Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“Most of the energy of political work is devoted to correcting the effects of mismanagement of government.”     Milton Friedman

August 1, 2006

No Incentive to be Accountable

by Brad Warbiany

Listening to Newt Gingrich speak, I remember one of his stories. He was speaking to a crowd, asking about people who traveled overseas. He asked them how many had taken money out of an ATM in a foreign country. Think about it. You’re 6,000 miles from home. You stick a magnetic card in a machine, punch in a few numbers, and in seconds you have the local currency ready to spend. It takes it out of your bank account at a slightly unfavorable exchange rate, but it is a secure and reliable transaction on any point of the globe. And we’ve all gotten to the point where we consider it so secure that we don’t even keep the receipt! Of course, that’s a bank, where if you lose money, you get sued. Not so with this story:

Senator Seeks to Create a Single Spending Database

Technically, creating a central searchable database to track all types of federal spending wouldn’t be a problem, experts say.

If large banks can monitor individual credit card transactions, certainly the Office of Management and Budget could set up a Web site for federal spending, said Alan E. Webber, senior analyst at Forrester Research Inc. of Cambridge, Mass. “It would be a huge undertaking, but it would be feasible.”

But whether it would be politically feasible is something else entirely. “The lobbyists are not going to want this to come out,” Webber said.

Webber was commenting on legislation by Sen. Tom Coburn (R-Okla.) that was approved Thursday by the Senate Homeland Security and Governmental Affairs Committee. It would require the Office of Management and Budget to set up a searchable Web site containing data on all types of federal spending — including contracts, subcontracts, grants, subgrants, loans and other financial assistance.

The bill says the database would have to be searchable by agency, geography, industry, congressional district and types of federal funding.

He’s right about one thing. Technically, it wouldn’t be a problem, and while tracking $2.5T in spending won’t be easy, it would be feasible. But he’s wrong about another. It won’t be the lobbyists that interfere. It will be the inherent sloth and inefficiency of government.

I was thinking about this recently as I pondered my license plates. I had considered getting a vanity plate, something either related to my alma mater (Purdue) or liberty-related. But I wanted to know what license plates were available. After all, I don’t want to find out that all permutations of “BLRMAKR” are taken, and then get my 6th choice of plate. Now, if the Georgia DMV were smart, they’d make a very simple searchable database for people looking for vanity plates. In fact, it would be almost trivial for them to put such a thing together. But they’re a government monopoly, so they don’t care about serving their “customers”.

In the private sector, tracking money is a crucial part of running a business. Because you’re competing against other companies, you have to justify internally and to your shareholders (if a corporation) exactly where the money is going and why. Waste gives your competitors an advantage, and lost money is a quick way to ensure you have absolutely no shareholders. If you’re a corporate accountant, and come up with a way to better track and control monetary output, you get a raise. If, on the other hand, you lose lots and lots of money due to incompetence, you get fired.

But in the public sector, it’s a completely different mindset. You have nobody to compete against, except other government entities vying for funding. If you spend all the money you have, you ensure that your budget will increase for next year. And as for justifying spending to shareholders? When you extract your funding from behind a gun, you don’t even need to worry about that. You can always take more when people have no choice as to whether to provide it. If you’re a government employee and find ways to highlight fraud? You piss off your coworkers AND your bosses, because you’re drawing attention to them. But if you lose money, nobody worries (in reality, their accounting is so screwed up that nobody even notices), because they can always get more.

It’s a problem of incentives. There are no incentives for government to be efficient. So why do they care if we plebians can track their spending? They may make a half-hearted effort to create such a database, but as with everything else in government, it will soon either become so out-of-date and incorrect as to be useless, or so corrupted by political pressures as to be useless.

I’d like to think that the forces in our Congress that actually care about spending restraint could bring something like this about. But it’s clear to me that everything that constitutes government makes it resistant to the idea of accountability. We can’t point the finger at “lobbyists”, as much as I enjoy to do that for a host of other problems. Instead, the structure of government itself is the problem.

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3 Comments

  1. It takes it out of your bank account at a slightly unfavorable exchange rate…”

    Dude, you are using the wrong bank. It’s fairly standard for ATM and credit card FX transactions to be marked to market at the prevailing spot rate, with no surcharge.

    Now, ATM transaction fees are another matter.

    Comment by KipEsquire — August 1, 2006 @ 3:20 am
  2. The whole blame the lobbyists thing is a typical “treat the symptom, not the disease” reaction. We are running around pretending the emperor is wearing clothes. Government spending and corruption cannot be fixed by yet another law that says the government has to fix it.

    Qui custodiet ipsos custodes?

    Comment by Eric — August 1, 2006 @ 4:16 am
  3. Kip,

    I could be wrong on that point. I don’t travel overseas often, but I was under the impression was that you typically got better rates with ATM and/or credit card transactions than you would get at a currency exchange, but it was slightly below the market rate (or they used the lowest exchange rate of that trading day as a basis).

    If anyone would care to sponsor me on a trip through Europe to test this extensively, let me know :-)

    Comment by Brad Warbiany — August 1, 2006 @ 6:01 am

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