Arnold's Lesson in Public Choice Economics

The states have long complained, and rightly, about the number of unfunded mandates Washington sends them, and although the Republicans promised a decade ago to stop doing so, state budgets are continually drained by two huge money pits: education spending, and Medicare/Medicaid. The latter is definitely imposed by Washington, whereas education spending is a state-level obsession as well as a federal one.

The problem is, these are extremely costly items when done entirely as government-run programs. As a consequence, state budgets keep rising and are strained. When the economy is growing, the budgets rise quickly, and when the economy and consequent tax receipts slow, the budgets do not decrease accordingly. The cost of state government ratchets up steadily and hardly ever decreases, even in inflation-adjusted terms. This is proving to be an increasing problem across the nation.

Public-choice economists point out that government expenditures at any level and in any jurisdiction rise to the extent that powerful interest groups benefit from the spending: they have a far greater incentive to push for additional spending that benefits them than an individual taxpayer has to oppose any particular expenditure item. Thus spending keeps rising, especially when the real beneficiaries (in money and power) can say, "It's for the kids!," or "If we don't help the poor and elderly, who will?"

In California this evil reality is playing out today. Governor Schwarzenegger's opponents have attacked him aggressively as "an uncaring, partisan Republican doing the bidding of big business," as an article on Schwarzenegger's political troubles in today's New York Times put it.

Led by various public employee unions, especially the teacher unions, the attack on Schwarzenegger has taken a powerful toll on his popularity, which has dropped some 20 percent in the past four months, down to 40 percent in the most recent reckonings. Schwarzenegger took a further beating this weekend for daring to suggest that Arizonans are to be praised for doing something about illegal immigration when their government simply refuses to deal with a matter about which a large proportion of the public there is truly concerned.

You can be perfectly sure, however, that all of this has precious little to do with concern for society's underdogs and everything to do with politically greedy individuals' grabs for money and power. It is always so, and the furor over Schwarzenegger's minor efforts to stem the grotesque ballooning of California's government expenditures shows just how hazardous it is to stand between a greedy person and the big grab bag of government money power and power.