Steven Landsburg has an Op-Ed on the super-committee that is more or less right as it goes but, I think leaves the wrong impression. He says

Here’s another way to say essentially the same thing: The government’s chief asset—in fact, pretty much its only asset—is its ability to tax people, now and in the future. The taxpayers are the government’s ATM. Make a withdrawal today, and there’s less available tomorrow.

Now the ability to tax is a pretty huge asset and the government has not (yet!) come close to depleting it. In that sense, there’s a lot of money in the bank. But no matter how much you’ve got in the bank, a policy of ever-increasing withdrawals is nothing at all like a decision to earn more income. It’s important to get the analogy right. And it’s clear from the blogs and the op-ed pages that not everybody gets this.

Instead, the notion persists that an extra trillion in federal spending can be converted from "irresponsible” to "responsible” as long as it’s accompanied by an extra trillion in tax hikes. That’s like saying a $500 haircut can be converted from "irresponsible” to "responsible” as long as you withdraw the $500 from your bank account. If the super committee loses sight of this fundamental truth, it is doomed to fail.

This is correct. However, seeing this I think should help people understand why its not really sensible to say that current or even project federal spending is irresponsible or unsustainable.

It may be undesirable, in that you wish the government was smaller but there is nothing irresponsible about it in the sense that it is exhausting the government’s ability to either forcibly take command of or direct the allocation of real goods and services.

About these ads