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[Note: This essay is one in a continuing series by ICCFA executive director Bob Fells focusing on various issues in our federal government. Although the subjects are political in nature, the approach is bipartisan in outlook, at least so far as that is humanly possible. The goal of each essay is not to persuade the reader to adopt a particular political viewpoint or party, but to illustrate why an understanding of the system is important to protect our businesses, our homes, and our families.]
Why Congress's "Super Committee" Really Failed
Last week, Congress’s much publicized “Super Committee” (officially called the bipartisan Joint Select Committee on Deficit Reduction) was supposed to reveal its plan on how to control run-away spending and reduce the national debt. Instead, many Americans were stunned to learn that the Committee announced its failure to do either and simply closed down on November 21. Partisan politics aside, to understand why the Super Committee was doomed from the start is to understand the current structure of our federal government.
The government functions much like any large corporation – think IBM – in that it provides services and products to the public. All business enterprises, whether public or private, must pay its workers who produce those services and products. But this where the similarities between the government and the private sector end. The private sector offers its wares in competition with other similar entities and charges a price the public is willing to pay to obtain these services and products. The proceeds are used by the employer to pay expenses including workers’ salaries and other forms of compensation. The element of competition forces private businesses to improve efficiencies, reduce waste and hold down their prices. Failing that, they close down.
By contrast, the government offers its services in the absence of competition, and without charging any fees by which to pay its workers. Since the government has no competition (with few exceptions), it is under no existential pressure to improve efficiencies and reduce waste. And since government services typically produce no revenue of their own, funds must be appropriated by fiat to pay its workers through taxation, a process that some politicians insist on calling “revenue enhancement.”
But the comparison gets worse. Unlike the private sector, government services are generally provided only to those members of the public who qualify. So while not everybody can obtain government services, the need for the government to determine who is eligible and who isn’t creates a gigantic infrastructure of workers who are employed just to make those determinations. The private sector has no such equivalent in determining who may obtain its services and products.
It would be unsustainable for the private sector to employ hundreds of thousands of workers yet produce no revenue by which to pay them. True, some agencies such as OSHA impose fines and penalties that can indeed generate some actual revenue of their own. If the private sector tried this approach they would be accused of a giant conflict of interest, not unlike police officers who give out tickets to meet their “quota.” When the federal government first embarked on its efforts of “job creation” in the 1930s, it did not count such civil service jobs in the employment rate, presumably because they weren’t “real” jobs funded by “real” income. Today, the civil service rate is counted in the employment statistics, thereby overstating the numbers of workers. Today’s unemployment rate of approximately 9 percent is undeniably higher if non-revenue producing government jobs were not counted.
This brings us back to the Super Committee. It failed in its purpose because it was tasked with doing the impossible: to control spending money that the government doesn’t have and to increase revenue when the government doesn’t charge for the services it provides. For simplicity, this diagnosis ignores the lack of political will power needed to cut government programs or increase taxes. This factor alone made the Committee’s task unlikely but the structure of government itself as it has developed over the last 40 years made it Mission Impossible.