Four-Eight-Four [dot org]

I’ve already hypothesized the government exists as an economic entity. However, governments have one peculiar feature that isn’t shared by most other economic entities, and that is the ability to compel their clients (citizens) to pay taxes. Because of this peculiarity, it is desirable that government be limited in its scope as much as possible.

If the government fails to provide adequate service and economic value to its clients for the “membership fees” that it compels them to pay via taxation, the citizens have several options. First, they can exercise their right to vote, at least in countries where they have that right and the votes are actually counted and acted upon. Second, they can revolt and attempt to set up a new government. Finally, they move into the “service area” of another government that they believe will provide adequate value for their “membership fees.”

Interestingly enough, we see this third option acted upon relatively often, specifically in relation to government services like the public school system, garbage and recycling collection, parks, etc. When people relocate, those things are often part of the criteria they use to choose the location of their new home.

In fact, one of the reasons I am a client of the US Federal Government in the first place is that several hundred years ago, people made an economic decision to replace the government (Britain) that was providing them with poor customer service in exchange for high membership fees with one that would be more in tune with what they wanted, and would also allow them to have more control over the its direction.

Prior to that, many people made an economic decision to leave the boundaries of one government to create (or become clients of) another one that would provide them one one or more service of benefit not being provided by their current government provider (religious liberty, of course, being one that we often hear about).

Throughout our history, people have made the economic decision to move within our borders to trade one inferior government service provider for another one (ours).

However, we have collectively allowed our federal government to expand the services that it provides so far that it is difficult to separate it from the economy that birthed it (and in fact, via the Federal Reserve, the government attempts to control that very economy). The root of the problem is that, as mentioned above, the government has the peculiar ability to compel its clients to pay taxes.

Restaurants, for instance, cannot do this. If I don’t like the food at McDonald’s, I can vote with my wallet and go to Burger King. If McDonald’s provides poor enough service, most of its clients will vote with their wallets and take their money elsewhere, and McDonald’s will either have to respond by improving its customer service or close.

When the federal government expands the scope of its powers, it becomes difficult for its clients to vote. They cannot stop voting with their wallets (outside of moving to another country). Even though they can vote at the ballot box, it becomes more difficult to express their opinions in any sort of binding way. I can vote against my senator and representative because I don’t like their support for the Patriot Act or the war in Iraq, but what if I like other actions they are taking? I have to decide what issues are most important and vote based on those. The more things the government has its hands in, the more difficult it becomes to meaningfully change the direction of the government via voting! Outside of voting, my only option is to make my voice heard by writing or calling my senator or representative about each issue (which more of us, myself included, should do), but that, of course, is not binding on them in any way.

Another further issue … since the government can compel me to pay taxes, the expansion of the scope of government means I have less say over how my money is spent. Let’s take health insurance, for instance. Under the current (more or less private) system, I can choose to pay for health insurance if I want. I can choose my provider based on customer service. I can choose my plan. I’ve done all of these things … I’ve chosen to pay for health insurance, I’ve chosen a high-deductible plan in combination with a health savings account.

But, if government were to intervene and require universal health insurance, it would hamper my ability to vote with my wallet. What if I decided that none of the insurance companies and health savings accounts were working for me? I wouldn’t be able to opt out. Furthermore, my tax dollars would end up subsidizing somebody else’s insurance, perhaps with a provider that wasn’t servicing them well, or that I didn’t like. Worse yet, if there was a single government-authorized provider, I’d have no choice whatsoever.

This, in a nutshell, is why expansion of the scope of the federal government should be done carefully. Besides, we already have a document that defines its scope … this thing called the Constitution of the United States of America. Unfortunately, our federal government is currently operating outside of its scope in many ways …

More on this in another installment … specifically in reference to the Federal Reserve, Social Security, and interventionist foreign policies.