Do institutions contract? If not, is that necessarily bad?

I disagree with almost every critique Congressional Republicans make against President Obama’s budget, but I will concede one point: once in place, it will be difficult, if not impossible, to roll back the size and scope of government.  This forms a basic locus of the popular and political discourse: Republicans fear an encroaching, permanent government presence which Democrats, for the most part, embrace as necessary.  Moreover, Republicans often cite the permanent nature of any government activity as the most negative characteristic of governments.  If Republicans then want to shrink government, the only avenue is usually then to keep budgets nominally equal year after year, so the real purchasing power of government decreases.   In fact, as far as I know, no president since WWII has cut the budget in nominal terms, i.e. actually pared government.  (If I am wrong, please let me know.)

I don’t think, however, that the permanent encroachment is a feature unique to governments.  For example, many companies cut payroll by replacing retired workers (especially in countries where firing employees or being fired carries significant stigma) or buying out workers.  Buying out workers is a significant cost for a company and represents some calculation of lost income streams to a worker; the long-term effect is positive for a company, just like not replacing retired workers, but the short-term is quite painful.

A bit more personal, think about our aversion to throwing things away.  We tend to accumulate much more than we discard; we loathe shedding our material abundance even when that materialism has ceased to bring us emotional fulfillment.   We can feel less cluttered by moving to a bigger house or buying a storage shed, but this is the same effect as keeping the government of the budget nominally the same: it only sheds our encroached lifestyle in relative terms.  The trajectory of our life tends to amassing more stuff, not less.  Of course, to a certain extent, this is necessary: a bed is better than no bed, but a king size bed brings much less well-being once one already has a bed.

In America, instead of maintaining infrastructure (keeping the nominal amount of infrastructure constant), we expand it (encroaching infrastructure) even when the marginal benefit of expansion is much less than the marginal benefit of maintenance.

Going back to government, Republicans are not exactly good at trimming government.  George W. Bush almost doubled the military’s budget, and it does not appear like it will return to pre-Iraq levels; in other words, the expanded budget is going to be quite permanent in nominal terms.  He also greatly expanded Medicare.  Nixon created the EPA.  Eisenhower built, wisely, the interstate system.

I would like to argue that the increase in permanence we observe around us roughly paralells the material increases of the previous 150 years, but I do not know enough to make that claim.

One last thought: in small settings, one does see radical shrinkage.  Small companies go bankrupt much more frequently than large ones.  Poor people have a much weaker grip on their material comfort than the middle-classes.  And small governments collapse under their economic failure, in which case the leaders and institutions shrink or disappear.