Is the Budget Mess a "Tragedy of the Commons"?
That's the provocative thesis put forward by economists Bruce Yandle and Jody Lipford in a new working paper released by the indispensable Mercatus Center at George Mason University.
Most of the Ricochetoise are probably familiar with the "tragedy of the commons", but for those who aren't, the term essentially refers to a situation in which a resource is overconsumed because the user has no ownership interest it.
Now consider Yandle and Lipford, from the paper's abstact:
... the Sixteenth Amendment establishing the income tax nullified the prior constitutional restraint on the size of government and enabled one group of citizens to vote themselves benefits at the expense of another. In terms of economic theory, the budget has become a “commons” and is subject to the tragedies of overuse and abuse. Over the past three decades, the distribution of U.S. tax liability has become more skewed. A rising percentage of citizens pay few or no federal taxes, so that a smaller share of the citizenry increasingly bears the tax burden.
Analytical work shows that the skewed distribution of the U.S. tax liability is correlated with higher debt and greater entitlement spending. Since currently there are no constitutional constraints on deficit spending, the research calls for policy makers to broaden the tax base so that more citizens will feel the cost of deficit spending and to take action to reduce the associated tax burdens. This paper demonstrates that when the tax-price of government services is zero, more will always be demanded.
This is a great paper that will appeal to the economics nerds amongst the Ricochetoise. That being said, it worries me to live in a nation where academics feel -- with much justification -- that they have to produce a scholarly work to prove that when people get stuff for free they want more of it.
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Re: Is the Budget Mess a "Tragedy of the Commons"?
Wow, that's a really interesting premise. And yes, the budget mess certainly does seem to qualify as a tragedy of the commons.
Most conservatives agree that we need to broaden the tax base, but also are resigned to the political infeasibility of the prospect. Instead of raising taxes on people who don't pay income taxes, what if we simply did away with automatic withholding for payroll taxes (which everyone who gets a paycheck pays)? Would that achieve a similar result? I think that causing folks to feel the loss of money that they've earned would get their attention in a big way.
May '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
The national income tax code has been expanded and complicated for nearly a century... by both parties (meaning the exemptions and qualifications are hopelessly scattered and ubiquitous). It is one of the greatest contributing factors to the ambitions of politicians and myopic desires of citizens. If we are ever going to meaningfully and lastingly reform the tax code, we should begin by removing the incentives to tax — cutting programs and agencies.
I'm all for eliminating automatic withholding, as Diane suggests.
Nov '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
Awesome link, thanks Troy.
This might be more appropriate as a full post, but bear with me for a minute: I've been re-reading a lot of Aristotle lately and one idea of his that seems to me to be useful when thinking about our problems is his division of different types of government. One way to categorize them is by the number of people with power--either one ruler, or a few, or many. Another way is by who they're designed to benefit. Governments that are designed to benefit everyone in the society are "correct," while those designed to benefit the rulers are "deviant." Tyranny belongs in the category of deviant rule by one person, because the tyrant seeks only his own benefit, and democracy belongs in the category of deviant rule by many, because the many are the poor and they are ruling for their own financial benefit. I say all this as background for the idea that struck me as I was reading through the paper:
If James Otis was right that "taxation without representation is tyranny," then I would say representation without taxation is democracy.
May '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
This appears to me as issue of incentives. According to the law of demand, as the price of a good drops, the quantity of that good demanded rises and as the price of a good rises, the quantity of that good demanded drops. An entitlement is a good and tax consumers demand entitlements. For many tax consumers, the price of entitlements is zero because they pay no taxes; for others taxpaying tax consumers, the price is low. Hence, among tax consumers, the quantity of entitlements demanded is high.
This is what happens with commons. The price of resources is zero, hence the quantity demand is high and the quantity supplied is low, leading ultimately to a shortage.
Oct '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
Insanity is the more plausible diagnosis. There used to be sane Democrats (Bill Clinton is a perfect example) that thought reasonable growth of government, without massive deficit spending was enough to achieve their policy goals. Compare that to 40%, $1.6 TRILLION dollar deficits of the past several years (and the forseeable future). What is going on today is not "the tragegy of the commons," because the people don't get to vote. We live in a republic, where representatives are elected. And the Democrats in Congress and the White House have decided to ignore economic reality. The Democrat Party has gone completely insane if they think remaking the US into the rubble of Greece is a country that they can control.
Dec '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
Yet, if it is asserted that Democrats want more people on welfare, on food stamps, or in government jobs in order to consolidate their power, the idea sounds foolishly extreme.
When it is asserted that our historic first Islamic apostate president deliberately intends to immiserate the middle class and subjugate them to the whims of the Leviathan in order to consolidate collectivist power, the idea outrages the bien pensant.
But when he uses the word “balanced” to mean raising taxes and the word “tax spending” to mean raising taxes, it all makes such good sense that the Republican old guard hastily passes a bill providing for three of its members to form a praesidium with Democrats before the end of the year in order to raise taxes on a chronically diminishing tax base.
Tea party movement: Faster please.
Dec '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
The left will just discount the methodology...
Diane, I felt this going from military service to civilian life. While I was in the navy I received over 90% of my pay because so much of it was non-taxable. Now with all of it being taxable, and paying for health insurance, dental insurace, life insurance, and retirement savings, I only take home about 70% of my pay. I make (on paper) about the same amount of money, but I took a huge net pay cut.
May '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
I agree that to eliminate withholding would force people to realize how much they hate parting with their money. However...
The advantage of tax withholding is that you don't end up with an enormous tax bill at the end of the year that you unscrupulously didn't prepare to pay. I suppose if they had quarterly taxes due, that would help, but then wouldn't you have to do four tax returns per year?
Jun '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
The "commons" analogy has one major flaw. When the villigers over-grazed livestock on the commons, the common pasture was ruined and the villiagers had to deal with starving livestock. One rational response would be to that everyone would agree to be limited to say, one milk cow and five sheep on the commons. The other, perhaps inevitable, response was: "Kick down his lordship's fence, he has more grass than he needs"
Edited on Aug 2, 2011 at 9:52amMay '10
Re: Is the Budget Mess a "Tragedy of the Commons"?
No, you only file 1 tax return per year-- but you have to cut a check every 3 months or so for "estimated taxes."
It would force a bit of discipline into people's budgets, which is much needed. And yes, show people how much the government takes. It would be a quarterly reminder of how much we pay for the "services" we receive.