Why Running a Business Is Different Than Running the Government

Balancing the federal budget is a fair greater challenge than running a business.

By + More

Lawmakers are very skilled and responsible at reducing and eliminating debt—as long as it's campaign debt. The federal budget? Not so much.

The Democratic and Republican congressional campaign committees have both done a very impressive job at reducing their debt, and both should be commended for it. The Democratic Congressional Campaign Committee has just erased more than $19 million in debt, which Politico's John Bresnahan rightly points out is particularly impressive following a disastrous 2010 campaign season for the party. "It frees up resources to invest in races instead of a bank," DCCC chairman Steve Israel correctly told Bresnahan.

[See a collection of political cartoons on the budget and deficit.]

The National Republican Congressional Committee, meanwhile, is making good progress, whittling its debt down to just $500,000. Party officials expect even that vestigial debt to be eliminated soon.

Why, then, is it so hard for Congress to tackle the national debt and deficit?

This question exposes some deep misunderstandings—not about Congress, which deserves a collective whack on the head sometimes, but which is generally made up of hard-working, dedicated people (even if they are dedicated to different goals). It has to do with a naive attitude toward government budgeting.

[Read the U.S. News debate on the Balanced Budget Amendment.]

Some new members of Congress—those without government experience—like to say things like, "If I ran my business the way Congress runs the federal government, I'd be bankrupt." And that's true. Here's what's different:

When you're CEO of a company, you can make all or most of the decisions. When you're a House member, you are one of 435 members who make up one of two chambers of one of three branches of government. You have to take other people's differing views and constituencies and powers into consideration, and you can't always get your way.

When you run a business, you can grow or shrink to accommodate the market. This is not so easy with the federal government. True, "government"—be it regulation, reach, subsidies, whatever—can be shrunk, but you can't shrink the size of the country or the needs its citizens have. If the needs are not filled by government, they need to be filled by a private entity or individual. It's not impossible, and sometimes it's best. But the need doesn't just disappear because the federal government isn't attending to it anymore.

[See a slide show of 10 cities dealing with budget troubles.]

When you own a business, you can fire people who are either under-performing or too expensive. The federal government can't fire Social Security recipients, or disabled schoolchildren, or prison inmates or anyone else who—by sheer nature of what they cost versus what they contribute—are a financial drain.

The campaign committees, notably, are out of debt because they raised enough revenues to do the job. Granted, voluntary contributions are not the same as mandatory taxes, but the debts were not erased by reducing regulation or giving higher salaries or tax breaks to the upper-level staff.

It's laudable that the DCCC and the NRCC have drawn down their respective debts, and Congress should see it as an inspiration. But they should not be fooled into thinking that it's as easy.

  • Read the U.S. News debate on who is handling its debt crisis better—United States or Europe.
  • See a collection of political cartoons on the European debt crisis
  • Check out a roundup of editorial cartoons on the economy.