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The Incessant Growth of Government Bureaucracy, Part 1

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The natural progress of things is for liberty to yield, & government to gain ground. — Thomas Jefferson

“It is far easier to introduce a government program than to get rid of it.”

Those were the words of a former federal bureaucrat who had worked in World War II in the Office of Price Administration (OPA). He was quite successful. His wartime work has had an effect on all wage earners to this day.

As an OPA bureaucrat, he devised the withholding tax. That was also known as the “win the war” tax. Withholding was supposed to conclude once the war was won. Yet withholding — like so many other government programs and bureaucracies — goes on even though the circumstances that gave rise to it ended long ago.

It is the same with just about all government programs and the bureaucracies that administer them, successful or not, popular or detested. They never end. Withholding, for example, has lasted for so long that almost no one can remember when employers didn’t withhold taxes.

That OPA bureaucrat was none other than Milton Friedman. In his book of memoirs that he wrote with his wife, Rose, Two Lucky People, Friedman wrote that his wife would kid him for the part he played in making possible “overgrown government.”

Why are government bureaucracies resistant to the same forces of change that remake the competitive private sector?

In the 1950s and 1960s, popular socialist economist John Kenneth Galbraith remarkably complained in bestsellers such as The Affluent Society and The New Industrial State that government bureaucracies were starved of resources. He also warned that big American corporations had virtually omnipotent pricing power and, thus, could practically dictate to consumers how much they would have to pay for their products. He talked about the “dependence effect,” by which consumers were led to buy things they never really wanted. If one accepted those notions, he would think that corporations had a power that could guarantee permanent survival and success.

Yet every day in the private sector we see this disproved. Big stores go out of business. We frequently see supposedly invulnerable corporations humbled or driven out of business.

Yet what public-sector bureaucracies, either under Republicans or Democrats, have died recently? Or, for that matter, ever?

Why haven’t government bureaucracies, many of which are hated or are obviously incompetent, such as the IRS or Amtrak, gone out of business, as have countless private entities that have been outdone by competitors?

The nature of government bureaucracy

Government bureaucracies, unlike private, competitive firms, sustain themselves with taxpayer dollars, and they are almost always successful in convincing policymakers that they deserve more power and more money.

The nature of government bureaucracy is to expand in good times and bad. Oftentimes, it uses the citizen’s own tax dollars to convince him that he needs much more of the same — that any cut in funding or authority would be the height of recklessness.

For instance, not long ago in city libraries in Brooklyn, Manhattan, and Queens, I found handouts everywhere urging people to act — and act now — to save a public bureaucracy. Here was what one said:

Library Day at City Hall. Thursday, May 28, 2009. Fight Massive Budget Cuts — Save Our Libraries! Travel to Manhattan by chartered bus. Orientation and materials for your own information, and to share with your City Council Members. Light breakfast provided.

Who paid for the pamphlets? Who paid for the chartered bus? (Why did they have to take a private charter bus to city hall? Weren’t the wretched state-run subways good enough for them?) Who provided the orientation and materials? Who paid for that light breakfast?

And what was the nature of the orientation? Somehow, I don’t think the city’s and state’s notorious overspending practices were discussed. By the way, as of this writing no significant cutbacks have taken place in those library bureaucracies, which maintain their same schedules.

I don’t have any answers. Repeated calls to the Queens County Library CEO Thomas W. Galante were never returned. Government bureaucracies are not accountable to the average citizen, whom they supposedly serve.

How am I doing? Great!

While cutbacks go on in the private sector, bureaucrats often use taxpayer money to tell citizens how great they are and that any suggestion of waste or incompetence is ridiculous. That is tantamount to letting me — not my private-sector boss — do an evaluation of how good I am as a worker. Why can’t public bureaucracies have the same evaluation standards as the private sector has?

The successful private-sector company survives only because it successfully competes today, tomorrow, and into the future. To succeed, it must constantly please finicky customers. Remember that customers, unlike taxpayers, aren’t obligated to continue buying at the same business and often change their preferences.

The opposite is the case in government bureaucracies. Suppose you became disgusted with Social Security and the accounting gimmicks of its so-called trust fund. You are angry and vow never to “contribute” to Social Security again. Sorry, not allowed. You must pay into the Social Security bureaucracy whether you like it or not. Forever. Suppose you think Amtrak is a joke and swear you will never ride its egregious trains again. You can, but there’s a problem: you will still pay for its incompetence through your tax dollars, regardless of whether or not you ever ride it again.

But government-bureaucracy supporters, economist Ludwig von Mises warned, resist all these comparisons to the private sector, since they make the government sector look so bad.

Again today, as in so many previous economic crises, the public sector and its allies have been able to convince lawmakers and mainstream media that it would be an injustice if the public sector were reduced even in the midst of a deep recession.

“Bureaucracy,” Mises wrote in his book of that name, “is imbued with an implacable hatred of private business and free enterprise.” But the greatest danger of government bureaucracy, Mises argues, is that the bureaucratic mindset may start to infect the private sector.

“The trend toward bureaucratic rigidity is not inherent in the evolution of business. It is an outcome of government meddling with business,” Mises writes. Bigger and bigger government bureaucracies will justify themselves by reference to the supposed evils of the private sector.

It doesn’t matter that times may be difficult or prosperous; the assumption of ruling Democrats and Republicans is that the taxpayers can always afford more bureaucracy. For instance, between 1994 and 2004, a conservative, supposedly anti-government era in America, the number of state and local government workers rose from 13.4 million to 15.8 million workers.

So government bureaucracies are resistant to the same economies that the market imposes on businesses operating in the private sector.

For example, here in New York State, the state government, despite all its considerable taxing powers, is once again grappling for dollars. The bond market gives state bonds an unsurprisingly poor rating. Yet the latest proposed state budget calls for an increase in spending. The public sector experiences none of the pain that individuals and business must accept.

Having lived through the Rockefeller years in New York in the 1960s and 1970s, I’ve seen this happen many times. (Governor Dewey, before Rockefeller became governor of New York, told the young Rockefeller, “Nelson, I like you. But I don’t think I can afford you,” according to Thomas Dewey and His Times, by Richard Norton Smith.)

Yet the taxpayers must pay for the policies of elected officials who frequently find it convenient to get along with bureaucracies at the expense of what William Graham Sumner called the Forgotten Man, the average taxpayer.

As I write these words, New York transit workers and city teachers are being given raises by units of government that are running huge amounts of red ink and must take more from the overburdened taxpayers, many of whom plan to retire to places with lower taxes. Meanwhile, we hear every day of the slow growth of salaries in the private sector.

Many private-sector workers have had to accept pay cuts in lieu of losing their jobs. Yet government bureaucracies, even in bad times, prosper owing to one interesting fact: All they must do is win just once and then they will go on forever.

Part 1 | Part 2

This article originally appeared in the September 2010 edition of Freedom Daily. Subscribe to the print or email version of Freedom Daily.

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  • This post was written by:

    Gregory Bresiger, an independent business journalist who works for the Sunday New York Post business section and Financial Advisor Magazine, is the author of the book Personal Finance for People Who Hate Personal Finance.