What is the Federal Government’s Job?

Jun 1, 2023 | Bubble Monitor, No Bull Economics

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A couple of weeks ago we conducted a thought experiment in which the government became a nonprofit, and this week we propose another thought experiment in which the government becomes a public corporation. We suggest that this could provide very useful input into the debt ceiling debate.

  • With all the discussions & debates about raising the federal debt cap, it seems logical for us all to take a step back, stop & consider what the citizenry wants to establish as the federal government’s mandate.
  • Granted, if you ask different people, you will get different & conflicting mandates. All the same, it is the nature of a democratic republic to wrestle through these differences to create mandates to guide our governance.
  • As business people & financial analysts, we would propose a very simple mandate for the federal government: tie its budget growth to real GDP growth (adjusted for inflation). If the government is doing its job, our economy should be growing. If we get a raise, they get a raise – fair? If we lose our jobs & purchasing power because of inflation, the feds also lose jobs and purchasing power via budget reductions.    
  • In a perfect world, we would have an independent board of directors to help set the country’s goals for economic growth, cost structures & financing needs. You know, simple goals that a working stiff could easily understand & measure. In turn, the board would have the ability to replace the fed’s senior financial team when they keep coming back to the citizenry asking for higher debt limits while putting up lousy numbers year after year, and decade after decade.
  • The board could simply create an index to govern government spending (see chart below). Higher real GDP growth, higher government spending – not the other way around. While we are at it, let’s tie government wages to 3rd party satisfaction scores which measure how citizenry customers rate the government’s performance.
Real GDP vs Government Total Expenditures Graph

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