Ryan Bourne and Chris Edwards
Supporters of federal spending make it sound simple: the government designs expert programs, raises money from taxes, and steers it to individuals, businesses, and nonprofit groups to solve problems in society.
Our new study, Federal Government Spending Is a Leaky Bucket, describes why this view is far too optimistic. Every step in raising and spending money is undermined by design errors, bureaucratic inefficiencies, and behavioral responses that result in most programs generating more costs than benefits.
The study’s name borrows from economist Arthur Okun, who famously likened welfare programs to a leaky bucket.
We argue that the government bucket is even leakier than Okun described and that his lessons apply to all federal programs—whether spending on welfare, defense, infrastructure, or health care.
Our study provides a framework to understand why most federal spending undermines the economy and why most activities should be left to the states and the private sector. It details the many ways policymakers—carrying their program buckets—are leaking resources all over, making us worse off.