HOW TO CUT THE BUDGET
by Dr. Lawrence Wilson
© April 2011, L.D. Wilson Consultants, Inc.
Today there is much talk about how to reduce the government debt in many nations of Europe, and the United States. Some nations are in good shape if they have many natural resources and if they sell them, such as Canada. But most Western nations are in serious financial difficulty.
This article details some proposals that would solve the problems quite easily, but are not politically correct and not discussed honestly and openly enough. The suggested cuts are in:
1. Social welfare programs
2. Corporate welfare programs
3. All government research
4. All federally-funded education programs from kindergarten to college level
Let us discuss each in more detail.
BUDGET CUT #1. REDUCE MILITARY SPENDING A LOT
The problem with this is that without a strong military, the United States and other nations are vulnerable to military attack by other nations that are spending much more than the United States on their military. These nations include China, Russia, sadly and North Korea. They even include Iran. So this idea, while seemingly good, is not going to work, is a dangerous idea, and hopefully will not occur.
BUDGET CUT #2. CUT SOCIAL PROGRAMS SUCH AS WELFARE, MEDICARE, MEDICAID SOCIAL SECURITY AND IN SOME NATIONS, HUNDREDS OF RELATED SOCIAL WELFARE PROGRAMS
This is proposed by the Republicans and the Tea Party movement in America. Two avenues are possible. One is to reduce the size of these programs. The other is to do away with them altogether. I want to state why I believe they should be done away with altogether and why individual families, and local community groups should be given the job of taking care of the poor, the sick and the elderly who cannot take care of themselves.
The problems of large government bureaucracies administering welfare, retirement and medical programs include waste, fraud, abuse, lack of competition and other market controls, and perverse incentives. Let us examine each of these.
1. Waste. This occurs for several reasons:
a. The type of people who work in large government organizations. Sadly, those attracted to government jobs tend not to the smartest, most efficient and most diligent workers. The reasons for this are complex, but basically it is because people learn that certain government jobs are ‘cushy’, or perhaps just secure. Private sector jobs are not secure in America, at least. Government jobs in many nations also pay quite well.
As a result, those who take government jobs are often more security-minded individuals, rather than the brightest or most creative. They are more concerned with keeping their position and enhancing it, rather than saving money for the taxpayers.
b. The motivation of these people and motivation of their organizational structures. Sadly, government workers often have much less incentive to be efficient and careful with money. For one thing, their jobs are usually guaranteed, meaning if they do a poor job, they do not lose their job. In fact, they are often rewarded for “not rocking the boat”, so to speak. This just tends to be the way large organizations often operate.
Also, their personalities tend to be of the type that they do not enjoy being lone wolfs, going after problems, cheaters and abuse. They prefer the quiet life of the paper-shuffling offices that dot the landscapes of America and Europe today.
Also, they do not have to really “work for their money”. If they run out of money, they just as the legislature to give them more. The more they can get, the bigger their agency gets, so they get more power and prestige. And if the funds are denied, they do not lose their jobs, often. They just give out less welfare or other benefits and tell the legislators that they are doing their best.
c. The problems of all large organizations. These include being out of touch with the local people. This has to do with the work style and personalities of some people, and simply the centralized nature of large bureaucracies. They are simply not “on the scene” enough.
Another is being burdened with mountains of rules and regulations. These are, or perhaps seem to be needed to run any large organization. They bring order to the chaos, but they also hamper its flexibility, creativity and often its ability to police itself in many ways.
Also, a certain sloppiness often sets in to any large organization that deals with millions of dollars of funds. They just tend to discount small errors, mistakes and so on. Yet these add up easily to large mistakes and errors of accounting, for example.
Larger private organizations such as foundations and corporations have the same problem, and work hard to stop it. The difference is they fire anyone immediately who does not do an excellent job.
d. The problem of public sector unions. Sadly, unions have become a force for evil in most nations. This was not always the case, and is not something inherent in unions. However, it is the case today and must not be forgotten.
Instead of protecting the public, which is the stated goal of government workers, their unions seek only to protect the jobs and benefits of the government workers. This is completely backwards. Often, wasteful and stupid practices are built into union contracts to “make work” or enlarge paychecks. They negotiate costly health care benefits, or for example, workers are paid overtime if they work more than 40 hours per week, or less in some nations. This is silly, since in the private sector many people work 60 hours or more, often with no pay at all if it is a sole proprietor, for example.
The main problems with public sector unions is that those who negotiate the union contracts in the government have no incentive to really stick up for the taxpayers, who are distant to them. So they allow the unions all kinds of benefits they should not have. Also, many government workers are corrupt, so they trade monetary or other favors for lucrative union contracts. In reality, unions are helpful only in situations in which workers are being obviously abused, such as the old coal mines, perhaps, or some old factory situations. Unions are not needed in the public sector, where people are treated well anyway, and should be abandoned there. It is time to stop listening to those who oppose public sector unions of being anti-worker and “union-busters” when all they are trying to do is restore sanity and efficiency to government. Even as socialistic a president as Franklin Delano Roosevelt was firmly opposed to public sector unions and prohibited unions for federal government workers in the United States.
How can we take care of those who cannot care for themselves? We must care for our poor, our sick and our elderly who cannot care for themselves. I do not debate this fact, and it is sickening to hear how some blame the opponents of government programs of “hating the poor” and just wanting the old people to die or to languish in the gutter.
However, the answer is that welfare programs of all types, meaning retirement, medical, and social assistance and insurance are best handled by local churches, charities, community groups, service clubs like the Rotary Club and similar groups. Smaller, local groups are in touch and more responsive to the needs of their clients, have the correct incentives to be efficient and save money, are more humane in most cases, are far better run, in general, are not unionized, and much less subject to all the problems listed above.
2. Fraud is another serious problem with all welfare programs, private and government, but it is generally worse in large, government-run agencies. Fraud is another word for stealing from the program, specifically by those who provide services. These may include doctors, hospitals and drug companies if it is a medical program. They may include old age homes and wheel chair makers if it is a program for the elderly.
Government statistics indicate that most large government programs lose up to 15% of their money due to fraud or simple stealing.
The reasons this occurs are the same as the reasons for waste above. They include “ivory tower” syndrome, meaning the people who run the program do not monitor the money carefully enough, perverse incentives, corruption, even union rules, and the problem of running any large, sprawling agency.
Cheaters often find it easy to file false work reports and can collect millions of dollars because the rules are complex and they learn how to “game the system”. Government workers really have little incentive to catch the cheaters. If money is lost, they just ask for more money to pay for the program. Meanwhile, their jobs are secure, even if corruption abounds. When they discover fraud, they could become whistleblowers, but usually this is not rewarded in government. Many prefer not to upset the status quo, and this is rewarded in most cases with a higher position and more pay.
Large organizations are highly prone to fraud and stealing, and once again, this is just another reason why smaller, more local and more “in touch” groups are better at caring for the poor, the elderly and the sick among us who cannot care for themselves.
3. Abuse. This is when the recipients of social benefits cheat or steal from the program. According to government statistics, this also eats up and extra 10-20% of the money in these programs. Some would say the real numbers are much higher.
It happens when people say they are more ill than they really are, when they get their families on welfare because they know someone on the inside, or when they file false paperwork, which happens all the time. Sadly, some people are experts at this, and some legal beagles are very willing to assist them for a fee, of course.
Others misuse welfare benefits, like buying cigarettes with food stamps, which is not allowed, because they basically bribe a friend who works in the supermarket or other store. So there are many ways in which this occurs.
Also, some welfare recipients just become depressed by being dependent, and don’t bother to work their way out of poverty. This has been proven over and over again. In fact, the system always contains incentives to keep the people poor by paying them regardless of how hard they try to better their lives.
All of this costs the taxpayers billions of dollars in America and elsewhere, and does nothing to help the poor, who become more numerous because they are rewarded for it. Bureaucrats living thousands of miles away cannot police their clients well, and once again have little incentive to do so even if they want to, which some do. Their jobs are not on the line, union rules keep them from really working overtime to do a fine job, and so things just are let slide.
Large agencies, in particular, must follow arcane rules that also stop prosecution of cheaters in a timely way in many cases, and some groups such as the ACLU seem to always be willing to sue anyone who comes down too hard on the poor and the downtrodden, even if they are abusing the system. This just makes the bureaucrats give up easier.
It takes a special person to understand the mind of the cheaters and the fakers. Government workers are usually not of this nature. Private corporations can hire real detectives, but governments are not as good at this as they have less freedom with hiring and firing people.
While small, privately run welfare programs are certainly subject to abuse, many studies prove it is much less of a problem because of their size, their local nature, their incentives, and the type of people who tend to run them.
4. Lack of competition and market controls. Private charities and community groups that care for the poor, sick and elderly must compete for business, and must maintain certain standards of integrity, efficiency and honesty. Otherwise they tend to lose their donors and they quietly go out of business.
In contrast, government welfare systems usually have no competition, so when they are shown to be inefficient, corrupt or incompetent, there are no market forces that tend to correct the problem. They usually just remain in business. Supposedly, they have oversight committees to deal with these issues, but they are part of the same bureaucracy, and so they don’t work well in most instances.
THE WORST PROBLEM OF GOVERNMENT LARGESSE: PERVERSE INCENTIVES AND MORAL PROBLEMS
Perverse incentives means that for some reason, programs set up to take care of the poor tend to create more poverty, programs set up to care for the sick tend to create more sick people, and programs to care for dependent people (those who cannot care for themselves) tend to create more dependency.
This results in more misery and higher costs for the taxpayers and the nation. It also tends to demoralize and destroy the social fabric of the society, at least somewhat.
Why do government welfare programs tend to create more of the exact problem they are designed to solve? This happens because:
a. Hidden agendas on the part of the government workers. Many government bureaucrats primarily want to keep their jobs, so at a deeper level, they do not really want people to get free of the system and be independent, healthy and happy.
In fact, they often want to create more dependent, sick and impoverished people, because then their jobs will be more secure and they will have more power and prestige by working with a larger agency. I know this sounds cynical, and it is not true of all government workers, but it is an attitude of many at the top of the agencies and in other positions of power. They enjoy power and control, and they secretly want the citizens to be poor, sick and therefore more dependent upon their largesse.
b. Problems that occur in the welfare recipients such as the so-called entitlement mentality. Having the official government legally forced to provide benefits tends to make these benefits into “rights” or “entitlements”. This means they are something that one deserves or is owed. This is very different from the idea of giving people a hand up if they are in financial distress, for example.
When the handout mentality develops, as it has in the United States and particularly in Europe, many people begin to care less for themselves, for others, for their families, and for their communities. After all, why bother? The government will take of their problems – from jobs, to flood insurance, to retirement, to healthcare.
This is always a dangerous direction for a society. It leads to less caring for one’s health and for one’s financial security because there is less incentive to do so.
c. Rewarding irresponsibility. Another problem for welfare recipients and the entire society is that having a lot of government “safety nets” as they are called, tends to reward irresponsible behavior, while punishing people who take responsibility for their lives. This is because if you are responsible and care for your health and money, you will not receive nearly as many benefits as if you are irresponsible with your health and your money.
d. Moral problems. This may sound a little esoteric, but moral issues do matter in any society. With private charity to help the poor, ill and infirm, people choose to donate to assist others. This has a beneficial effect as people are assisted to make good decisions and to support worthwhile causes. Those who are helped do not take the help for granted as much as with government programs, and this is also beneficial for them, as they are encouraged to take responsibility for their lives.
Government welfare programs, in contrast, are paid for at the point of a gun, because failure to pay taxes will land you in jail. Some good, moral, responsible people can become very angry when their hard-earned tax money is spent unwisely, especially to support those who do not want to work, or do not take care of their health, for example.
The responsible people always tend to rebel and either leave the nation, or take measures to avoid taxes such as hiring lawyers and accountants to take advantage of the laws. This fosters attitudes of cynicism, cheating and lying, at times needed just to make ends meet. These attitudes tend to cause the bankruptcy and moral decay of the society and its citizens.
These are some of the main reasons why government welfare programs are always a bad idea and should be discontinued.
BUDGET CUT #3. CUT GOVERNMENT MEDICAL AND OTHER RESEARCH
Here I will surely be challenged. However, I believe that most government research is a complete waste of money today and should be stopped. The ‘war on cancer’, which has cost at least $50 billion dollars in the USA alone, has not stopped or even slowed cancer very much. Similar ‘wars’ on heart disease, lung disease and more have had similar dismal results. I want to suggest the reasons why, which are similar to the problems with large government welfare programs.
The reasons are waste, fraud, abuse and more. Throwing money at medical problems is wasteful, often easily corrupted by drug companies and others who stand to gain from new drug research, and the people who do the research are government employees who, once again, are rarely if ever fired for not doing a good job. This is the problem.
In fact, they have a strong incentive not to find a cure for cancer. After all, if they found a cure, they would all lose their jobs. I learned years ago by research that the National Cancer Institute and National Heart Institute actually suppress and destroy wonderful natural therapies because they know that they would be out of business if they told the truth about nutrition, for example, or many other natural approaches to health care.
I hope this last fact can be learned and appreciated. It is sad, but very true. As a result, cutting medical and other government research and allowing the private sector to do research would be best and would save more billions of dollars almost overnight.
BUDGET CUT#4. REMOVE GOVERNMENT FUNDING FOR ALL EDUCATION
This sounds like a horrible thought at first. However, I contend that education in the United States and Europe is far worse thanks to “no child left behind” and literally hundreds of other government education programs from kindergarten through college and graduate school levels.
Traditionally, education in the United States, in particular, was left up to parents and local authorities. This changed in the 1960s or so, and have things gotten better? The answer is no. Why can we not just look at this fact and realize that running schools efficiently, and the ability to innovate and be creative in education are not done well by large government programs?
There is a sort of bias or feeling that the federal government can do anything, when the truth is they are not good at many functions, especially education. The reasons why are exactly the same as those listed above as to why we should defund the welfare and retirement systems.
Before mentioning the reasons, I fully realize there are thousands of dedicated teachers and school administrators who are trying to do their best inside the public school system. The problem is not them, but rather the system itself.
Federal bureaucrats to dole out the money are too out of touch, not smart enough, not motivated enough, and often have motives to maintain the status quo or make people stupider. They are also easily corrupted, and today often burdened by union contracts and rules that institutionalize waste and stupid practices. The result is a mess.
In short, the system is seriously broken, has become too costly, and must be changed at once. The simplest way is to defund it and allow private sector education to take over. I have no doubt the test scores, the joy of the children and the joy of their parents would improve immensely. This is based on research, not on my fantasies about the private sector or ‘corporate education’, as some detractors call private schooling.
The saddest part of the education mess. The worst consequence of today’s public education is that millions of children’s minds are wasted, or even destroyed. The disaster of public education in America is truly sad to behold, and anyone who cannot see it is not looking closely. Newer technology like the internet is ignored, the children are treated all alike, which is insane, and the school environments are not safe and not emotionally, mentally or spiritually healthy for too many children.
One way to view it is that removing love, religion and spirituality from the classrooms in the name of “value free education”, “moral relativism”, “cultural diversity” and other ideas has destroyed the system.
For these reasons, I always advise parents to consider home schooling for this reason, or at least look at all the alternatives for education. Sending a child to school these days can be worse than a prison sentence. I see it in the hair analyses of the children once they enter school.
Religion and spirituality are essential for the proper development of a human being. Keeping them out of classrooms phoney, dangerous and stupid in the extreme. Life is not only about learning to read or write. It is far more than this, and unless the basic philosophy of life is taught and understood clearly, children grow up rudderless, powerless, hopelessly confused, without proper moral training, and more. It is no wonder than children out of wedlock, drug use, stealing and other crimes among the young are rampant in many nations today.
BUDGET CUT #5. END WHAT IS VARIOUSLY CALLED “CORPORATE WELFARE”, “INDUSTRIAL POLICY” OR “TAKING SIDES WITH BUSINESS”
This is quite simple. Many Western nations subsidize some businesses while essentially punishing or discouraging others, even though they are legal and helping people. This policy is called corporate welfare or industrial policy. It is practiced in Europe and Japan a lot, and less so, but definitely to some degree in America, China and elsewhere.
The idea is that somehow the wise government knows which businesses are best and supports them to “help the nation”. The problem is they are often wrong. This wastes billions of dollars, misallocates resources and capital that should be spent elsewhere, distorts the marketplace, and often causes disasters.
A perfect example is the meltdown of the nuclear reactors in Japan and earlier in Russia and the Three-Mile Island disaster in America. Nuclear power cannot survive without huge government subsidies. It is simply too costly and far too dangerous a technology. Instead of realizing this, governments around the world have ignored the marketplace, which dictates which technologies are most cost-effective, and have literally forced the development of this horrendously dangerous technology.
The mess in Japan and the others could have been avoided if the government had simply kept its hands out of the corporate welfare business and allowed nuclear power to die, once it was discovered how costly and dangerous it was – way back in the 1950s. We would be left with coal, oil, natural gas, hydroelectric power, geothermal, solar, wind and other alternatives. They may not be perfect, but they do not pollute the planet for thousands of years and cause subtle cancers in millions of people.
Coal and oil can pollute the planet, but we have ways to clean them up very efficiently. The same cannot be said of nuclear power. For more on this topic, read Nuclear Power on this website.
There are many ideas floating around for cutting the budget. This article suggests that the wisest path is to cut funding for:
1. Social welfare programs
2. Corporate welfare programs
3. All government research
4. All federally-funded education programs from kindergarten to college level
These activities are simply not done well by large government bureaucracies. Welfare, retirement, medical programs, research and education are best handled at the local level by local churches, foundations and private community groups of all kinds. This approach worked in the past in America, particularly, and it can work again.