Cutting the Budget; D. Bechara

Public opinion polls and the press publicize the people's fear that "their program" will be cut. And beneath it all is the suspicion that only the .wealthy will truly benefit from a re duction in government spending. To succeed in reducing the size of Mr. Bechara is an attorney in Mayaguez, Puerto Rico. government, it ,is imperative to un derstand the nature of the demo cratic process 4nd the cause of the organized opposition to those efforts. A major reason for such opposition is that the be:q.efits of government projects are distributed to small groups of recipients, whereas the cost of such progtams is dispersed throughout the population. There fore, any single government spend ing program represents, to each tax payer, a small i~crement in his taxes or in the cost of government. How ever, to the beneficiaries of the pro gram, the prop0sed spending repre sents a significant infusion of capital.

So, it is logical for the proponents of the different sp~nding bills to mar shal their forcea and actively lobby for such measUres. The individual taxpayer, on the other hand, finds it 226 THE FREEMAN April more costly to oppose a given pro gram than he might save in taxes in its absence. To their further advantage, the champions of government spending are able to point to the specificproject as evidence that they have created employment and consequently have favored a group that is deserving of aid. The opponents of government spending, on the other hand, cannot show what jobs have been created or preserved in the absence of govern ment spending and intervention. R. L. Schreadley, Executive Edi tor of the Charleston, S.C., Post Courier, came to the point in his ed itorial of December 27,1981: "What we don't see, what nobody sees or records, are the buildings, the jobs, the hope that might have flourished within and without the cities had federal bureaucrats and their eager accomplices not succumbed so long ago to the dangerous business of be lieving. themselves more prescient than the market. . . . You do not make a bad investment good by salt ing it with taxpayers'dollars. (Ex cept, of course, for the lucky devel opers up front who are quick enough and smart enough to take the money and run.) You do not restore confi dence. in the financial future of the cities or of this country by requiring taxpayers to assume risks no pru dent private investor would take."

Since government has no re sources, it either taxes, borrows, or simply prints new paper money in order to finance its activities. Any government spending must neces sarily have a corresponding effect on the economy. If government were to tax in order to raise revenue, this represents a loss of investment and savings from the private sector, which is also translated into a loss ofjobs. Therefore, the jobs created in any government project which is fi nanced by taxation implies the elimination of jobs in the private sector. Similarly, if government spending is financed through bor rowing in the capital markets, this means that the funds which other wise could have gone to the private sector are being channeled into the government project. Higher interest rates are one of the consequences. If the printing of money is the alter native chosen by the state to finance its projects, that spells inflation.

The opponents of government spending projects thus appear to be the enemy of the deserving minori ties who are the object of the govern ment's largesse. Opponents are psy chologically disarmed because they cannnot show precisely who will be harmed by the government pro gram. The·Democratic Aura Those who would curb govern ment spending face one further hur dle. Governments have traditionally attempted to justify spending and 1982 CUTTI~G THE BUDGET 227 interventionist policies by placing the imprimatur of democracy on such activities. Governments have sensed the aura of legitimacy conveyed by the term, and they have disguised many of their economic policies in democratic garb. This tends to dis·· courage criticism. Examples of this are legion. The public school system exists as a re-· suIt of laws which provide that the taxpayers must support the school ing of the community's children.

Many taxpayers are opposed to the system, yet become involved in vot ing for membership in the local boards of education. Similarly, the raising of revenue has been democ ratized, as bond issues become en tangled in the election process. The National Labor Relations Act has instituted the system of demo cratic elections under which the em ployees of what the NLRB deems to be an "appropriate bargaining unit" may select a union as their repre sentative for the purpose of collec tive bargaining. In addition, the Landrum-Griffin Act contains what is known as the "Union Member's Bill of Rights" under which certain democratic values are upheld. Many other Acts of Congress, which call for government interven tion, similarly provide themselves with the shield of democracy. This happens because Congress, in decid ing to implement a program, does so after a process of consultation and after obtaining evidence through testimony in public hearings.

The impression that the process is democratic is ~lways present in any legislative eff~rt, because the Con gressmen whQ approved the differ ent spending proposals were popu larly elected. Therefore, if the people were truly opposed to policies imple mented by their elected officials,their recourse would be through the elec toral process. Interventionby Way of JudicialPowersof Government The judicial powers of govern ment are also prawn upon to legiti mize economic iintervention. Admin istrative tribunals have been created under which gqvernmental agencies exercise their c,ntrol. The people who are the object o~ this scrutiny are thus made to feel: that somehow the treatment was: fair and democratic, because due pifocess was followed. After all, notice was given to the parties, and an opportunity was af forded them to present evidence and to cross-examine the opponents' wit nesses.

However, th~ most important as pect of government intervention is blithely ignorea: its economic con sequences. Ren~ control is a classic example. A bur¢aucratic agency may treat each easel:individually, apply ing the same· formula to different landlords in order to determine the maximum prices they may charge.

228 THE FREEMAN The landlord in turn may be able to establish, through a quasi-judicial proceeding, that there are other fac tors which the government ought to take into account in computing the rent. But despite recourse to due process, the effect of rent control will be felt. This will be the reduction of the available capital which will be devoted to building rental space, and the improper utilization of space, as tenants discover they can occupy more than they actually need be cause the price they have to pay for it is lower than its market value. Similarly, claiming that govern ment policies are democratic just be cause a majority of the people opted to follow the practice does not change its economic consequences. When the labor union, which was elected by a majority of the employees, obtains wage concessions from employers that discourage further production, the inevitable result is unemploy ment.

However difficult the task of re ducing the size of government, it is Government Relief not impossible. Essential to any fun damental change of policy iseco nomic education. Once voters and taxpayers understand the economic implications of spending programs, the proponents of limited govern ment will be in a more persuasive position. The present economic crisis may well motivate us to discover the so lutions to these problems. We are witnessing today many efforts to re duce the scope of government. These efforts stem from the crisis that is the result of the failure of interven tionist policies. And this crisis, as Leonard Read says, "is sending up signals~messages loud and clear that our past is filled with errors which inexorably produced their evil results. The consequences we suffer now were caused by past mistakes, and we need to know what wrong actions are responsible for these bad effects. The fact is, we are being graced with warnings which, when and if read aright, can lead to our salvation." , IDEAS ON LIBERTY RESPONSIBILITY to oneself and family, coupled with the necessity of working to meet this responsibility, are the ingredients for human progress and the development of the individual personality. Govern ment relief is a proven failure, a social evil, a destroyer of human per sonality. The greatest and kindest deed government could perform would be to remove the temptation of something for nothing.

RAE C. HEIPLE II Mark Hendrickson Teachings iof Soviet Experienqe OF ALL the many lessons that the Free World can learn from the So viet "experiment" of the last sixty four years, the most urgent is that life under a socialist command sys tem is far from the "workers' para dise" promised by Marxian ideo logues. As Alexander Solzhenitsyn and many others have so thoroughly documented, the socialist order, trumpeted as the wave of the future, is maintained only by the most bru tal measures. The fact that the so cialist state depends upon force for its continued existence is powerful evidence that free individuals would promptly reject such an inhumane system. Economically, poverty has been institutionalized in the Soviet Union. Mark Hendrickson recently earned a master's d. greet with a thesis based on the works of Solzhenlt syn. This is condensed from a chapter of that thesis. Sociologically, ,a well-defined class structure has emerged, with special privileges accomed at the wish of the ruling elite. Pblitically, individual rights have be~n trampled upon and extinguished by ruthless despots.