You might have heard the term “efficiency” thrown around now and again. In fact, an entire US government department was recently created specifically for this purpose. Long gone are the days when voters had any influence over how their resources were used, if they ever had any to begin with.
Instead, we have elected yet totally useless rulers — aided by an incredible team of economists who have never even had to talk to an actual working person! — to show us why public spending should only exist to the extent that it aligns with the interests of the very rich.
The rhetoric around government efficiency — or inefficiency, rather — didn’t begin with Donald Trump. Many economists, including the Father of Economics himself Adam Smith, have tried to limit the role of government in the market, but not always for the reasons you might think.
Smith’s critique, for example, was directed at “corporate welfare”, essentially the idea that taxpayer money would be used to prop up or give certain advantages to private companies through something like subsidies (…but obviously, we see nothing like that today).
This narrative is a purposeful tactic by politicians — from both parties — to distract the public as they sell off their resources to the private market.
Yet prior to the 1980s, many economists agreed that the government had a role to play in stimulating consumer demand and ensuring full employment. This period also coincided with the end of World War II, in which many countries implemented welfare states as a kind of “reward” for the sacrifices the public had made during the war.
Taxes on the wealthy were used to pay for programs in fields such as education, healthcare, housing and transportation over the course of the next three decades. In the United States, the adoption of the “GI bill”, for example, helped veterans returning from war gain access to a college education, as well as an affordable home mortgage.
But, as you might expect, the wealthy weren’t too happy about paying higher taxes, which was of little benefit to themselves (…except for the fact that they had a well educated and healthy work force at their disposal). However, any politician that attempted to cut the welfare state would need to convince voters that it was in their best interest to do so.
So in came US President Ronald Reagan (as well as UK Prime Minister Margaret Thatcher) who would introduce two narratives that would prove to be incredibly persuasive in politics.
- First, Reagan put all taxpayers in the same boat. There was no longer any difference between “rich” and “poor” taxpayers, only hard-working American taxpayers who weren’t getting their fair share (because they were paying too much in taxes rather than, you know, being exploited by their bosses).
- Secondly, these taxes went to “wasteful” or “inefficient” public programs that didn’t benefit them. Or, in other words, they supported “freeloaders” or “welfare queens”, a narrative that has been absorbed and reiterated by numerous economists and politicians for decades.
Now, this isn’t to say that the government can’t be wasteful. But what are we actually talking about when we talk about “government waste”? Are we talking about research grants for scientists, some of which gave us the very computer network that you are reading this on right now (aka The Internet)? Are we talking about the millions of dollars that go towards unemployment benefits or health care?
Suddenly a public institution that may have worked well before no longer has access to the same resources, and so it stops being as “efficient”.
In general, most “hard-working taxpayers” greatly benefit from these things at one point or another throughout their life. Yet the problem is that rich people can’t make any money off them, especially if they are funded through taxes. So how do you convince voters to sell off public resources, even though it is clearly not in their best interest? A tactic that I call the old slice and dice.
Essentially, you slice off the piece of the government that you would like to privatize and then you dice it, meaning you cut funding little by little. Suddenly a public institution that may have worked well before no longer has access to the same resources, and so it stops being as “efficient”. This is by design: it allows the private market to fill that funding gap.
How American Education Was Privatized
Let’s look at a historical example. Before Ronald Reagan became President of the United States, he was governor of California during which time he significantly cut the budget of the University of California school system, partly in response to the anti-Vietnam War and civil rights protests that had been taking place on campus (sound familiar?).
The cutting of state — and later federal — funds was not just an attempt to stomp out student protests, much like Trump is currently doing in regard to the pro-Palestine movement. It was also a way for private investors to gain a piece of American higher education.
As a result of the drop-off in funding, universities around the country were forced to raise tuition fees, in addition to relying more heavily on endowments. Endowments are beneficial to wealthy donors for two reasons: one, they allow them to exert more control over universities; and two, they provide a steady financial return.
Higher tuition fees, on the other hand, force many students to take out loans, which may either be public or private. In the case of private loans, the gain to investors is obvious: they are able to make profit through the interest rate on student loans, not to mention any additional loans that students might have to take out for living expenses. But what about federal or public loans?
Well, an obvious effect of federal loans is that it shifts the financial burden away from wealthy taxpayers to middle and working class students who will have to pay that money back. This disincentives people from poorer backgrounds from continuing their education, which was precisely what Reagan wanted.
Universities around the country were forced to raise tuition fees, in addition to relying more heavily on endowments.
The other, and perhaps unexpected thing to mention is that private investors can still make money off the interest on these loans because they can buy up national debt! Private investment in the national debt might take the form of savings bonds bought by mutual or pension funds or even holding companies, for example.
Ironically, many public figures who speak out against the budget deficit are the same ones who buy up national debt. Warren Buffet, for example, actually owns about 5% of US Treasury bills through his company Berkshire Hathaway, despite his warning of the “unsustainable” fiscal deficit (which is probably more than anything an attempt to make sure his dollars won’t lose value).
Many like Buffet point out the incompetence of the US government in reducing the deficit — which isn’t completely unfounded — but this seems to be less about idiocy than it is about politicians acting in their own self-interest. Reagan ultimately increased the fiscal deficit due to funding for the military, no doubt the result of intense lobbying by private military contractors…
But this, of course, is nothing like Trump who plans on spending millions on a North Korean-style military parade for his birthday tomorrow, even as he claims that there isn’t enough money for Medicaid. (Reagan also made cuts to Medicaid during his time in office … meanwhile private insurance companies are allowed to make record profits).
Long story short, this narrative is a purposeful tactic by politicians — from both parties — to distract the public as they sell off their resources to the private market. The US budget deficit could be closed in a matter of seconds if tax rates on the wealthy returned to their pre-Reagan levels, but that would force politicians to betray the very donors that they have come to rely on for elections thanks to Citizens United.
Instead, wealthy politicians like Donald Trump take advantage of the US budget deficit — that they are ultimately to blame for — to make cuts to public institutions like Social Security with the long-term goal of privatizing it.
Like I said, the old slice and dice.