Dubiously Spending More Money We Don’t Have
By Howard Levine – Apr 3, 2020
If individual Americans were given the choice of going further into debt by over 50% of their annual salary or taking prudent risks to continue functioning normally, what percentage would choose that debt over continuing to function during the COVID-19 outbreak? The United States government will be spending over $2 Trillion on a COVID-19 stimulus package. Normal tax revenue is $3.5 Trillion per year. That is a very heavy debt load in addition to the already $1 Trillion per year deficit that is now a “normal” part of the budget. Do you think even half the people in this country would borrow that much money on their own and stay home from work? We will never know because government has made that decision for everyone.
Spending Someone Else’s Money is Easier than Spending Yours
Of course, with government programs, what really happens is that taxpayers supply the money and other people get the money. When people are spending someone else’s money, what could possibly go wrong?
It is true that people without savings would face more pressure to continue working than those who had saved. But why should people who live frugally and save subsidize people who spend freely and don’t save? For those hard hit by the COVID-19 infection, some relief may be in order. Whether it should come from the Federal government, state governments, or charitable organizations is a legitimate question. The only advantage the Federal government has is it can print money. However, printing money and debasing the currency risks inflation which can create additional, serious problems for everyone. Massively increasing debt significantly increases the risk of a future economic and societal collapse. We also need to be careful about politicization of government loans and grants. There is substantial discretion given to public officials to decide who gets certain grants and loans – particularly for businesses that are eligible.
Destroying Wealth Hurts and Kills People
Increased wealth is associated with better health and longer life spans. Destroying wealth due to COVID-19 restrictions costs lives and results in generally poorer health. It is not clear that more lives are saved by protecting people from COVID-19 using extreme, production crippling measures. In the short run, COVID-19 might cost more lives. However, how many people’s years of life will be lost due to lost wealth caused by economic shut downs? That doesn’t even factor in additional misery and lost opportunities due to a lower standard of living. Risking your life to improve your quality of life is something we do every day. Anyone who travels in a vehicle going more than 10 mph does that.
People Can Usually Make Good Decisions on Their Own
Clearly, people should be careful about washing their hands and not getting too close to others. However, prudent protection is possible without government shutting everything down and becoming totalitarian. Consider, for example, that some people might actually be safer eating in a professionally cleaned fast food restaurant than a shared house or outdoors. People making these decisions for themselves based on their own knowledge of their situation is probably better than a universal command from a benevolent dictator disguised as a state governor.
In the United States, those at higher risk of death from COVID-19 generally have ways to self isolate and protect themselves. Those who are very risk averse also can self isolate whether they need to or not. It is their decision and risk assessment to make. The entire country does not need to be shut down for people to maintain their health.
If most adults in the United States are not able to make good decisions, that has serious implications. For those saying most voters are too ignorant or stupid to make decisions for themselves, what does this mean for representative government and liberty? Obviously, it means doom because “smart” people should make decisions for everyone. That is despotism – not freedom.
Porkulus Package Problems
There are some other factors that undermine the legitimacy of the Porkulus Package. If the issues related to the virus and supply chain disruptions are truly the concerns, here are some questions that should be answered; this list only scratches the surface.
- Why was there a provision in the bill to allow women menstruation supplies be allowed medical expenses for tax exempt medical reimbursement accounts? This may be a good policy, but why would anyone seriously concerned about coronavirus take the time to put it in an emergency relief bill? Is the bill for emergency relief or just an excuse to enact unrelated laws under the radar? What other gems like this are in the bill?
- Why are government regulations that have hampered the response of the private sector to resolving problems not been eliminated? Price gouging laws and other price controls continue to wreak havoc with supply chains for everything from toilet paper to respirators. Market prices encourage conservation of scarce items and encourage people to produce more of what is needed. Giving people cash grants makes sense only if prices are deregulated to allow markets to work. Otherwise, we could have the government simply dictating which people get particular items as the New Jersey governor is doing. Some of the regulatory agencies should be scaled back and have their powers stripped away permanently instead of just for the emergency.
- Why are state governments that implement counterproductive policies such as buying solar panels instead of respirators and making supply problems worse with price gouging laws getting more money to fix problems they help create?
- Why burden medical device and supply companies with additional regulatory reporting requirements? Can’t the government just set up stocks of supplies for emergencies?
COVID-19 is Just One More Problem to Deal With
The bottom line is that America deals with a lot of deadly things all of the time. COVID-19 is just one more of them. Politicians and government officials have an incentive to over respond to problems like COVID-19. They get public relations fallout from media hyped deaths, but someone else pays the costs of draconian policies they use to prevent those deaths. Private individuals and companies have strong incentives to apply prudent measures to protect people at a reasonable cost.
Government makes trade-offs all the time too. Consider that we don’t impose national 30 mph speed limits to reduce traffic deaths, but we do make safer roads and cars that allow us to go 75 mph on some highways very safely and at a reasonable cost of our time and money. More vehicle deaths result from requiring better gas mileage. We don’t lock down high crime areas and make people in them subject to search at all times because we have a trade-off between saving lives and living in a free, constitutional society rather than a police state.
Indefinitely Long Emergencies = Despotism
Government has a role in emergencies because using force and making decisions applying to everyone may be needed to immediately control a situation and restore normalcy. However, a free society cannot exist in a constant state of emergency. If an “emergency” will continue indefinitely, it is the new normal and is, by definition, no longer truly an emergency. Otherwise, we would live under self described “benevolent” despots.
There are some legitimate issues of externalities that provide some opportunities for government to improve matters. A person not facing the cost of infecting other people will not have the right incentives to behave prudently. The government, though, should resolve the emergency quickly and set up legal processes to internalize externalities as efficiently as possible. In the case of COVID-19, this includes getting out of the way of the private sector providing inexpensive, reliable testing, getting rid of price controls so markets can correctly allocate resources, and cutting medical industry regulations that limit the supply of medical services.
Private Sector has Good Solutions
Grocery stores have minimized externalities of people infecting others by doing extensive cleaning (with good cleaning solutions – bad pun intended) and having people maintain minimum distances from other people. Shoppers have an incentive to choose stores that have these policies. This is a simple, inexpensive way that the private sector deals with the externality problem. It promotes the public good at a reasonable cost.
Saving Lives Can Cost Lives – Balance Trade-offs
Those who say that we should do anything to save even one life are not facing reality. In the real world, saving lives costs lives, comfort, freedom, or health. There are trade-offs of expected benefits and costs. Saving a life with a “safe” policy may cost lives or suffering in other ways. Allowing government officials to make these decisions – especially over any extended period of time – instead of individuals who bear the consequences, is a recipe for generating a man made disaster in response to the original disaster.
Howard Levine earned a B.S. in Economics from the Massachusetts Institute of Technology (MIT) where he was introduced to computer programming and marksmanship (YES to 2nd Amendment). He also was commissioned as an Army Reserve Officer through ROTC. Later, he earned an MBA with concentrations in Management Information Systems and Operations Management. Howard has been…
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