Monday, August 29, 2011

Posner on Size of Government vs. Amount of Government Spending

Over at the Becker-Posner Blog, Richard Posner observes an important distinction, which other analysts have missed: the size of the government and the level of government spending are two different issues.
The federal government is not too large in the sense of having too many employees or even too many functions. We need a large military, and we need regulatory agencies that are well staffed—regulatory laxity was a major contributing factor to the financial crisis of 2008 and the broader economic crisis that it triggered. What we can’t afford is not federal employees (including soldiers) but careening entitlements. But the administration of vast entitlement programs is not particularly costly. A small government can transfer immense amounts of wealth among its citizens. The problem is the entitlements themselves, not wasteful expenditures on administering them—indeed the Medicare program would probably be more efficient, and, specifically, less susceptible to fraudulent and other overbilling and approval of unnecessary or marginal medical treatments, if the Medicare administration had more staff. 

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