Tax-Subsidized Recreation Brings Conflict

The following article originally appeared in Grand Junction's Free Press.

April 28, 2008

Fruita rec center another zero-sum game

by Linn and Ari Armstrong

In our last article, we discussed Barack Obama's confusion about zero-sum games, situations in which one person's gain comes at another's loss. Michelle Obama perfectly summarizes the zero-sum mentality (as reported by Neal Boortz[via Myrhaf):

"The truth is, in order to get things like universal health care and a revamped education system, then someone is going to have to give up a piece of their pie so that someone else can have more."

We don't think that people's pies, or their pay checks, belong to national politicians. Or to local politicians, for that matter.

A defining characteristic of a free market is that people are able to make mutually-beneficial transactions. One person's gain is the other person's gain.

A fun place to view the workings of the free market is Down Town Grand Junction during Farmers Market. But even here the invisible hand that Adam Smith talked about can go unnoticed. We do not see the thousands of exchanges of goods and services that came before a single apple could be sold at the Farmers Market. Breeding, planting, irrigation, fertilizer, tractors, haulers -- the list goes on and on -- made possible the apples we buy at market.

The free market system is beautiful to see, so why would anyone want to upset the apple cart?

Farmer John's apple cart competes with other apple carts and also, to an extent, with many other businesses. If we buy apples, we have less money to spend elsewhere. Yet if Farmer John offers quality apples at a good price, he'll make sales.

Now imagine that, one day, Farmer John notices a new apple cart across the street, one run by the government. The latest freeze was less frightening. These apples are subsidized by taxpayers, whether they eat the apples or not. Because the government forces people to subsidize its apples, Farmer John suddenly faces lost sales and, perhaps, bankruptcy.

Moreover, because people lose more money to taxation, they have less to spend with the lemonade stand, the dance teacher, and so on, who in turn have less money to spend for goods and services that they want.

The government's apples are seen, as Henry Hazlitt would say, whereas all the goods that are not produced, and all the services that are not offered, are unseen.

Subsidized apples are an example of a zero-sum game. Some people's gain -- the employees and customers of the government's subsidized apple cart -- imposes a loss on others -- Farmer John and everyone else who loses business.

True, there are winners and losers in a free market, but the difference is that, in a free market, exchanges are voluntary, so the losers are those who fail to satisfy their customers; the system remains one of positive gains. In zero-sum politics, the resources of some are forcibly transfered to others, creating a net loss.

Substitute a recreation center for an apple cart and we arrive in Fruita, notably a town that did not get its name from government-run fruit production.

Recently the people of Fruita voted on a measure to use tax dollars to build a city-owned recreation center. The measure failed on a tie vote.

This issue has divided the community of Fruita, and this is not surprising. Half of the community is willing to use governmental force, ultimately at the point of a gun, on their neighbors to build the center. (If our claim strikes you as overly dramatic, try writing a letter explaining that you choose not to pay your taxes, and see what happens to you.)

Is a recreation center a good idea for Fruita? We don't know. If it is, then it will be profitable on a free market. Those who want the center can raise the capital, build the facility, offer the services, and pay for it all by charging their customers (or collecting voluntary donations). Just like any other business.

But if the recreation center cannot be built without government force, it shouldn't be built at all. The government has no more business offering recreational services than it does selling fruit. The government should not subsidize some people's pet recreational activities at the expense of movie theaters, dance instructors, ski slopes, Boy and Girl Scouts, restaurants, 4H, tour guides, outdoors stores, rafting companies, and so on.

Even a small tax can have large effects when spread out over a city's population. Moreover, a government that can forcibly transfer a little wealth can forcibly transfer a lot of wealth. A few dollars here, a few dollars there, and suddenly the total tax burden approaches half our income. Families that would rather spend their money on an ice cream cone or put it toward the college fund, rather than toward a recreation center, have that right.

Zero-sum politics diminishes neighborly trust because it harms some to benefit others. The alternative is the positive-sum, voluntary free market.

Brook: End Tax Social-Engineering

Tax season is now behind us. But it's not. Yaron Brook of the Ayn Rand Institute points out in an article for Forbes that, with 66,000 pages of tax code controlling our lives, tax day is every day.

After offering numerous examples of the way that the tax code skews incentives, Brook summarizes:

Tax policy works by attaching financial incentives to a long list of values deemed morally worthy. If you want to maximize your wealth come tax time--and who doesn't?--you must look at the world through tax-colored glasses, "voluntarily" adjusting your behavior to suit social norms and thereby qualifying for tax breaks. In this way, the social engineers of tax policy preserve the impression that you're exercising free choice, while they're actually dispensing with your reason and your judgment.

Brook then briefly describes the proper alternative:

Government's job is not to dictate your values but to protect them. In a free country, you choose values and then use your own money as a tool to achieve them. But a value-rigged tax policy reverses this cause and effect--it uses your money against you, bribing you with tax breaks that let you keep some of your earnings in exchange for abandoning your preferred values.

Brook's entire article is worth perusal. Brook's topic is delimited, so he does not touch upon all of the misincentives of the tax code. A huge problem is that high taxes reduce the incentive to produce. Taxes also reduce the division of labor. Work you do for money is taxed, while work you do for yourself is not taxed. Thus, rather than spend their time working in their field of speciality, many people divert some of their time to doing things they don't especially enjoy and aren't particularly good at, such as fixing the car or painting the house. But these are just two more examples of the way that taxes distort incentives. The combined effects are massive.

Demonic International Airport

The Denver Post hosts a photo and description of the giant new Mustang that now sits on the road to Denver International Airport. "Denver officials commissioned 'Mustang' from [sculptor Luis] Jimenez in 1992," the Post reports.

My first reaction to the sculpture was that it's "repugnant." My wife said, "It looks like it's possessed."

My wife's view seems to be a common one. On a separate blog post, the Post includes a number of comments about the piece that are almost entirely negative. Here are the highlights: "diabolical," "hideous," "a demon horse... melt it down," "truly horrifying," "looked better when it was wrapped in plastic," "waste of tax payer money... beautiful if you are a satan follower," "more appropriate in a horror type theme park," "a debacle," "an embarrasment to Colorado," "likely to give children nightmares."

"Crank This Sucker Up"

Deb Riechmann writes for the AP that President Bush supports "an economic rescue package that would include extra money for food stamps and jobless benefits in addition to tax rebates of hundreds of dollars each for millions of Americans. ... 'Crank this sucker up,' he exclaimed..."

But the only suckers are the ones who believe that Bush's plan will do any long-term good.

There are two obvious problems with Bush's proposal. First, it includes no commitment to offsetting the welfare transfers and tax rebates with reductions in federal spending. Second, it seems to promise more federal spending to cover the additional welfare transfers. In other words, spending will go up even more, while tax revenues will go down. This will be achieved through the magic of deficit spending, which necessarily takes real wealth out of the private economy by reducing investments, and/or more inflation. And, to address the problem of unemployment, Bush will pay people more not to work. That's Bush's strategy for "rescuing" the economy.

The Democrats are unhappy because Bush does not want to bump up federal spending to even higher levels than he already plans: "'We want a balanced package of tax rebates for the middle class and spending stimuli that jump-start the economy quickly. The president has included one; he also needs the other to quickly improve our economy,' said Charles Schumer, D-N.Y."

Because the way to "jump-start the economy" is to forcibly take even more wealth from the people who earn it and turn it over to bureaucrats. "Spending stimuli" in this context is a euphemism for taking other people's money for political payoffs to special interests.

The Denver Post agrees with the basic strategies above but also wants more tax breaks for businesses and, apparently, some sort of federal bailout for people who signed onto mortgages that they cannot now afford. Oh, and force down the interest rate more.

Nowhere in the popular media have I read about the policies that would actually improve the economy over the long term: cut (or at least restrain) federal spending and reduce political economic controls.

Cato's Daniel Mitchell gets the basic problems with Bush's proposal:

The president's proposed stimulus based on “temporary” tax cuts designed to boost “consumer spending” will not work. It is a disappointing re-run of the misguided policies of Jimmy Carter. Rebates are particularly disappointing because they resuscitate the discredited Keynesian notion that an economy benefits when the government borrows money from people in one sector of the economy and distributes it to people in another sector of the economy. Economic growth occurs when there is an increase in national income, not a redistribution of national income.

However, even Mitchell, a supply-sider, talks about tax cuts without mentioning spending cuts:

That is why lower marginal tax rates on work, saving, and investment are the best short-term and long-term strategy for faster growth. But such tax rate reductions should be permanent since temporary tax cuts -- even well-designed tax rate reductions rather than rebates -- do little more than generate economic activity today at the expense of less activity in the future.

Yet the first part of Mitchell's comments explains why tax cuts without spending cuts don't work.

Douglas Bruce Faces the Music...

... Yet, unfortunately, he seems to be tone deaf. As I've reviewed, on his first day on the job as a state representative, he kicked a photographer from the Rocky Mountain News. Bruce has not, so far as I've heard, apologized for the incident. Instead, he has tried to blame the journalist and downplay his behavior.

Now Bruce faces an investigation by the state house:

Joint statement from House on Bruce investigation
By The Denver Post
Article Last Updated: 01/15/2008 01:37:37 PM MST

Speaker of the House Andrew Romanoff, D-Denver, and House Republican Leader Mike May, R-Parker, issued the following statement today in response to the formation of a special committee to investigate the circumstances surrounding the incident that occurred between then Rep.-elect Douglas Bruce, R-Colorado Springs, and a member of the press on the floor of the House of Representatives on Jan. 14, 2008.

"We are both deeply troubled by the incident that took place yesterday morning. We are committed to preserving order and decorum in the House of Representatives.

"We have asked the committee to collect evidence and to hear testimony and to report back to the House on or before the 25th of January. ..."

Editorials by The Denver Post, the Rocky Mountain News, and The Daily Sentinel, and other papers have condemned Bruce's behavior. Columnists Mike Littwin and Susan Greene have written humorous and biting criticisms of Bruce.

Bruce has become the Democrats' new best friend. What better way to promote the stereotype of Republicans as heartless jerks? If Bruce is the "father" of the Taxpayer's Bill of Rights, then Democrats will reply that the fruit does not fall far from the tree. That's too bad, because limiting taxes is really about expanding voluntary interaction and reducing the initiation of physical force.

Perhaps that's why one of the harshest condemnations has come from conservative John Andrews:

State Rep. Douglas Bruce jerking around Speaker Andrew Romanoff before joining the House was one thing: a calculated bid for attention, rude but arguably shrewd. His putting the boot, literally, to a Rocky Mountain News photographer is something else again, however: plug-stupid with no conceivable justification.

Someone needs to tell him the ink-by-the-barrel rule of political life and public relations. Bruce's foolhardy footwork, bringing down the wrath of Rocky publisher John Temple along with a near-unanimous rebuke from his own Republican caucus, is an utter loser for the man’s legislative aspirations and, worse, for the GOP conservative cause he claims to support.

Deliver us, please, from such friends. My endorsement of Bruce's candidacy for this House seat, and my congratulations to him upon winning in it, are on extreme probation and rapidly approaching termination.

What a circus!