Tuesday, March 20, 2012

Can Government restrain its own bureaucracy?

As budget crises affect governments across the world, citizens are wondering whether their elected representatives have the spline to restrain even the government's own agencies charged with spending taxes efficiently.  Clearly, it is not a difficult task to specify a financial hurdle rate of return for a project to be considered. This is standard practice in the business sector.  No businessman would push a project that does not meet the specified hurdle rate. Unfortunately, that is not the case for projects in the government.

Conservative columnist Chris Edwards in his Townhall.com article about the civilian projects of the U. S. Army Corps of Engineers asserts the agency "has a history of distorting its costs-benefit analysis." Why does this happen? Pork-barrel politics and the Corps own agendas are not subject to the restraint of the cost-benefit analysis. Chris Edwards points out "the priority of the projects is based not on the highest economic return, but whether a particular project is in a powerful congressional member's district" or a pet project of the Corps. Likewise, journalist Michael Grunewald found GAO reports that stated "the Corps analyses often understated costs and overstated benefits." From the GAO reports it appears the Corps used analysis to justify their actions rather than to verify projects were pursued in the proper order. Congress is similarly unrestrained in their pursuit of projects that do not pencil out. In a Congressional oversight meeting with the Corps, George Voinovich (R-OH) expressed the Congressional perspective when he stated, "We don't care what the Corps' cost-benefit is ... we're going to build it anyhow, because Congress says it's going to be built."

When government agencies and representatives ignore legislated restraints it makes a mockery of process.  In N Theory I discuss the role of restraints, termed constraints, in the business sector.  Constraints provide the foundation rules for the marketplace. Attention to these rules is essential to ensure success. Constraints are an essential factor in effective economic controls. When governments allow their own operations to function without these controls it creates a severe inequality between the business sector and government sector. It is like allowing government employees and contractors an exemption from traffic laws. Although not a egregious situation unless it is abused, it nevertheless sets a precedent and a perception that government employees are special. They are not subject to the same economic factors that constraint the rest of society.

This leads to the ultimate question. Why are these people given special rights?

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