I would rather we learn from Argentina’s mistake instead of repeating it.
A hundred years ago, Argentina was one of the wealthiest countries in the world, while today, in terms of GDP per capita adjusted for purchasing power, it is ranked a lowly 74th. This makes it the only country in modern history to drop from first-world status to something lower. It's a stark reminder that economic decay is possible, and that it may happen so slowly that many do not notice or believe, akin to the frog contentedly sitting in the slowly heating pot of water.
Gradual economic decay can be caused by poor economic policy, excessive regulations, an over-sized government, or all of the above. Either way, the result is millions of poor economic decisions, the small cuts that over time combine to bleed the economy dry.
What exactly is an economic cut? How do we know it when we see one? How can they be minimized? Recall that economic wealth is created by applying productive labor to an economic resource. Consider the city of San Diego, where one such valuable economic resource is the scarce public beachfront property, for which there is high demand to store boats. As you will see, what is lacking is "productive labor." The result being a wealth-draining economic cut.
In response to multiple calls to the San Diego fraud hotline, a recent audit of San Diego's boat storage program on Mission Bay revealed that just 131 of the 270 available beach storage slots were leased, even as 400 people were on a waiting list. It was so mismanaged that there were literally 29 abandoned boats sitting on the beach; some sections looked like a boat dump yard.
At the present storage slot lease rate of $171 per year, the 139 unleased slots represented lost revenue of $23,769 per year. The available slots come in two sizes (small and large), and given that for every person on the small boat waitlist, there are five on the large boat waitlist, even a 5th grader would correctly surmise that the city should be charging more for the fewer, more in-demand large boat storage locations.
But they are not, because this is not how government works. Market signals are ignored. Similar beach communities in the Los Angeles area are charging three times the annual rate for similar boat storage, so that same 5th grader would correctly surmise that maybe, just perhaps, the San Diego boat storage fee is too low. Charging too little for a rental unit is akin to rent control, which nicely explains the long waitlist. Benefitting those lucky enough to have an indefinitely long, low-cost storage location, and too bad for those who have been on the waitlist for up to 10 years.
It would be naïve to ignore the established historical fact that long lines for valuable assets encourage corruption, which undermines a free-market economy that depends on enforced law and order. Perhaps it was suspected "line-cutting" that led to the calls to the fraud hotline in the first place?
And too bad for the taxpayers because by not charging a more competitive rate, or more for the larger slots, the lost revenue was probably more like $50,000 to $100,000 per year, which represents the "cut" that has been bleeding taxpayer wealth. A valuable resource squandered even as the city employees who were supposed to manage this boat storage program continued to receive full salaries, which would be the second cut. Not to mention the cost of the audit, also funded by the taxpayers, making it the third cut.
Even after the public exposure of this wealth-losing program, the park officials said they wouldn't be able to implement many of the recommended audit changes until as far into the future as fiscal year 2028, making it crystal clear that there will continue to be no incentive to manage this program in a cost-effective manner.
What's another four years of taxpayer loss?
Any chance we also freeze the city employee salaries until 2028? No, because once again, this is not how government works, as there is usually no incentive to operate efficiently, and no penalty for wasting taxpayer money.
It is obvious that the taxpayers and boat owners would be better off if San Diego turned over this program to a private entity, one that would be financially rewarded only if the program is run efficiently. Free-market dynamics will ensure that all slots will be leased, the waitlist minimized, and that the fees will reflect a true balance between supply and demand.
Better yet, divide the storage space into two and allow for competing programs.
I understand that a poorly run boat storage program on public beaches is not the end of the world, but a cut is a cut, and millions of cuts later, the economy starts to decay. Whether it be the Post Office, the IRS, the Veterans Administration or the San Diego Mission Bay boat program, the problem is the same. Within a government program, there is no incentive to offer good service, to evolve, or to stop wasting taxpayer wealth, implying that the number of cuts, i.e., the amount of wealth bleeding, is proportional to the size and scope of government. This in turn implies that the only way to minimize the bleeding, to maximize economic growth, is to minimize the size and scope of government. Whatever can be outsourced to the private sector should be.
Which is exactly what Argentina is doing today.
An alternative solution would be to audit more often, not every 15 years. But audits also cost taxpayers money, making it a diminishing return unless the audits can be performed very efficiently. Perhaps a promising future application of A.I. for those programs that remain within the scope of government.
I sincerely hope that D.O.G.E. exposes and eliminates many thousands of wasteful programs, ensuring that taxpayer wealth is respected and not squandered. I would rather we learn from Argentina’s mistake instead of repeating it.
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