Is It ‘Well Worth the Money’?

A former congressional page tells the Washington Post that the recently ended page program was "well worth the money." At the Encyclopedia Britannica Blog, I note:
Well, it would be, wouldn’t it? For those who benefited from it, it is indeed well worth the money. But, as with all government programs, the beneficiaries weren’t paying for it. Did the program do the taxpayers much good? Yes, in the days when members of Congress needed a way to get documents to one another, the page program may well have been an efficient use of resources. But times change; technology has eliminated a lot of jobs in the private sector, and there’s no reason to think it shouldn’t have the same impact in the public sector. Cynics point out that pages were mostly the children of people with good political connections. And then they make better connections: The writer who thought the program was “well worth the money” now runs a company that boasts of having made more than 500 million political robocalls over the past 30 years. So we all owe something to the page program!
Much more on the problem of concentrated benefits and diffuse costs, some appalling examples, and a suggestion as to how we might determine whether each government program is "well worth the money."

Posted on August 22, 2011  Posted to Cato@Liberty

Well Worth the Money

David Boaz

Two weeks ago the House of Representatives announced that it would end its nearly 200-year-old page program. What with new technology and all, there just isn't much need any longer to employ teenagers to take phone messages and carry documents from one member of Congress to another. The program costs $5 million a year, which isn't much in a $3.8 trillion federal budget, but taxpayers should appreciate any elimination of an unnecessary program.


The Washington Post published remembrances from former pages. One outraged response was titled "Well worth the money."

Well, it would be, wouldn't it? For those who benefited from it, it is indeed well worth the money. But, as with all government programs, the beneficiaries weren't paying for it. Did the program do the taxpayers much good? Yes, in the days when members of Congress needed a way to get documents to one another, the page program may well have been an efficient use of resources. But times change; technology has eliminated a lot of jobs in the private sector, and there's no reason to think it shouldn't have the same impact in the public sector. Cynics point out that pages were mostly the children of people with good political connections. And then they make better connections: The writer who thought the program was "well worth the money" now runs a company that boasts of having made more than 500 million political robocalls over the past 30 years. So we all owe something to the page program!

But this is just a tiny example of a much bigger problem: every government program is "well worth the money" to its beneficiaries. And the beneficiaries are typically the ones who lobby to create, expand, and protect it. When a program is threatened with cuts, newspapers go out and ask the people "who will be most affected" by the possible cut. They interview farmers about whether farm programs should be cut, library patrons about library cutbacks, train riders about rail subsidy cuts. And guess what: all the beneficiaries oppose cuts to the programs that benefit them. You could write those stories without going out in the August heat to do the actual interviews.

Economists call this the problem of concentrated benefits and diffuse costs. The benefits of any government program — Medicare, teachers' pensions, a new highway, a tariff — are concentrated on a relatively small number of people. But the costs are diffused over millions of consumers or taxpayers. So the beneficiaries, who stand to gain a great deal from a new program or lose a great deal from the elimination of a program, have a strong incentive to monitor the news, write their legislator, make political contributions, attend town halls, and otherwise work to protect the program. But each taxpayer, who pays little for each program, has much less incentive to get involved in the political process or even to vote.

And so we get bailouts for the Chrysler Corporation in 1979 and for Wall Street in 2008, a protective tariff for Harley-Davidson in 1982, higher-than-necessary wages for public employees, sugar and ethanol subsidies that benefit Archer-Daniels-Midland, farm subsidies, and thousands more programs with beneficiaries who know exactly who they are. When the Pentagon decided to cancel a program to build new presidential helicopters — after the price ballooned from $6.8 billion to $13 billion — an 11-year-old girl in Owego, New York, where Lockheed Martin had planned to build the helicopters, wrote a letter to President Obama that became "a voice for her shaken community":


Lockheed is the main job source in Owego. If you shut down the program, my mom may lose her job and a lot of other people too... . Owego will be a ghost town. I've lived here my whole life and I love it here! Please really, really think it over.


This girl loves her family and her home town. And we can't expect her to understand what $13 billion means to the American taxpayers. To the girl and her mom, the new helicopter is "well worth the money." But after all the beneficiaries of all the programs lobby to keep them going, we end up with a $3.8 trillion budget and a $1.5 trillion federal deficit.

For an unusually candid view of what it means to direct federal dollars to particular areas, we might turn to an advertisement in the Durango, Colorado, Herald in 1987, which touted the Animas-La Plata dam and irrigation project and made explicit the usual hidden calculations of those trying to get their hands on federal dollars:


Why we should support the Animas-La Plata Project: Because someone else is paying the tab! We get the water. We get the reservoir. They get the bill.


In the private sector, the voluntary sector of the economy, we know that something is "well worth the money" if people are willing to spend their own money on it. In government, politicians work to separate the payment of taxes from the receipt of specific services. We're not asked "will you pay $100 right now for farm subsidies and $4000 for Medicaid and $1600 for the wars in Iraq and Afghanistan and $130 for a new presidential helicopter and ... ?"

If we did get such a question, we might well decide that lots of government programs were not "well worth the money" to the people who would be paying the money.

And by the way, I said above that taxpayers would appreciate the elimination of even a small spending program. But House leaders said that they "will work with Members of the House to carry on the tradition of engaging young people in the work of the Congress." So chances are, taxpayers won't actually see even that $5 million savings. That's life in the taxpaying business.

Posted on August 22, 2011  Posted to Cato@Liberty

Anarchists for Big Government

Three months ago I wrote a long, thoughtful (ahem) critique of the Washington Post's use of the word "anarchists" to describe people outraged at the possibility that governments might finally be forced "to cut social benefits and slash public payrolls." "Odd anarchists," I harrumphed, who "object to the state reducing its size, scope, and power." Today, Michael Cannon made the same point to many more people in a few pithy sentences on the Post's letters page:
Anne Applebaum informed us that “the anarchists in Athens wanted more government spending” [“The smartphone riots?” op-ed, Aug. 11]. Which is it? Were they anarchists, who want no government? Or were they statists, who want more government?
The lesson? Write letters to the editor. People read them. Meanwhile, two other letter-writers on the same page complain that the Post should not reveal how our tax dollars are spent, lest the masses turn against Washington. I disagree.

Posted on August 20, 2011  Posted to Cato@Liberty

Libertarianism’s Cross-Cutting Appeal

NPR's Ari Shapiro reports from New Hampshire on Ron Paul, including this heart-warming story:
Robin and Tom Jacubic are husband and wife who had sat on opposite ends of the political spectrum for years. "I was for Ned Lamont because he was anti-war," says Robin, "and when the Democrats took over in 2006, nobody did anything to stop the war, so I found Dr. Paul from there." "He is the only one in the Republican race that knows what he's doing, knows what he's saying and has the answers," adds her conservative husband. After a decade of married life supporting opposing political candidates, "We found each other in libertarianism," says Robin.
For more on fiscally conservative, socially liberal voters, read "The Libertarian Vote."

Posted on August 19, 2011  Posted to Cato@Liberty

Why Is the Tappan Zee Bridge in the Wrong Place?

David Kestenbaum of NPR Planet Money reports this morning:
You would never look at a map of the Hudson River, point to the spot where the Tappan Zee Bridge is, and say, "Put the bridge here!" The Tappan Zee crosses one of the widest points on the Hudson — the bridge is more than three miles long. And if you go just a few miles south, the river gets much narrower. As you might expect, it would have been cheaper and easier to build the bridge across the narrower spot on the river.
Was there in fact a good engineering reason to put the bridge there, one that escaped the notice of the NPR reporter? Was there a good economic reason, perhaps avoiding expensive property confiscations? Well, it won't surprise readers of Cato-at-Liberty to discover that the bridge is in the wrong place because it made money for the State of New York:
If the bridge had been built just a bit south of its current location — that is, if it had been built across a narrower stretch of the river — it would have been in the territory that belonged to the Port Authority. As a result, the Port Authority — not the State of New York — would have gotten the revenue from tolls on the bridge. And [Gov. Thomas E.] Dewey needed that toll revenue to fund the rest of the Thruway.
Now the bridge needs repairs, which will cost more because the bridge is three miles long, instead of one mile long as it could have been. In Libertarianism: A Primer (page 199), I cited the work of the Italian fiscal theorist Amilcare Puviani, who asked, If a government were trying to squeeze as much money as possible out of its population, what would it do? He came up with 11 tactics, from inflation and borrowing to extraordinary budget complexity. I wonder if "placing a bridge in an inefficient place so that we get the tolls instead of another government" is covered by one of his strategies.

Posted on August 19, 2011  Posted to Cato@Liberty

David Boaz on libertarian issues on FBN’s Stossel

Posted on August 18, 2011  Posted to Cato@Liberty

Freedom in Russia

The news out of Russia the past few years has been depressing for believers in liberal democracy. Twenty years ago, it was sometimes said that Russia had put political reform before economic reform, and China had started with economic reform. Many people, following the analysis of Fareed Zakaria in The Future of Freedom: Illiberal Democracy at Home and Abroad, thought that China's path was more likely to lead to the development of a middle class, civil society, and eventually democratic capitalism. And that may yet be the case. But today, on the 20th anniversary of the attempted communist coup in Russia and Boris Yeltsin's victory for democracy, Masha Lipman has some interesting things to say in the Washington Post about the state of freedom in Russia. She says the previous hopes for democracy have been replaced by Vladimir Putin's "recentralizing power and reinstating state dominance over the people," leading to a withdrawal of most citizens from political involvement and thus to "increasing corruption, cronyism and lawlessness." But there's good news beyond the headlines:
The freedom of individual pursuit — as long as one stays away from politics — is one undoubted achievement of Russia’s post-communist development. Putin’s government reinstated the Soviet-style political monopoly and uncontested governance but did not encroach on individual rights. The constraints that existed in the USSR on entrepreneurship, artistic or academic self-fulfillment and lifestyle were not brought back. If one views the events of August 1991 as people rising in defense of freedom against a communist comeback, today’s individual freedoms should be seen as a goal fulfilled. Another post-communist achievement is the rise of a consumer society. Although a sizable number of Russians still have low incomes, never has the proportion of those who enjoy reasonable wealth and comfort been so high. During Soviet times, frustrated consumers faced chronic shortages and ubiquitous lines; after August 1991 and the adoption of a market economy, this cause of discontent was eliminated. These days in Russia, individual freedoms and the developed consumer society are taken for granted.
That's good news, 20 years after the fall of communism.

Posted on August 18, 2011  Posted to Cato@Liberty

Stossel Thursday

I'll be on "Stossel" Thursday night, along with Nick Gillespie, George Mason University economists Robin Hanson and Alex Tabarrok, and, um, Dog the Bounty Hunter. The topic is "Defending the Indefensible" (!), and we'll talk about such putatively difficult issues as insider trading, private money, bounty hunting, and gay marriage. "Stossel" is on Fox Business Network on Thursday at 10 pm ET, and again at 10 pm Pacific Time (1 a.m. ET). It is rebroadcast on Saturday and Sunday nights. But watch it Thursday night, so you won't be embarrassed when everybody's talking about it at the water cooler Friday morning. If you can't wait till Thursday night, watch me take questions on "Stossel" from the 500 students at the International Students for Liberty Conference.

Posted on August 17, 2011  Posted to Cato@Liberty

Your Tax Dollars at Work

President Obama says that we are a  "generous and compassionate" country and that "through government, we should do together what we cannot do as well for ourselves." And to fulfill that "progressive vision," he's going to work on "making government smarter, and leaner and more effective. " Today, under the rubric "Breakaway Wealth/Reaping Riches from Federal Spending," the Washington Post gives us a front-page picture of where a lot of those generous and compassionate federal dollars actually go:
Millions of dollars worth of federal contracts transformed Anita Talwar from a government accounting clerk into a wealthy woman—one who can afford a $2.8 million home in the Washington suburbs with its own elevator, wine cellar and Swarovski crystal chandeliers. Talwar, a 59-year-old immigrant from India, had no idea that she and her husband would amass a small fortune when she launched a company providing tech support to the federal government in 1987. But she shrewdly took advantage of programs for minority-owned small businesses and rode a boom in federal contracting. By the time Talwar sold Advanced Management Technology in 2004, it had grown from a one-woman shop to a company with more than 350 employees and $100 million in annual revenue—all of it from government contracts. Talwar’s success—and that of hundreds of other contractors like her—is a key factor driving the explosion of the region’s wealth over the last two decades. It also has exacerbated the gap between high- and low-wage workers, which is wider in the D.C. area than almost anywhere else in the United States. Washingtonians now enjoy the highest median household income of any metropolitan area in the country... More than $80 billion in federal contracting dollars will flow to the region this year, up from $4.2 billion in 1980.
That's my kind of smart, lean, and effective government!

Posted on August 16, 2011  Posted to Cato@Liberty

Free or Equal on PBS

In 1980 Milton Friedman made a splash with his 10-part PBS documentary, Free to Choose, which also became a bestselling book. Thirty years later Cato senior fellow Johan Norberg travels in Friedman's footsteps to see what has actually happened in those places Friedman's ideas helped transform. From Stockholm to Estonia to India, from New York to Hong Kong to Chile and Washington, D.C., Norberg examines the contemporary relevance of Friedman's ideas in the 2011 world of globalization and financial crisis. The result is a one-hour documentary, Free or Equal: A Personal View, which is now running on PBS stations across the country. Visit the Free to Choose Network page to find out more about the documentary. Click on "Carriage Grid" to find showings in your area. Note that it's arranged by size of media market, so New York is first, then Los Angeles, and so on down through 210 media markets. It's searchable. I missed the first Washington showing on Sunday, so check it out today. But note that showings will run into mid-September, so your friends will have many chances to catch the show. And for a book by Norberg on related issues, check out In Defense of Global Capitalism.

Posted on August 16, 2011  Posted to Cato@Liberty

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