Thursday, July 28, 2011

The Government Is Not A Business

The Government Is Not A Business
A helpful primer for confused liberals.
by John Hayward

Tommy Christopher of Mediaite offered this criticism, via Twitter, of House Speaker John Boehner’s refusal to raise taxes:

Boehner compared govt to a business. What business wouldn't fire board members who promised never to increase revenue?

Liberals often embarrass themselves when they try to compare government to a business. It’s heartbreaking. Here’s a primer listing some of the most important ways in which government differs from free-market business entities. Keep it handy, and refer to it before inserting your foot in your mouth during a socialist diatribe!

Patronizing a business is voluntary. To address the most immediate point first, a business increases its revenue by persuading more customers to voluntarily purchase its products. It can also try raising its prices, at the risk of prompting customers to choose a different provider for their needs. For example, the huge price hike recently implemented by Netflix will reportedly cause it to lose more than 6 million customers. These folks can freely choose a different vendor for their video entertainment, or make do without rented DVDs and video streaming altogether.

On the other hand, “patronizing” the federal government is compulsory, unless you’re willing to renounce your American citizenship and move to a different country. The government “raises its prices” at gunpoint, with the threat of fines and imprisonment hanging over those who refuse to pay up. It doesn’t matter if a given customer does not benefit from certain government services, or even has profound moral objections to them.

A business might also try to increase its revenue by holding price and sales volume constant, but reducing costs. A government can try doing that in theory… but have a look at today’s headlines, and see how that works in practice. Reducing costs is very difficult, as any actual business owner could tell you. It’s much easier for the government to raise taxes, and easier still to run up piles of debt.

Businesses must earn a profit. A free-market entity exists to turn a profit. All other considerations are secondary to this goal, although many other considerations are deeply linked with it. Many business owners have personal motivations beyond the profit motive, but if profit is not made, eventually the business will fold.

For example, I used to live in a college town that had a small family restaurant, run by friendly and devout Christians. They felt they had a religious calling to feed the students nourishing food at very low prices. Their restaurant would run for a while, packing in big crowds of budget-conscious students… and then go bankrupt, because the family wasn’t charging enough to keep the thing running. They would take a few months to recover their finances with other business ventures, and then open the restaurant again.

To put it another way, businesses must succeed. If they fail, they will die, no matter the secondary (and perhaps quite noble) intentions of their founders.

On the other hand, government grows through failure. A government agency would put itself out of business by “succeeding,” and dramatically improving whatever condition it was created to address. The Department of Energy, for example, does not generate any energy. On the contrary, its primary goal is impeding energy production through regulations. It grows, increasing its budget and power, by failing to improve the amount of energy available to Americans.

Likewise, as public education in America grows worse, the Department of Education demands more money. You might also note from recent headlines that certain elements within the Bureau of Alcohol, Tobacco, Firearms, and Explosives have spent the past few years working to increase gun crimes.

Any government agency that spends less than its budget would see its budget reduced. Therefore, it has a powerful incentive for failure. It must convince legislators that it always, forever, eternally needs more money to accomplish its assigned tasks. Towards the end of a budget year, some bureaucrats begin spraying money around like water on a blazing fire, desperately seeking to ensure they appear underfunded.

Businesses must obey the law. Private sector corporations exist within a framework of laws, which they must obey. They face serious penalties, and perhaps dissolution, if they break the law. That doesn’t stop some of them from trying, of course, but they must conceal their efforts from detection.

Government, on the other hand, makes the law, and violates inconvenient laws on a regular basis. President Obama famously decided to stop obeying the Defense of Marriage Act, lawfully passed and signed by President Bill Clinton, because he didn’t like it. Previous Congresses passed all sorts of relatively “balanced” ten-year budgets, and yet we have a $14 trillion national debt. Even the Constitution is flouted without hesitation, by everything from campaign-finance laws to ObamaCare.

Consider the basic laws of accounting. A private corporation must conduct strict audits of its finances, to satisfy both stockholders and regulators. The federal government could not possibly pass even the most cursory audit. Billions of dollars regularly vanish without a trace. Obama “stimulus” money was sent to non-existent zip codes. Much of our national debt consists of money the government borrowed from itself. A corporate financial officer that conducted himself the way Congress does would swiftly be fined, imprisoned, and stripped of his credentials forever.

A business must remain solvent. Business entities borrow money all the time. Some of them carry large amounts of debt. However, they must demonstrate a basic ability to cover their liabilities and repay their debts, or they will soon run out of willing lenders and investors. The recently shuttered Borders bookstore chain, for example, died when it couldn’t convince any investors to provide funding to cover its debts and restructure its business operations.

In other words, investment is voluntary. An investor willingly assumes the risk of failure, in return for the hope of reward. A lender advances money with the expectation of repayment at interest. For socialists to describe the forcible seizure of property from citizens as “investment” is obscene.

The federal government has run up staggering levels of debt that can never be repaid… and now uses its very insolvency to demand even more debt. This is not regarded as insanity in Washington, the way it would be in a corporate boardroom. Indeed, the people who object to such irresponsible spending, wildly in excess of revenue, are described as “lunatics” or “extremists.” Many politicians can scarcely keep from laughing at the notion that the federal government should stop borrowing money, much less repay the debt it has already incurred.

The government cannot possibly cover all of its liabilities. The combined outstanding debt and unfunded entitlement obligations of the United States exceed the annual gross production of the entire world. Businesses are considered unhealthy when liabilities far exceed their total assets, but that’s standard operating procedure for the government.

I hope that helps anyone who was still tempted to describe the government as a “business,” or use capitalist terminology to describe the application of compulsive force!

To read another article by John Hayward, click here.

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