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What's it called when...

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Kevin posted on Mon, Dec 10 2012 12:01 AM

I'm writing a paper for school, and I can't remember what the phenomenon by which a failing government agency or bureaucracy is rewarded with more taxpayer money is called. I seem to remember there being a label for this, but I just can't remember what it is. Could somebody help me out, or tell me I'm imagining things? It'd be a big help.

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Neodoxy replied on Mon, Dec 10 2012 12:34 AM

To my knowledge there is no explicit term for this beyond a bailout or an increase in funds. Remember that in most cases its impossible for a government agency to "fail" because it usually doesn't have to make a profit and therefore can't go out of business. Therefore the government agency merely restricts output. For instance the DMV can't really go broke since even if I cut down its funding to ten thousand dollars a year it could still just hire some guy part time at minimum wage to handle all the DMV's stuff and even though he could barely provide any quantity or quality of service it would still be provided. The only things which can run at a loss are things like the post office which work in return for money. The fire department can either be considered as incapable of running at a loss or as running at a permanent loss. This is because they exchange nothing for money. Their expenditures vs. their income is always equal to a negative sign slapped on in front of their expenditures.

With this said government agencies which run over their budget are often able to secure additional funding. My old American History teacher used to be a lieutenant in the army and he once told the class about how, when requesting funds to run a training exercise, the military gave him like five times the funds which he asked for so that instead of a million dollars the training exercise cost five million.

The reason that this happened was something along the lines of this: In the military (government in general?) the budget of this year is based upon the expenditures of last year. so for instance if I received 200 dollars this year and I only spent 100 dollars of that then the other 100 dollars would go back to the govt. proper and then the following year the budget might be 103 dollars (the extra 3 dollars being for inflation). This would imply then that no government agency (assuming the entire govt. was structured like this) would ever have any incentive to save money and just to spend spend spend. Then whenever their projects cost too much they can go to the government itself for help. I assume this latter instance is what you're talking about. In this case they are spending more than what they have to spend in the first place and then they will either have to receive more money from the government, or they will have to sell off assets/spend less in future and pay off debt.... Or not do either of those things and then get sued by debtors.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
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idol replied on Mon, Dec 10 2012 1:02 AM

Positive feedback loop?

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Moral hazard?

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Aiser replied on Mon, Dec 10 2012 9:42 PM

There is certainly a perfect term invented specifically for this purpose. Graft I especially loved how Rothbard would use the word "Graft" in such a powerful manner.

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There is certainly a perfect term invented specifically for this purpose. Graft I especially loved how Rothbard would use the word "Graft" in such a powerful manner.


Is that a Godzilla monster in your avatar?
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