An additional dollar of resources that government uses means one less dollar of resources for the private sector. The private sector’s use of resources must satisfy consumers’ wants. If they don’t, businesses won’t make profits. A government’s use of resources however makes no guarantee about satisfying consumers’ wants.
Take for example, the video game and movie series Resident Evil. It’s about an evil corporation that produces an army of cannibalistic zombie warriors. My willingness to pay for cannibalistic zombie warriors is $0. I imagine most people share my unwillingness to pay. Quite frankly I’d rather have a beer, or a million other goods. All those resources used to produce zombies (scientists, security guards, cement and equipment, etc.) become unavailable to satisfy my preferences for an additional beer or other wants.
So who on earth is willing to pay for cannibalistic zombie warriors? Governments are. If the zombie warrior example is to extreme for you just consider the following government waste of resources: Amtrak, bridges-to-nowhere, nuclear missiles, your DMV, the TSA’s full body scanners, etc. No single human is willing to pay for them so no business is willing waste resources to produce them.
But if a government can take resources from people (taxes) and spend it as politicians choose, businesses can avoid producing to satisfy consumer wants. Rather, by making the right political campaign contributions, businesses can avoid satisfying consumers and just get contracts from government. All of a sudden insider trading by politicians becomes a lucrative trade and crony capitalism reigns supreme.
The TSA full-body scanners are a particularly egregious case of this. George W. Bush’s former Homeland Security Secretary, Michael Chertoff has a personal financial stake in the production of full body scanners produced by Rapiscan Systems (a subsidiary of OSI Systems). Notably, the CEO of OSI Systems recently joined President Barack Obama on the recent trip to India. No doubt it was a great opportunity to convince Obama of the “necessity” of full-body scanners in the ironic battle to protect freedom.
OSI’s 10-Q statement reports that “Revenues for the Security division for the three months ended September 30, 2010, increased $3.8 million, or 8%, to $51.1 million, from $47.3 million for the comparable prior year period. The increase was attributable to… a $8.1 million increase in people screening equipment as a result of wider adoption of body scanners…”
If OSI Systems is representative of the crony capitalist industry, you can see here how much better crony capitalist firms (see blue line) are performing relative to the S&P 500 (see red line).
The President, as leader of the executive branch of government, is supposed to protect and defend the Constitution of the United States, which (via the Fourth Amendment) protects Americans from government searches and seizures without probable cause. I consider TSA searches to violate this.
Any economist will tell you that incentives matter. If current and former executive branch members have a personal, financial incentives regarding issues (especially ones that contradict the Bill of Rights/Constitution) they’ll be more likely to shirk their sworn duty to defend and protect the Constitution.