Spending Other People’s Money

by Veronique de Rugy

Rich Lowry’s piece about the GSA and the incredible abuses of taxpayers’ dollars is, as he explains, “yet another reminder of the waste and laxity inevitable in organizations where it’s difficult to fire anyone and all the pennies are from heaven.”

But, in a sense, I wonder why we even need a reminder. The GSA scandal is particularly outrageous because the spending involves a party in Vegas with stuff like a $75,000 bicycle exercise and $19-per-person artisan cheese. But I would argue that most government spending, while less in-your-face ridiculous, suffers from the same problem: When you aren’t spending your own money, it’s not likely that you will spend it very wisely.

Take Secretary of Defense Panetta’s rides home. His 27 trips home since July have cost taxpayers $860,000 (roughly the same amount as the Vegas party). No one spending his own money would make the decision to make those trips at this price. Obviously, there are some mitigating factors in this particular case, but they only go so far.

For instance, Panetta wasn’t allowed to fly commercially. Under a set of rules imposed by president Bush, the defense secretary is required to fly on a military aircraft (outfitted with secure communications). That makes sense, I guess. But I bet you that if Panetta was spending his own money, or if he had to shoulder a much larger share of the airfare bill, he may have made fewer trips home. Incidentally, his predecessor, Robert Gates, had a home and family in Washington state but made way fewer trips back home.

What about his family life? The Washington Post, this morning, reported that the secretary wants to fulfill his responsibilities to his job but also to his family. As a result, his weekly trips back were one of his conditions for accepting this job. But did the guy who made the decision to hire him under these circumstances even bother to check how much that would cost taxpayers? Or did this person know the cost of this commitment but agreed to it because he wasn’t paying with his own money? Either way, taxpayers are once again shouldering the bill for decisions (though not as outrageous as the Vegas conference, I will admit) made by others.

No offense to Mr. Panetta, who for all I know may be a great secretary of defense (in spite of his hysteria over the defense cuts), but I can’t imagine that we couldn’t have found someone locally to do the job. Maybe we could have found someone who was willing to move his family to D.C. even. Or someone who was willing to pay the crazy price of $800,000 for 27 trips to California.

It is important to realize, however, that these examples (GSA and Panetta’s trips home) are the extreme versions of something that happens in government all the time. Government officials, every day, make decisions about how to spend our money on themselves or on others. As Milton Friedman explained, this is a recipe for bad spending — even with the best people with the best intentions working for the government. There is no way around it.

Unfortunately, I don’t believe that we can credibly change incentives so that government employees would start spending our dollars as if they were spending their own. As a result, I think the only way to address this problem is to contain it: That’s achieved by significantly shrinking the size and scope of government.

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