Making Economic Sense
Making
Economic Sense
by Murray Rothbard
(Contents
by Publication Date)
Chapter 106
the Trouble with the Quick Fix
If conservatives and free-market economists are
supposed to have one dominant virtue, it
is a thoughtful awareness of the indirect and not just the immediate
consequences of a public
policy. In the spirit of Henry Hazlitt's "Broken Window Fallacy," they
are supposed to bring a
"look before we leap" attitude into political life.
Instead, in recent years, friends and colleagues
who should know better have been
increasingly running after some Quick Fix or some flashy gimmick that
will magically solve our
problems and bring no ill consequences in its wake. Unfortunately, they
seem to have forgotten
the basic Misesian Law of Government: that government actions, even and
perhaps especially
Quick Fixes, are apt to get us into a worse mess than we are in
already.
The basic flaw of the Quick Fix is to focus on one
aspect of a problem, often the most
politically catchy part, to the neglect of other important issues.
Thus, the school voucher scheme
focuses on the horrors of the public school to the neglect of such
broader and more important
questions as tax-supported education and government control of all
schools, public and private;
opposition to welfare concentrates on taxpayers paying people to be
idle, to the neglect of the
broader question of taxpayer subsidy period, whether recipients are
idle or not.
And we have mainly free-market economists to thank
for the disastrous "Tax Reform
Act" of 1986, which, in a Jacobin pursuit of equality and "fairness,"
closed the tax "loopholes"
so successfully as to crush the housing market. In addition, and
totally neglected, tax reform
helped hasten the current Clinton health monstrosity by virtually
eliminating deductions of
uninsured medical payments from one's income tax, thereby creating the
Problem of the
Medically Uninsured.
The current Quick Fix craze of free-market
economists was the late, unlamented
Balanced Budget Amendment (BBA). It seems that every couple of years
there is a Silly Season
in Congress when this amendment pops up. Not only that; each successive
incarnation of the
BBA is worse than its predecessor. Pursuing an hysterical desire to
pass any amendment, the
limit on increasing taxes is progressively weakened. In the latest
Simon amendment, a mere
majority of Congress could "solve the problem of deficits" by
increasing taxes.
The unwisely narrow focus of the BBA is, of course,
on "the deficit," as if the deficit is
the root of all fiscal evil and must be stamped out by Any Means
Necessary. But the broader and
more important problem of Big Government is not the deficit; it is not
even, as Milton Friedman
has long emphasized, total government spending;
it is government action period, which
fiscally means all three interlocking items: deficits, government
spending, and taxation. Big
Government is a swollen, ever-expanding and parasitic entity crushing
the productive economy,
the "private sector"; and the focus must be on rolling back, as much
and as "drastically" as
possible, all three of these facets of the government budget.
Looking at the BBA, then, the first obviously
unfortunate consequence of focusing solely
on the deficit is that it might well, and indeed would lead to drastic
increases in taxation, and
would do nothing about curbing government spending. The one fiscal
thing worse than a deficit
is higher taxes; imposing a BBA and raising taxes in order to combat
deficits is akin to curing a
patient of bronchitis by shooting him in the chest.
There are many other things terribly wrong with a
BBA. It can be overridden at any time
by only a three-fifths vote of Congress; it ignores the fact that an
increasing number of spending
items can be and are simply placed "off budget" and would therefore not
be subject to any limits;
and it ignores the off-budget federal government spending of mandates
on states or private firms,
which can be conveniently chalked up to their budgets but not to the
federal government.
Moreover, the BBA is a total hoax; for it would not
balance the budget at all. Ever since
the mid-1970s, the federal budget process has focused not on the actual
budget for any given
year, but on estimated budgets over the next several years. The BBA
would mandate a balance,
not of the actual federal budget, but of Congressional estimates of
next year's budget. And as any
fool knows, it is all too easy to estimate anything you want, and to
manipulate assumptions to get
the desired result. Traditionally, government has always underestimated
the expense of its future
actions, and overestimated its revenue.
Thus a BBA would not only increase the crippling
tax burden on the American people; it
would also perpetrate a cruel hoax on a public that want deficits ended
and who would embrace
an amendment that only gives the appearance, and not the reality, of
ending the deficit. In short, a
BBA would aid Big Government by relaxing public opposition to its
expansion--which might,
after all, be the point of the whole thing.
There is a final, and totally neglected point that
was emphasized by the leading opponent
of the BBA, the much-maligned Old Mr. Pork Barrel, Senator Robert Byrd
(D-W.Va.). Pork
Barreler or not, Senator Byrd was eloquent in stressing a vital
constitutional issue: that Congress
must retain its one vital power, the power of the purse. A BBA would
take that power away from
Congress, which for all its sins is at least accountable to the voting
public, and put it into the
hands of federal judges, an unelected, unaccountable, and unremovable
body of oligarchs who
have long been engaging in runaway expansion of their own power.
As Senator Byrd put it in his opposition to the
BBA, "The power of the purse belongs to
the people . . . . It is vested in the branch that represents the
people, elected by the people. Judges
are not elected by the people."
And speaking of Quick Fixes, there is a veritable
nightmare coming down the pike.
Libertarians have long pushed privatization of government activities,
but, as all too often
happens, even a good thing like privatization has suffered from
becoming a fetish, a cherished
object of an ideological movement, to the neglect of broader and more
important considerations.
Thus, we have seen in the former Soviet Union that a lot depends on the
extent and the form of
"privatization"; for example should we really cheer when the Communist
managerial elite of the
old steel, copper, etc. monopolies, suddenly become the "private"
owners of these uneconomic
complexes?
Coming closer to home, we now find that our beloved
Internal Revenue Service, backed
by the Clinton administration, would like to engage in some
privatization. It turns out it would be
more efficient for the Treasury Department to contract out, to
privatize, its collection of back
taxes by bringing in private collection agencies to do the job. Hey, do
we really want to make
income tax collection more efficient by privatizing some or all of the
tax agencies?
Do we really want our lives and records combed
through, our door broken down, by the
peremptory orders of IBM or McDonald's "tax police"? Anyone who knows
history will know
that the most hated institution in pre-modern Europe was that of the
"tax farmers." The king used
to get a lot of money quickly and save himself
the costs of a giant bureaucracy by selling
the right, or privilege, to collect taxes to some private firm, or "tax
farmer." Can you imagine
how intensely and bitterly the tax farmers, who lacked the cloak of
sovereignty or legitimacy,
were hated by the people?
There are those who believe that the worse the
despotism the better, in order to provoke a
revolutionary backlash among the public. Well, privatizing tax
collection might just do it.
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