Government Needs to Waste More

We can skip the fraud and abuse

Government spending—like any exercise of government power—should be taken incredibly seriously. The government is unlike other institutions by dint of its monopoly on the legitimate use of force. Betray your friends, and you will be an outcast. Betray the government, and you will be a prisoner (or worse). The government can imprison you, deprive you of property, and restrict your exercise of your freedoms—and, with or without due process, governmental agents can end your life.

This is something like a fundamental fact of society. Rough institutions on the fringes of polite society make their appeals to violence overtly—the tough bouncer in the club, the casually displayed firearms in Texas. Civilized institutions at the core of society—the bank, the public school, the law firm—are no less reliant in the final analysis on the threat of coercion and the use of violent compulsion, but they need not appeal to what is so well known. In some very formal situations, the gap between surface politesse and the degree to which coercion can be called in on one party’s behalf is astonishing on reflection. If you are a defendant, you may call the judge “your honor” out of politeness, belief, or fear, but call her “your honor” or else. And no Mafia don ever wielded implicit threats of violence so carefully, calculatedly, and at scale as the diplomats of nuclear-armed superpowers.

I mention all of this to remind folks that discussions about taxing and spending are in fact serious businesses—that decisions about the tax rate and budget outlays really are moral decisions with immense stakes.

That’s not to say that you shouldn’t tax or spend; heck no! Forget what the liberty-loving slaveholders would say: The best government isn’t the government that governs least, it’s the government that governs best; sometimes that’s a little and sometimes that’s a lot. The trick is to know, rather than assume, what any given problem demands.

But if there’s one thing that everyone can agree on, certainly it’s that government waste is bad. The good folks running the “Department” of Government Efficiency would agree—Elon and Vivek are prowling for all the waste, fraud, and abuse they can recommend be trimmed from the budget. At least they say they are, and who am I to doubt such honorable men?

Yet I want to offer a cheer for government waste. In fact, I want to do more than that: I will argue that the government that wastes least governs … okay: parallel construction says I should be able to say “worst” to end this in a pithy way, but I don’t quite believe that least waste = worst government; surely a wasteful bad government would have a fair claim to be worse than an efficient bad government. So I will argue that a government that wastes least governs suboptimally.

Let me be clear about what I mean by waste in this scenario. I don’t mean cost overruns caused by incompetence or political follies undertaken for craven ends. Nepotism is right out; so too are bad programs—arguably including Medicare Advantage, which as far as I can tell is a way to take an efficient program (Medicare) and add middlemen who take a percentage for adding very little value (and that appears to be generous). All of those seem more like “fraud and abuse”, the indefensible parts of the unholy trinity of bad government expenditures.

No, what I mean by “waste” here is more like “projects that don’t turn out the way you’d expect” or “expenditures that don’t necessarily appear to be wise to the guy on the street” or even “comforts for federal workers.” I know of what I speak; I did enough years as a federal bureaucrat (junior varsity) to see both that most civilian bureaucrats are living rather spartan lives by comparison with their private-sector equivalents (on a work trip, I once sat next to a deputy director of the International Space Station; we were both flying coach, although only one of us was responsible for the single most expensive building in human history) and also that rules designed to curb federal waste end up slashing the muscle that does the work.

If you’ve never been a government employee (non-military, and definitely non-LEO branch), you may not quite grasp how many rules and how much paperwork there is. As an academic, I work much, much longer than I did as a federal worker, but that’s in some small part because you simply cannot work the same long hours as a fed—no matter how important your job is. (Yes, yes, at the level of, say, the National Security Council or CIA agents, this is different, but we’re talking about the hundreds of thousands of ordinary workers.) There’s limited scope to improve work processes, most of which are established or delimited by regulations, and limited incentive to do so. I’m not going to bother to check, but I recall at the time that the top federal worker award was something like a $10,000 bonus check—that’s what the Secret Service agents who saved Reagan got. I once received a smaller, but not that much smaller, bonus for working as a very very junior editor at a magazine of ideas that had somehow turned a profit.¹ And any such bonuses are, of course, on top of salaries that are, well …. look, the top federal civil servants (GS-15s and Senior Executive Service members) are making entry-level big law firm salaries, or top-level social science salaries. (Indeed, thanks to salaries being public at state universities, I can definitively state that a good many university deans out-earn people who are in charge of major components of large agencies.)

A lot of this has to do with the fact that there’s very small constituencies for what seems like a wasteful proposal: paying (at least senior) federal employees more. The standard answer to this is that civil servants will make up their earnings on the back-end when they go work for industry. That’s not better. You know that’s not better, right? Another alternative is, in essence, that people should do it for the love of the game—that public servants should love the public to the extent they earn way less than they could for walking out the door (all the while dealing with the insults of being in public service to begin with). And these are the populist answers—that either we should expect influence peddling or that we should hope that only a combination of the power-hungry and those unable to find employment elsewhere should run the government.

The biggest problem, however, is that the fear of waste shuts down useful experiments. The point of experimentation is that sometimes you succeed by failing. Let’s say, for instance, that you wanted to develop a new rocket. You might expect that the first few ones will explode. That’s not failure, so long as they’re exploding in new and informative ways each time! In fact, that can be the basis for success—because if you learn from mistakes, you have to make mistakes to learn.

Now imagine you’re a run of the mill federal agency. Okay, okay, you don’t want to make mistakes if you’re, say, processing Social Security checks—but what if you wanted to experiment with ways to process those checks faster? You can imagine lots of ways to improve processes that wouldn’t involve risking mission-critical systems or outcomes—and you can also imagine that when you’re disbursing money to millions or tens of millions of clients, realizing efficiencies on the level of one or two percent could have big effects. Yet just try to get projects going that involve uncertain prospects for success—and, more important, to get the resources invested in projects when your agency’s budget is already below what you need to accomplish the mission-critical goal in the first place.

One way to think about this is just that having enough resources to accomplish what you’ve been tasked with is really not enough to do a good job. Rather, that’s a recipe for stagnation, and stagnation over time becomes a breeding ground for inefficiency and error. To do a good job, you need to have enough of a surplus of requirements to do more than just what’s absolutely necessary—there needs to be time and resources to train, improve, and innovate. But some attempts at innovation will fail—and if someone later turns around (either an inspector general or some congressional staffer) and turns that failure into a bullet point (“Mr. Undersecretary, how could you waste millions of taxpayer dollars on X?”) then the lesson of that mistake will be learned very well: “you tried your best, and you failed miserably. The lesson is: Never try.” A savvy executive—that is, one who keeps their names from crossing the lips of members of Congress—will anticipate that lesson, and only approve initiatives with a perfect chance of success. You know: none.

The larger point is this. We know the government—like every organization—isn’t performing its job as well as it could, but we can’t know which of many plausible ways it could improve without trying some of them. Yet because those would be guesses, we know that, with certainty, some of those will be wrong—and since there’s more political hay to be made from pointing out errors than celebrating successes (when was the last time American society celebrated a government success?), there’s every incentive in the world to avoid error and stick to the tried-and-truly-bad.

The public would clearly be served better by having risk capital, and the public would clearly be served better by having some civil servants be paid more than they’re worth if that means keeping around more of those who are worth it. Over the next four (or forty) years, it looks like neither will come to pass. Ah, well. Every nation gets the government it deserves.

1. OK, I think the fact that our ace ad sales exec had booked AIG to take a full-color ad on the back of the book every issue probably helped. To this day, I can’t think of AIG and the 2008 financial crisis without mixed emotions.