FOLLOW THE MONEY
An enduring truth of economics is that by and large, people consider their own financial fortunes more seriously than they do when they are caring for other people’s money, Sadly, that is also true of our political governors. They systematically are patently stupid when handing out government funds, particularly when the appropriation is based on a claimed national emergency.
In a rush to show that Government is the source of the peoples’s welfare, not only are legislated appropriations accompanied by imprudent controls against fraudulent disbursement, but this pattern persists over time through many Administrations. Markets do a far better job of punishing inadequate controls on fraud by punishing corporate executives once the fraud becomes a public matter. CEO’s and CFO’s are regularly fired and entire Boards can be replaced if the scandal is big enough. What about Government? Hardly ever!
Even when a Government is attacked by its own watchdogs, little is done to the failed Administrators who allowed or worse participated in the fraud. We should expect such exposés when the massive appropriations stimulated by Covid come to be matters of future election campaigns. Watch for them. They are the next attraction in Political Theater in your local election district.
The problem with ex post revelation and punishment is that the next national emergency will feature a similar lack of financial prudence regarding “other peoples’ money.” Legislators applaud themselves for simply passing emergency funding and clearly not for prudential financial watchman-ship, They leave that to the administrative bureaucracy which suffers “agency” issues like all other delegated activities in Government,
Primarily, when disbursing funding to the public suffering from an involuntary emergency, the main criteria for legislation succor are size, timeliness and the description of beneficiaries. If Government functionaries regarded the protection of tax revenues, (the People’s Money), one might expect more care of such resources. That some unqualified individuals or fictitious firms are able to obtain these funds is a sign of woeful neglect and awful political governance. It is a major failing of US political governance over the vast resources generated by taxation.
When news stories such as this referenced story in THE WASHINGTON POST appear, one has to wonder about the activities of the senior Senator from Massachusetts? She is constantly trying to introduce regulations to protect citizens from the alleged rapaciousness of private financial companies? Where is this Senator on the issue of protecting the resources of the public weal?
We know the answer, It is not a meaningful inducement to her political campaign. As an aside: Senator Warren widely announced on television that she wouldn’t vote for the renomination of the current Chairman of the Federal Reserve because of his alleged neglect of the poor and needy! It will be interesting if she reverts to the political consensus among Senate Democrats when Powell’s reconfirmation is voted on again. My skepticism is unbounded.