Financial Reality Part II: Shrinking the Size of Government

Henry David Thoreau in his essay Civil Disobedience wrote, “That Government is best which governs least.” Those particular words, written in 1849, summarize the simple truth that the power of the individual and self-reliance in our free society are what has driven the development of American Exceptionalism. Unfortunately in the 162 years since, our great nation has fallen prey to the dependency of entitlement programs administered by a suddenly powerful central government. The cost of all this government in our lives, programs that now approximately 50% of our population has become dependent on, has reached unsustainable levels and our liberty is in peril.

The major entitlements of Social Security and Medicare, which all workers pay for through payroll taxes, are only part of the problem. The future liabilities of these programs can be managed by restructuring the timing of benefits and the manner in which collected taxes are invested. Future installments in this series will offer some thinking on these matters. The other part of the problem is the combination of additional entitlement programs and the cost of the large federal bureaucracies to administer these other programs.

In 2011, we will pay out $385 billion in food stamps, $365 billion for the federal portion of Medicaid (with an almost equal amount due from the states), $200 billion in unemployment benefits and over $100 billion in aid to education. The total cost of these payments will exceed $1 trillion, but the cost of administering these programs will add approximately $300 billion in expenditures to the federal budget. The Department of Agriculture, the Department of Labor, the Department of Education, the Department of Health and Human Services and the Department of Housing and Urban Development are largely in place to administer the distribution of government aid. Excluding defense, these departments and their associated costs represent half of our entire non-military federal government.

Without questioning the necessity of the programs, it is reasonable to question why we need all the extra government to administer them. One solution is to consider localization of the management of these entitlements by transferring that authority to the states. Private sector experience has proven that more local operations and management results in lower costs and greater efficiency. Decisions made closer to the source of the need are made faster and by fewer employees. Recognizing that there will be a cost to localized administration, the net impact of eliminating these cabinet level departments and their hundreds of thousands of personal and the associated supportive infrastructure will be a significant reduction in overall costs.

Another benefit from localization is the potential to more effectively attack fraud. On a state level, the size of any program is going to be a smaller part of the whole. This being the case, the corpus of benefits provided is smaller and more easily audited. There will be fewer corners to hide misappropriations and false claims.

Perhaps the greatest achievement of having the states in charge of government aid will be a greater opportunity to work more closely with the people receiving aid, helping them to become more self-reliance and break their dependency on these programs thereby reducing future costs.

Elimination of cabinet level departments that have grown to be nothing more than welfare bureaucracies perpetuating a culture of dependency will not only save taxpayer money, but will also end the natural tendency for these departments to further justify their existence though more government involvement in the lives of citizens.

The growth of government and the potential for destructive economic consequences is not restricted to cabinet level departments. We must also consider the elimination of agencies that our Constitution never intended to be empowered. The most dangerous agency to our economy and our future financial strength as a nation is the Environmental Protection Agency (the “EPA”). The EPA, with a staff of unelected bureaucrats, can increase energy costs across the country with a simple stroke of a pen. This agency has already contributed to higher energy costs and dependency on foreign sources of energy by prohibiting the reasoned development of domestic resources. By removing this federal authority and allowing the states to make resource development decisions, modern science and engineering can be put to work to dramatically increase domestic energy production. We have learned a great deal about how to develop these resources and still protect the environment. It is estimated that millions of skilled jobs can be created through the expansion of domestic energy reserves of natural gas, oil and clean coal. A central authority run by political appointees, far removed from local resource potential and specific realities, does nothing more than introduce national politics where it does not belong.

In today’s troubled economy with the federal deficit at $1.65 trillion, we no longer can ignore the size of government. Government for the sake of government solves nothing. Localized control of entitlement programs and related services is a start toward a more self-reliant society and should be debated. Our republic cannot survive if the current generation cannot pay for its own needs. Cross generational debt is unsustainable and will eventually consume our liberty.

Robert Allen Bonelli is the author of “Liberty Rising,” an accomplished business executive, public speaker and involved citizen.