Illustrating Government Inefficiency

 

“I don’t mind a parasite.  I object to a cut-rate one.”

            —Humphrey Bogart as Rick Blaine in Casablanca

 

My apologies for the extended absence.  I’ve been occupied with other things, and frankly the news just hasn’t been that interesting.

That said, a reader sent me a series of local news articles that, taken together, cast a neat light on the inherent inefficiency (or corruption) of government.  These articles happen to come out of Akron, Ohio, but they’re not unique and it is not my intent to single Akron out—you can find similar stories (I’ve seen some recently out of Newark and Philadelphia) just about anywhere.  It’s just that the collection makes for a convenient focus on a broader point.

In the first story, it seems that the City of Akron is giving its (largely unionized) employees raises despite a reduced overall budget and significantly decreased revenues.  The raises are to be funded mostly from “federal grant money.”  Meanwhile, as with many private sector employers, the looming specter of Obamacare is likely to produce layoffs and reductions in hours among the lowest-paid workers.  Case in point: Tim Wheeler, a sanitation worker currently working 40 hours a week—subject to regular  90 day furloughs—has been informed he will likely be cut back to 29 hours, specifically so he no longer qualifies as a full-time employee for whom the City would be obligated under Obamacare to provide with health care coverage.  

In the second story, we learn that the University of Akron is facing a nearly $27 million budget gap in 2014.  The shortfall is blamed largely on the loss of $14 million in federal “stimulus” funds.  This is on the heels of a retroactive 5% raise for faculty and top administrators approved by University Trustees last Fall.  Once again, those on the “in” will get theirs, even while the budget shows a deficit.

Notice that these two situations provide a sharp illustration of the inefficiency of government.  In both instances, public institutions facing fiscal headwinds—in the case of the University of Akron, an actual budget shortfall—are nevertheless handing out raises.  This, of course, is exactly the wrong behavior from an entity having trouble paying its bills; you don’t increase your fiscal obligations when you already don’t have enough money.  Unfortunately, however, it’s exactly what we’ve come to expect from bureaucrats whose sole real mission is not protecting the public interest but in preserving their own power base.

Then there’s the policy inefficiency that inevitably results when a perhaps well-intentioned, but nevertheless naïve and ill-informed government exceeds its charter in an attempt to solve every problem of every individual human being.  These efforts inevitably backfire, as those who assume the power/responsibility of crafting the supposed “solution” lack the expertise, foresight, and sometimes basic intelligence necessary to do the job properly (or to recognize that it can’t or shouldn’t be done at all).  In this case, the City of Akron provides us with yet another example of Obamacare directly imposing negative health care and employment effects on the very people it was supposed to help.  I’ll bet you a million dollars Mr. Wheeler voted for Obama and the other Democrats in large part because he thought Obamacare was going to help him; instead he finds his hours—and thus his income—cut by over 25%, and he’s without medical insurance, which is exactly the opposite of what he was promised.

Perhaps more interesting, though, is the common thread in the funding discussion.  The City of Akron is funding its pay hikes with money received through federal grants.  Meanwhile, the University of Akron’s budget shortfall is blamed on the loss of federal funding.  Both circumstances beg the same fundamental question:

Why is there any federal funding involved at all?

Taking the situations in reverse order, it should come as no surprise to the University of Akron that any stimulus money it received dried up.  By definition, that funding was intended to be a temporary boost, not a permanent addition to general revenues.  Yet one gets the impression that the University’s trustees failed to plan for the day when the stimulus funding went away and they would be left to make their way on their own revenue sources, as they had done before.  But like all government money, there’s a sort of ratchet mentality attached to it that assumes that, once granted, the funding represents a permanent floor, and that each subsequent raise only lifts that floor; future funding can increase, but it can never decrease.

More to the point, and germane to both contexts, there is no provision in the Constitution for federal funding of either a municipality or a state university.  Certainly, I understand that such funding has existed for decades, if not longer.  But there’s no constitutional basis for it.  You won’t find anything in Article I that authorizes Congress to appropriate money from the general public to then give to a city.  Nor will you find anything authorizing Congress to appropriate money to fund education (you can argue that the military academies are different, as a legitimate extension of the federal government’s authority to field an army and navy).  Yet there it is.

But here’s what gets me, and it’s the core illustration of the inherent inefficiency (if not outright corruption) of government:

Where does the money the federal government gives to the City of Akron and the University of Akron come from?

Of course the answer to that question is it comes from the government’s general revenues, which means it comes from your taxes.  The rub is in how the outlays are allocated.  There are only two (three, really) alternatives.  One is that they’re allocated proportionately to contribution, such that the people of Akron (and, in the University’s case, of Ohio) are receiving back in the form of federal grants the same proportion they contributed to the general revenue.  And that would seem fair, but it begs the question why it needed to be laundered through the IRS at all.  If we’re just giving Akron and Ohio back their proportionate share of what they put in, wouldn’t it have been far more efficient never to have taken that money in the first place, thus leaving it in Akron and Ohio for the City Council and State Legislature to tax it directly as they locally deem appropriate?

The other—more likely—alternative is that the allocation isn’t proportionate; Akron and Ohio receive back from the federal government grants and funding in greater proportion than their respective contribution to the general revenues.  What this means as a matter of mathematical necessity is that the federal government is taking money from people in, say, Texas, to give to Akron and Ohio.  Even if we indulge in the very unlikely third alternative that Akron and Ohio are receiving funding in a lesser proportion than their share of contribution you still end up with the inequitable situation that they’ve had their money taken from them to give to people somewhere else, say, California.

What we’re left with is a two-edged shaft, if you will.  Either the government is taking money only then to skim off the top and give it back—which is simply unnecessary—or the government is taking money then to skim off the top and give it to someone else—which is looting.  All at the behest of an alleged majority of Americans, but increasingly those who vote for and benefit from the federal largesse aren’t the ones who have to pay for it. 

Inefficiency/corruption at its finest.

*******************************

EDITOR’S NOTE:  Just as an aside, is there anyone who gives a crap what Dennis Rodman does?  I mean, honestly; CNN has been giving The Worm’s budding bromance with Kim Jong Un almost equal coverage with the now-ended conclave in Vatican City.  I could have sworn he became irrelevant a decade ago.

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