Genetically modified food is a flashpoint in the public debate over the wholesomeness of the modern diet. Many speculate that consuming GMOs has been linked to several various health problems. Few people question whether there are any benefits to producing genetically modified food products. There is a bit of irony here since most anti-GMO activists also happen to be exponents of environmentalism. In certain situations, GMO food could feasibly be sustainable alternatives to dwindling supplies of natural food sources. One salient example is in the market for edible fish.
The Fall 2021 issue of Regulation magazine details the struggle of AquAdvantage to obtain approval from the FDA for their edible genetically modified salmon. However, even after nearly 13 years of pending FDA approval, AquAdvantage still has other legal hurdles to clear, obstructing their entry into the market of consumable fish. This threat is coming from the political and business interests in the state of Alaska. Sen. Lisa Murkowski (R–AK) assuming the veneer of consumer production advocate; argues that consumers need to know what they are consuming. Murkowski:
“… attached a rider to the FY 2019 appropriations bill that required genetically engineered salmon approved before the labeling standards created by the U.S. Department of Agriculture’s National Bioengineered Food Disclosure Standard regulation to include the words “genetically engineered” in its market name — a requirement seemingly intended to spook consumers…” (P.3).
The “moral” concern expressed by Murkowski; creates a dynamic conducive to Bootlegger and Baptist’s (1983) coalitions. Murkowski can be considered a Baptist for articulating consumer protection concerns for the stringent labeling requirements. She also could arguably fall into the category ofDuel-Role Actor if her consumer protection advocacy is sincere. After all, Murkowski is a politician and has an incentive to appease her constituency. Consumer protection advocacy is a win-win strategy. Since the average voter may superficially perceive this initiative as being in their best interest, of their health and safety, continue to vote for Murkowski. But arguably, the most more powerful voter-bloc she will need to win would be the salmon fisherman and hatcheries. The industry surrounding food-grade salmon production is estimated to generate $600 million annually in economic output. Making it quite evident who the Bootleggers are! However, placing restrictions on genetically modified salmon creates a bit of a Prisoners Dilemma, as the U.S. producers cannot meet domestic demand for salmon, 90 % of all salmon sold in America is imported.
As another variant of anticompetitive market behavior, there are generally moral arguments for supporting the measure. This means that advocacy for maintaining this system is subject to Bootlegger and Baptist’s (1983) dynamics. Concurrently, while some argue that the MLS system from a consumer interest standpoint inevitably NAR realtors are the ones that benefit. Our Bootleggers realtors profit handsomely. Not only does this practice allow the buying brokers from having to negotiate fees, but American realtors are paid “… two to three times higher than in other developed nations..” (p.30). Effectively operating as a transfer of wealth from the consumer to the service provider (p.30). However, some realty companies such as Clever Real Estate assume as a Dual-Role Actor. Such a firm is a beneficiary of the current trade practices; they also argue that the MLS system is more convenient for sellers to expediently sell their homes
In the political process, many coalitions are symbiotic relationships that require the resources from both groups to successfully achieve results. The classic Bootleggers and Baptist (1983) model best exemplify this very fact. However, there has always been the implication that this political relationship has always been one-sided. The Baptists do all the heavy lifting from a public relations standpoint, meanwhile, the Bootleggers lurk in the shadows as silent beneficiaries. Superficially it almost seems as if the Bootleggers are free riders how to prosper at the expense of those who risk their reputation for controversial positions. But typically in the political landscape of the United States morality isn’t enough. In the absence of adequate funding, a political campaign ends up being dead on arrival. Because money is required for advertising, organizing outreach events, and other means of communicating the campaign’s message. Often for what the Baptists lack in finances, the Bootleggers tend to contribute to the initiative. This is due to the Bootleggers frequently being involved in business and having a serious monetary stake in the issue. It would be a mistake to interpret this previous statement as a value judgment since anyone of us would do what we could to defend our paychecks.
One excellent example of this dynamic was detailed in the Spring 2021 issue of Regulation magazine (Vol 44, No. 1), published by the Cato Institute. Presented in the article Not So Unlikely Coalitions (p.12-15) written by economics professor Jeremy Horpedahl. The article focused on the legalization of alcohol in various counties throughout the state of Arkansas. Since the repeal of prohibition, the re-legalization of alcohol sales has been done incrementally at the county level. By state law, the legal status of alcoholic beverages can be altered by being voted on as a referendum. Similar to how the Marijuana relegalization issue is being handled now, except at lower level governance. For the initiative to appear on the ballot a petition must be signed by 38 % of the “.. jurisdiction’s voters..”. The author also notes that regionally voter turn is approximately less than 50 %, meaning that last-minute campaigns to halt the legalization process tend to be ineffective (p.14).
In Arkansas, the alliance between religious leaders and liquors stores in adjacent “wet counties” in Missouri have been proven to be effective. Both sides of the coalition found that it is better to direct campaigning efforts towards keeping the referendum on the ballot rather than beating it at the ballot box. Generally, once an initiative to re-legalize alcohol reaches the voters in Arkansas it tends to pass. During the 2010s, Craighead, Crawford, Faulkner, Independence, Johnson, Randolph, and Yell counties all successfully prevented alcohol legalization from appearing on the ballot. Bootlegger interest groups easily raising over $100,000 to fund various PACs to defeat the bill before it even reaches the ballot box. Funds are being allotted to press interviews with local religious leaders and various media campaigns (p.14). It should be noted that areas that are landlocked between other dry counties lack any liquor stores to act as the Bootlegger interest group leaving the Baptists on their own for obtaining funds (p.15). However, per Horpedahl there has been a new entrance to the political interest game operating as Bootlegger for the legalization side, Walmart. The titan of retail raised over $700,000.00 in 2014 to support the legalization effort in Saline county dwarfing the contributions of the opposing set of Bootleggers ($157,500.00) (p.15).
It is easy to perceive the role of the Bootlegger as being almost parasitic. The Bootlegger interests idly standby while the Baptist do all the leg work of persuading the public. Upon reviewing Professor Horpedahl’s s article it becomes quite clear that the Bootleggers do assist in supporting political advocacy, they just happen to do so in the shadows. These business interests are forced to conceal their direct involvement in public policy due to the stigma of the intermarrying of business and politics. Demonstrated by the fact terms such as “dark money” have now entered the public consciousness. Leading most to express skepticism of the purported intentions of corporations when they tip their toes into the pool of political advocacy.
The renewed interest in raising the federal minimum wage is gaining steam as a hotly contested debate. Especially considering President Biden is inserting a $15 an hour minimum wage requirement in his latest Coronavirus relief bill. There are many proponents on both sides of the issue. Many advocates of a higher minimum wage claim the moral high ground on the issue, considering the rate has not kept up with inflation. Suggesting that raising it to $15 per hour would aid those working in low paid professions with being able to afford the bare necessities. Some even boldly advocating for a pricing floor of $24 per hour as being an adequate minimum wage.
However, is it economically sound to raise the minimum wage to even $15 per hour? Over the past couple of years, several papers have suggested so, but their interpretation of the data did suffer from some misconceptions. If we underwent an extremely rudimentary cost/benefit analysis of raising the pricing floor for labor we would see that it is a detrimental policy. A recent study found that raising it to $15 an hour would lift approximately 900,000 people out of poverty. As many advocates enthusiastically indicate as being evidence that this would be a good policy. Per the 2020 U.S. Census, it is estimated that 34 million people were living in poverty in 2019. Making 900,000 only a drop in the bucket in terms of battling the social issue of poverty. What the pro-raise the minimum wage camp neglects to inform us of that the same study they cite also estimates that 1.4 million people would also stand to lose their jobs! Making it reasonable to question whether raising the minimum wage would truly benefit the poor members of society.
The resurgence of the minimum wage debate mirrors the arguments for imposing pricing ceilings on in-demand goods during the beginning of the COVD-19 pandemic. Why? Because minimum wage laws and price gouging laws both operate as forms of price controls. Generally, these policies are implemented to insulate the consumer or work from “exploitation”. Either being paid inadequate wages or having to pay exorbitant prices for commodities during a time of crisis. However, prices are the key market signal that bridges the information asymmetries between consumer and supplier. Prices are contingent upon the supply of a product or service and the level of demand. Hinging on one of the most basic and universally known economic laws. Despite the good intentions of the activists pushing for an elevated minimum wage they are doing more harm than good. By mandating by law that the minimum wage needs to be at a certain dollar amount it immediately creates distortions in the labor market.
In an abstract sense, the worker is selling their time, services, and human capital when they agree to accept a job offer. In the job market, the corporations and small businesses looking for workers are the consumers. The job seekers are the ones supplying the labor. High wages alert prospective job seekers were the most lucrative job opportunities are which generally require less common skills. Directing the job seekers to make the appropriate investments in human capital. Implicitly detailing which degrees, certificate programs, and other forms of job training are required to stand out in the job market. Workers with little in the way of skills command a lower starting wage. Compensation is based on a worker’s productive output capacity. If a worker has few skills their productivity would be relatively lower from an economic standpoint. When the minimum wage is raised there is an imminent risk of displacing low-skill workers. If a fast-food worker is only producing $9 an hour worth of productive output and the minimum wage is raised to $15 an hour the business owner stands to take the loss. Then he may decide to cut corners and operate with fewer people, compromised product quality, or automatic the process. The threat of automation is real. Several studies have found that driving the price floor for labor up results in increased automation of operations. It is clear that the distortion of prices in the labor market could lead to displacing more low skill workers. The result being more low skill workers harmed than helped. Some income better than no income at all?
On a philosophical level, the virtue of charity is highly exalted. Few are willing to question if charitable efforts are effective. An even increasingly small number of philanthropists are willing to entertain the notion that they are harming the recipient. It is counter-intuitive to fathom the idea of our helping hand is causing negative consequences. Unfortunately, sometimes good intentions do not yield good results.
Despite the clear need for charity in our society that still doesn’t negate potential externalities. Intentions are mutually exclusive from the repercussions. This observation is demonstrated by Noble Laureate James M. Buchanan’s Samaritan’s Dilemma. Buchanan based his postulation upon the Parable of the Good Samaritan. This biblical passage details an account of “… the Samaritan aiding a man who had been beaten and robbed by thieves…” ( Wagner, P.11) . Buchanan took this biblical allusion one step further and generalized it to charity as a whole. Once the recipient is cognizant that the charitable donation is larger than what they can earn from labor, they will lose the incentive to work (Wagner, P.11) . Thus, they become dependent upon charity.
While this concept is applicable to private charity, it is quite prevalent in public policy. Many “safety-net” programs are merely forms of socialized charity. The implication of “socialized charity” is intended from a value-neutral standpoint. The Samaritan’s Dilemma is not confined to our stereotypical examples of government assistance. For instance, the Samaritan’s Dilemma arises in the area of subsidies for crop insurance. A 2009 study found a” … 0.2% decrease for every percent increase in expected disaster payments…” (Deryugina & Kirwan, P. 27) . Similar findings are also applicable to moral hazard in flood insurance policies. As policymakers succumb to the pressure of voters demanding increased funding for flooding relief. The number of property owners with flood insurances decreases (Michel-Kerjan et al, P. 9) .
The presence of moral hazard seems to be prevalent throughout disaster relief literature. Applying both domestically and internationally. If the precedent for government aid is established individuals are less apt to take precautions. Making them solely dependent on aid provided by various government agencies.
Why Focus On Means-Tested Welfare Benefits?
It is quite evident that there is a robust body of literature related to disaster relief and the Samaritan’s Dilemma. The obvious question becomes, why focus on means-tested welfare? For one, programs such as SNAP, WICC, Medicaid, etc. tend to find into our stereotypical perception of charity. Making it a clear example of where the line of assistance veers into incentivizing long-term dependence. Also, funding for such programs is always a consistent talking point pertaining to economic policy. There is also a lot of misconceptions concerning the incentives for welfare dependence. The ubiquitous image of indolent dirtbags avoiding work is largely a myth. The vast majority of welfare recipients wish to participate in the labor force. However, typically the total value of welfare benefits allocated tends to surpass an annual salary for most entry-level positions. A fact that has been demonstrated by a 1995 study (Tanner et al. p.2) and the 2013 follow-up (Tanner & Hughes, p. 7) conducted by the Cato Institute .
The Cato Institute 1995 Welfare Study:
The 1995 welfare study conducted by the Cato Institute found that overall combined welfare benefits generally exceed the income of most entry-level positions. The added benefit being even a state with benefits comparable to minimum-wage such allocations would be tax-exempt (Tanner et al. p.1) . Clearly aligning incentives with long-term welfare dependence. In the short-term could be perceived as being within the best interest of a rational actor. Setting the stage for applicability of the Samaritan’s Dilemma in the sphere of entitlement programs.
In order to fully illustrate how welfare benefits reduce incentives to work, it is best to compare wages with the sum of allocated benefits. Back in 1995, 40 states’ welfare benefits collectively amounted to more than $8.00 per hour (Tanner et al. p.1). In 17 states, the total amount was equivalent to more than $10.00 per hour (Tanner et al. p.1). Some of the more generous states in the country (HI, AK, MA, CT, NY, NJ, RI,& Washington D.C.) paid out more than the equivalent of $12.00 per hour in welfare benefits. That is more than 2.5 times the federal minimum wage in 1995 (Tanner et al. p.1) . 8 states within this time frame provide more than $25,000.00 in welfare benefits annually (Tanner et al. P.2) . This is equal to the purchasing power of $42,154.53 in 2020 when adjusted for inflation.
It is imperative that we cross-compare these findings with average entry-level wages back in 1995. This will establish a proper context for the previously detailed allocations. Simply stating that Hawaii paid out the wage equivalent of $17.50 means very little without the appropriate context of market wages (Tanner et al. P.2). Per Tanner et al. :
An entry-level secretary can expect to earn about $9.01 per hour, which is less than equivalent to welfare benefits in 29 jurisdictions. The national median wage for a janitor is $6.75 per hour. Welfare recipients in 47 jurisdictions receive more in benefits than the average janitor. It is important to realize that, contrary to popular belief, the average janitor’s wage is well above the minimum wage rate of $4.25 per hour. Perhaps more interesting, the national median wage for computer programmers is about $13.03 per hour–less than the welfare benefit levels in the six most generous states. (Page 23-24) .
It is quite conspicuous why a welfare recipient would be susceptible to indefinite reliance on entitlement programs. If you are able to obtain more than the equivalent of a computer programmer’s median annual salary in public assistance it would be irrational to work. Typically those receiving government assistance lack the human capital to make equivalent wages in the labor market. When you combined the advantages of these benefits being tax-free and the general human preference for leisure, the choice is simple. Continue to receive welfare benefits as long as possible. Not only are incentives to work are removed, but consequentially the drive to improve one’s circumstances is relinquished. An occupation such as computer programming requires a lot of job training and even college degrees. Keeping human nature in mind, if there is a way to circumvent the schooling and job training but have equal compensation most people will take the shortcut. It is not laziness or malevolence, but rather a rational cognitive appraisal. That is why merely 68.6 % of welfare recipients in 1995 were actively seeking employment (Tanner et al. P.2) . Poor people aren’t stupid, they respond to incentives in the same way anyone else would.
It should be important to not overgeneralize the findings of the 1995 study. The potential for misapplication is highly probably. Both by welfare advocates as well as opponents. The study notes how there were 77 programs in 1995, no single recipient receives benefits from each one (Tanner et al. P.4). For example, only 23 % of AFDC beneficiaries had received housing assistance (Tanner et al. P.26) . However, most had received benefits from multiple programs.
The 1995 study concludes that the salient incentives for long-term welfare dependence are tied to the number of benefits provided. As a means of policy reform, it is recommended that welfare benefits be reduced to minimize persistent reliance on such programs (Tanner et al. P.30) . The timing of this study is somewhat ironic considering the timing of the study in relation to the 1996 Welfare reform of the Clinton administration. I would strongly surmise that this study provided some fodder for justifying such a policy change.
The Cato Institute 2013 Welfare Study:
In social sciences much like other disciplines that utilize empirical research replication of results is paramount. In science, if results cannot be replicated odds are the researcher’s results were due to sampling error. Verifying the importance of follow-up studies. Michael Tanner and Charles Huges conducted a follow-up to the 1995 study. One core difference between the 1995 and 2013 study is the implementation of the Welfare Reform Act of 1996. It would be natural to assume that the parameters of this reform have reduced the numbers of people dependent on welfare. Unfortunately, such an assumption is superficial and inaccurate.
Despite the efforts of the Clinton administration, the welfare reform of 1996 wasn’t as successful as anticipated. The dollar value of welfare benefits paid out has declined in 18 states since the reform (Tanner & Hughes, P. 8) . However, in 33 states and the District of Columbia, the monetary sum of benefits paid out increased even when adjusted for inflation (Tanner & Hughes, P. 8) . Placing into question the overall impact of the 1996 reform. Since 1995 the number of federal programs geared towards low-income recipients ballooned 126 (Tanner & Hughes, P. 7) . Which does not lend much confidence in the effectiveness of the 1996 reform.
The unfortunate facts are that many state welfare programs are still far too generous. Despite minor improvements. In 2013, 13 states had benefit allocations averaging over $15.00 per hour (Tanner & Hughes, P. 7) . The study also notes that 35 states still have welfare benefits that exceed the wages earned on a minimum-wage salary (Tanner & Hughes, P. 7) . The subsequent study found that in 12 states leaving welfare would result in a loss of income. Even with EITC and CTC tax credits taken into account (Tanner & Huges. P.7) . An incentive that makes up for taking a job that pays slightly less than welfare benefits in 39 states. However, still cannot counterbalance the value of leisure (Tanner & Huges. P7) .
In 2013, the issue of welfare allocations eclipsing many entry-level positions is still a lingering issue.
In 11 states, welfare pays more than the average pre-tax first-year wage for a teacher. In 39 states it pays more than the starting wage for a secretary. And, in the 3 most generous states a person on welfare can take home more money than an entry-level computer programmer. (Tanner & Hughes, P.8) .
The number of states providing benefits surpasses the salary of an entry-level computer programmer has been reduced by 50% since 1995. However, it does seem superfluous to have any aid to top the salary of a computer programmer. Computer programming is a prime example of skilled labor. That alone is enough to discourage those in need to find work. Why go to college to gain such skills when you can just apply for welfare? However, it seems as if such generous distributions are relegated to a minority of states. State welfare benefits exceeded the salary of a starting secretary in 29 states in 1995. That number jumped to 39 in 2013. This is obviously a step in the wrong direction. Especially considering secretary positions can be a solid career stepping stone.
The five most generous states all increased the overall welfare allocations since 1995. Hawaii had a $7,265.00 increase in average welfare benefits paid to a household. Washington D.C. a notably $8,730.00 increase. Massachusetts exhibited a $5,169.00. Connecticut a modest increase of $1,781.00. Finally, New Jersey with a $5,533.00 (Tanner & Hughes, P. 8) . To truly put these numbers in perspective it would be helpful to see how these benefits rank terms of hourly wages. For Hawaii, it amounts to the pre-tax equivalent of a resounding $29.13 per hour. Washington D.C. $24.43 per hour. Massachusetts $24.30 per hour. Connecticut $21.33 per hour. New York $21.01 per hour (Tanner & Hughes, P.12) . Please note that in Hawaii minimum-wage as 2020 was $10.10 per hour .
While derisive criticism could be directed at the states for generous benefits programs, there are other factors contributing to the lackluster results of the 1996 welfare reform. There is much due opprobrium that can be levied against the work requirements. The 1996 legislation added more stringent work requirements as a contingency for receiving means-tested aid . Per federal law, each can provide hardship work exemptions for up to 20 % of all welfare recipients (Tanner & Hughes, P. 39) . Such a restriction seems like reasonable restraint many there are still states such as Massachusetts that have few recipients participating in work actives.(Tanner & Hughes, P. 39) . For example, per the study, only 18% of adult participants in TANF were engaged in work actives (Table, P. 41).
Nationally less than 42% of adults receiving public assistance are working (Tanner & Hughes, P. 41) . Even at that, the definition of work activities stretches beyond actual productive labor. Encompassing job training and even schooling. The definition of work activities was made even broader under the Obama administration. Per a 2012 executive order (Tanner & Hughes, P. 41) . Providing more malleability in the parameters for welfare requirements only creates more loopholes. Participants are most likely not looking to cheat the system. However, broadening requirements increases the aptitude and propensity for chronic dependence. In turn, fulfilling the prophecy of Buchanan’s Samaritan’s Dilemma.
A help-handing can make all the difference for those who are in need. I would never set out to write a critical polemic against the virtue of charity. The institution of privatized charity would be the preferential over socialized assistance. Whenever the costs are socialized there is a disconnect between funding and the actual effectiveness of the government program. Most taxpayers operate under the assumption that the policy must be effective. Acquiesce the existence of welfare as a necessity, if it wasn’t the program wouldn’t exist. Few question whether or not their helping-hand is securing the ball-and-chain of multi-generational welfare dependence.
My policy preference concerning welfare programs leans Libertarian. However, the complete abolition of social assistance initiatives is unrealistic. Any politician suggesting such policy prescriptions would be committing political suicide. Most of these programs are entrenched fixtures of the massive bureaucratic body. Making them difficult to dismantle. Odds are most voters’ preferences would align with keeping such efforts in place. Therefore, it is important to look at this issue from the framework of reform versus the lofty aspirations conveyed in political theory.
Once you re-orientate your expectations become a matter of honing in welfare. Focusing on shaping these programs into being temporary assistance versus lifelong entitlements. Scaffolding towards independence versus multi-generational shackles. The only way to make this policy shift would be through reducing the value of welfare benefits paid. In turn, such a policy adjustment would realign motives towards investment in human capital and situational improvement. Not indefinite continuation of the same programs. Which is why I would recommend time limits on the duration of time a recipient can receive benefits. It is evident that work requirements are flimsy barriers. Flimsy barriers which can be easily penetrated.
Judging by some of the gaping holes in the Welfare Reform Act of 1996, it is reasonable to question if the Clinton Administration was serious about welfare reform. Easy to see this piece of legislation as a series of insincere concessions between a Democratic White House and a Republican congress. Even in light of the loopholes in the initial legislation, the reform initiative has been further eroded by subsequent administrations. Per the Cato Institute 2013 study pertaining to the work requirement changes made by the Obama administration:
However, other observers disagree, pointing out that the definition
of work activities is already extremely loose so that any increased latitude can only make the situation worse. Ron Haskins, who as a Republican committee aide helped draft the 1996 welfare reform and who now is an analyst for the Brookings Institution, says that if the administration “wanted to undermine the work requirement,” the new policy “is away to do it.” (Tanner & Hughes, P.45-46)
Which circles back to the whole concept of welfare dependence being a byproduct of legislative flaws. Designing welfare programs that make it too easy or too rewarding to obtain welfare benefits will breed long-term dependence. The question becomes are we are helping or hurting these individuals. I would be speculating we are hurting them. They continue to lack the skills for substantial employment. All it could are budget cuts or elimination of a program and then they are living in a cardboard box. The price of being completely reliant on government assistance is having no autonomy over your economic future. No hope of upward mobility. Being held captive by congress and voter attitudes towards welfare. If either falls out of favor of supporting welfare, vicissitudes do not bode well for recipients.
What it means to be a political conservative has drastically changed throughout the course of American history. The meaning in a political context has even shifted from the defining proclamations of Barry Goldwater in The Conscience of a Conservative. Arguably a seminal pamphlet in defining conservative values in the 20th Century. I personally feel that conservatism much like any other body of ideas has its advantages and drawbacks. One value of conservatism that has been slowly eaten away by political opportunism has been fiscal responsibility. While not personally a conservative, this is a conservative value I am fully on board with.
The irony is that in the modern era of the 21st century even purported conservative politicians are not fiscally conservative. Making this virtue a relic of a bygone era. Profligate spending was a policy fixture of both Bush administrations and even prevalent in the Regan administration. It appears as if President Trump will also follow suit with veering away from budgetary constraints.
Interestingly enough Libertarian/ Conservative icon the economist, Milton Friedman, felt as if he had found the solution. This remedy is referred to as a Starve the Beast policy. Which is based upon a rather linear concept, simply cut taxes as this will discourage spending. Certainly, a novel postulation that appears to have been underneath our noses this entire time. Does this theory hold water upon the scrutiny of empirical analysis? This question has been highly debated among scholars of all stripes. Not to mention fiercely defended by Friedman-fanboys. As brilliant as Friedman was it does not make him infallible. There is sufficient evidence to suggest that Friedman was dead wrong about the overall impact of the Starve the Beast method of cutting spending.
One fact that should be noted is that while many conservative Republicans have anointed Regan with the status of a demigod, this is to some extent a shallow perception. The beloved cherub of the conservative shrine was not the most fiscally responsible president. It turns out while Regan may have cut taxes, he actually increased spending. These findings represented in a 2009 study published by the Cato Institue. The study found overall that cutting government tax revenue created the illusion of decreased spending. A firm nod to my previous blog entry addressing Fiscal Illusion. Overall, based on the result of the cited research it does not appear as if the data backs up Friedman’s claims.
From the standpoint of science, replication of results is the validation of the data obtained. It veers away from the potential of findings being an anomaly caused by sampling error. Thankful for our friends over at the Cato Institue have conducted further studies pertaining to Starve the Beast policies. Researcher Michael J. New conducted a regression study of the relationship between expenditures and taxation from 1981-2005. It was found that even when adjusted for wartime spending, limiting tax revenue did not effectively curtail discretionary spending. Substantiating the previous research of William Niskanen.
It is excellent that these studies have exposed the numerical shortcomings of simply cutting taxes. However, what is causing the profligate spending to continue even when tax revenue is decreased? Now it is time to applaud the advocates of the Austrian School of Economics and Public Choice Theory for acknowledging the role of inflation. If the printing presses are running the possibility of funding without direct tax dollars is on the table. This is a massive blindspot in Milton Friedman’s thinking, but an understandable one. Utilizing inflation for financing expenditures is circuitous means of procuring funding. Not an obvious means of generating revenue. Also, it is important to remember he was a proponent of monetarism making him less apt to question the government’s role in controlling the currency supply. However, considering the disastrous economic effects inflation can bring it is something that should always be questioned.