Let’s pretend that the existing welfare state is necessitated by the existence of those in need of financial or other assistance. How, then, do we explain the huge discrepancy between the amount of money required to ensure that every citizen is above the poverty line and the actual amount of money being spent on just that? The six municipal golf courses in San Francisco may provide some indication. That’s right, to ensure that every citizen – working or not – does not have to survive without access to the leisure activity of golf, the government has taken it upon itself to buy, build and operate six golf courses so that they may set the price lower than it would be otherwise. While this is nice for the small minority of golf-loving residents from these low-income areas, the state is losing millions of dollars a year maintaining this artificial economic exchange. Renovations on two of the courses recently cost the city $23.6 million, which they funded primarily from state bonds that must be paid back with tax dollars at high interest rates.
As we must concede that maintaining golf courses is unrelated to the effort of fighting poverty, it becomes evident that politics and the allocation of funds within government is often manipulated and advanced under the guise of “helping the poor.” Indeed, that stated purpose certainly sounds more deserving a notion than “helping the golfers.” Classifying any political scheme as being in the interest of the under-privileged guarantees a rare protection and ready defense against a majority of potential criticisms.
Price controls may be the most blatant and frequent violation of economic common sense that government imposes. Such artificial price ceilings and floors are also the largest contributors to the discrepancy between tax inputs and tangible benefits. The appeal of government programs such as San Francisco’s is that they negate the economic reality of prices. Prices serve an important function in any economy. They are necessitated by the fact that the sum of what everyone wants is greater than what there actually is – desires exceed resources. Thus, prices arise naturally out of the supply and demand and serve as mechanisms by which people choose how to allocate their resources. Ignoring the need for that mechanism is a common practice among otherwise astute politicians and the sanctity of the economy is abused as a result. The six state-owned and operated golf courses and San Francisco serve as a prime example.
The government has no more legitimacy in arbitrarily assigning a price to a service or product – worth cannot be assigned or fixed but is determined by supply and demand. The price controls the government has imposed in the nation’s health care are subject to the same misgivings. When the price is high, consumers will use their limited resources carefully and when the price is low, that kind of self-rationing is no longer necessary. When price ceases to be a real indication of limited supply and real demand, the market no longer operates at optimum efficiency. When the price is artificially low, then consumers do not hesitate to see the doctor for minor skin irritations, colds, etc. The supply of doctors has not increased but the demand has; this translates to longer waits for appointments – often months – and the risk that those with more problems seeking more immediate medical attention are forced to wait at cost to their health while another healthcare consumer gets their sniffles checked out.
Labor unions are also guilty of distorting the efficacy of supply and demand at determining prices. By imposing a minimum price on their labor above that which is appropriate for the amount of laborers in existence, the consumers of labor – employers – must decrease their demand to reach equilibrium. They do this by either laying off workers or – as is the case of the automobile industry – accommodate for a more expensive labor force by adopting automated machinery to complete those tasks formerly performed by human laborers.
Politics very rarely complements economics. Although in the short-term, which is of primary importance to politicians, the realities of a functional economy can be negated or disguised, doing so is ultimately detrimental and rendered unintelligible in the long-term.