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Paying for Vital Things
Kevin writes regarding my "Relief and Outrage" post:
I've omitted other supporting details, but the argument is essentially that the New Orleans area is vital to the nation's economy and that a city is needed to run the transportation infrastructure there.
I agree, it is vital. When I heard the news that a hurricane was headed for New Orleans, I felt a sense of dread from the fact that so much commerce through the lower Mississippi River area would be disrupted. I agree without hesitation that it's in the interests of the entire country for this region to get back to normal.
And yet, I am totally unmoved by claims that the federal government should pay for reconstruction. Firstly, this "vitality argument" ignores all the reasons I gave in the earlier post about why we shouldn't subsidize people to live in disaster areas. But let's consider the vitality argument on its own merits, and assume arguendo that federal spending would help the "vital" task of getting the transportation infrastructure back to normal more quickly.
So what? Federal spending could arguably help anything. Farmers troubled by a drought? Give 'em subsidies — farming is "vital", isn't it? Banks wrote a bunch of bad loans? Bail 'em out — the financial industry is "vital", isn't it? People prefer to buy things other than health insurance? Create a national health care system — the government has a vital stake in the health of its subjects, doesn't it? In all of these cases it can be argued that the economic impact of "doing nothing" is enormous. Food is one of the United States' largest exports. The economy would be seriously undermined by a cascading banking collapse. National productivity would be harmed if millions of people needed medical care but couldn't get it.
Note carefully that my examples are all real, and that they glide away gradually from a sudden catastrophe like Katrina. Droughts are a kind of natural disaster, but they're relatively frequent and very slow-acting. Banking crises are (when they strike) sudden disasters, but are not natural. Low health insurance coverage is the product of human choice, arguably neither natural nor a disaster — but observe that people still call it a "crisis" in need of federal funds.
Every "crisis" has a constituency ready to belly up to the slop trough. Socialism is the predictable end state. If anything that's "good for the country" is ipso facto acceptable for the government to do, you'll be amazed to discover that everything any politician has ever dreamed of doing to buy votes is good for the country! Bread and circuses for all!
It's not merely that subsidizing risk encourages risky behavior. Beyond that, these things are outside the legitimate scope of government action. Governments properly exist for the purpose of protecting individual rights, and that's all. It is not the purpose of government to "help people in need." Helping people in need — with other peoples' money — is wrong. If Bill Gates decides to donate $10 billion to hurricane relief, that's his business. But if the government takes that $10 billion through a special tax, the oil companies … oops, I mean Bill Gates, is just being looted. There is no difference in principle between looting from a small number of very wealthy people, or in looting a smaller amount from the broad swath of all American taxpayers. It's wrong.
Returning specifically to the subject of Katrina, federal relief is interesting from a geographical standpoint. Which area do you suppose has a greater economic connection to the Ports Of Southern Louisiana — Alaska, or Mexico? I'll wager it's Mexico, hands-down. So why should Alaskans pay for rebuilding, but Mexicans not? Should the accidents of history that made Alaska but not Mexico a state have any bearing on the matter? After all, we're talking about economic impact, not politics.
Different people in different regions of the country have different levels of dependence on Louisiana's transportation infrastructure. Why, then, should all taxpayers be affected in the same way? Given the principle of contributing due to economic importance, shouldn't the reconstruction tax be adjusted based on each region's economic connection to Louisiana? Or further, on each individual's?
The short answer to that is yes, it should. But I don't have a literal "tax" in mind at all. I believe the right approach to rebuilding is the free-market approach. The people most connected to the region will contribute toward its rebuilding through the higher prices charged by businesses operating in or through the disaster area. In exactly the same way that Intel's customers fund the construction of new multi-billion dollar chip fabrication plants, the customers of the companies affected by Katrina will pay for the billions in construction funds those companies need to raise, too.
If it really is economically vital, the free market will pay for it — because it's profitable to do so. If the market doesn't pay for it, you need to rethink your assumption that it was ever vital in the first place.