More subsidies in the age of corruption entitlements

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More subsidies in the age of corruption entitlements

By: John A. Baden, Ph.D. Douglas S. Noonan
Posted on February 28, 1996 FREE Insights Topics:

"Don't Gore us with new taxes", picketters in Miami shouted last week. They opposed Vice President Gore's plan to "tax" the sugar industry in Florida. A sugar "tax" would be used by the federal government to purchase Everglades land for ecosystem restoration. In addition to the penny-per-pound "tax", Gore announced a $1.5 billion environmental cleanup initiative for the Everglades.

The Everglades ecosystem is clearly degrading. Environmentalists accuse the sugar industry of despoiling the Everglades. Economists such as Jonathan Tolman of the libertarian Competitive Enterprise Institute counter that government subsidies have encouraged the destruction.

Predictably, environmentalists demand a higher tax, and sugar growers want lower taxes. The debate misses the mark entirely, because the "penny-per-pound tax" is no "tax". It is a subsidy reduction. Gore's plan reduces federal price supports by a penny per pound. Over $250 million in sugar industry subsidies and an import quota on sugar cost consumers over $1.4 billion a year and harm the Everglades.

Subsidies foster destructive agriculture in the Everglades. Such subsidized destruction of environmental quality is the norm, not an isolated exception. But politicians of both parties remain blind to opportunities to link fiscal responsibility with ecological integrity. They and their constituencies have a parasitic relation to taxpayers. Recipients of wealth transferred from others think they have a right to handouts. This exemplifies a disturbing trend in American political culture: the conversion of subsidies into entitlements.

Robert Samuelson of the Washington Post describes this in his new book, The Good Life and Its Discontents: The American Dream in the Age of Entitlement. He describes the conflicting and paradoxical nature of entitlements--the notion that we are all entitled to progress and prosperity which government can provide. The mirage of entitlements, he rightly concludes, shakes the very foundation of American culture. The problem with entitlements, aside from their conflict with the American ideal of individual responsibility, is the logical consequences of assuming that government can and should provide.

Should government guarantee us income security and high-quality health care? If it does, and then what? What are the predictable consequences of such entitlements? Entitlements require that government take citizens' scarce resources and distribute them to various interests. Once government allocates any valuable resource, corruption of purpose must follow. Here's why:

We can never precisely specify what the bureaucrat must do. Some discretion must remain. And that discretion will normally reflect a political calculus. The decision maker has incentives to make those determinations that advantage himself, those he favors, and his cause. National Public Radio programming provides an excellent example.

When spending the money of others, discretionary power corrupts. We then see resources going to corporate welfare projects like Senator Bob Dole's ethanol subsidies for Archer Daniels Midland and to the Clintons' friends who wanted to handle travel arrangements for the White House press corps. With a constituency in place, "subsidies" harden into "entitlements".

In the booming postwar years, Samuelson reports, Americans began "to take propserity for granted." Times have changed, but our expectations haven't. We still demand our Social Security, Medicare, and subsidized housing. These goals necessarily imply trade-offs among competing demands. The 'right' to farm subsidized sugar comes at the expense of taxpayers and intact ecosystems. Potential entitlements are endless, but resources are finite. It's morally and intellectually irresponsible to ignore this reality.

A century ago, the Progressives did just that. They claimed that government can and should not only monitor, but also manage resources and provide material benefits. They and their modern liberal followers believe that social problems can be fixed if only the "right" people were making the decisions. They thought more discretion by the right bureaucrats will ensure good policy that advances the public interest. This counsel of perfection was grossly naive.

America's Founders knew better. They believed mankind is not perfectible, but rather self-interested. Therefore they designed institutions to prevent people from harnessing government as an engine of plunder. They chose a constitutional, limited government with strong checks and balances. The rights they "entitled" Americans to are found in the Bill of Rights -- mainly freedom from abuse of government power.

Federal budget deficits, national debt, and actuarial deficits symbolize our Age of Entitlement. This simply cannot continue indefinitely. Samuelson suggests we return to the Founders' vision of a limited government that only makes promises it can keep. Otherwise we'll crash on a runaway system that favors the election of opportunistic, short-sighted politicians with extraordinary abilities to lie in a convincing manner. All competitive systems favor certain talents. Political systems that run on claims to welfare favor the best liars.

When we consider reform in this Age of Entitlement, remember a constant of political economy: in all systems at all times, wealth and political power go together. Expanding government entitlements ultimately hurts the poor and debases the moral quality of politicians. In an Age of Entitlement, civic virtue is an endangered attribute.

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