Economist Richard Ebeling explains why government grows. Here’s a particularly telling paragraph, especially in light of David Broder’s claim in Sunday’s Washington Post that we Americans of late have a "toxic aversion to taxing ourselves enough to pay our bills."
Meanwhile, the government will take in an estimated $2.5 trillion in
taxes in the current fiscal year, roughly $22,100 per household.
Given the logic of politics, it’s misleading to suggest (as Broder and so many others do), that Americans choose, in any meaningful way, Uncle Sam’s spending and taxing policies. From the perspective of each individual taxpayer or voter, and from the perspective of each elected official, what government spends is unconnected with what government receives as tax revenues, and what Uncle Sam receives as tax revenues is unconnected with what it spends.
Elected officials make government-spending decisions overwhelmingly in response to political pressures — the clamoring of this group, the self-serving pleas of that group. It’s not terribly difficult for politicians to vote to lavish money on interest groups because, in doing so, no politician spends his or her own money; the money spent comes from faceless others.
Of course, many of those faceless others do vote, and they generally prefer to pay less in taxes. So passing the bill to future generations is even better politics: mollify interest-groups today and pass the bill to people not yet born.
It’s amazing, really, that budget deficits are not larger than they are. The fact that the average American household forks over about $22,100 each year in taxes to Uncle Sam alone suggests that Americans aren’t as repulsed by taxes as Broder suggests.
(By the way, the title of this post is stolen from a pamphlet my friend Dwight Lee wrote many years ago.)
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We don't really pass much of the bill to people not yet born, because these people "pay the bill" in inflated dollars. The people really paying these bills are people producing now without receiving comparable entitlement to consume, because a second group of people is entitled to consume the produce of the first group, but the second group is not obliged to produce anything the first group really consumes, unless we simply assert definitively that I'm "consuming" the pleasure of knowing that Baghdad is now cleansed of Sunnis for the benefit of Shias, with the remnants of the former walled off from the latter, to establish "peace" and declare the "success" of the surge. Whether the state taxes me to provide this "consumption" or simply prints the money, the result is largely the same.
I find this so-called explanation lacking. Where's the beef?
I find this so-called explanation lacking. Where's the beef?
Martin,
Perhaps your persepctive is a bit off. If you're say, 40 years old, or perhaps younger, this isn't really your government… rather, its more likely the government of your parents (mr. Bush is quite substantially older than you). Surely Mr. Cheney's friends at Halliburton are consuming the pleasure of a Sunni free Baghdad, and its his age bracket that really elects our government.
Furthur, while my generation will be paying back the debt (I'm 25) in inflated dollars… I'll be paying it back with interest.
Its one thing to borrow today to build a bridge that will last 50 years. Its quite another to borrow today to fund transfer payments, fund the protection of the oil rich so suburbanites can drive their SUVs, and mail stimulus checks to most of the country.
Again, there is actually a lesser of two evils. It's unfair to lump them together when the past and present show remarkably different susceptibilities to lobbyist.
Look at the D.C. column. Especially since the last 10 years. That's lobbyist,, lawyers and contractors living off your tax dollars as the Republicans have opened up the treasury to the highest bidder as they sell off our country and bring it to its knees.
This whole cleptocratic sell off is well detailed in Thomas Franks book The Wrecking Crew. The bottom line is as long as we want to continue calling money a form of free political speech expect more of the same. If you want to stop it at some point you have to come to your sense and call money in Washington conflict of interest, bribery or something worse. But if you think people should have the "liberty" of using their money to buy off Washington prepare to lose a lot of your other liberties. Especially when the Republicans are in office.
On "Spending:"
Does anyone remember a Constitution that established a government of enumerated powers?
Once the enumerations became infinite via the breach through the Commerce Clause, the objectives of "spending" expanded exponentially.
Does any informed, cognizant person (scholar or not) think that the Res Publica of today would support the convening of a Constitutional Congress to restore the limitations of enumerated powers, and thus constrain the expenditures to limited objectives?
Frankly, there is no prospect of turning back. There may be some prospect of developing Constitutional modes of resolving contending priorities (as happens in times of War)and conflicting interests, but limitations on the uses to be made of the mechanisms of governments seems lost – absent some phenomenal change in human nature (which would probably require a catastrophe of enormous range).
This is one of those cases where the average is highly misleading. The vast majority of taxes are paid by a few people.
What does the median household pay?
Far less than its share of the cost of government, I'd bet.
Most Amercians, when they implore the government to provide them with some new goodie, can reasonably expect that someone else will have to pay for it.
Muirgeo cites Thomas Frank. Frank, in my view, is incredibly weak. When it comes to economics, he hasn't a clue. Here, for example, is a letter that I sent back on June 5, 2008, to the Wall Street Journal in response to one of Frank's columns there:
"Thomas Frank asserts that 'the rise of China and India … was possible only because those countries shunned global commercial credit markets in the 1970s, allowing them to avoid the interest-rate shock of the early '80s' ('Obama Needs a Better Reading List,' June 4). Nonsense – both theoretically and empirically. Theoretically, because a country avoids global interest-rate shocks only by avoiding global capital. No economy grows rich by keeping investors away in droves.
Empirically, because the data suggest that the recent impressive economic growth of these two countries is the result of their liberalization – China's starting in 1978 and India's in 1991. Dartmouth economist Douglas Irwin calculates that had China continued to grow at its pre-liberalization rate, real per-capita GDP in that country would today be no higher than one-fifth of its actual level. For India, real per-capita GDP today would be only 60 percent of its actual level had that country not liberalized in 1991.*
Sincerely,
Donald J. Boudreaux
* Douglas A. Irwin, Free Trade Under Fire, 2nd ed. (Princeton University Press, 2005), pp. 166-170."
…..
Any pronouncement by someone THIS out of touch with reality must be approached with more than the usually requisite amount of skepticism.
Muirgeo should also check out this blog-post on Thomas Frank's latest book:
http://cafehayek.com/2008/08/frankly-confuse.html
Again, there is actually a lesser of two evils.
No, there's a different of two evils. You just happen to prefer one of them. But at least you acknowledge that they're both evil.
Mr. Boudreaux-
Your per HH analysis is, well, pretty amazing. I have never heard that in those terms before.
That said, averages are misleading as I think you will agree. It would be much more interesting to see who ultimately pays the tax. I would guess that, at least for income taxes, the top half of the HH pay almost all of it.
And, for the critiques of my comments, it would also be interesting to see what percentage of income is paid. I suspect that the wealthier among us still pay a higher rate.
Can someone with the data tell me what the current cut-off is for a household to earn income but not pay taxes?
What's the difference between the 'pay taxes threshold' and $22,100 average household tax bill?
I may be older than you think, but I see your point.
Surely. That ain't me though. The problem is that they enjoy increased entitlement to consume my produce (not to mention your produce and the produce of Chinese workers) while producing nothing I consume myself. I instead pay them to destroy produce I might consume or output produced instead of other output I might consume.
Of course, Halliburton's role wasn't supposed to work out this way. Halliburton was supposed to restore Iraqi oil production and other productive means, but the state pays them regardless of this outcome, and they wouldn't be over there otherwise, because the prospect of doing it profitably is highly dubious.
You'll repay it insofar as the state doesn't just recycle the debt (borrowing further to repay it), as it routinely does.
I'm not making light of your obligation to repay the Bush/Cheney largess, only emphasizing how this cost to you isn't really in the future as much as you might think. You pay more for goods now, relative to your wages, because the state entitles many unproductive factors to consume now. It really doesn't matter that the state borrows (or creates) dollars for this purpose. What matters is that the state is not organizing factors to produce anything you'll freely consume.
This only scratches the surface. The federal government does a 'cash based' style of accounting where obligations are only put on the books when the come due. So the $22,100 is far too low. As the GAO pointed out in 2007:
"As shown in figure 7, despite improvement in both the fiscal year 2006
reported net operating cost and the cash-based budget deficit, the U.S.
government’s major reported liabilities, social insurance commitments,
and other fiscal exposures continue to grow. They now total
approximately $50 trillion—about four times the nation’s total output
(GDP) in fiscal year 2006—up from about $20 trillion, or two times GDP in
fiscal year 2000. We all know that it is hard to make sense of what
“trillions” means. One way to think about it is: if we wanted to put aside
today enough to cover these promises, it would take $170,000 for each and
every American or approximately $440,000 per American household."
Source:
http://www.gao.gov/new.items/d07342t.pdf
So it looks to be $22,100 per year per household with another $440,000 per household for future obligations.
This is why I refer to democracy as nothing but a pyramid scheme.
This $440,000 figure simply divides the future obligation by the number of households without specifying the period over which the obligation is due. Is it all due next year, uniformly over the next fifty years, all at the end of fifty years? Uniformly over a million years? Without this specification, the figure is meaningless.
Also, adding the value to the current burden per household is also meaningless, because the current burden includes the current burden already includes Social Security and the other programs.
Martin:
If that $50 trillion is over 50 years, then each household will have to fork over 8-9K additional.
That figure ignores growth, but the cost of Social Security and other pension benefits soon rises rapidly, and that's a big problem, and we're denying the problem incredibly. I won't dispute that. The problem was challenging before the incredible deficits and other entitlement expansions of the last eight years. The Bush administration is easily the worst of my lifetime.
So what's to be done about i? Renew the tree of freedom with the blood of patriots?
If you have a shot, take it.