Here’s a letter to WTOP Radio:
In today’s 7am hour a pundit, interviewed by your anchors, said that the fiscal problems besetting many European countries are “hard to fix” because these problems have “complex origins.”
I disagree with his claim about the alleged ‘complexity’ of these problems’ origins. These fiscal crises are the perfectly predictable consequences of spending other people’s money.
As the economist Dwight Lee notes, “Because of the absence of privately owned and transferable claims against the collective value created, or destroyed, by political decisions, citizens will be less sensitive to reductions the long-run wealth of the general political community than to temporary, but individually realized, benefits. For this reason politicians can pursue with impunity a policy analogous to that of excessive corporate borrowing to finance current benefits.”*
Advocates of government intervention readily see the elemental truth of Prof. Lee’s observation when the parties spending other people’s money are private corporations. In fact, these advocates ‘see’ this problem, mirage-like, in the private sector even when it’s absent. Mysteriously, though, these same folks are blind to the same problem as it plagues the public sector. If, as Pres. Obama said this week, spending other people’s money is a recipe for irresponsibility, how are fiscal problems ‘solved’ by enlarging the size and scope of government – an agency far more dependent than is any private corporation on spending other people’s money?
Donald J. Boudreaux
* Dwight R. Lee, “Deficits, Political Myopia and the Asymmetric Dynamics of Taxing and Spending”; chapter 16 in James M. Buchanan, Charles K. Rowley, & Robert D. Tollison, eds., Deficits (New York: Basil Blackwell, 1987), p. 296.