Monday, December 26, 2011

How Do We Pay For It?

Whenever the question arises as to how a public works project will be paid for, the 'normal' answer is "Well, that's what taxes are for!"  Libertarians (and, yes, I am one of them) take issue with this answer.  It's a tough 'sell', but I believe that every thinking person, if they spend time actually thinking about the issue, eventually comes around to the libertarian view that almost everything in the 'public works' arena probably ought to be funded with voluntary contributions or subscriptions.  Let's take a look.

Let's start with an easy assumption:  Whatever the project, there will inevitably be those who think it's unnecessary or counter-productive or a poor use of scarce public funds.  They will be opposed to spending money on the project.  So the root assumption is 'you can't please everybody'.  Nevertheless, those opposed to the project will be taxed their proportionate share.

There is a corollary to this:  While nobody doesn't like Sara Lee, everybody doesn't like something.  Everyone will be able to point to some project they wish hadn't gotten enough votes.

If the number of 'antis' is small it's easy to dismiss them as mere malcontents, but what about when the vote goes down 50.2% in-favor to 49.8% opposed?  You have nearly half the populace being forced to fund a project they oppose.  "Well, that's how the system works!" some will say (if they're part of the 50.2%).  The rest will carry a grudge over their ultra-skinny loss.  This is a bad way to run a community.  Nothing good can come of it.  That, however, is hardly the point.

We tax the community wall-to-wall for tasks that we feel will benefit the community wall-to-wall, but the undeniable fact is that our opinions as to who benefits are not universally agreed-to.  We're guessing, and those guesses, good or bad, are backed by the political power to make them a reality via taxes, part of which comes from people who made different guesses.  Is this really what we intend?  Is this really a good idea in itself?  Because what we're seeing here, stripped of all the trappings, is that we're forcing someone to fund our pet project du jour against their better judgement, and it doesn't matter whether that project is a war in the Middle East or cancer research.  It is a given that someone will think it's a great idea and someone else will think it's a mistake.

The one great source of conflict here, the 'bone of contention', is what is called the 'free rider problem', and that has a corollary, a flip-side, too.  What of those people who will be taxed for this new 'benefit' but who will never use it?  You tax to fund a new art museum, but what of our blind citizens who cannot see the visually beautiful art that now populates the museum?  What of the hearing-impaired who cannot use the audio guides?  So we tax some more to provide Braille commentary and sign-language interpreters and on and on.  If we do the project on voluntary contributions, what of those who didn't contribute yet who will enjoy the new museum?  Having no universally fair method of funding the project, we fall back on what we assume is the least-worst solution: tax everybody.  When I point out that this solution is favored simply because it involves the least effort on the part of those who propose, that it's the lazy way out, I'm accused of being politically incorrect.

"Political correctness" has been called 'the absurd notion that a turd can be picked up by the clean end.'  There simply is no fair way to raise revenue, isn't that how it seems?  When the 'anti's suggest that the proponents 'put their money where their mouth is', that's when the cries of "unfair!" ring out the loudest, but there's something to be said in favor of that position.  If a project does, indeed, have broad popular support, it should be fairly easy to fund it from contributions.  After all, we're dealing here with a project whose benefits will far outweigh the puny costs, no?  Isn't that how such projects are sold?

If support for a project is so narrow that it cannot be funded from contributions, what does that say about how the people view the supposed benefit of the project?  And, really, shouldn't the opinions of those taxpayers have some weight in the deliberations?  If all they're willing to do is vote to have other people fund the project for their benefit, what does that say about the supposed 'benefit'?  "Yes, this will benefit me, but not so much that I'm willing to invest my own money..."

That, in fact, is the rationale for having private investors handle much of what we think of as 'public works'.  If a project is truly a beneficial improvement, the measure of that benefit is that people will be willing to pay for it after-the-fact on a case-by-case basis and for fees that far exceed what they might have been charged up-front in taxes.  That is how 'profit' is defined, and wise investors will be willing to 'put their money where their mouths are' for the prospect of future profit.

When wise investors are not willing to front money for such projects, it's a warning that we ought to be adding some salt — much more that just a grain or two — to those promises of pie-in-the-sky we get from proponents of the latest boondoggle.

Taxes for public works?  It would probably be more efficient to find an alternative way.

And before anyone holds up the Interstate Highway System as an example of 'a public works project that really worked out well', let me call all those people who complain that we don't have rail service like Europeans do and have them come over to talk to you.  Do you know why we don't have rail service like the Europeans do?  I'll give you a hint.  It has something to do with the Interstate Highway System.

When you take the path on the right, of necessity you cannot take the path on the left.  When you take the path of 'taxes', you give up the path of 'freedom to choose'.  Is that the kind of 'bargain' you go looking for?

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