1 Trillion dollars in $100 bills stacked on pallets
Article by Chris Edwards in Cato Institute Commentary
Ten Reasons to Oppose More Spending
To hear most politicians tell it, you would think there are no downsides to federal‐budget expansion. But that is not the case.
(This article appeared on National Review (Online) on September 7, 2021)
Here are ten reasons to oppose the infrastructure and entitlement bills.
Federal Overload
With more than 2,300 programs,
the federal government is already far too large for policy‐makers to
oversee. As economist Milton Friedman once observed,
“Because government is doing so many things it ought not to be doing,
it performs the functions it ought to be performing badly.” The White
House’s focus on expanding the welfare state in recent months may, for
instance, have distracted it from properly planning the Afghanistan
pullout.
Tax Hikes
The infrastructure and entitlement
bills would be funded partly by damaging tax hikes. Proposed
corporate‐tax increases would undermine business investment, thus
reducing job opportunities and wages. Proposed capital‐gains‐tax
increases would undermine investment in start‐ups, particularly in
technology hubs such as Silicon Valley.
Rising Debt
Both bills would be funded partly by incurring more debt, which would
result in higher taxes down the road. If both bills pass, federal debt
per U.S. household would rise from $179,000 today to $288,000 by 2031.
As debt rises, a larger share of worker pay will be taxed to pay
interest costs, which will be very hard on tomorrow’s workers, who will
have their own costs and crises to deal with.
Economic Crisis
Rising debt could
trigger an economic crisis marked by soaring interest rates and falling
output. Greece’s debt crisis a decade ago created long‐lasting damage —
its real income per capita is still down one‐quarter from its pre‐crisis level. Our combined federal‐ and state‐government debt is already about the same size relative to the economy as was Greece’s before its crisis.
States Can Fund It
Most of the proposed spending
is for activities that states can fund themselves. With infrastructure,
more than half the states have raised their gas taxes to fund their own
highways and transit since 2015. With entitlements, some states are
already funding activities that the Democrats want to impose nationally,
such as paid family leave. Expanding entitlements is a bad idea, but it
is far more damaging when in the form of a top‐down scheme imposed by
Congress. Besides, the federal government is running huge deficits while
the states are enjoying budget surpluses with tax revenues up 11 percent over pre‐pandemic levels.
Democracy
One casualty of rising federal
spending is democracy. When the feds hand out subsidies for state and
local activities, decision‐making authority is moved from elected state
and local officials to unelected and unknown officials in far‐away
Washington. The infrastructure and entitlement bills would move control
over activities such as preschool, child care, paid leave, housing and
zoning, and the electric grid to federal bureaucrats. That is why former
Senator James Buckley argued that “citizens are effectively disenfranchised” by federal subsidy programs. In his April address
to Congress, President Joe Biden expressed his support for “democracy”
16 times, but his plans to expand federal power would do the opposite.
Diversity
Residents of each state have varying
preferences for social programs and taxes. In our federal system, the
states can maximize value by tailoring policies to the needs of their
residents. But the proposed bills would undermine such beneficial
diversity by imposing one‐size‐fits‐all programs for paid leave,
preschool, energy, and other activities. In his April address, the
president promised that he would bring the nation together, but trying
to force conformity on Americans with top‐down programs would increase
anger and division.
Corporate Welfare
Democratic leaders, such as
Senators Elizabeth Warren and Bernie Sanders, often rail against
corporate subsidies. Yet both bills include hundreds of billions in
corporate subsidies for broadband, utilities, electric vehicles,
manufacturing, research, renewable energy, and other items. If passed,
the subsidies would be a boost to the corporate lobbyists in Washington,
encouraging them to ask for even more, more, more …
Regulations
Federal subsidies come hand in hand
with costly regulations imposed on the states, cities, and private
groups administering the programs. The current federal education
disabilities law, for example, is 94 pages long but has generated 1,700
pages of regulations and masses of litigation. Meanwhile, federal
infrastructure subsidies come tied to labor and environmental rules that
raise costs and delay projects. The proposed legislation would likely
be accompanied by a mass of costly federal rules on education, energy,
housing, college, child care, and other subsidized activities.
Fraud and Waste
Federal subsidy programs suffer
from high levels of waste and fraud because state and local
administrators have little incentive to restrain costs when the funds
come “free” from Washington. Programs such as Medicaid and national
school lunches have long had high fraud rates; we have seen massive fraud
in the recent pandemic aid to the states, too. Meanwhile, federally
funded local projects, such as light‐rail systems, often suffer from
large cost overruns. The new hand‐out programs would suffer these same problems.
In sum, new infrastructure and entitlement spending would overload federal policy‐makers, who are already doing a lousy job of managing the vast array of current spending programs. All the proposed spending is for activities that should be instead handled by states, businesses, charities, and individuals. When it imposes national programs, Congress needlessly crushes diversity and local democratic choices. Americans would benefit more from a smaller, leaner federal government that balanced its budget and focused on its core missions.
https://www.cato.org/commentary/ten-reasons-oppose-more-spending#
