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Letters from an Ohio Farmer

Federalism–and Cheese Factories on the Moon

October 11, 2011

To the Members of the 112th Congress:

I considered  how liberalism depends on crisscrossing dollars blackening the skies above the fruited plains—how under liberalism the federal government takes money from Peter to send it across the amber waves of grain to Paul, and all Paul’s cousins, aunts, uncles, and nieces, and back again to Peter, and invites them all to believe that in the process the dollars have somehow magically increased in number.

In truth, however, this liberal poker game cannot help being a zero-sum game: the dollars you start with will be the same as the dollars you end with. And when the central government plays the zero-sum game of taking money here and awarding it there, elected legislators from the various states and congressional districts in the country have tremendous incentives to minimize the amount of dollars their states and districts send to Washington, D.C., and maximize the number they receive from there.  In this perverse game, though party affiliations may divide them, American politicians are united in the need to present themselves to their voters as agents who adeptly enrich the Americans who elect them at the expense of all other Americans.  Phil Gramm, a conservative Republican who represented Texas in the U.S. Senate from 1984 to 2002, once said that while he would oppose a federal program to build a cheese factory on the moon, “if the government decided to institute the policy, it would be my objective to see that a Texas contractor builds this celestial cheese plant, that the milk comes from Texas cows, and that the Earth distribution center is located in Texas.”

Such jockeying for advantage by senators from 50 states and representatives from 435 districts will tend towards an equilibrium where each state and district sends exactly as much money to the federal government as each receives from it.  At that point, of course, the involvement of the federal government becomes completely pointless – every jurisdiction winds up exactly where it started out.

William F. Buckley, Jr.The fiscal logic of Bill Buckley’s suggested welfare reform, which we mused about in  (“Congress shall appropriate funds for social welfare only for the benefit of those states whose per capita income is below the national average”), is that some states would be net importers of federally reallocated dollars and others would be net exporters.  Poor states would get help and rich states would render it.  Any other alternative allows states more affluent than the nation generally to be net importers if their senators and representatives are especially aggressive or cunning, or if their bureaucrats are especially skilled at reading the fine print of federal appropriations laws.

A nation where federal welfare programs were limited to states with incomes below the national average would have much smaller welfare programs. Smaller welfare programs would mean lower federal expenditures.  Lower federal expenditures would allow tax cuts that did not increase the federal deficit.  This, in turn, would leave to the wealthier states dollars with which to finance welfare programs they design and administer internally.  The dollars over the skies of New York, California, and other prosperous states would be ones launched from within their borders.

The political logic of Buckley’s reform is that it discourages the wrong kind of competition within federalism and encourages the right kind.  The wrong kind is where the public officials in one state compete to come up with ways to use the federal government to help its residents at the expense of Americans living in the other 49 states.  That sort of competition sustains rather than penalizes bad governance.

The right kind of competition aims to provide citizens with choices among 50 different sets of taxes, regulations, and quantities and qualities of government services.  People voting with their feet will signal which approaches they consider most and least attractive.  Since different people want different things, various different arrangements of taxes and regulations, etc., will flourish.  No one, however, will seek to live or do business in states that specialize in combining shoddy, wasteful, ineffective public services with high taxes and burdensome regulations.

The automotive industry, by the same token, does not seek to offer the car every driver will want, but manufactures different products for those who care most about luxury, performance, design, price, fuel efficiency, or reliability.  What it doesn’t do – or didn’t until the GM and Chrysler bailouts – is to build ugly, unreliable, overpriced lemons and then rely on the government to rescue enterprises car buyers have rejected.  Clearing the skies, by simplifying and streamlining modern federal-state relations along the lines Buckley recommended, might be one way of  advancing federalism’s original and best purpose: to give Americans the kind of government they want, and enlist them in the republican enterprise of securing it.

On the other hand, before creating yet another program that takes money from some states and sends it to others, Congress might consider whether it would be better to leave the money where it is in the first place. Let the people in the states decide for themselves how to use it, as the Founders intended. If you do, you might find yourselves taxing and spending as the Constitution envisions: not for the benefit of one part of the country or another, but for the “General Welfare” of us all.

Ohio Farmer