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Campaigns and Giveaways

Mises Daily: Monday, September 11, 2000 by

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In recent days, political polls have seen Al Gore shoot past George Bush, especially in polls of potential women voters. Gore, according to those interviewed, has the "better ideas," while Bush seems to be mired in a real slump.

Perhaps we should be surprised at such numbers. Gore, after all, has given us proposal after proposal to increase the size and scope of government. His campaign is a Big Government campaign, and he is proud of it. In fact, he has scored points time and again with the voters in calling Bush’s modest tax cutting proposals a "risky scheme" that will leave this country in debt and leave the economy in a shambles.

Conservative syndicated columnist Robert Novak asks this interesting question: "Could it be, they ask, that voters – while enjoying prosperity – really want more government instead of less?" The answer is a qualified "yes." Economic analysis may have a partial answer to this issue of whether or not the voters want to see Washington, D.C., extend its boundaries even further into their lives. Austrian economic insight can be a powerful analytical tool here.

If one reads between the lines of Gore’s stump speeches, he seems to be saying that he is not going to have to raise taxes in order to provide more free services to the electorate. This is vital to his plan to grow the government. In 1984, Walter Mondale in his acceptance speech at the Democratic National Convention said that both he and Reagan would raise taxes, but that only Mondale would admit that he planned to do it. The Democratic nominee proceeded to lose every state but Minnesota (his home).

Gore, on the other hand, has promised to give more free services to Americans without raising their taxes. At present, he argues, America is enjoying a huge tax surplus and is now free to spread out the goodies to even more people. On the other hand, he also points out, Bush "wants to cut taxes for the rich" which, according to the Vice President, would be unfair to lower-income taxpayers and would prevent such "needed" reforms as giving free prescription drugs to elderly people.

Why, one might ask, would anyone be against cutting his taxes? If given a choice between paying $1,000 in taxes and paying $900, any reasonable person would rather pay the latter. However, because of the high progressivity of the U.S. income tax system, a relatively few people pay the bulk of taxes, as has been pointed out in numerous past articles on this page. This means that millions of people can enjoy government services at virtually no expense, since others are paying the tab.

For example, since five percent of taxpayers pay about one-third of all income taxes, a 10 percent across-the-board cut in tax rates obviously would bring the largest dollar savings to that top five percent. Gore and his news media amen chorus call that "a giveaway to the rich," when in reality it is simply confiscating less income. (In modern political parlance, the state owns everything. Individuals own nothing. Therefore, a tax cut is tantamount to the state "giving away" benefits to those who receive them.)

A number of economists have explained growth of government in prosperous times as a natural thing, since to its recipients, government products are "normal goods," for which economists say demand grows as people become wealthier. Like so many other things in modern Neo-Marshallian analysis, this statement is only partly true.

There is no doubt that individuals will demand some government services as their wealth increases. For example, the Clinton Administration has been locking up huge portions of national forests and other government-owned lands and preventing any commercial use of them like logging and mining. Former President Jimmy Carter quietly has been urging President Clinton to bar any oil exploration in the Arctic National Wildlife Reserve (ANWR). This is despite the fact that the land sits atop what may be billions of barrels of oil, which would do much to alleviate the present high price we pay for gasoline.

This unwarranted action of locking up vast oil reserves is not done as service to America’s lower-income families. None of those folks will ever set foot on ANWR. Rather, the demand to close these lands to oil exploration come from environmentalists, whose minions are mostly found in high-income brackets. They are the only people who would be able to afford a trip to one of the world’s most remote regions.

In fact, most of the environmental "gifts" set aside by President Clinton benefit wealthy people. Poor people benefit from cheaper housing and inexpensive gasoline, both of which are eliminated by the president’s directives.

Other government products, however, are clearly inferior goods. Wealthy people send their children to private schools, while the children of the poor languish in inferior government institutions. Public housing, welfare payments that trap the poor into vicious poverty cycles, and government medical care are "enjoyed" by poor people. Individuals who have once partaken of these "goodies" but later enjoy higher incomes are quite happy to dispense of these government freebies for something more to their liking.

The Gore plan includes both inferior and normal goods. He promises to "do more for the environment," which means creating more spaces where wealthy people can go wilderness camping and hiking. On the other hand, he calls for a "prescription drug plan" for elderly Americans that includes price controls on drugs, a plan that others have noted will have the disastrous effect of curtailing the development of new medicines and will create shortages that can only prolong sickness or bring premature death. Wealthy people can afford expensive new drugs and they have a way of getting around restrictions that limit possibilities of less-wealthy folks.

While one can make a strong case against school vouchers, Gore simply continues his theme of "making schools stronger," which actually means giving more power to the National Education Association and its government allies. This should have the effect of making an inferior good even more inferior.

There is one other element to the connection between growth of prosperity and growth of government. As people become wealthier, they also crave security. Gore promises protection against gun violence through more government control of firearms, and he promises all sorts of social "safety nets" designed to appeal to middle class voters who fear loss of income if they lose a job.

Such assurances are chimeras, of course. Gun control laws increase the threat of violence, as studies by John Lott and others have demonstrated, and the vast numbers of regulations that come with policies of "safety and security" undermine the real source of wealth. In the end, growth of government trumps prosperity itself.