June 13, 2011

"The American government must not jump the shark"

I find Walter Russell Mead enormously perceptive.  See how clearly he illuminates the life cycle of a government program.

When Government Jumps the Shark

In the first stage of a government program, there’s a terrible social problem that has people wringing their hands.  Not enough kids are going to college.  Middle class families can’t get home mortgages.  The river keeps flooding the town.  Sick old people who have worked all their lives are eating cat food in the hobo jungle.

The government offers a solution that will fix the problem at a relatively modest cost.  It is the hero cutting the heroine loose from the railroad tracks as the train approaches.  It is the Lone Ranger riding into town to fix the bad guys.  The government program in this early stage is the Great White Hope: once we get it up and running, people believe, life is going to get better.

Often it does, and a
well established and functioning government program makes itself very popular in the next phase.  Retirees are cashing Social Security checks, and the cost to those still working is very low.  More creditworthy families are building homes because federal market makers are enabling banks to lend more; more homes make for more construction jobs.  Life is getting better — and as most people count them the benefits clearly outweigh the costs.  In this second stage of life, the Great White Hope becomes the Great White Father in Washington, benignly scattering benefits among an adoring population.
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In the
third stage, the law of diminishing returns sets in....At this point the program enters the third stage of life: it is now a Great White Elephant.  It is a large and expensive program that does less and less good at a higher and higher cost....

Little by little, mission creep sets in.  A powerful cluster of interests organizes around the government program.  The real estate lobby looks for ways to extend Fannie Mae’s guarantees to more people.  Programs and subsidies become steadily more complex, less comprehensible.  Successive waves of ‘reform’ generally make things worse as the special interests focus with increasing power and skill on warping the programs to meet their needs and goals.

The
fourth stage of life comes when the Great White Elephant morphs into a Great White Shark: a man-eating terror of the deep that ruthlessly attacks anyone who gets in its way.  At this stage the government program has moved beyond being wasteful and has become unsustainable.  Fannie Mae goes from providing mortgages to creditworthy households to providing vast numbers of mortgages to uncreditworthy households, poisoning the financial system with bad loans.  Medicare is unsustainable in the medium term and hugely expensive day to day — even as the procedures and regulations of Medicare warp investment decisions across the entire health care system.

...The problem today is that we are looking not just at one or two government programs that have succumbed to elephantiasis or turned into sharks; the progressive complex of social and economic policy as a whole has reached this point.  Today many of our New Deal and Great Society programs are either elephants or sharks.  They either lead us to misallocate scarce resources in ineffective ways or they threaten us with ruin by becoming politically untouchable budget busters.
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The United States must tame and reform the programs and ideas gone rogue that hammer at the sides of our boat.  We must impose our will on the fiscal chaos before the chaos works its will upon us.

The American government must not jump the shark.
Posted by Jill Fallon at June 13, 2011 10:38 AM | Permalink