A Stitch in Haste

An astonishingly arrogant, and economically oblivious, op-ed in today's Washington Post by the mayors of Cincinnati, Rochester and Stamford:

Although the House and Senate have both defeated a moratorium on earmarks, the debate about direct congressional grants rages on. And generally absent is any mention of the pressing needs that these grants have helped so many of our nation's communities meet.

Are programs to reduce gang violence a good use of taxpayer funds? How about keeping sewage out of local streams? Or fixing unsafe roads and bridges before another tragedy?

By any reasonable standard, nearly all congressionally directed grants would be considered a good use of taxpayer funds.

Putting aside the Bridge to Nowhere, let's dissect (actually, "psychoanalyze" might be a better word) this bizarre reasoning:

1. It completely ignores opportunity cost, a/k/a the Broken Window Fallacy. The question, properly framed, is not whether "programs to reduce gang violence are a good use of taxpayer funds." The question, properly framed, is whether such programs are a better use of funds than the next best alternatives: Is "reducing gang violence" more important than whatever it was that we didn't get instead?

(And yes, that "whatever it was that we didn't get instead" can be lower taxes or budget deficits and not just some other expenditure. There are "public benefits" to low taxes and fiscal restraint and not just to unbridled majoritarian spending.)

From the op-ed:

Contrary to conventional wisdom, such congressional grants do not increase federal spending but only help to guide how this funding is directed. For fiscal 2008, Congress held to the total discretionary spending caps that President Bush demanded. So congressional grants did not add one dollar to federal spending or to the deficit.

You read that right: When we spend taxpayer money we're not really spending taxpayer money. There really is such a thing as a free lunch. Somehow.

2. It completely ignores fiscal federalism. Reducing gang violence in Cincinnati may be a "good use of taxpayer funds" when it's Cincinnati taxpayers who do the funding. But why should I pay taxes to reduce gang violence in Cincinnati? Why should taxpayers in Cincinnati pay to give me a Second Avenue subway? ("Because we took a vote" is of course not a valid answer.)

There is a moral justification (except perhaps to the anarcho-capitalists) to requiring people to pay taxes to fund legitimate public goods that they cannot help but benefit from. But that requires strict fiscal federalism: Federal taxes should only be extracted to fund federal public goods, state taxes should only be extracted to fund state public goods, and local taxes should only be extracted to fund local public goods. Any breach of those barriers is pure looting by the majoritarian mob.

3. It completely ignores progressive income taxation. There are defenders of earmarks (and their cousins, block grants) who are less unapologetic than these three mayors and who will, when called out on the fiscal federalism question, default down to the argument that, when all the taxes and expenditures are netted out, it reduces to a case of, "Everybody pays for everything, and what's so bad about that?"

Well, what's "so bad about that" is that it conveniently omits the fact that not everybody is paying for everything. It omits the fact that the bottom 40% of households, reflecting almost 50% of the population, pays no federal income tax. So, when the three mayors assert ...

In addition to local taxes, Americans send more than $1 trillion in federal taxes each year to Washington to fund projects that localities cannot undertake alone: building highways, providing for defense and so on.

... they really mean a subset of Americans — the small subset that pays the overwhelming majority of federal income taxes. So earmarks and block grants are not merely a case of "New Yorkers funding Cincinnati programs," (bad enough) but actually a case of "New York taxpayers funding Cincinnati non-taxpayers" (much worse). How is that not naked, brazen looting?

4. It completely betrays "the democratic process." It would still be illegitimate even if it didn't — "two wolves and a sheep," etc. But to suggest that it is somehow "the democratic process" to simply give legislators taxpayer money to dole out as they see fit, with no debate, no individual votes and no independent oversight (beyond the legislators patting each other on the back for their "civic-mindedness") is about as far from "the democratic process" as a non-dictatorship can get.

(Incidentally, does it really need repeating that the Senate — where North Dakota has the same representation as California — is hardly a "democratic" institution? See also, "farm subsidies.")

5. It completely ignores the fact that all politicians are, by definition, moral defectives. The three mayors:

For fiscal 2007, Congress placed a moratorium on grants ... and spending decisions were left solely to the Bush administration. What happened? The administration picked a select group of winners that got all the money — and hundreds of smaller and less well-connected communities were left out in the cold.

So the Bush administration succumbs to rent-seeking, but members of Congress do not? That lunacy does not require a detailed response any more than would a belief that the Sun-God revolves around the Flat Earth.

One last point, from the original excerpt:

By any reasonable standard, nearly all congressionally directed grants would be considered a good use of taxpayer funds.

When the ad hominem card is the only card you have, you play it. Anyone who disagrees is simply not "reasonable." Q.E.D.

Could you imagine someone saying, "Chocolate is better than vanilla, because it is unreasonable to suggest that vanilla is better than chocolate..."? It makes no sense in ice cream, and it makes no sense in economics or politics.

Indeed, the very fact that earmarks and pork are so controversial would, if anything, suggest that the "reasonable" conclusion is to scrap them. But when you're the local hack politician who is doing the actual sucking at the teat of an anonymous taxpayer halfway across the country, "reasonable" seems to take on a whole new meaning.

More thoughts from Cato@Liberty.

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.