The Illusoin Behind Government Aid; P. D. Russell

Bastiat continued, uAll of us are petitioning THE STATE in this manner .... But THE STATE has no means of granting privileges to some without adding to the labor of others." Then Bastiat gave us this defini tion of government: uTHE STATE is the great fiction through which everybody endeavors to live at the expense of everybody." He said that this ~~ great fiction" was doing great harm to the French people and na tion. Could this absurd concept of government-everybody living at the expense of everybody else-ever become prevalent in the United States? Well, today more than 130 million Americans are directly de pendent on tax dollars, in one form THE ILLUSION BEHIND GOVERNMENT AID 663 or another for at least a part of their incomes. That's more than half of us.. Included in the 130 million people who are now living at the expense of everybody are local, state, and fed·· eral employees and their depen ..

dents, armed forces personnel and dependents, everyone (and their de·· pendents) receiving any form of di·· reet cash payment from government, e.g., government pensions of all types and aid to families with de pendent children. Not included are recipients of Medicare and Medicaid, food. stamps, and similar ttin kind" pro·· grams. Including them would result in considerable double counting .. Also not included are the millions of persons (and their dependents) who work for private companies under government contracts, even though the source of most oftheir incomes is government. Nor does the ·figure in· elude the millions of foreigners who receive direct support from our taxes. Nor does it include those per sons whose jobs are based indirectly on government aid programs, e.g., doctors who get a share of their in comes from Medicare patients. Thus the figure of more than 130 million Americans who are totally or par tially dependent on government for their livelihoods is surely not exaggerated.

Understandably, the· recipients and supporters of these government programs are quick to defend them on both economic and moral grounds, especially moral grounds. Shouldn't hungry children be fed? Shouldn't elderly people (most of whom paid Social Security taxes when they were younger) be main tained with some dignity in their old age? Do you begrudge a veteran his pension? Shouldn't farmers be guaranteed at least a mininum in come through parity prices? And so on, through literally hundreds of similar government-administered programs that take resources from people who produced them and give them to people who didn't. I'm not here either condemning or defending any of these programs; some of them do provide valuable services. I'm merely pointing out the fact that far more than half of us American people (130 million) are now living totally or partially at the expense of fewer than half of us (90 million). And the number of those who get the money (as well as the amount) is constantly increasing. At some point, the producers will sim ply refuse to support the non producers. In truth, they won't really have a choice in the matter; for there just won't be enough produced to go around.

I suspect that this breaking-point has already been reached. It's prob ably the primary reason for the in creasing growth of the (tsubterra nean economy" for exchanging our products and services. This non664 THE FREEMAN taxed market system of exchange includes cCmoonlighting" electricians and plumbers and service people in all categories who take their pay in unrecorded cash. Estimates of the size of this cash-and-barter economy range from $200 billion to $300 bil lion, perhaps as much as 10 to 15 per cent of our Gross National Product-and it's growing rapidly. Most of the people who deal in this market are not crooks but law abiding citizens who are trying to keep for themselves a reasonable proportion. of what they produce. That's what the taxpayers are say ing to the lawmakers when they vote for (proposition 13's," and de mand that their state legislators also endorse aeon vention for the purpose of amending our Constitu tion to restrict taxes by putting a limit on federal government spend ing.

This strange illusion that we can live at the expense of someone else is, I'm convinced, the sole cause of the governmental programs and ac tions that, in turn, have brought on the disastrous inflation we have. It's simply impossible for all of us to live at the expense of all of us, or even for half of us to live at the expense of the other half. As Bastiat said, gov ernment is a construct, i.e., in the area of real goods and services, it produces nothing, but acts merely as a transfer mechanism. And since government produces nothing, it can't give anything to anyone (in cluding even basic police protection) without first taking the required funds from someone else in one way or another. The surreptitious transfer-method now increasingly favored by our leaders, i.e., taking goods and ser vices indirectly from everyone by the concealed process of printing addi tional money to buy the goods from private producers, doesn't alter the basic process. In fact, since the added money doesn't represent any production at all, it makes the situa tion worse by driving up the price of everything that is produced.

The Hstrange illusion" identified by Bastiat some 130 years ago is at the heart of most of the social and economic ills we American people are now suffering. Before we can deal with our inflation, our short ages, and other related problems, however, we must first understand that our government can't really guarantee a material level of living to anyone-not permanently and with a reliable guarantee, it can't. When we finally accept that fact, we'll close down the government owned and destructive C(money machine" and take whatever mea sures are necessary to speed up the constructive and privately-owned (Cproduction machine" that is the only possible source of increased goods and services for the American people in general. @ The Case for the Minimal State Henry Hazlltt •n SINCE at least as far back as Plato, many of the world's great minds have devoted themselves to thE~ problems of politics. But they have not come up with any answers that have satisfied more than a narrovI and transient majority in some country here or there. Today there are about 150 national governments in the world; but no two operate on exactly the same principles. If a free expression of opinion could be ob tained in anyone country, it would probably be found that at least a substantial minority was unhappy with some important part of the Henry Hazlltt, noted economist, author, editor, re viewer and columnist, Is well known to readers of the New York Times, Newsweek, The Freeman,Bal' ron's, Human Events and many others. Among the more recent of his numerous books are The Inflation Crisis and How to Resolve n and a revised edition of Economics in One Lesson.