It takes a worried man to sing a worried song, and in a recent speech that seemed like Larry Summers' swan song, the president's departed economic adviser warned that America is "at risk of a profound demoralization with respect to government." He fears a future in which "an inadequately resourced government performs badly, leading to further demands that it be cut back, exacerbating performance problems, deepening the backlash and creating a vicious cycle."
The idea that America's problem of governance is one of inadequate resources misses this lesson of the last half-century: No amount of resources can prevent government from performing poorly when it tries to perform too many tasks, or particular tasks for which it is inherently unsuited.
Actually, government is not sufficiently demoralized. The hubris that is the occupational hazard and defining trait of the political class continues to cause government to overpromise and underperform. This class blithely considers itself exempt from the tyranny of the bell-shaped curve -- the fact that in most occupations a few people are excellent, a few are awful and most are average.
James Q. Wilson, America's pre-eminent social scientist, has noted that until relatively recently, "politics was about only a few things; today, it is about nearly everything." Until the 1930s, or perhaps the 1960s, there was a "legitimacy barrier" to federal government activism: When new policies were proposed, the first debate was about whether the federal government could properly act at all on the subject. Today, there is no barrier to the promiscuous multiplication of programs, because no program is really new. Rather, it is an extension, modification or enlargement of something government is already doing.
The vicious cycle that should worry Summers is the reverse of the one he imagines. It is not government being "cut back" because of disappointments that reinforce themselves. Rather, it is government squandering its limited resources, including the resource of competence, in reckless expansions of its scope.
Congress has been so busy passing gargantuan legislation to expand government's responsibilities that it has not had enough time, energy or sense of responsibility to pass a budget. And the pathologies of expanding government are becoming worse because of two concepts Summers mentioned in his valedictory -- Baumol's Disease, and Moynihan's Corollary to it.
William J. Baumol, Princeton economics professor emeritus, said that in certain economic sectors -- e.g., labor-intensive service industries -- productivity will increase, if at all, more slowly than in the rest of the economy. The late Sen. Daniel Patrick Moynihan's corollary was that such services -- e.g., teaching, nursing, the performing arts -- tend to migrate to the public sector.
Moynihan noted that if you want a string quartet, you must hire four musicians with four instruments, just as in Chopin's day. "Productivity," said Moynihan, "just hasn't changed much. And when it does -- e.g., playing the Minute Waltz in 50 seconds -- it doesn't seem to work right."
Moynihan noted a danger to his party in the tendency for the "stagnant services" to become government services: "The Democratic Party is identified with this very public sector in which relative costs are rising. By contrast, the Republican Party is identified with the private sector where relative costs are declining." The public sector's involuntary tendency to become, regarding productivity, a concentration of stagnation is a reason for government to become more circumspect than it has been about the voluntary acquisition of vast new responsibilities.
Summers says he remains hopeful because "markets climb walls of worry." That is, American history is replete with self-refuting prophesies of peril -- predictions of national decline that prompt renewals.