When Government Shuts Down

by Llewellyn H. Rockwell, Jr.

Recently by Llewellyn H. Rockwell, Jr.: What Does ‘Class Action’ Mean?

From The Free Market, December 1996.

According to official history, the 104th Congress doomed itself when it shut down the government to force its budget priorities on the president. People got up in arms and demanded that government be reopened. This taught the people and their representatives a valuable lesson. As much as we may complain, we truly need big government. Today, we all agree with the White House vow to never allow the government to shut down again.

Of course, everything about this story is nonsense. Shutting down the government was this Congress's most noble act. Though the freshmen, who forced the closing against the leadership's wishes, didn't properly prepare for the inevitable response from the media and the bureaucracy, they were on the right track. It may have been the only principled act in two years of political compromise.

Moreover, nobody has produced a shred of evidence that the government shutdown was as unpopular as the media claimed it was. It was asserted daily, but never proven. Oh sure, we heard about how people couldn't get passports, couldn't get into Yellowstone, couldn't see the Vermeer art exhibit at the National Gallery of Art. But what's most startling is that the central government – which consumes 40 percent of the national wealth – wasn't missed much at all.

There was a fiscal illusion at work. At issue was a budget authorization that entitled government to spend money before it was there to spend. But government could have reopened, and run based on present receipts. That way the budget would be immediately balanced. Everyone claims to want pay-as-you-go government, but nobody suggested this as an option. They acted as if debt finance is part of the natural law.

There is still more to learn about government during shutdowns. Consider what is known as the "Washington Monument Ploy." When budget cuts are threatened, visiting hours at popular monuments are cut back. A budget cut is voted by Congress, or an insufficient increase, and moments later an official-looking official asks the assembled tourists to please disperse. Thanks to those greedy Congressmen, we've been denied essential funds.

The media are there to record every word, and conduct interviews to be broadcast on national television. Average people tell the reporter, "my family and I came all the way from Sacramento, but because of political bickering, our vacation has been ruined," etc. The lesson is clear: Congress had better vote every dime the president demands or the People will strike back on prime time news. Sadly, this ploy works time and again.

Behind the scenes, the whole scenario has been orchestrated. There are very few things the federal government does that people directly benefit from. Among them are issuing passports, delivering the mail, running monuments and museums, and maintaining national parks. That's precisely why they take the hardest hit.

Now, in running the Washington Monument Ploy, the White House has to be careful not to cause it to backfire. For example, if the mail stopped being delivered, the public might revolt against the Post Office itself, and fuel demands that it be privatized. The trick is to shut down services that affect a minority conspicuously, in ways the media can dramatize, but not generate anger against government itself.

What's behind it all, of course, is the desire to keep the largess flowing, not to serve the public. If the feds wanted to serve the public, and Congress wasn't authorizing new spending, they could divert money from services people don't need ("Social Services for Refugees and Cuban/Haitian Entrants") to those they do need (passports). Even better, a truly beneficent leader would simply give away control of monuments and passport offices to private entities to run for profit.

Here's the irony. The services that people need most from government are the very ones that could easily be run privately. This follows by definition: if people want something, an entrepreneur is glad to make a profit providing it. On the other hand, the services people don't need shouldn't exist at all.

From a strategic standpoint, the government has the incentive to hold onto privatizable services like national parks because they are useful in times of government shutdown. It monopolizes some services just to keep the public from thinking they could get along without the government.

This is more than just a budget trick; it goes to the heart of nearly everything government does. Even at the local level, when budgets are cut, the first thing to get the axe are extended hours at the public library. Then the most popular periodicals themselves are canceled. Government, in its malice, gains more benefit from withholding useful services than providing them.

This is the very opposite of how private business operates. When a business has to cut costs, it looks for waste and inefficiencies, but it is loathe to cut consumer services. In fact, it might improve them if doing so is likely to bring in more revenue. Sticking it to the consumer would only create more losses and drive the company toward lower profitability.

With government sabotaging any attempt to cut its budget by cutting services people want, how can government budgets be successfully cut? There's no easy answer – ideally the person doing the cutting would have massive power over the bureaucracy – but here's the first step. All so-called essential government services should be privatized. That way government would no longer be seen as economically or socially essential.

Let's start with the Washington Monument. There's no excuse for not handing it over to a private company or association to run, just as Mount Vernon is run privately. Those who say it can't be done haven't noticed how many people visit that political temple every year.

But isn't this monument a public good that people should have full access to? Granted. That's why we need private enterprise, which always focuses on the public, to provide it. The same is true of the mails, national parks, passport offices, the Smithsonian, or any other good or service the government provides that people regard as necessary to their well being.

The advantage would be obvious. During the next government shut down – let's hope it comes soon and stays long – the bureaucracy would have fewer means of demonstrating that we really need them. They will be reduced to showing how awful it is that the Indian and Native American Employment and Training Program has been shut down.

All of this presumes that government has no other means to fund itself during emergencies. Unfortunately, that is not true. During the 1995 shutdown, Treasury head Robert Rubin conspired with other government-financial elites to run the government on money looted from civil-service pension accounts, although this is illegal.

Then the bureaucracy gave Congress a sock in the chops by forwarding unearned back pay to the entire government workforce. The whole shutdown ended up as a paid vacation for the most despised class in the country. If anything about the shutdown inspired public anger, it was this above all. Sadly, the opposition party took the blame, and then let bygones be bygones.

The lesson of the government shutdown is not that people want it to stay open, always and forever, but that the world doesn't fall apart when Uncle Sam takes the day off. Let's give him the next century or so, see how the people on their own can restore prosperity and liberty. With no taxes to pay, there'd be plenty left over to pay even exorbitant admission fees to the Washington Monument.

July 28, 2011

Llewellyn H. Rockwell, Jr. [send him mail], former editorial assistant to Ludwig von Mises and congressional chief of staff to Ron Paul, is founder and chairman of the Mises Institute, executor for the estate of Murray N. Rothbard, and editor of LewRockwell.com. See his books.

Copyright © 2011 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

The Best of Lew Rockwell