The Strange Illogic Of Fiscal Libertarianism

One thing I’ve noticed some people who support market liberalisation and smaller government say is that certain kinds of government spending are illegitimate.  That is to say that they disagree with the government spending money in a certain way not just because they think it is bad policy, but because they think the government is violating some sort of fundamental principle by doing so.  As one specific example, I have seen someone argue that the per-vote political party subsidy that exists in Canadian federal politics is undemocratic because in their words, it forces people to fund political parties they disagree with.  More recently, I witnessed someone arguing against a grant given out by the U.S. government to an organisation attempting to preserve the history of video games on the grounds that one could not justify using the force of law in order to extract money from individuals in order to fund cultural preservation.

I’m not going to argue whether either of those programs is particularly good policy (though for the record, I more or less support the per-vote subsidy and am ambivalent on cultural preservation), but I think the logic behind the two views I described above is a misunderstanding of how government operates. Further, I think that when you follow that kind of thinking to its logical conclusion, you find that it doesn’t present a model of government that could actually function in the real world.

So why is this way of viewing government a misunderstanding of how government operates?  I’d argue that there are two separate but related mistakes here.  The first is the idea that your taxes are divvied up in a particular way to pay for programs.  That’s not a view that really makes sense.  Many people use more in government services than they pay in taxes.  This is true even of many people who are not low income earners; for example, chemotherapy is kind of expensive.  Paul Krugman has said that the U.S. government is basically a big insurance company, and I think this is true of the governments of virtually every industrial, democratic country to varying degrees.

Even among people who use less in government services than they pay in taxes, the view doesn’t really hold up.  In 2009, the average income of an “unattached” (ie. not married and with no dependants), employed, non-elderly male in Canada was $46,300.  I’m oversimplifying a bit here, but those individuals pay roughly $7000 in federal income taxes per year.  Expenditures in the federal budget for 2009-10 were $258.6 billion.  I couldn’t find a 2009 number, but the Conservative election platform claimed that last year (2010), the per-vote subsidy cost $27.4 million.  That means that the per-vote subsidy took up 0.01% of the federal budget, or 1/100th of every penny spent.  0.01% of $7000 is $0.70.  But the per-vote subsidy started at $1.75 and rose to $2.00, so how is it possible that the average single, employed male is actually subsidising less than that?  It’s because taxes don’t directly fund programs on a per-taxpayer level.  You can’t just divide up your taxes to determine how much money you paid into specific programs.  For that reason, it makes no sense to say that you’re being forced to support political parties that you dislike through the per-vote subsidy, because there is no way to determine what your taxes, specifically, are being spent on.

I think part of the problem here is viewing taxation and spending as being much more tightly connected than they actually are.  With a few exceptions (like the Canada Pension Plan), the government collects taxes to place in a general fund.  From that fund, money is parcelled out to departments, who further parcel the money out to specific programs, and so on.  Foreign affairs is what my background is in, so I’ll use the Canadian International Development Agency as an example here to demonstrate how this works. While the Minister that CIDA is responsible to (currently the Minister of International Cooperation) must sign off on particular programs, it’s actually the staff at CIDA who investigates and plans various programs, based on guidelines set out by the Ministry/Government.  And this is a good thing – we want people who are trained in and knowledgeable about international development making decisions about things like how to distribute food aid during a famine, rather than partisan politicians who may not even know what a famine is (technically speaking, anyway).

While there are many reasons that expenditures work this way – program expensese are not always known ahead of time, the government needs room to react to unforeseen circumstances, etc. – what’s important is that this is actually how taxation and spending work.  The government absolutely does not collect a specific amount of money to pay for specific program outlays.

And I think that’s it this inaccurate conflation of taxation and spending that causes many libertarians to argue that so many government expenditures are illegitimate and undemocratic.  But let’s say that those people do actually understand the difference between taxation and spending, but think that the government shouldn’t operate that way, that the government really should only raise taxes for specific, pre-determined programs.  I think that would result in a country that more or less couldn’t operate, but I think there’s an even bigger philosophical problem that that view entails.  This view of government argues that the government can only legitimately spend money in one particular way – the way that matches up with how the person currently arguing believes the government should spend money.  In their view, any expenditures that they do not personally agree with are undemocratic.

That argument doesn’t stand up to logical scrutiny, though, unless the person is actually arguing for no government rather than democratic government.  While there are surely some libertarians who really do believe the world should be ruled by corporate gangs and that the average person should struggle to survive by throwing their lot in with whichever warlord they choose, I think most people of a libertarian disposition do actually recognise the need for government and are simply caught up in romantic ideals about what they think “liberty” ought to be.  And that romantic view simply doesn’t make sense, because it’s not technically possible for a government to only spend money in a way that everyone agrees on or for government to tax people only for programs they specifically authorise.

One of the things that we accept as part of living in a representative democracy (for those who do agree to be a part of it, at any rate) is that even governments that we do not like are still perfectly legitimate so long as they act within a certain set of legal (and perhaps ethical) boundaries.  This is not to say that we can’t disagree with specific funding decisions, only that we accept that the government has the authority to make them so long as they do so within a set of agreed upon rules.  For example, I strongly disagree with the current Conservative government’s decision to increase prison sentences for drug crimes and spend billions of dollars in an attempt to imprison more people.  Nevertheless, I accept that they are within their right to do so.  In fact, I must accept that right, or else a government that I support would likewise have no legitimate authority to implement programs either.  This is the bargain (or social contract, if you prefer) of representative democracy – we accept that governments may do things we disagree with in order to maintain for ourselves the ability to likewise make policy and spending decisions should we become government in the future.  And further, we don’t just accept this begrudgingly because we hope to be powerful later on; rather, we accept it willingly, knowing that it is the fairest way of making complex political decisions.

At some point in the future I think I will explain what specifically I think the role of government is.  It seems pretty relevant to what I’m discussing here, and I think it presents a consistent framework that allows for ideas other than my own to be legitimate and democratic.  However, this blog post is already up to undergraduate essay length, so I’ll leave the subject here for now.  Thanks for reading.