Funding government

Perusing some left-wing blogs recently I noticed that Sarah Palin was roundly criticized for the following remarks in an interview with Sean Hannity:

Hannity: …The price of oil is going up again. It’s not quite at $140 a barrel, but it’s on its way up to $70 and $80…

Palin: Yeah, well and I thank God it’s not at $140. You know people say, “Hey, Alaska! 85% of your state budget is based on the price of a barrel of oil. Aren’t you glad the price is going up?” I say, “No!” The fewer dollars that the state of Alaska government has, the fewer dollars we spend. And that’s good for our families and for the private sector.

This quote was offered as yet further evidence of Palin's lack of brainpower and suitability for public office. While the particulars of the criticism vary from blog to blog, the most common theme is something along the lines of "Why would you want the government to have less revenue, especially given that it doesn't come from taxpayer wallets? This is simply an unreasoned statement by Palin based solely on extremist ideology."

While I don't have much of an interest in Palin's political fortunes and do not count myself as a supporter for a 2012 presidential candidacy, I found her remarks to be eminently sensible. Simply put, my objection to government expenditures is not that they come at least partly out of my wallet, but the pernicious distortionary impact they have on the economy and society.

Take welfare for example. In 1995, the year before federal welfare reform was passed, public aid consumed $254 billion of the federal budget. On a per capita basis this comes out to $949. Now, that's not nothing, but it isn't a gamechanger in how you live your life either.

I suspect that most people's anger over welfare was not simply that their money was being taken by the federal government to fund the program, but that it was associated with a culture of dependence and all manner of social ills that were at least perceived as being subsidized with government money. It wasn't simply that money was being spent but that it was producing poor results and actually making society worse. The biggest virtue of getting people off of welfare was not that it reduced federal expenditures but that it made many recipients into more productive citizens.

It isn't just welfare, with many government programs having similar effects. Government subsidies and programs tend to promote behaviors that would otherwise not take place -- indeed, that's why they exist. Whether in agriculture or education -- where federal expenditures have correlated with a decline in academic performance -- the impact of such expenditures are frequently negative. The fact that they take valuable dollars out of taxpayer wallets to fund these activities is only salt in the wound.

Sarah Palin, implicitly in her statement, seems to realize this. A government with more money is one with more power and more ability to impact the daily lives of Alaska's citizens in an undesirable way.

When I raised these objections with one well-known left-wing blogger (in the top 100) he responded that Palin's statement was ridiculous because increased oil revenue could also fund more conservative aims such as increasing the defense budget, funding a tax cut or paying down government debt. On their surface these may seem like quite useful ways to make use of the money, but on closer inspection I think that these too would be misuses of such revenue.

I will make my objection on defense short and sweet: the budget is already massive. Our defense budget is over $500 billion. Waste and abuse at the DOD is rampant, and the department gets too much of a pass from politicians because no one wants to be perceived as weak on defense. Although most peope think that more dollars means a stronger defense the reality is that it probably means a bigger bonus for defense industry lobbyists.

Paying off debt seems like an extremely responsible move and you could certainly devote the money to worse ends. The reality, however, is that this would be almost identical to funding an expansion of government. Just perform this thought exercise: if tommorrow the national debt were completely wiped out would that make it more likely, less likely, or have no impact on the health care reform debate? You can bet your last dollar that if the national debt didn't exist that Congress would go (even more) hog wild on spending. Although I am unconvinced about the merits of the "starve the beast" philosophy the surging deficit does seem to be tempering ambitions on Capitol Hill for the scope of health care reform.

Lastly, a tax cut would likewise be ill-advised. I am a big believer that people should have to pay for all of the government that they want. If you want government programs you should find a way to fund them, which I believe should be the income tax. Everyone should feel the pain. A disconnect between the citizenry and taxation is terrible for democracy, lessening a check on government power should the politicians receive access to an easy source of money that belongs to no one. The result would be a government based more on vote buying than funding necessary expenditures for the public good.

Indeed, in countries that depend to a significant extent on revenue from natural resources we tend to find extremely poor governance -- they don't call it the "resource curse" for nothing.

The more one considers Sarah Palin's comments, the more on target they appear to be.