By Arnold Kling
If the government is taking more in taxes than it did forty years ago, then why does the typical citizen not feel that he or she is getting more in services? Kevin Drum proposes an answer.
In fact, most of the per capita increase in government expenditure over the past 40 years has come from Medicare, Social Security, and interest on the national debt, none of which benefit him at all — for the moment, anyway. And much of the rest of it comes from the fact that we pay government employees more, just the same as we pay private sector employees more these days too thanks to rising GDP and increasing prosperity. School teachers, for example, are no longer expected to do their jobs for $15,000 per year.
My problem with the latter explanation is that it begs the question of why public-sector productivity growth is nonexistent. The only reason that private-sector employees earn more than they did forty years ago is that their productivity is higher. While it is true that the public sector must now pay higher wages in order to compete with the private sector, it would seem plausible that the same technologies that have increased productivity in the private sector would increase productivity in the public sector.
There is, of course, William Baumol’s “cost disease” thesis, which is that productivity tends to stagnate in the service sector in general and in the government sector in particular. However, it seems to me that we should try to alleviate cost disease if we can.
Note that Victor Davis Hanson’s assessment of the war in Iraq would suggest that the military has managed to overcome cost disease.
The United States military is now evolving geometrically as it gains experience from near-constant fighting and grafts new technology daily. Indeed, it seems to be doubling, tripling, and even quadrupling its lethality every few years.
For Discussion. Given that much of government spending growth in the past decade has been at the state and local level, is there anything other than cost disease that might explain why a taxpayer would perceive a failure of the quality of government services to keep pace with taxes?