The Problem with Reforming Big Government Decision Making

My favorite quote over the last two weeks comes from the Planet Money podcast Episode 394: Why Taxpayers Pay For Farmers’ Insurance. I immediately thought of Ms. Pelosi’s remark about the Affordable Care Act in which she states, “We have to pass the bill so that you can find out what is in it”. Here is the YouTube link,

Planet Money talked to agricultural economist Dan Sumner of the University of California at Davis, who has some theories about how the program persists. Sumner recalled the sage words of Norfleet Sugg, former executive secretary of the North Carolina Peanut Growers Association and later head of the Agricultural Council of America, who explained to him: “The peanut program is so complicated, there’s only three people in the world that actually understand how it works. It’s my job to keep it that way.”

Just when I thought that big government was the culprit Planet Money gave us another update on the problems with the decision making in a much smaller government with the podcast Inside America’s Most Indebted City. The problems with the decision making in Harrisburg may even result in criminal charges.

From these two podcasts we can see that a major distinction between large and small government decision making is that the residents in Harrisburg are definitely feeling the effects of bad decisions. People have had their pay cut and some residents have moved out of the city. The effects of bad decision making at the big government are more benign. Although the decision making at both the local and federal level may be equally bad from a moral or government effectiveness viewpoint, the effects at the federal level are more muted. The primary advantage of bad decision making at the federal level is that it does not result in cuts to government services. Of course, this can change quickly if the markets start to punish the government for bad stewardship. It may seem a strange argument that we want the markets to punish the government finances for bad decisions but not enough that we might actually feel the effects.