Why Governments Are Lousy at Running Business, But Excellent at Scaring You About "Annihilating" Budget Cuts


Good piece in yesterday's Wall Street Journal from John Steele Gordon (hat tip: Veronique de Rugy), reminding a forgetful nation why it is that state-run enterprises almost always end in tears. Here's one point that has resonance for those of us interested in California's tribulations:

Cost cutting is alien to the culture of all bureaucracies. Indeed, when cost cutting is inescapable, bureaucracies often make cuts that will produce maximum public inconvenience, generating political pressure to reverse the cuts.

What's that you say about "generating political pressure to reverse the cuts"? Here's the headline on an L.A. Times news piece today: "California braces for brutal budget cuts." The lede:

Gov. Arnold Schwarzenegger and lawmakers scrambled Wednesday to avert a financial meltdown, and public officials across California braced for annihilating cuts on the day after voters trounced their leaders' rescue plan for the state.

Italics mine, to emphasize the objectivity. In the parts of the newspaper actually labeled as opinion, Bill Maher blames California voters, UCLA prof Daniel J.B. Mitchell pines for a federal bailout, free marketeer Tom Campbell calls for a gas tax, and business columnist Michael Hiltzik advocates revising Prop. 13 and eliminating the two-thirds requirement for raising taxes, the latter of which the editorial board enthusiastically seconds.

Keep in mind that the "annihilating cuts" proposed thus far include trimming 5,000 employees out of a 235,000-strong state workforce (after a historic run-up in the state's employee-per-resident ratio). So: Only after hiking spending by 40 percent in five years, raising taxes across the board, matching even Gray Davis' deficits, and then getting spanked in a multi-tax suite of propositions, is California's debased political class even beginning to contemplate a 2 percent reduction in its bloated, tax-sucking workforce. Maybe voter petulance isn't such a bad thing after all.