Italy has made some progress on spending cuts, but reform seems to be slowing down at just the point when real gains could be locked in. The FT reports on Prime Minister Matteo Renzi’s announcement that the country will see spending cuts of €10 billion next year. That number, however, still leaves the country €6 billion behind the target savings the government was originally aiming at. Future savings gained by making the Italian government more efficient are promised, but the FT reports that some are skeptical these savings will materialize.
There’s a reason why many advanced governments today have trouble meeting budget cut targets. At the end of the day, the cuts that would be least painful for Italian society would be unbearably painful for special interests that are well-entrenched in the political system. Making government procurement more effective, with less room for waste and corruption, for example, wouldn’t harm any of those who depend on government services — but it would reduce the profits of the well-connected crony capitalists and the local politicians who are hand in glove with them.
Similarly, reducing bloated staffing, rationalizing government administration, and otherwise making government more transparent and effective would enable taxpayers to enjoy the same level of services with less debt and taxes. A clear gain, you would think, but politics (and not just in Italy) has a hard time delivering this kind of result.
In the U.S. as well as in Italy, many of our debt and spending problems don’t come from the ‘greed’ of those who receive government services. They come from government ineptitude and from those who profit from bloated and irrational delivery systems. From our defense procurement system to infrastructure to the health care system to higher ed, our country—like many of the other advanced industrial democracies—suffers from the high costs of a badly-run state.
The left characteristically attacks all forms of spending discipline as a cold-hearted assault on the poor even while it continues to serve the special interests in the governance machine. For its part, the right howls rhetorically about the evils of spending, but is also unwilling to go after deep-pocketed special interests who profit from government inefficiency (think, for example, of state politicians everywhere who suck up to crony capitalist highway construction firms, or presidential candidates bowing to the Iowa ethanol lobby).
The left—in Italy as in the U.S.—needs to learn that budget discipline properly done helps the poor rather than hurts them. The right needs to learn the importance of governing well so as to govern less intrusively and less expensively. There is an agenda here that could electrify voters and put us on the road to better societies with less debt. Let’s hope that a new generation of real reformers will come along to give us the government we need at a price we can pay.