Acton Institute Powerblog

Achieving Real Budget Reform

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John Boehner recently stated, in the debt-ceiling talks, that “We’re going to continue and renew our efforts for a smaller, less costly and more accountable government,” which most Americans agree with in principle.  However, citizens say that keeping benefits the same for the three big programs, Social Security, Medicare, and Medicaid, is more important than taking steps to reduce the budget deficit by a margin of 60 percent compared to 32 percent for Social Security, 61 compared to 31 percent for Medicare, and 58 compared to 37 percent for Medicaid.

So Americans purportedly want thriftier government, but still want benefits? What gives?  Part of the problem, according to James Kwak, is “the idea that there is one thing called ‘government’–and that you can measure it by looking at total spending–makes no sense.”

What Kwak means is that total expenditure is a misleading measure of the “size” of government. He presents this example:

The number of dollars collected and spent by the government doesn’t tell you how big the government is in any meaningful sense. Most government policies can be accomplished at least three different ways: spending, tax credits, and regulation. For example, let’s say we want to help low-income people afford rental housing. We can pay for housing vouchers; we can provide tax credits to developers to build affordable housing; or we can have a regulation saying that some percentage of new units must be affordably priced. The first increases the amount of cash flowing in and out of the government; the second decreases it; and the third leaves it the same. Yet all increase government’s impact on society.”

So increased spending (or decreasing it) does not necessarily mean the “size” of government has grown (or shrunk). Think how regulation is synonymous with big government, but it does not involve a tax or direct spending of any kind.

In fact, “big” government is often viewed through the lens of regulation, rather than cost. For instance, Kwak explains:

When people say government is too big, they often have in mind something like the Consumer Financial Protection Bureau–a regulatory agency that tells businesses what they can and can’t do…the CFPA’s budget is about $300 million, or less than one-hundredth of one percent of federal government spending.”

Again the divergence between cost and “bigness” is seen.  The CFPA may be viewed as “big,” intrusive, and unnecessary but it is not large in terms of cost like Social Security and Defense spending.

Kwak states, “popular antipathy toward the regulatory state has been translated into an attack on popular entitlement programs.”  Many people dislike certain government regulations and, due to the budget debate, dislike of regulation, the amount of government spending, and specific government programs may have become accidentally intertwined.

As mentioned before, Americans view Social Security, Medicare, and Medicaid as important and worth preserving.  Kwak elaborates: “Rationally speaking, your opinion about Social Security or about Medicare should be based on how much you put in and how much you get out–not on the gross size of the program, and not on how big the rest of the federal budget is. Yet instead the total size of the budget has become the driving force behind potential structural changes in Social Security and Medicare.”

Kwak suggests that “we should make decisions on a program-by-program basis, just like a business is supposed to do.”  His advice is: “If there’s a program that the American people, through our democratic system, agree will provide benefits greater than its costs, we should do it, independently of the existing spending level. And if there’s a program that isn’t covering its costs, we should kill it.”

Instead of focusing on a generality, “government size”, our elected officials should evaluate programs on a cost-benefit level.  Then government agencies that are viewed as too costly or intrusive (the CFPA) could be eliminated and government programs that are viewed as beneficial (SS, Medicare), but need reform, can be focused on in an unbiased way and not be harmed by the “too big” generality.

Jordan Ballor, in a blog post for Acton, wrote: “All government spending, including entitlements, defense, and other programs, must be subjected to rigorous and principled analysis.”  Indeed, although the American people think Social Security, Medicare, and Medicaid are beneficial, 52 percent think Social Security needs significant reform, 54 percent think Medicare needs reform, and 54 percent, likewise, for Medicaid.  However, without having a clear definition of what “too big” means, successful retooling will be difficult to achieve.

Ballor added: “This means that the fundamental role of government in the provision of various services must likewise be explored. This requires a return to basics, the first principles of good governance, that does justice to the varieties of governmental entities (local, regional, state, federal) and institutions of civil society (including families, churches, charities, and businesses).”  True reform requires not simply legal and budgetary change, but a reevaluation of what entities perform certain services, as Ballor suggested.

The Acton Institute is committed to real budget reform, and, to make sure that programs, like Social Security, are evaluated fairly and reformed properly, the United States should make sure it clearly defines the costs and benefits of individual programs before taking drastic action.

John Meszaros John is from Hartville, Ohio. He is pursuing a bachelor's degree in economics from Wittenberg University in Springfield, Ohio and is scheduled to graduate in May 2012.


  • J.E. Rendini

    Unfortunately, government is a blunt instrument and the alternative to drastic action is often inaction.

    Two things are going on here: 1) the economic viability of Social Security, Medicare and Medicaid (and other entitlement programs in general) and 2) the gross size of these programs.

    As for the first, citizens who say they want want entitlements reformed but do not want benefits reduced are missing the point. No matter what we do or do not do, the benefits are going to be reduced, either as the result of a rational, humane process or of a mindless, inhuman Greek tragedy.

    As for the second, it doesn’t matter how big the government is in terms of its budget or the number of its employees. What matter is how much power it exercises over our lives. The more spending government controls, the more power it has. The more power it has, the more it attracts into its ranks those who want power, and the more corrupt it becomes. Whether or not the actual cash passes through its coffers is almost immaterial.

    • John Meszaros

      I do agree that benefits will likely have to be reduced.  However, if people view these programs (SS, Medicare, Medicaid) as providing more benefit relative to other government agencies, those other programs and agencies may need to be cut more significantly to preserve benefit levels in what are viewed as more useful programs.

      And I think we agree on your second point, from what I understand from your comment.  Money, spending, etc., are indeed measures of government but money passing through does not calculate “control”. For instance, the TSA has a budget of 8.1 billion, miniscule compared to other agencies, yet I view this as one of the most intrusive government agencies.  So I think, correct me if I am wrong, that we agree that spending doesn’t necessarily correlate to size, “bigness”, or control.

      • J.E. Rendini

        In general, I think we do agree and, in principle, if the people prefer Social Security and other entitlement benefits to other government goods and services, it’s the “others” that should be cut. However, some of the “others” like national defense and law enforcement, can only be cut so much. And entitlements are already such a large portion of total government expenditure that feasible cuts in the “others” can not shift enough revenue to entitlements to prevent substantial entitlement spending cuts.    

        • John Meszaros

          I would definitely agree with your assessment.  I think people would like to see the “others” cut somewhat more (at least that is what Gallup and others tell us) but, as you said, the “others” can only be cut so much before they become useless.  I also think we do need substantial reform on entitlements to make sure that, if people still desire them, they can still have some level of benefits in the future. Thanks for reading the post and for the insightful comments too!

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