If you want another example of how misguided incentives in the public sector lead to bad outcomes, here is another pathetic example (available from the WSJ for a fee):

…What’s meaningful about the [highway] bill the Senate passed yesterday…is just how quickly and utterly some Republicans have abandoned all spending principle.
The 89-11 Senate vote for a $295 billion highway bill exceeds the $284 billion limit that President Bush has said is acceptable. But more than that, it also defies the budget resolution that Congress adopted only last month…The resolution isn’t binding (which is the way Democrats designed it in 1974), but it is intended to provide some parameters for a Republican Congress that’s supposedly serious about changing its free-spending ways. Or so they keep telling us.
It’s bad enough that only nine Members voted against the House version of the highway bill in March, which makes us wonder if there’s any political constituency for spending restraint….But at least the House measure, at $284 billion, stayed within the overly generous spending limits set by the White House.
President Bush has threatened to veto any highway bill in excess of that amount, but apparently Senate Republicans don’t take his threat seriously. Senate Finance Chairman Chuck Grassley is claiming the extra $11 billion is “paid for” and won’t add to the deficit. But Senator Judd Gregg told reporters last week that the higher figure is “quite simply, unequivocally, unquestionably, a budget buster.” He was being kind…
The highway trust fund, supported by federal gas taxes, is the main source of money for highway projects. To claim deficit “neutrality,” the Senate bill mainly diverts general revenue funds into the highway trust, or shifts highway trust fund liabilities into some other fund. But either way, it constitutes deficit spending…
It’s also worth noting that the $284 billion ceiling set by the President is a record high level of funding and $73 billion, or 35%, more than the last six-year bill enacted in 1998. Which is to say that the White House strictures are far from unreasonable. It’s too bad that only nine GOP Senators — Sam Brownback, John Cornyn, Kay Bailey Hutchison, Jim DeMint, Lindsey Graham, Jon Kyl, John McCain, Judd Gregg and John Sununu — saw fit to vote against the bill. They were joined by the two Wisconsin Democrats, Herb Kohl and Russ Feingold, who opposed the measure because they said it shortchanged their state.
The transit bill is already 20 months late, and since there’s little in there to promote the types of infrastructure reforms — toll roads, public-private partnerships — the country could really use…
…a veto is in order. Make that imperative. Mr. Bush has been preaching spending restraint since his re-election, and to let Congress get away with busting the first big spending bill of his second term is to guarantee that he won’t be taken seriously again. Senators are daring Mr. Bush on this bill because they simply don’t believe he’ll use his veto…

Plain and simple, this is nothing but revolting behavior by the Congress.
For more on the broader problem that afflicts public sector incentives, go here, here, here, and here. Then go read Lawrence Reed’s speech entitled Seven Principles of Sound Public Policy.