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To Cut Spending, Focus on the Rules of the Game, Not the Players

by Matt Mitchell on April 25, 2012

in Institutions, Public Choice, Tax and Budget

It might seem that the natural solution is to elect politicians committed to reining in spending, especially on the entitlement programs and pensions at the heart of state and federal overspending. The problem, however, is that even fiscally conservative politicians face significant perverse incentives to spend beyond their constituents’ means. And even if they do manage to trim the budget, today’s cuts can be reversed by tomorrow’s leaders.

Luckily, there is hope. Political incentives are shaped, in part, by institutions, i.e., the rules that govern budgeting, electioneering, and legislating. These rules influence the decisions of legislators, governors, presidents, bureaucrats, voters, and even lobbyists. So if we can improve the institutions, we can enduringly diminish the incentive to overspend.

That’s me, writing in the spring issue of The Insider.

  • Kate

    I think this is a really good point, but it still comes down to elections.  You’re not going to change the institutions until you elect people willing to make modify the current system. 

  • AliMichelle

    Great piece in The Insider. It bring up a good point about the people in favor of “throwing the bums out of Washington.” Replacing congressmen won’t do anything if the institutions remain unchanged. 

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