Government spending is a systematic problem, not a lack of leadership

On January 9, 2013 economist and Nobel Prize recipient James Buchanan passed away. Buchanan was best known for pioneering ‘public choice theory’ in modern political economy. Buchanan developed what we call the ‘benevolence’ critique of government: regardless of the knowledge that government has when crafting policy, there is no reason we should expect them to be any more benevolent than ordinary economic actors interested in satisfying their own wants. Buchanan’s idea is not complex; in fact, I once heard that after winning the Nobel, Buchanan told a reporter that his main idea is that in government you ‘don’t let the fox guard the chicken coop.’

Though Buchanan’s first insight might seem relatively simple, the implications of his work are profound; especially given our current fiscal crisis. The U.S is in its fourth year of trillion dollar plus deficits, and we are due for yet another debt ceiling increase. The debate about our fiscal and spending problems extends beyond the halls of congress. These debates cause uncertainty that leads to stalled investment, hardened partisan lines and ultimately an erosion of government legitimacy.

Countless columns and television commentators look at this re-occurring problem and call it a lack of leadership, but students of Buchanan might not be so quick to agree.  Once we internalize that politicians are vote maximizes and respond to the incentives surrounding them, just like non-politicians, it’s easier to understand why government spending seems to be an ever-present headline.

Congressmen receive praise directly from their constituents for spending money. Sometimes that praise of from the elderly who wanted extended Medicare/Medicaid benefits. Sometimes that praise is from a local government contractor who happens to live in that congressman’s district. However, once the bill comes due for all the spending there is no one person to blame for the large deficit we are all responsible for. Because politicians are insulated from the negative consequences of spending, yet not insulated from the votes that spending could get them, they have an incentive to overspend; they do just that- regardless of political party affiliation.

Calls for more bipartisan collaboration and stronger ‘leadership’ are not bad things to demand, they’re just empty. Napoleon Bonaparte said that leaders “define reality and give hope.”  Buchanan helped us understand reality- government spending is a systematic problem, not a lack of leadership. Hope for eliminating the next series of government spending related crisis requires changes the incentives that politicians face.