Monday, July 25, 2011

The Core Business of Government

Companies often refer to their “core business” as that part of the enterprise where they have the most expertise, and are usually an industry leader. Many companies get into trouble when they venture out of their core business. There are many examples of companies spinning off (or writing off) segments that were less than successful because they were not in the core business.

Similarly, government has a core business, which is to do what only government can and should do. At the local, county and state level, the main elements of their core business is providing fire and police protection, maintaining roads and other local infrastructure, running public schools and the court system, providing a safety net for the helpless in our society (mentally ill, handicapped, temporarily unemployed through no fault of their own), and often providing water, sewer, and garbage collection. Of course what do local governments do when the budget gets tight? Cut back on those core businesses.

At the federal level, the main elements of its core business consist of military protection, consumer protection, regulatory enforcement, postal service, national infrastructure, and the handling of foreign affairs. The Constitution specifically placed many limitations on the federal government, and delegated most of the burden of governing to the states. However, today Washington it too involved in governing outside of its core business, plus it hands down unfunded mandates forcing state and local governments to make the kinds of cuts they’d rather not be making.

No matter which level of government we’re talking about, government should only be doing its core business. Getting involved in other areas, no matter how worthwhile they may seem, is not what government should be doing. That’s because when government ventures out of its core business, it’s usually serving a special interest group at the expense of the taxpayers. If you look at government programs and earmarks, I would bet that the vast majority serve special interest groups.

The failure of Socialism in Europe has demonstrated that government can’t be all things to all people. It can’t (and shouldn’t) provide womb to tomb social benefits, regardless of how desirable they may be. Eliminating government programs that don’t fit with its core business will be painful, as we’re seeing in several European countries whose populations have come to depend on the generosity of the government (with very high taxes to pay for it). Look at the riots in Greece to understand how embedded these benefits are in that society.

However, even with high taxes, the governments of Greece, Portugal, Ireland and Italy got into financial trouble because they were spending more than they were taking in. The U.S. is doing the same, and at this rate it’s only a matter of time before we become another Greece. We can’t let that happen. Our representatives in Congress must make those tough decisions now before we default on our loans or our credit rating is lowered. These will be painful, and thee will be crying and gnashing of teeth by the special interest groups, but we must stand firm in our resolve to cut spending. Under President Clinton the government enacted welfare reform, so change is possible. Government must spend its money on the core business of government (such as rebuilding our infrastructure). Cutting expenses is especially important because we have both demographics and higher energy costs working against us.

As the Baby Boomers age, we’ll have even fewer people paying higher taxes. Already in 2010, 47% of the population paid no federal income tax (“Yes, 47% of Households Owe No Taxes. Look Closer” by David Leonhardt, New York Times, Published: April 13, 2010). We must cut government expenses now for another reason as well. We must pay down our multi-trillion dollar debt as quickly as possible because of the enormous interest we have to pay. The sooner we cut costs and stop increasing the debt, the sooner we can pay it down and lower our interest payments. Think about this: The U.S. is in debt to China for about a trillion dollars. So every month we’re sending them millions of dollars in interest. How long can we afford to do that?

Write your Representative and your Senator. Tell him or her to stop pandering to special interest groups and get the job done. All the campaign contributions from all the special interest groups can not offset an angry electorate. We kicked out a bunch of ineffective politicians in the last election, and we’ll do it again.

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