In any mechanical system, you put energy in, some of it is wasted by friction, and when you get the energy out, it’s necessarily less than what you first put in. Government is like friction!

Why is government wasteful?

The answer to this question is actually very simple! Government is wasteful because it spends other people’s money.

Anyone who’s ever had an employee’s expense account knows that when you’re spending money that isn’t yours, you have very little incentive to spend it wisely on the owner’s behalf.

Likewise, politicians and bureaucrats are in charge of spending money of the faceless, nameless taxpayer, who has no direct control over how the money is spent. And therefore, they have very little incentive to spend it wisely.

Furthermore, when you have an expense account, at least you are somewhat accountable to someone (such as the company’s owner) who feels the pinch when you misuse funds and can cut you off when you do. However, a taxpayer has no direct say in how the money is spent. The taxpayer can’t cut the government off if he/she doesn’t like how the money is spent.

Therefore, since government decision makers are not spending their own money, and are not directly accountable to anyone whose money is being spent, they have little incentive to:

1. Hire qualified workers and fire unqualified workers.
2. Make sure contractors don’t over charge.
3. Economize on purchases.
4. Initiate work on fruitful projects, and cut off wasteful ones.

One of the most famous cases of government waste was a Pentagon purchase of $600 toilet seat covers back in the early ’80s.

Another famous and more recent case is Alaska’s “Bridge to Nowhere“, a project that was allocated $320 million to build a bridge to an Island with a population of 50.

As the examples above indicate, occasionally there is public outrage over egregious cases of misuse of public funds, but almost all cases fly under the radar. It’s possible to expose a useless $320 million bridge, but who is going to bother a bureaucrat who doesn’t want to fire a lazy useless employee because… well… who likes firing people anyway?

Government decision makers have little incentive to spend taxpayer’s money wisely, but that doesn’t mean they lack motivation for other things. Like everyone else, they are motivated to further their own personal self interests, such as their political careers and size of their bank accounts. And in doing so they tend to:

1. Dole out government contracts to campaign contributors, who may not be the best for the job.
2. Hire friends and family members, who may not be best qualified, for projects that are not necessarily needed.
3. Spend money so they can tell constituents they’ve brought money to their district, a.k.a pork spending.
4. Spend money so they can tell constituents something is being done to solve their problems, regardless of if it actually helps.
5. Spend all their budgets regardless of need to avoid inducing a budget cut. If a certain department doesn’t spend its entire budget then it’s a clear signal that it can do with less, and no bureaucrats wants to be in charge of a smaller budget next year.

And then there’s criminal corruption. If you think that private corporations are corrupt, then government bureaucracies are much more so because of the potential to steal from those whose money is taken away anyway, i.e. the taxpayers.

Therefore, the government will always be much, much more wasteful than the private sector, where someone owns the bottom line.

Next, discover why government waste is bad.