It seems to me that many of the debates in Washington and the business press about TARP, the budget, the deficit, health care reform, the cash for clunker program, cap and trade, and so on, cloud a very important, very fundamental issue: the fact that Government spending replaces the preferences and choices of private businesses and individuals with the collective choices of local and national politicians. These politicians do not personally consume the goods and services purchased. The spending is ostensibly authorized for "our benefit." Of course, the politicians also want to please their constituents in order to raise funds and get re-elected.
Government spending is fundamentally a different animal than private spending. Private spending is the essence of the freedom of choice. When you mull over the decision to purchase an item, you are making a very personal decision based on your current income or resources, the prices of the other goods and services you currently purchase or may purchase, and your personal tastes, risk preferences, needs, and wants. You make so many mental comparisons and tradeoffs when you consider a purchase that they truly cannot be listed. And then you live with the consequences of your choice, for better or worse. If bad, you learn. If good, you enjoy. And the process repeats itself every time you make a buying or investing decision, updated with new personal, private information on the circumstances, choices, and preferences of the individual.
Government spending, on the other hand, involves a huge middleman who first decides that they do not approve of our spending choices. If they did, there would be no need for government spending. So, they decide that they don't like how we decide to spend our income, and they take income from private business and individuals (out of business income, which also generates the wages from which individual taxes are collected) in order to spend it on goods and services that they think we should have bought, but didn't. And in the process, they shrink the disposable income available to support our private decisions on spending and saving.
The motivation behind government spending is not what we decide is good for us or preferable. It is what some collective group of people "out there"....in other states, on certain Congressional committees, working for certain causes or who have particular political points of view...feel we should be purchasing. That is extremely powerful, in part because no one individual behind the government spending is really accountable for any particular purchase. It's "purchases by committee." And the individual is essentially powerless to change it if they disagree with the particular spending programs that government authorizes. I know. I strongly disapprove of the current government spending programs and am powerless -- other than this blog and my one vote -- to do anything about it.
Now, I understand that there are some goods and services that are necessary for the safety, security, and functioning of our country that would not be provided if left to the purview of private individuals and businesses, like defense, highways, and other public goods. But there must be a limit -- a strict, unforgiving limit -- or we will slide along the spectrum away from a free society with limited government spending toward socialism, where all spending is determined by the government and individuals are no longer self-determined. Once people are dependent on the government to make their spending choices for them, there is very little chance of ever turning back. We have proof all around us. When is the last time a program was actually cut in any real sense? And when state budgets are cut, when the arts get less funding, when the "clunker for cash" program is suspended, there is an uproar. Some group that was getting a handout, that was getting a free ride from our tax dollars that we would have used to purchase some good or service that we preferred or to invest in our future or to start a business or to donate to charity....that group will complain loud and hard about the cutback in a program that should never have been authorized in the first place.