags: big government., government mission, government spending
The Homa Files 
August 22, 2012 at 10:13 am |
Thanks for the info. I’m having this same debate with a very close and liberal friend … this is good ammo! :)
I am making the same argument as you. I support government, and I have no problem paying taxes as long as they are going to the services that assist me and my family to live a happy, safe and comfortable life here in the USA. The basic services, military and infrastructure are two of my arguments, although I wasn’t aware of the shift in % of spending since 1970. I do believe we could and should be leaner and more sophisticated, and government contracts could take a lesson from private business, but overall, who really can argue against the fact that we have significants threats from China (who may or may not use them, but it’s still significant) and terrorists cells, and we need to combat these. As well, infrastructure should be expanded to include not only transportation, but also innovation. Some concepts, such as cleaner energy sources, are too costly for a private business to engage in (unless you are the owner of SpaceX, but he’s focused on other things), so they need to be supported by all for the benefit of all (future generations).
Education, in my opinion, needs to be a public operation, because far too many live under the income level to afford private education. Does the system need improving first … absolutely, which is a debate in and of itself.
But, I do agree with you that our tax income is being spent inefficiently and with little reward to support the safety nets. Safety nets are fine, as we don’t want anyone living on the street, but when the system that supports less fortunate individuals promotes them to stay on the system, then it is broken. I have seen it more than once … someone turning down a job in my office because they “make more on unemployment” than what the starting wage is (no way I am paying an entry level position more than seasoned vets in our office). It also bothers me to see people paying for groceries with food stamps, while dolled up in designer clothes and accessories, driving $30K automobiles. I’ve seen it … again, more than once. I run a business and work 60 hours a week, and I drive a 2007 Honda Civic!! Do I believe that ALL individuals on welfare want to stay on welfare … no, absolutely not. There are motivated people who have just hit the skids, and these safety nets provide the support needed to get back on their feet. SC has a great employment program that trains people, then places them. The welfare department is linked to this program, so that individuals in the program can prove they are really trying to improve their lives. This should be mandatory … not optional. The system MUST be reformed to encourage productivity from all people.
Looking forward to hearing more.
August 23, 2012 at 10:49 am |
It would be helpful to see how these numbers looked during the late 90’s or early 2000’s. I’m guessing that the welfare number has been jacked up by the current crisis. If that is the case, there is a strong argument for government borrowing at historic lows to cushion the blow and help laid off workers transition to new jobs.
I’d also suggest that growing health/pension/welfare costs have been the result of business maximizing profits while handing their social responsibilites off to the government. The real estate bubble, college costs, for profit universities – the common thread is that a business is being paid by the government by encouraging individuals to take on debt. At the end of the cycle we have an impoverished middle class and a few fabulously wealthy “business leaders”. When a bank gets robbed, I suspect the guy holding a bag of monety. Not the guy holding a bunch of empty promises.
Its good to hear that the “Welfare Queen” argument is alive and well. For all you know the “designer clothes” were donated or purchased at a deep discount. More importantly, let’s talk about the safety net. What’s wrong with an out-of-work person deciding to use their benefits to allow for a longer job search? The idea that somebody should take the first job they are offered is ridiculous – especially if it is a low wage job that does not match the applicants level of skill. On a net basis will this person be better off waiting for a better opportunity? Will the worker need childcare? If so, will taking the job actually leave them in a more vulnerable position?
The time bomb warning makes zero sense. You can’t assume that borrowing will remain high when borrowing costs rise. Your own evidence suggests that interest costs remain relatively stable over time.