Kevin Corcoran, a regular reader, has yet again sent me an interesting basis for a blog post. Here’s Kevin:
Senator Bernie Sanders once tweeted:
Say Bill Gates was actually taxed $100 billion. We could end homelessness and provide safe drinking water to everyone in this country. Bill would still be a multibillionaire. Our message: the billionaire class cannot have it all when so many have so little.
Advocates of government programs have a history of excessive optimism about the costs of their initiatives. When Richard Heffner interviewed Milton Friedman in 1975, Friedman stated, “John Kenneth Galbraith, in an article he wrote in The New York Times Magazine Section, said there are no problems in New York City that would not be solved if the New York City budget were twice what it is now. Now, the New York City budget has since then something like tripled. And all the problems are worse.”
Let’s assume Senator Sanders is correct: that for a one-time cost of $100 billion, the federal government could not merely reduce or relieve homelessness, but actually end it outright, with the added bonus of clean drinking water for all.
But if that is so, there’s an obvious question to answer: why hasn’t the government done so already?
It’s not as though the government is insufficiently funded. In FY 2022, the federal government will take in revenues of about $4.4 trillion and will spend about $5.9 trillion. So, if Sanders is right about the cost of ending homelessness, the federal government could completely end all homelessness in America with just 1.7% of what the federal government already spends in a single year. Accepting Senator Sanders’ claim would significantly strengthen Bryan Caplan’s argument that priorities, not capacity, is paramount to explaining poor government performance.
I’m sure Senator Sanders would agree that the federal government has demonstrated terrible priorities in how it directs the vast resources at its disposal. I can think of various reasons for these terrible priorities. Regulatory capture leads to the government using resources defending the wealthy and well-established against upstarts. Special interest groups and lobbyists exercise significant influence in the legislative process. In general, the powerful tend to favor the interest of the powerful, and the political process does little to improve that.
But for some reason, Bernie Sanders seems to think that if he can just get his hands on another $100 billion from Bill Gates, then the money will finally be wisely spent in the pursuit of worthy goals. But why? The same incentive structure that created the existing terrible government priorities hasn’t changed, so why should we think the extra $100 billion will actually be put to better use? There is no reason that I can see.
If you believe that the political system has been hijacked by powerful special interests to favor the rich and the politically powerful [DRH note: although there is strong overlap, these are not the same] over the masses, the last thing you should want is for even more resources to be funneled into that system, at least until after those structural issues have been addressed. If you had a wealthy friend who was financially struggling while extravagantly spending on frivolities, the appropriate response isn’t to give him even more money. Your priority should be on making sure he gets his act together and use his already immense resources more responsibly.
So why is the Senator so fixated on putting even more resources into a system he also believes uses those resources so poorly? Lacking mind reading skills, I can only speculate. But I suspect it’s at least partly to do with the fact that “raise taxes on the billionaire class!” is an easy applause line, particularly among the people who will vote Sanders into power. By contrast, imagine a politician who says “Look, there are serious structural issues affecting how the government is using the taxes it already has, which results in the money being used in a way that’s contrary to everything we believe in. Unfortunately, until those issues are fixed, nothing will be solved by bringing in even more money: it will keep being put to the same poor use.” That’s not going to fire up a crowd, or drive people to the polls to tick his name on the ballot. The only thing it has going for it is that it’s the truth. But the currency of elected officials isn’t truth; it’s applause lines for their base.
READER COMMENTS
JFA
Aug 10 2022 at 10:50am
I enjoyed this post. Thanks, David.
Henri Hein
Aug 10 2022 at 12:50pm
I’m not sure. There are politicians who shows an inkling of fiscal responsibility who are still popular at least with their bases. Ron Paul and Howard Dean come to mind.
Kevin Corcoran
Aug 10 2022 at 1:00pm
Fair point – that’s part of what I was driving at when I mentioned the reaction from “the people who will vote Sanders into power” and how politicians seek “applause lines for their base.” Sanders has a very different base from Ron Paul, after all, so what will “drive people to the polls to tick [their] name on the ballot” will be different in each case.
Henri Hein
Aug 10 2022 at 12:59pm
This morning I was looking into the F-35 project and learned that Bernie Sanders supported the program. He could get many times the $100 billion he needs for his social programs by just working to cancel the F-35.
Why Bernie Sanders is backing a $1.5 trillion military boondoggle (cnbc.com)
john hare
Aug 10 2022 at 5:37pm
Perhaps what is needed is an honest way to fire up the population about spending incompetency in a way that leads to implementation when actually in office. Not holding my breath.
David Seltzer
Aug 10 2022 at 6:33pm
Why stop at targeting Bill Gates? If Gates refused, would Bernie use the full weight of the government to go after Bezos, or Zuckerberg or anyone he might target so as to confiscate their wealth?
C. Carter
Aug 10 2022 at 10:40pm
A pernicious side effect of this kind of rhetoric is that it undercuts how challenging problems like homelessness really are to solve.
I am reminded of a Vox article recently linked on Marginal Revolution describing the challenges the Effective Altruist movement has seemingly discovered: “A frequent lament in EA circles these days is that there’s just too much money, and not enough effective causes to spend it on.” To illustrate the article notes that “the movement had, very roughly, $46 billion at its disposal, an amount that had grown by 37 percent a year since 2015. And only 1 percent of that was being spent every year.”
This is a group of people dedicated to finding the most efficient ways of helping the greatest number of people and yet they struggle to spend more than 1% of the resources at their disposal.
I imagine the Bill & Melinda Gates Foundation is no less committed (or capable for that matter) of finding important projects to fund. Which leads me to suspect – getting back to my original thought – the problem is not lack of desire on the part of (some) billionaires to solve the problems Sen. Sanders laments, nor indeed a lack of funding.
These are just really hard problems to solve. And it’s important to acknowledge the challenge so we can discover better approaches rather than simply throwing more money into activities that clearly haven’t worked.
LifeStraw was not invented at the behest of a government program.
Alas, I suspect Kevin is right on the problem of incentives. No one gets applause (let alone elected) for talking about problems without a ready-made solution.
Daniel B
Aug 12 2022 at 2:51pm
This reminds me of this Milton Friedman video.
Where does that $100 billion from Bill Gates come from? My understanding is that rich people in general make most of their money from investment income. That $100 billion is going to come from money no longer invested — and thus no longer available for businessmen to lower prices, compete by offering higher wages and better compensation, or pay more dividends to stockholders (remember that 58% of Americans say they own stock, and I’m not sure why the self-reported figure would be inaccurate enough to matter).
There’s plenty of evidence that the corporate income tax lowers productivity and is borne heavily by workers. A good starting link on that for skeptical readers is here.
Why should people retire with less income and earn lower wages so we can use the incentive structure of the government — which as Kevin points out has plenty of problems and in fact has spent lots of money itself (e.g., apparently it’s spent $20 billion a year on farming subsidies alone — that adds up to $100 billion in just a few years even if the $20 billion rate was lower in the past)? This isn’t even getting into how government intervention made housing more expensive — a nice primer on that is Sowell’s Economic Facts and Fallacies.
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