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Jewish World Review July 28, 2000 /25 Tamuz, 5760

Thomas Sowell

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The "costs" of government

http://www.jewishworldreview.com -- Bill Clinton says that the budget surplus cannot be used to reduce taxes because it would "cost" too much. Just what does that mean? It certainly does not mean that the government would have to give up doing something that it is already doing. The very fact that there is a surplus means that tax revenues exceed what the government is spending on everything that it is doing.

If what Clinton really means is that the government would like to expand what it is doing, instead of returning the surplus to the taxpayers, then let him say that -- if he dares -- instead of talking about what a tax cut would "cost." Obviously, every time the government sends you a tax refund of $100, it has "cost" the government $100, if you want to use that kind of meaningless rhetoric.

The other great insult to our intelligence by those who oppose tax cuts is that the money should be left in Washington, to be used to pay down the national debt. Anyone who thinks that you can leave hundreds of billions of dollars in Washington, without the politicians spending it, has a faith which passeth all understanding.

The very idea of government's "costs" is strange. Since government does not generate wealth, but simply spends wealth generated by the people, the only costs being borne are those costs borne by the public. When the public gets part of its own money back, that costs the country nothing.

What we should really be concerned about are the costs created by government. Not all these costs are paid for in taxes. Some are paid for in many other ways. More important, many of the costs created by government are not counted -- and can therefore reach astronomical levels without creating an outcry or a backlash.

Housing is a classic example. State, local and national governments blithely pile all sorts of costs on those who build homes and apartments -- and then often express shock at a lack of "affordable housing."

If a builder were so optimistic as to imagine that he could build a 20-story apartment building in Silicon Valley, he would quickly discover that he would be lucky if the powers that be allowed him to build something half that height. What is the cost of this -- not to the builder or to the government, but to the people? It means that half the people who could have lived near their work will have to live farther away and add to the highway congestion -- and highway fatalities -- that result. Not all costs are financial.

The other half of the people who rent apartments in Silicon Valley will find the prices driven sky-high by the artificially restricted supply and the growing demand. These include not only height restrictions but also restrictions on the amount of land that must be set aside for "open space," on which nothing at all can be built.

Open space, like height restriction, has its benefits. So do millions of other things. Outside of government, however, we do not simply say that something is a Good Thing, without asking how good and at what cost. How much open space is worth how many people dying needlessly on highways getting to work from far away?

As for financial costs, a computer software engineer who recently looked for a two-bedroom apartment in Palo Alto, in the heart of Silicon Valley, found it priced at $2,400 a month -- and there was a waiting list. The same apartment out in California's central valley rents for about one-fourth of that. There aren't as many restrictions on building out in the valley, nor as many other costs created by government as in politically correct Palo Alto.

If you were to drive through Palo Alto, you would probably find it a nice little town with comfortable-looking old -- and often drab -- houses. But unless you were familiar with Silicon Valley prices, you would probably not think of it as a place where these houses would go on the market at asking prices of half a million dollars -- and often be bid higher.

Housing is just one of innumerable areas in which government creates huge costs to be paid by the people, without even a suspicion as to the source of these costs. In addition to the 18 cents a gallon that the government adds to gasoline prices in taxes, its restrictions on oil drilling drives the price higher by supply and demand.

We ought to be looking at the real costs of government, which go far beyond the numbers in the federal budget.


JWR contributor Thomas Sowell, a fellow at the Hoover Institution, is author, most recently, of The Quest for Cosmic Justice.

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