Thursday, October 13, 2011

Bureaucracy and budget deficits

Eugene McCarthy’s dictum, “the only thing that saves us from bureaucracy is its inefficiency.”

What is important in the current political environment is separating good policy from emotions. The emotions are associated with bad implementation of policies or rejection of policies that would be good for the country. People are upset if they think the government is wasting money yet private business or citizens have to belt-tighten. Action from the government is desired if it is done efficiently. Since there is limited confidence on government efficiency, there is pressure to balance the budget and cut government expenditures. There has not bee a strong case of government efficiency. Waste reduction and good management have not been high priorities.

There is the further issue of the paradox of thrift or n this case the paradox of debt. More savings by consumers will cut aggregate demand. Similarly, debt reduction or consolidation by consumers and businesses will translate into a weaker economy unless there is a more debt financed expenditures by government. What is good or appropriate for consumers has to be offset by the government. What applies to consumers may not apply to the government if it has a goal of full employment. A paradox of behavior that has not been well explained to the country

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