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January 22, 2012

Don't Be Fooled By Obama's 'We're Shrinking Government' Banter

Last week, President Obama announced that he's "taking aim" at the burdensome bureaucratic structure of the United States government. As an example, he set to consolidate six federal agencies into one. A CNBC article online implied that the President was going to shrink the size of the government.

The White House stated that 1,000 to 2,000 jobs would be cut, but not through layoffs. The agencies will wait until individuals quit or retire to opt out of replacing them. This move is estimated to save $3 billion over 10 years, or $300 million per year.

Implied Fallacy of Less Regulation

Just because six agencies are being consolidated does not mean that government is getting smaller. Keep in mind that in order for the President to accomplish this, he would need to receive new powers from the Congress. 'New powers' certainly doesn't imply less government control.

In his last State of the Union address, the President mentioned how different organizations regulate different parts of the salmon trade. The White House asked why so many organizations had to have their hands in the salmon trade. What we should have been asking is 'why should the government be concerning itself with the salmon trade at all?' Just because this re-organization is occurring doesn't mean that government is going to interfere less with commerce. On the contrary, it may give it a greater ability to interfere.

What "Attrition" Job Loss Means

When the government says that it will cut jobs by "attrition," that doesn't sound very promising. First, if you are waiting for the person to leave, how useful are they in the first place? Next, if they are useless and they know it, but can't be cut, wouldn't they be incentivized to stay and not be productive? Until we see actual job cuts from these agencies, the promise of reduction is simply smoke and mirrors.

The $3 Billion in Savings Myth

At $300 million per year, we'd be saving the equivalent of $4 per year for a household that earns $40,000 per year. 1/100th of a percent in savings is not impressive. Furthermore, this comes out to about $150,000 per job lost (or reduced, as mentioned above). Therefore, if the attrition losses don't occur, the savings will easily be reduced by 70% or more.

A Sad Reality

It's sad to think that this is the best that the federal government can do when it comes to efficiency, cost reduction, and smart regulation. A smarter idea would be to narrow the field of regulatory prowess of all six agencies, then eliminate the five least useful, leaving the sixth to absorb the roles of the other five. It may be a little messy or hectic, but what do you call three government agencies investigating a salmon vessel and trying to determine who is responsible for what?

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