The Federal Government Is NOT A Business, It Never Was, It Never Will Be [178*7]
The Impossible Dream
I AM NOT SURE WHY I HAVEN'T TACKLED this subject before for it is something I know a lot about and it has been ubiquitous in the political dialogue for the last several decades; further people seem to believe this myth is true. What is the myth? That the federal government ought to act like a private business. Nothing could be further from the truth in all respects and the Democrats seem to be too embarrassed to make the case against this assault against common sense.
This isn't to say that the government shouldn't follow the best practices of private business ... "where they are able to", and there are many areas where government can,for sure, but in the main it is impossible to run government like large corporations. It simply wasn't designed that way from the outset. Founders like Thomas Jefferson, John Adams, James Madison, and Alexander Hamilton did not want government run like normal businesses because they knew that would be dangerous to maintaining liberty for all.
What are the natural impediments to an efficiently run government? How about three branches of government with competing agendas; or a biCameral Congress which responds to different pressures and work on different cycles; or a long, laborious constitutionally designed budget process guaranteed to inject inefficiency; or two Parties who have completely different priorities as to what direction America should go. No, there is nothing in the federal government's design that lends itself to operating "like a business" or "like a family".
A BUSINESS IS A DICTATORSHIP
A well run business is, in effect, a dictatorship; it must be to survive. Is this what those who believe in this catchphrase want the government to be? (actually, a few do.) When businesses are run by committee, they often fail. Well that is exactly what the law making and judicial functions of the federal government is, a committee. Once laws are passed, it is then turned over to the monarch, the President, to implement.
EXECUTIVE BRANCH
In theory, the executive branch could be run more like a business; but the Constitution will not allow that to happen either. Why not? Because, while the executive branch has the power to enforce the laws, it doesn't have the ability to fund its own operations, that comes from the legislature ... in most cases on a yearly basis. Can you picture any private business being able to operate successfully under these conditions? Of course not, it defies common sense. So why are those, most often on the Right side of the political spectrum, who believe government CAN operate like a business keep insisting on it? Why does anybody believe them??
YOU, THE PEOPLE, ARE THE PRINCIPAL REASON
Yes, you! You are the main reason why the federal, or any government can't run itself like a business because you want a government on the cheap; some of you seem to want government for free, if you could; you don't want to pay for it. Finally, you don't want your government making a profit!
A business who has a successful, well established, elastic (economically-speaking) product, can raise and lower prices as needed without endangering the bottom-line; there are lots of companies like that ... think oil. Let's say it is decided by BP they need to replace several of their remaining gulf rigs in the next 20 years; what do they do? One possibility is to establish a sinking fund of some sort and start funding it. Where do they get the money? They raise prices and you pay them, or at least some of you do. Compare that to the federal government seeing the need to replace several old bridges over the next 20 years, where does it get the money? By raising taxes ... over your dead body! Don't you see the conundrum? How is the federal government supposed to act like a business when it isn't allowed to raise capital like a business.
Another alternative, of course, is for BP to borrow the money to pay for the oil rigs. What if the federal government wanted to do the same thing today for it decay bridges? Do you think the People will let it? Over their dead body! Yes, let's make the federal government run like a business ... over your dead body because you damn well aren't going to let it raise taxes or borrow money; but it is their fault for not achieving your goal of "running like a business". (Is there an emoticon for shaking one's head?)
COULD GOVERNMENT DO BETTER?
Of course it could, lots better!!! When I joined the ranks of the Air Force Comptroller in 1983 with my accounting degree fresh in hand, I was astounded to learn that the federal government does not use "double-entry" bookkeeping; the gold-standard of accountability! Instead, they still used what was used back in the 1700s, single-entry bookkeeping. As far as I know, there is no legal or Constitutional reason the federal government couldn't adopt double-entry accounting, but so far they have chosen not to; and that is a shame. In one fell swoop, you could reduce fraud, waste, and abuse by a few orders of magnitude. Why hasn't Congress changed this? My guess is that they truly don't want the accountability because it would make it too easy to trace responsibility back to them.
Another thing they could do which business does his when you purchase a capital item, like a bridge, you also budget for 1) its operations and maintenance costs for many years out and 2) its replacement. Congress does neither for one simple reason ... you wouldn't pay for it; the total ownership cost will seem too high. Consequently, Congress hides (ignores) these costs so the price appears to be affordable. As a result, we keep getting "surprised" by rising support costs of our programs that we "suddenly" have to fund and then get accused of being a spendthrift Congress.
These are just two, but there are many more examples of things Congress could do. There are things the executive branch could do, have done then abandoned, as well, but, you get the picture.
I promised myself I would keep this short, so I will leave it here with this final comment. You will notice I didn't really bring up conservatives, moderates, or progressives much in this hub. Granted, it is the conservatives when vocalize this myth the most, but belief in it appears to cut across the political spectrum. There is more than ample evidence that it is impossible for the federal government to achieve the impossible dream of those who naively think it can operate like a business and I have presented only a sampling of it. Common sense, on the face of it, screams "you can't do it, it wasn't designed to, it never has, and it never will".
What Do YOU Think?
Do You Truly Believe that the Federal Government Can Operate Like a Private Business?
Related Links
- The Stimulus Can Giveth and the Budget Cut Can Taket...
Virtually all economists agree, Government stimulus', when properly used, do work. Virtually all economists also agree, ill-timed budget cuts can drive the economy into recession. This hub looks into both phenomenon. - Another Way to Explain Deficit Spending, the Debt, a...
This is Part 2 in my look Deficit Spending, this time as it relates to the proposed Balanced Budget Amendment Conservatives would like to see passed and is now a part of the Republican platform in the 2012 Presidention election. It is sure to be a ho - Another Way to Explain "Deficit Spending, the Debt",...
One of Mitt Romney and the conservatives main weapons against President Obama is the misrepresentation of the $4 trillion in debt that has been accumulated from the time Obama assumed office. In fact, roughly $2.5 trillion of that debt would have hap
Amazon on Federal Government
© 2012 Scott Belford
Related
Comments
My Esoteric
Once again avoiding the details of my comments.
Another questionable stat.
Businesses fail because they have to make a profit, and when they spend more than they bring in they can't tax their customers to make up the difference like the government.
The other reason is that globalization, mergers and acquisitions have run the smaller companies, not only small business but smaller than the ones buying them out of business. Added to this is the exporting of manufacturing jobs to their world countries this was the result of unions wanting excellent pay and benefits for the same kind of unskilled labor found in the fast food industry.
Government, both federal and state have taxed the businesses to where they can't make a profit to stay in business. We are no longer a manufacturing world power, we are a service industry.
The US Government as any government rely on taxing, and taxing and more taxing to cover for their spending, spending, and more spending.
What we see today is the failure of the dream of our founders. They never intended to have the states replaced as they are today by the federal government.
I was hoping to learn a lot here, but not as much as I thought, I could learn.
Thanks
- AUTHOR
BM - you keep saying "if business had run it .." then good things would happen. Why do 80% of businesses fail?
My Esoteric
You wrote
@bradmaster, the government must have run successfully because by observation, we still exist in much the same form as we started with and we have prospered as a nation in part because of the government, not in spite of it. If your statement were true, America would be a failed state like the Soviet Union.
bm
The reason that we have the same form is the reason why the US declined every decade since the oil crisis in the seventies. Russia was never as powerful as the US, so we wouldn't have failed in the same way. But the US is no longer the world leader, it was before the seventies. There is something wrong if you think the
US doing as well.
-------------
You wrote
As to the purpose of gov't vs business, simply compare the Constitutions Preamble to IBS's mission statement or vision statement. They aren't the same, nor should they be. Because each entities "purpose" is different, so must be how they are operated.
bm
Today we are looking at another government shutdown because congress can't agree on the budget. If the government was a business, it would have been out of business several decades ago.
----------
You wrote
There are functions that are "inherently governmental" and others that are not; those that are not can be run like a business, but those that are, cannot be.
bm
What are those functions, because they all have budgets, and so do businesses?
=========
You wrote
DoD tried very hard to run their maintenance operations like a business. They started the effort shortly after I began working for the AF and ended about 5 to 10 years before I retired. Various SecDefs tried very hard to make this work but it failed, as it had to.
bm
Why?
---------------
You wrote
It failed because what makes 'those few' businesses that are successful, successful is the profit motive; there is no such motive in government and there is no workable substitute. The intent of DoD's policy was to make base commanders use their limited budgets efficiently and have depot maintenance and other logistics functions "compete" for their work. But in the end, maintaining our fighting forces "is an inherently governmental function" with different objectives than businesses so it had to fail as a business.
bm
The objective for the DOD is to provide for national defense, a job that it has failed. Once again, not a single defense was made on 911.
---------
You wrote
Likewise, Social Security, Medicare, and ACA are all inherently governmental functions where profit is NOT the motive (and never should be).
bm
They are all taxes, and taxes are revenues, and that is the same as revenue in business. The only difference is that if a business managed these programs, they would be sued for mismanagement, and maybe even fraud. SS and Medicare are causing the budget to fail every year now, only followed by the funding of the government pensions, and benefits.
-----------------------
----------------
You wrote
In fact, it is my opinion that it was the Profit Motive that destroyed our healthcare system in the first place when Reagan deregulated it. If these programs were run as a business as you suggest, they would fail just as surely as the DoD effort did.
bm
Government fails because they make bad decisions. Such as giving government bids to the lowest bidder. Then these companies run out of money halfway through the program. Then the government is stuck with having to pony up the money to finish the program.
Another big problem, the government is run on politics, and that is why the B1 bomber failed. It only came back to life after the vendors for the program B1A, were spread across the country.
---------
You wrote
And btw, none of those three programs are failing. They are fulfilling the purpose for which they were designed and if Congress would be responsible and fix those things that need tweaking, they will remain viable; Medicare itself has already had 10 - 15 years added to its expected life because of the achieved cost savings from the ACA law.
bm
Come on that is all spreadsheet magic, the ACA hasn't done anything that can actually be measured.
SS has been tapped by congress since it had any money in the trust fund. And Medicare has made doctors millionaires. Are these the goals of these programs.
Since 1999, congress has been messing with the numbers on SS, like the minimum age being moved up because it slows down the the red bottom. Its intended purpose was to get more control of the people. And it is pathetic that so many people have to rely on the scraps thrown at them by SS. They have to contribute for life, as long as they get a wage. The self employed have to pay double the FICA, and all they get is a tax deduction for half of it.
If people were able to have the SS tax, both their contribution and the employer into a private pension they would own their own retirement, instead of waiting for their uncle to decide if and what they get.
Congress can take SS and Medicare off the table in one session. They think of it as an entitlement like welfare. FDR and congress created this program, and then LBJ added to it, and now we have the trilogy ACA.
No president or congress since then has made any improvement to them or privatizing it. The reason is simple, the left and the right cannot agree period. And they never will agree, and hundreds of years of history are proof. Today, they are at their widest opposition.
And you think that the country is doing well, just because we didn't fail
Also, if running things like a business is the be-all, end-all; why do 80% of businesses fail?
- AUTHOR
@bradmaster, the government must have run successfully because by observation, we still exist in much the same form as we started with and we have prospered as a nation in part because of the government, not in spite of it. If your statement were true, America would be a failed state like the Soviet Union.
As to the purpose of gov't vs business, simply compare the Constitutions Preamble to IBS's mission statement or vision statement. They aren't the same, nor should they be. Because each entities "purpose" is different, so must be how they are operated.
There are functions that are "inherently governmental" and others that are not; those that are not can be run like a business, but those that are, cannot be.
DoD tried very hard to run their maintenance operations like a business. They started the effort shortly after I began working for the AF and ended about 5 to 10 years before I retired. Various SecDefs tried very hard to make this work but it failed, as it had to.
It failed because what makes 'those few' businesses that are successful, successful is the profit motive; there is no such motive in government and there is no workable substitute. The intent of DoD's policy was to make base commanders use their limited budgets efficiently and have depot maintenance and other logistics functions "compete" for their work. But in the end, maintaining our fighting forces "is an inherently governmental function" with different objectives than businesses so it had to fail as a business.
Likewise, Social Security, Medicare, and ACA are all inherently governmental functions where profit is NOT the motive (and never should be). In fact, it is my opinion that it was the Profit Motive that destroyed our healthcare system in the first place when Reagan deregulated it. If these programs were run as a business as you suggest, they would fail just as surely as the DoD effort did.
And btw, none of those three programs are failing. They are fulfilling the purpose for which they were designed and if Congress would be responsible and fix those things that need tweaking, they will remain viable; Medicare itself has already had 10 - 15 years added to its expected life because of the achieved cost savings from the ACA law.
Also, if running things like a business is the be-all, end-all; why do 80% of businesses fail?
My Esoteric
The problem is that the government can't run period.
The government raises revenue from taxes, while private companies raise revenu by selling their stock, and selling their product.
The problem with the federal government is that it is taking over much of the governming that was allocated to the states. Today, there are no bounds for the federal government.
They have been shown to be inept in most of the things that they governm. And that includes SS, Medicare, and Obamacare, as these three are taxes, but they need to be run as a business, not as a government.
Because the government doesn't run like a business the first two of these are not poised to be a success. The model for these three didn't factor in the time that new people wouldn't be sufficient to offset the benefits that would be paid to the people that would someday no longer contribute into the system, but would instead take fromit.
bradmasterOC
- AUTHOR
That was a new word for me, Penumbrus, had to look it up and came up with this - "However, in legal terms penumbra is most often used as a metaphor describing a doctrine that refers to implied powers of the federal government. The doctrine is best known from the Supreme Court decision of griswold v. connecticut, 381 U.S. 479, 85 S. Ct. 1678, 14 L. Ed. 2d 510 (1965), where Justice william o. douglas used it to describe the concept of an individual's constitutional right of privacy." it is also defined as "The rights guaranteed by implication in a constitution or the implied powers of a rule." - I am not sure that is what you wanted it to mean.
In any case, I think you are still more or less right about the Preamble ("the introductory part of a statute, deed, or the like, stating the reasons and intent of what follows"), the Constitution sets out the purpose of the federal government and specifies five specific duties, albeit in large terms for the People, through their representatives, to figure out, that the federal government must strive to do "in Order to create a more perfect Union" (not union).
It then set out the framework of the federal government will work within to accomplish these duties (with common defense and general Welfare mentioned again). This includes loosly identifying which are federal and which are state powers, with the 10th amendment making it clear that if it isn't a specified (or implied, based on numerous Supreme Court decisions) power of the federal gov't, then it belongs to the People OR the state.
However, Article 1, Section 8 left things to wide-interpretation. Washington, Adams, and Hamilton interpreted it broadly, as did Chief Justice John Marshall. Taking the opposite view were Jefferson (who really wasn't a hardliner based on his terrible experience as the VA governor), Madison (who later changed his mind when he was President), and Monroe, among others.
The point is, a strict constructionist view of the Constitution is not a given, it is just one groups interpretation. There are equally intelligent founders who think you are wrong, just as they thought Jefferson was wrong. Although it wasn't true, the Federalists were considered and called monarchists back in the day, for the very reasons you mention today .. imagine George Washington a monarchist (although he wasn't a Federalist, he was nevertheless branded that by those on what would be the Right today).
We have managed to get through 200+ years of going back and forth in interpretation and it has never even gotten close to where the federal government took everything over. When it got too lopsided, the People moved things back to the Right. When things went too far that way, like they are now, as far as I am concerned, and were in the late 1950s and before 1930, the People will move it back to the Left, which I think will start to happen in 2014.
Like many other legal documents, the Constitution makes some generalized statements at the beginning as an introduction and later specifies the details. The preamble to the Constitution is that introduction which provides a vague big picture of the goals of the document. These statements are referred to as the penumbras of the Constitution.
For a justice to use the penumbras of a basis for interpreting specific points of the law is a gross misuse of the document because the justices are free to pretty much read any policy preference they desire, into the document.
If the Permumbras can be used to discover rights not specifically written in the Constitution, why bother with the 10th admendment or the amendment process? The Constitution is a contract between we the people and the government, it was designed to be a limiting document which specifically specifies the role of each level and branch of government. Allowing the courts to read their own policy preferences and personal viewpoints into the pernumbras of the Constitution allows the courts to usurpt the law making powers of Congress. This is the very dangerous consolidation of power and changes the government of the people to a government run by elite experts in black robes.
Even the staunchest federalist would be shocked and strongly object to the size and scope of the federal government today. Before the Civil War one of the main arguments facing the Supreme court was whether the federal government could fund post roads for federal post offices.
- AUTHOR
What is your interpretation of each of these roles for the federal government: "establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty"?
I can easily argue that Education falls under both "Common Defense" and "General Welfare", while social welfare is a subset of "General Welfare" and "Blessings of Liberty". I presume you believe education and social welfare have nothing to do with these duties of the federal government?
You do recognize that your last paragraph was the central theme of the anti-federalists who did not want the U.S. Constitution ratified, don't you?
One of the main reasons for inefficiency and corruption in government is simply because its become too big, you have a lot of resources, money and power in a single location. An old saying may apply here, that says something to the effect that a large pile of goodies attracts ants.
It is true that our government was designed to be inefficient on purpose in order to prevent the consolidation of power and the trampling of individual freedoms. This is one of the reasons why the Constitution enumerates the roles of the different levels and branches of government.
A dangerous trend has been the gradual consolidation of power to the federal branch of government. Not only has this had bad economic consequences but threatens freedom as well. As far as i know know the federal government is not assigned a role in education, social welfare and a host of other things they have there hands in. To my knowledge these issues were to be left to the state and local governments.
- AUTHOR
Perfect comment, Secularist, thank you. You too MizBejabbers. In the federal gov't, we are under much tighter controls. The basic process goes like this: an executive agency submits a budget which is appoved up the chain through OMB and ultimately ends up in the Presidents budget. This is given to Congress in early Feburary and they can take it or leave or play with it. Congress may or may not pass their own budget, it is an internal issue. Ultimately, they first Authorize money among the several Appropriation accounts and then, theoretically, by October, they Appropriate funds and send it back to OMB to distribute it the executive branch pretty much as they are told to in the appropriation bills. As the money moves downhill, we are allowed to move money around a little bit within an approriation and within strict guidelines, but not between appropriations, without Congressional approval. OMB does not have the same discretion as your Dept of Finance and Administration (sounds like Arkansas), people would go to jail.
My Esoteric, you have done a fabulous job of explaining why the government cannot be run like a business, and I have enjoyed some of the knowledgeable comments, especially secularist10. I authored the budget for a state agency for seven years, and I would guess that the federal government runs about the same way. Please correct me if I am wrong. First there would be an appropriation for the agency, then the prioritizing of the categories for the funding. Just because money was appropriated for a project did not mean that it would be funded by the Department of Finance and Administration. So in that manner a dictatorial agency would override the approval by the General Assembly. In some ways that is good because it keeps the overall state budget balanced, but it is not good in that prejudice and favoritism can play a part in who gets what.
In 1980 we elected as governor a businessman who promised “to run this state like a bidness.” He was a very good businessman and it sounded good in theory, but it didn’t take the legislature long to find out it wouldn’t work. Needless to say, he was a one-timer. I voted you up, useful and interesting. I think your hub should be required reading in high school civics and college government classes.
Very important points, My. Indeed, taking the concept of "government run as a business" to its logical extent, you get some curious results.
For instance, there are many states that contribute less to federal coffers than they get in return. In other words, they are net losses on the federal budget--the government gives them more money than it gets from them. So the proper decision, if you are a businessman, is to cut those states loose. End the money-losing ventures. Most of them are conservative states like Alabama and Mississippi. How's that for irony.
The whole purpose of government, in many ways, is to do things and provide services that the private sector cannot or will not. If the private sector could do it--i.e. if it was possible to make money at it--then they would be doing it already, and we wouldn't need a government!
Massive money-losing operations like funding a police force to fight crime in impoverished neighborhoods, or providing free medicine to those in need, or educating children.
Indeed, what kind of a businessperson would allow workers (children) to be unproductive for 18 years, getting subsidized by the productive workers (their parents) when they could be working in the mines or shining shoes?
- AUTHOR
I am glad you enjoyed it Bill, it makes my day when my writing makes people think, even if they don't end up agreeing with me.
Very enlightening Hub! I was one of those who felt that running Gov't like a business was the way to go. But your piece has given me plenty to think about. Voted up, interesting and shared
- AUTHOR
Thank you MPerrottet, I am glad I could be of some use.
You have some excellent points here that I'll have to remember the next time someone says the government should be run like a business. I especially like the point that business is a dictatorship. Voted up, useful, interesting and shared.
- AUTHOR
Thanks for your comments GuitarGear. I too use to work for DoD and can't disagree too much with what you say; we need to be run efficiantly and effectively, but it is different that how it is done in the private sector to some degree because of the hand-to-mouth existence with Congress. However, I have watched the private sector and regarding fear and intimidation, gov't workers live in paradise.
Thank you LRS and you as well HS. In your observation that "profits would become the top goal ..." lies the seeds of my comment that if government were to be run like a business, the first thing to go is individual liberty; its inherent messiness costs lots of money.
A government is created by the people to do the people's business in their interests. If it were run like a business, profits would become the top goal not the good of the people. They would only aid the people if it contributed to the bottom line. Government should learn certain efficient practices from them but never to run the government itself. Excellent analysis, My Esoteric.
A great hub! Our socieities expectations of government are unrealistic. Your hub is clear and easy to understand; it strips away the mystery and myth. Voted up!
I work for a government agency. Since upper management is of the conservative persuasion and has been for quite some time, we are being run like a business to the detriment of both the tax payers and employees alike. What they fail to realize is that the government offers services which cannot be measured like a consumer commodities. It just doesn't work and is counter productive to the efficiency of the agency. I think the reason people don't speak out is that they are afraid of reprisals, at least where the people who work for these gov't. agencies are concerned. Gov't management has long used fear and intimidation as one of it's fundamental tools. I don't think politicians are aware of the magnitude of a problem that is right under their noses. They don't want to take the time or make the effort to investigate the many little holes that are steadily draining public funds. Thanks again ME.
- AUTHOR
Thank you very much Tammy. That is the soporific of the argument, it sounds so reasonable at first blush and if one doesn't think about it any further, that is the impression you are left with.
I am not sure why those in politics who know better don't speak out, because the counter-point is so obvious and intuitive, at least to me, anyway.
Fantastic Hub as always. You have a remarkable way of cutting through the bull and shedding a defining light on the subject. When I was younger I remember listening to Ross Perot, I thought it made sense that a business man that was successful could do the same for the Government, but as you have pointed out, that would never work, could never work, and should never work. Thank you again for a great read:)
22