Retirement and Social Security Reform
Government in the Way
The Washington Times
January 31, 2005
By Ernest S. Christian
Almost bursting at the seams with new technologies, U.S. businesses
are more able than ever to deliver a good product, on time
and at a reasonable price -- in a competitive world market
that quickly rewards merit and punishes fault.
And where is our government in this race for excellence? It
is a hindrance -- unable to keep up but too clumsy and stubborn
to get out of the way.
Judged by marketplace standards, government has a faulty business
plan and a product line with too many items. Most don't work
properly. All are grossly overpriced. Some are given away
or sold at deep discounts to favored customers.
All told, however, our government is the world's largest enterprise
and, based on past performance, has an almost unlimited potential
As chief executive officer of "Government Inc.,"
the president is fully in charge of military and foreign affairs.
But most power over other operations resides in a highly activist
outside board of directors made up of 535 members of Congress.
Because of their tireless efforts and dedication, the federal
government's annual revenues from "operations" now
equal to the combined revenues of the top 15 Fortune 500 companies.
Government Inc. is by far the largest consumer and the largest
employer in the world. Through a combination of taxes and
debt, it annually takes control of and spends 36 percent of
our total gross domestic product (GDP). State and local governments
soak up another 9 percent, leaving for the private sector's
discretion only about 55 percent of the total goods and services
produced in America each year.
Out of that remainder, however, Americans must spend another
5 percent to 10 percent of GDP in dealing with government
at all levels -- federal, state and local. Businesses, in
particular, must spend enormous sums trying to influence the
multitude of decisions made each day by governments -- decisions
that can affect them in powerful ways, such as providing an
advantage over competitors or putting them out of business.
Frequently, government is also their biggest customer.
As government spends or causes to be spent at least 60 cents
out of every dollar, politics and what is euphemistically
called the "government affairs" business are among
our high-growth industries. For those who know how, manipulating
government is often more lucrative than manufacturing a product.
The mark of a successful member of Congress who continually
gets re-elected and moves up to a leadership position is to
sponsor more legislation, to enact more laws and to promise
more "benefits" to more "customers" --
especially at discount prices. (Government is the only enterprise
that prospers by simultaneously increasing expenses and cutting
The key to this seemingly magic formula is Congress' ability
to treat Americans unequally -- most particularly to tax some
Americans far more heavily than others and, conversely, to
spend more money on some Americans than others.
Rampant discrimination is also the modus operandi of the vast
web of rules and regulations by which government -- from the
county zoning board to the Congress -- sticks its tentacles
into every nook and cranny of our personal and business affairs.
Regulations ostensibly designed to protect Americans from
tainted food, bad drugs, environmental damage, unsafe workplaces,
urban sprawl and almost everything else, all follow the same
discriminatory pattern: a broad general rule followed by a
continually growing list of exceptions (and exceptions to
the exceptions) that reward the favored and punish the disfavored.
The ability to grant special dispensations and indulgences
-- whether regulatory or tax -- is the largest source of power
for Government Inc.
Tax reform and Social Security reform are both about economic
growth -- the one about eliminating tax rules that unduly
impede growth, and the other, through private accounts, about
allowing more Americans to participate in the benefits of
a growing economy. The issue is whether the entrenched management
of Government Inc. will give up some of its power and perquisites
in the best interests of the shareholders. Will the members
of Congress cede to tax reform a large portion of the regulatory
(and political) power they now exercise through the tax code?
In the case of Social Security reform, will they be willing
today to pay the price for preserving the enterprise for future
generations of shareholders?
Ernest S. Christian is a Washington lawyer and former Treasury
tax official who is director of the Center For Strategic Tax