What should government spending be limited to?
- Thread starter Tani Coyote
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Only over the an entire economic cycle. During periods of economic prosperity, you want to have a surplus, in order to prevent inflationary pressures, but in periods of economic doom and gloom (like now) you want to have a deficit in order to increase economic activity. And whether you have a surplus now with which you pay for a deficit later, or have a deficit now and pay for it with a surplus later, is pretty irrelevant (assuming you don't completely crash and burn through public debt before you get to the later).
What if they didn't spend of the money they collected? Wouldn't that be stealing from people without giving it back?
Do you think a government should have savings?
In general, I like the government to invest in public goods (econ term) & public services (social term) that are underinvested in the private market, as well as investing in the prevention of feedback loops in selfish behaviour. Now, because the government is so bad at spending, I like to assume that 50% of the tax money being spent will be 'wasted', so if the private sector is underinvesting, the public benefit of tax-spending must assume a 50% loss on taxes.
As well, I like a bit of a social safety net to be available, even if it's not efficient. If it requires a 90% inefficiency to keep people from starving or freezing to death, I'm okay with that. Obviously, I'd prefer the system be improved, but I'm not going to ask to remove a system if it results in horrid conditions.
Integral
Can't you hear it?
Federal
- Military, to reap the benefits of a public good
- Administration of justice, to reap the benefits of a public good
- Economic affairs - primarily infrastructure spending, to capture externalities
- Baseline education expenditures, to capture the externality; this is placed at the federal level to smooth the playing field across high- and low-income states. To encourage competition, this baseline funding would be student-specific and portable (similar to voucher systems)
- Basic science funding, to capture the externality
- Antipoverty programs for those working, such as the EITC, to provide incentives for low-income workers
- Limited amounts of antipoverty programs for those unemployed, such as retraining and unemployment insurance, to smooth the effects of the business cycle on the disadvantaged and to smooth expectations
- Retirement security, in the form of pay-as-you-go social security, to smooth expectations; to be paid for by its own tax (like SS now, but with a higher retirement age to ensure sustainability)
- General public service (paying elected officials, paying for a competent bureaucracy, etc), because governments cost money to maintain
- Foreign aid, though I'd place much more emphasis on providing effective assistance. Much reform is necessary in the foreign aid realm.
- I have certain ideas on fiscal responsibility and ten-year budget windows that would be tedious to go into here.
State and local
- Police, to provide a local public good
- Public utilities, using a standard average-cost public monopoly model (break-even fee-for-service)
- More education, varying by state, to fit the tastes and preferences of state constituencies and capture any remaining externalities
- More infrastructure, to fit the tastes and preferences of state constitutencies
- Perhaps a more generous unemployment benefits system, as necessary
- State governments must show balanced budgets over any given two-year window
Looks like a good start. I will expand on any of these as necessary.
- Military, to reap the benefits of a public good
- Administration of justice, to reap the benefits of a public good
- Economic affairs - primarily infrastructure spending, to capture externalities
- Baseline education expenditures, to capture the externality; this is placed at the federal level to smooth the playing field across high- and low-income states. To encourage competition, this baseline funding would be student-specific and portable (similar to voucher systems)
- Basic science funding, to capture the externality
- Antipoverty programs for those working, such as the EITC, to provide incentives for low-income workers
- Limited amounts of antipoverty programs for those unemployed, such as retraining and unemployment insurance, to smooth the effects of the business cycle on the disadvantaged and to smooth expectations
- Retirement security, in the form of pay-as-you-go social security, to smooth expectations; to be paid for by its own tax (like SS now, but with a higher retirement age to ensure sustainability)
- General public service (paying elected officials, paying for a competent bureaucracy, etc), because governments cost money to maintain
- Foreign aid, though I'd place much more emphasis on providing effective assistance. Much reform is necessary in the foreign aid realm.
- I have certain ideas on fiscal responsibility and ten-year budget windows that would be tedious to go into here.
State and local
- Police, to provide a local public good
- Public utilities, using a standard average-cost public monopoly model (break-even fee-for-service)
- More education, varying by state, to fit the tastes and preferences of state constituencies and capture any remaining externalities
- More infrastructure, to fit the tastes and preferences of state constitutencies
- Perhaps a more generous unemployment benefits system, as necessary
- State governments must show balanced budgets over any given two-year window
Looks like a good start. I will expand on any of these as necessary.
Sure, they can be punished and rehabilitated through forced labor. While we're at it, why not make some money?
Because if there are people who profit from people being in prison, that's an incentive to send people to prison. Something that actually happened.
Jail is for punishment and/or rehabilitation, not for profit.
Cleo
Tani Coyote
Son of Huehuecoyotl
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Seems fiscally sound, an an excellent way to prevent the government getting caught in a continuous cycle of expanding taxes to cover new spending, and then using the surplus on more spending, and once more increaseing taxes to cover the deficit, and so on... it never hurts to remain fiscally sane.
Though as I've mentioned to other posters, the opening post asks what kinds of services should be done with tax revenue... have you anything to say on that?
That sounds fairly sound, since a common argument for government control and funding is it should be reserved for areas that private sectors don't pay attention to, at least for the time being(I think alternative energy, which many companies ignore due to the high costs involved, is a good example here that could use some government aid, if temporarily). I believe it's an interesting way to separate what should be public and what should be private.
Government waste could possibly be reduced by having more done at the local level(local levels have less money to work with, and will likely spend it more wisely. They also know their constituents' needs far better than some bigshot in the national capital). But in the end, it's a good idea to have low expectations of the federal government, as it helps reduce disappointment when they show their typical incompetence.
An unfortunate issue with local management, however, is certain areas are poorer or have less economic potential than others. The need for some sort of national spending then arises, and it can quickly be corrupted into a scheme where far more is spent and far more is administered by the national government...
But in the end, it's good that the public funding is assumed to be naturally inefficient, as it reduces disappointment, while it also could encourage others to find ways to mitigate waste. And given what humans have accomplished, I'm confident there are many ways to reduce that waste, be they discovered yet or not.
One of humanity's greatest redeeming qualities, I feel, would be the fact that they can be just as compassionate for their fellow human beings as they can be destructive and violent towards them. Many of the left-leaning people on this forum seem to have some form of compassion, though the reasons for embracing certain political ideals are numerous.
For ensuring a sustainable welfare program, I support the notion of workfare; the individual contributes something far greater than himself to the whole, and in exchange gets his basic needs met. However, how does one tackle the ugly issue of massive unemployment when it comes about? Keeping a government surplus(I'd say maybe, 5-10% of GDP? The number doesn't really have to stay solid and can be easily changed) for emergency relief would be a good idea here, and government economic activity should naturally be shifted towards creating jobs just as much as protecting consumers.
In the end, politics - especially on the issue of welfare - is a very ugly field to get into, because one must reconcile emotions/morals with logic, ideology with data/facts, and goals/ideals with resources/circumstances. Not to mention, you have to find a way to bridge the gap with your opponents. But, SOMEBODY has to do it!
I had never considered that idea that you need two budgetary extremes in order to have stability. Different means to the same end of a balanced budget, however, I suppose. If the economy is stable(and sustainable), it's all desirable.
On public debt, I'm pretty sure we'll crash and burn soon once China and the others cut off the life support... It will no longer be Obama '12... it will be Anarchy '12... Well, maybe not THAT soon, but eventually, the American glutton will pay for it's late-night loan binges... /paranoia + optimism
That's actually a very interesting idea, Camikaze. Nerd moment, but, back in the day(1800-1900 or so if I recall right?) when the federal government was very limited, so much revenue was raised from tariffs the defining issue of the day was not cutting spending, but cutting taxes so as to reduce the surplus(as the suprlus was viewed as stealing from the people and was thus very embarassing).
If the government made a habit of constant surpluses today instead of constant deficits, the issue would probably rise once more, and true fiscal conservatives would cheer at the fact they'd get both reduced government spending(hence the surplus), and lower taxes(to cut the surplus).
In sum, one can only hope for the day where America's Great Power Syndome(i.e. forgetting the very things that allowed you to become great in the first place, thus accelerating your decline) will finally be cured...
Well, surplus and deficit may be the two more extreme of the three possible budget outcomes, but that doesn't mean that they have to be extreme. The best thing to aim for is modest surplus followed by modest deficit, or perhaps the other way around (so as to gain the economic growth sooner, through earlier stimulus).
And public debt isn't really that hard to get rid of. Australia managed to cut its from 35% of GDP to 0% of GDP from 1996-2006, so America's 60% (from Wikipedia) isn't exactly catastrophic.
GoodGame
Red, White, & Blue, baby!
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Sounds ok, except I'd give pay incentives (Fed matching funds) for meeting mininum standards in K-12 education, having solid judicial reforms, and clean air & water.
It would be interesting if there was Federal referendum during elections, that put spending caps on the Fed budget, that only the combined vote of Legislative and Executive branches could override, and only in small percentage fractions (say 1%-5% over the budget).
Tani Coyote
Son of Huehuecoyotl
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I must say, your federal expenditure list is quite like mine! It's pretty much everything I want out of the national government, and the reasoning for all your plans is quite sound and similar to what I would mention.
I forgot to mention science and general government expenditures, but that's because I'd probably lump science under my economic stimulus section, and the general government is for the most part common sense.
(I don't think many charities would be able to cover the vast scope of Federal salaries...) I especially like how you tackled Social Security by making the age higher, and thus enabling it to be more sustainable by having fewer people reach the age to qualify it... considering healthcare's likely to get cheaper and by extension lifespans will get longer, it definitely helps to make it harder for people to reach the SS age.
EDIT: Forgot to mention the foreign aid part. That's certainly a hot potato. Foreign aid not only takes that money away from those who desperately need it here at home, but it also runs the risk of being wasted and embezzled in the country of destination(it's a sad fact that the countries that could handle incoming foreign aid the best are the ones that don't need it...).
It's quite radical, but at times, I envision some sort of paramilitary force - sponsored by a group such as the UN if necessary - escorting the aid and making sure it reaches those who need it and is not used by Third World oligarchs to benefit themselves... A bit of a pipe dream since it's the feared World Police, but besides that, I'm sure there's several ways wasted foreign aid can be dealt with. It doesn't hurt to make a few friends worldwide, especially when you live in a country like the US that could use a few more positive things to balance out generally-negative opinions of yourself abroad.
But what I like about your post in general is it seems quite balanced between left(federal power) and right(state power) government size ideals. Truely a document worthy of a true federal system, that both keeps federal power to a minimum, while also ensuring that none on the constituent states get left behind.
Overall, I quite like your proposals.
But if there's a harsh sentence for committing fraud in the justice system(such as life imprisonment; originally you'd be killed for resulting in the execution of an innocent person, now you should be sentenced to life for sentencing another; as a bonus, the innocent person could be released, which they couldn't be if they were executed), shouldn't that be incentive to NOT do it?
Those judges were eventually caught, and most rational people will fear a life of hard labor just as much - if not more - than being executed, and that should serve as a deterrent to anybody corrupt.
On the issue of making prisons non-profit... would it at least be acceptable to make the prison self-sustaining(such as growing it's own food and what not; businesses wouldn't be as attracted if there's no profit, after all, while the goal of making the prison system fiscally green is also attained), so as to reduce the strain on the taxpayers? As well, perhaps charities could pitch in to provide for the prisoners?
Apart from that, this is probably an ideological difference between the two of us that would be near-impossible to bridge.
I'll add something productive to this so-far excellent thread instead of just picking on other people.
The government should spend money on:
Providing a social safety net. This includes anti-poverty programs like Social Security. It also includes access to healthcare for all people. Whether the government decides to do the latter through a government-run system like in Britain, or a government insurance program like Canada, or something else doesn't matter. If people aren't constantly afraid of personal ruin, they'll be more able to make meaningful decisions about their own lives, and to take risks that end up benefiting everyone (i.e., entrepreneurship). The negative incentive (fear of ruin) makes for wonderful workers -- docile, cowed, indebted to their employers. The positive incentive (the possibility of riches if a risk takes off) encourages innovation and creativity. I'd prefer an America that focuses on the latter; many people for obvious reasons would not.
Providing an education for its people. One would think that's fairly uncontroversial, though some might disagree.
And all the stuff on which everyone agrees: defense, judiciary, police, fire protection, roads, &c.
Cleo
The government should spend money on:
Providing a social safety net. This includes anti-poverty programs like Social Security. It also includes access to healthcare for all people. Whether the government decides to do the latter through a government-run system like in Britain, or a government insurance program like Canada, or something else doesn't matter. If people aren't constantly afraid of personal ruin, they'll be more able to make meaningful decisions about their own lives, and to take risks that end up benefiting everyone (i.e., entrepreneurship). The negative incentive (fear of ruin) makes for wonderful workers -- docile, cowed, indebted to their employers. The positive incentive (the possibility of riches if a risk takes off) encourages innovation and creativity. I'd prefer an America that focuses on the latter; many people for obvious reasons would not.
Providing an education for its people. One would think that's fairly uncontroversial, though some might disagree.
And all the stuff on which everyone agrees: defense, judiciary, police, fire protection, roads, &c.
Cleo
But if there's a harsh sentence for committing fraud in the justice system(such as life imprisonment; originally you'd be killed for resulting in the execution of an innocent person, now you should be sentenced to life for sentencing another; as a bonus, the innocent person could be released, which they couldn't be if they were executed), shouldn't that be incentive to NOT do it?
Those judges were eventually caught, and most rational people will fear a life of hard labor just as much - if not more - than being executed, and that should serve as a deterrent to anybody corrupt.
Why have it be a cat & mouse game in the first place, between the wrongdoers and the police? Why have that incentive to throw people in jail at all? Modern society thrived for hundreds of years without a profit motive to throw people in jail. If there's profit to be made in imprisoning people, there will be lobbyists making sure that criminal laws are as strict as possible, or to criminalize new things. I wouldn't be terribly surprised to learn that the for-profit prison lobby is working against marijuana decriminalization, for example.
Criminal law is not business regulation. It's special. It's the community setting standards as to what people may and may not do, and the coercive power of the state is employed to enforce those standards. Profit has no place there.
Sure, why not? That's a great idea (and prisoners could learn useful gardening skills!). Reducing costs is one thing; creating a profit motive to throw people in prison is another.
Cleo
RedRalph
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so no borrowing whatsoever? That's going to be sort of impractical when theres a disaster or a war, isnt it?
Tani Coyote
Son of Huehuecoyotl
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I don't have much to say here, but I always like to learn economics from others.
Unfortunately with budgets and economic circumstances, they often have to be taken on a country-by-country basis...
Australia did it, but you guys generally don't go on such massive military campaigns so regularly, WITH social programs to boot. Reducing America's deficit will probably involve taking a huge bite out of the defense budget, and that is the one place where many right-wing "small government/limited spending" types suddenly go on the defensive and demand increases/keeping the expenditures constant...But, I believe, that if Americans can abandon or reduce their militarism, and voice themselves more often about government waste in general, it is possible that we can finally get our government to stop spending the money of future generations and stop destroying America's fiscal sanity. It will likely be a long, hard road... but wasn't it the same when the colonists chose to rebel against probably the strongest and wealthiest country in the Western world? Any people, not just Americans, can do just about anything if they put their hearts, minds and efforts behind a cause.
I don't mean to interject in your two's discussion, but I just wanted to comment that those are good ideas that could be used to fix our education system(when money talks, most kids - and people in general - walk!), and it also doesn't hurt to make sure the government does it's part in making sure we have a planet we can leave to next generation.
Cleo already responded, and I'd like to expand upon what she said.
Unfortunately, people who have grown up with social services are very resilient to getting rid of them... it is therefore up to politicians - who are generally more in-the-know - to make the risky choice of getting rid of social services at the expense of their political career. If you love your country, however, you will do what you feel is best for it and not what's best for yourself.
So with all that said, it'd be extremely hard to get the common voters to get rid of the services they've grown up with and now feel entitled to. The tree of Entitlement and Dependency must be destroyed before it has the chance to take root... otherwise it can easily grow into a monstrosity that cannot be stopped. /Libertarian paranoia
Overall, liberal democracy is great for the many liberties it gives it's citizens. But when it comes to politics and daily government procedure, it tends to suck. It's the price of giving a complete fool's opinion the same weight as somebody who spent their entire life thinking and studying how things work...
Integral
Can't you hear it?
I must say, your federal expenditure list is quite like mine! It's pretty much everything I want out of the national government, and the reasoning for all your plans is quite sound and similar to what I would mention.
I forgot to mention science and general government expenditures, but that's because I'd probably lump science under my economic stimulus section, and the general government is for the most part common sense.
I especially like how you tackled Social Security by making the age higher, and thus enabling it to be more sustainable by having fewer people reach the age to qualify it... considering healthcare's likely to get cheaper and by extension lifespans will get longer, it definitely helps to make it harder for people to reach the SS age.
EDIT: Forgot to mention the foreign aid part. That's certainly a hot potato. Foreign aid not only takes that money away from those who desperately need it here at home, but it also runs the risk of being wasted and embezzled in the country of destination(it's a sad fact that the countries that could handle incoming foreign aid the best are the ones that don't need it...).
It's quite radical, but at times, I envision some sort of paramilitary force - sponsored by a group such as the UN if necessary - escorting the aid and making sure it reaches those who need it and is not used by Third World oligarchs to benefit themselves... A bit of a pipe dream since it's the feared World Police, but besides that, I'm sure there's several ways wasted foreign aid can be dealt with. It doesn't hurt to make a few friends worldwide, especially when you live in a country like the US that could use a few more positive things to balance out generally-negative opinions of yourself abroad.
But what I like about your post in general is it seems quite balanced between left(federal power) and right(state power) government size ideals. Truely a document worthy of a true federal system, that both keeps federal power to a minimum, while also ensuring that none on the constituent states get left behind.
Overall, I quite like your proposals.
First, thank you for the kind reply.
I'd like to expand a bit on four topics: social security (hereafter abbreviated SS), "federalist" education, science and aid.
First, SS. There are a host of tedius economic reasons why retirement insurance is a Good Thing. As it stands, I have two requirements: first, that retirement security be paid by its own tax, so as to (at least nominally) separate it from the overall government; second, that the system be sustainable. In terms of sustainability, I would support a 'moving retirement age' which fixes the ratio of beneficiaries to contributors. Populations grow fairly consistently, so the practical effect would be a gradual increase in the retirement age. You can retire earlier, of course, but please do so on your own dime, not the taxpayer's.
A third general principle (not requirement) would be to link the amount of benefits received to the amount of contributions you paid over your working career. That way, it "feels" more like a traditional retirement account. A 'federalist' system of education funding.
I've always felt the need to balance two realities: first, that using local taxes to fund education leaves vast discrepancies across states in per-pupil spending; second, that if more affluent communities choose to self-levy higher taxes to support better education for their kids, that should not be forbidden. My 'federalist' education system, I hope, tackles both sides of the issue. The national givernment provides funding to schools based on school enrollment, say $3500 per student per year. This would be portable and could easily be integrated into a charter or voucher environment. Additional education expenditures would be provided by the states, to fit the tastes and preferences of individual constituencies. Thus poor districts are not punished for being poor, but rich districts are likewise not punished for being rich. In addition, funding isn't so much the important issue in education; I would also mandate a longer school day, increase the school year by 4 weeks (20 instructional days) and shuffle time off so that no break is longer than 8 weeks (thanks to downtown for that idea).
Funding for basic science research
This would include everything from high-profile projects like NASA down to NSF funding for grad students. Currently, the NSF's budget is about $5 bn/year; I'd like to see that doubled immediately. The opportunity costs are small and the potential benefits are huge. There are some downsides; funding and the system of tenure ensures that there is some inevitable fat in the university research community, but I can accept that. Publishing provides a good dose of competitive pressure.
Foreign aid
I'd like to see a shift towards evidence-based aid. I also have a few pet projects that I'd like to see expanded. In particular, several Latin American countries have experienced success with conditional cash transfer (CCT) antipoverty programs. I would support using American funds to support pilot CCTs in other countries, gradually handing over responsibility to local governments. There are other microdevelopment issues that I think the federal government could usefully invest in.
--
@Cleo: good comments on health care. There are significant externalties to guaranteed insurance (in econo-speak, guaranteed insurance greatly smooths expectations, which is a good thing). I'm still undecided as to how much government involvement is optimal in the health-care system, though the optimum expenditure is probably greater than 0. More on that later, if I think of something worth contributing.
Death_Machine
Slaytanic Warrior
So what exactly did you learn about economics from his post?I don't have much to say here, but I always like to learn economics from others.
Enkidu Warrior
Ultramagnetic
Whatever the electorate elect to limit it to. There shouldn't be any artificial limits placed on what the public want to do with their money.
Patroklos
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Well thats a different question
If the government ends up with a surplus via windfall tax collection or unexpected low costs for programs (
) then they should add the balance to the next year's budget and lower taxes for that year accordingly.Of course in the case of the US it should be used to pay back debt.
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