Government Is Not A Business

It has been said that government should be run like a business. Businesses cut back in lean times to stay open, so why shouldn't government cut taxes in lean times? This makes sense on the surface, but this ignores fundamental differences in the very nature of business and government.

A business provides a good or service in exchange for money and exists to turn a profit.

Government exists to protect its citizens, provide for the common defense, regulate commerce, and provide for those who cannot help themselves.

A business is allowed to market itself and to an extent, can pick and choose its customers by dint of their location and the price they charge for their goods and services. A business is also susceptible to competition from other businesses and the invisible hand of the market. A good business will survive and a bad business will fail. A business cannot operate at a loss for very long – it will cease to exist if there is no infusion of capital to make it solvent.

Government cannot pick and choose its customers; it must serve all its citizens without passion or prejudice. Government provides services such as roads, schools, police, fire, and military protection that the private sector simply cannot or will not provide. Government is tasked with regulating commerce so that the general public will be protected from unscrupulous businesses. Government also insures a peaceful society through a fair and impartial criminal justice system. Government can engage in deficit spending through the sale of bonds. Granted, this is not an ideal situation but is sometimes necessary in order for government to continue governing.

A business can raise money by increasing their prices and in lean times, cut costs in order to stay in business. Government raises money through taxation in order to provide services to its citizens. Cutting taxes means reducing services – services like national defense, police and fire protection, education, homeland security, environmental regulation, criminal justice, and so forth. Which of the aforementioned services is a luxury in today’s economy?