Budgets of Choice

Recently I’ve been aware of how badly the government spends money, disaster preparedness (FEMA and hurricane Rita), Homeland Security funds, the FBI’s $170 million “Virtual Case File System” that didn’t work, and the recent pork in the transportation bill. Why is it that the government spends money so poorly?

I suspect it has to do with something called “Tragedy of the Commons”. The idea is like this … some organization decides to go to dinner and agrees to split the bill evenly. Each individual buys something a little more expensive than they would normally, but in the end the total bill is more than it would be if each individual paid their own way. The same thing happens with people in government. They all try and get as much of the pie as possible to keep their constituents happy or their departments well funded. In the end we spend more money on more than we need to.

So how do we solve this ? One idea is to police the spending of money more thoroughly. You could create a Department of Fiscal Responsibility that has the authority to change budgets, but in some ways that just moves the problem from Senators, Congressmen, and bureaucrats to a new set of bureaucrats who would be less concerned about the money they were spending than a Senator or Congressman running for re-election. Another option is to create voter awareness of how money is spent in hopes that better representatives will be elected.

What is a government budget anyway? It’s mandatory financial participation for the civic good, doing those things that require collective action, roads, bridges, schools, prisons, military, foreign relations, health, and law enforcement. The way it works now, we take all our money and put it in one big pot and elect someone else to spend it. What if we could spend it?

The sytem works like this. Everyone is required to spend a certain amount. The budget would be broken down into categories and subcategories with minimums set on each category. Each person would choose how to allocate their money to each of the categories. As each dollar is spent the government tells you exactly what it was spent on. If you don’t like how its spent, the next time you move it somewhere else or even perhaps to another agency that does the same thing. Perhaps you can change your allocation each month to reflect changing circumstances. At the end of the year you could look and see how the government spent your individual dollars and you’d have a better idea of how good a job they did. Government bureaucracies that are wasteful would have budget problems and competing agencies that did a better job would grow to take their place or assist in their restructuring in order to regain the confidence of the public.

Most of all if money is spent badly, there is a fraction of the population that will know about it and make changes to prevent it from happening again.