Spending Cuts

Political Philosophy
1

Two related questions:

Do you guys have any preference over what government spending should be cut first? ie should infrastructure spending be cut before welfare spending?

Does Objectivist morality dictate any kind of order to spending cuts? ie traditional morality would dictate that if one were to cut spending then rich people’s benefits should be cut first. For example fire service cuts would occur in rich areas first, before they are cut in poor areas on the grounds that rich people can better afford private fees.

2

Oooh, good question. I’ve got lots of preferences, so buckle up. For instance welfare is immoral, unless justified by the unusual circumstances -i.e. someone who worked as a postman all his life got laid off when the Post Office was privatized, and needs time to adapt). In general, the guiding principle should be that productive people who lose their livelihood due to the sudden changes should be protected for a while (by delaying the closing of their workplace, subsidizing or at least not taxing their jobs for a year or two once in private hands, etc.; or in the case of children with poor parents, by subsidizing their education for a couple of years, to give the parents time to adapt or charities to form and take over from the government), while unproductive mooches (current welfare recipients) not so much (their protections should end much quicker).

As for the methods used to accomplish that, there are a number of real world examples of economies which went through an even more dramatic transformation than what we’re talking about: some formerly communist countries in Eastern Europe and Asia, after the fall of the Soviet Union, transformed from 100% socialist economies into countries with smaller governments than most Western nations (some of them did it in just a few years). The history of that transformation should be studied, and the lessons applied.

The most often used method for that transformation was not liquidation, but in fact privatization : public auctions in which government owned entities were sold off to investors, sometimes for money received by the government up front, other times for money received on conditions of future profitability, still other times investors took over a particularly inefficient government enterprises for free, or even in exchange for future tax cuts, depending on the number of employees they committed to keeping on the payroll for a set period of time. Only as a last resort, when no investors were willing to take over a company, was one closed down (often after years of it being kept on life support through subsidies, and with generous severance packages for the laid off employees ).

Obviously, in your fire department in a rich neighborhood example, a local government could announce the privatization of the department tomorrow, and have it sold (for a handsome sum) by the end of the week. It wouldn’t really affect anyone, the firemen would stay employed, and might even be looking at raises. In poor neighborhoods, things wouldn’t be quite as peachy, but I bet those departments would sell too (and most of them would manage to stay in business). Everybody needs fire protection, and if you have a house, you can probably afford at lest a basic fire policy on it.

A lot of other, more complex ventures (schools, roads) would have to be privatized in increments , to allow solid business practices to be formed, give employees a chance to know what the changes are likely to be and time to adapt (for instance a lot of postal workers would get laid off, teachers would become subject to more frequent evaluations and serious competition for the more prestigious positions), and consumers to get used to the newfound control over their money and the added responsibility that carries with it (instead of paying gas taxes at the pump, for instance, motorists would be paying subscriptions to the roads they use every day; instead of being taxed for the education budget all their lives, parents would have to save their money for years before their children reach school age, to make sure they can afford their eduction even in tough times).

[Reason for edits and all the colors: trying to make a post that goes on way too long as readable as possible - the sentences I highlighted sum it up well]

3

Here is an article from the Review of Austrian Economics from the economic point of view (Rothbard does not promote anarchy in this one, until the last sentence perhaps, but the main bulk of the article assumes a limited capitalist government) on How and How Not to Desocialize.

An interesting note, was that he recommends a tax of less than one percent would be sufficient to fund the limited functions of protection and justice as a transitional measure to non-taxation based funding.

Any Objectivist analysis on the Austrian prescription would be welcome. I always feel Objectivists have too long neglected critiquing libertarian economists in detail.

But I think you were asking as the the implications of egoist moral principles, so on that note, I disagree with the “auction off” method of selling off public property and governmental institutions to investors. As Ayn Rand noted in CUI/RotP, “The Cashing-In: The Student ‘Rebellion,’” public property should be thought of as expropriated property, and its morally legitimate owners are the tax-payers who fund it. By what right would the government expropriate something, then sell it off and keep the money itself? That would be inconsistent with the very moral purpose of private property in the first place.

Therefore it follows that all property titles which originally belonged to an owner or his heir should immediately be recognized as restored, such as land taken by eminent domain, etc.

But this doesn’t account for everything in the country obviously. If, in principle, each owns in accordance with his tax payments made, thus, a more consistent strategy of privatization in these cases would be to distribute shares of ownership to tax-paying members of the community in accordance with their amount of taxes paid and can prove they have made. Every public road, park, school, etc. was funded by taxpayers, hence, local taxpayers, in accordance with their tax payments, should be awarded local public property, and this would probably be the vast majority of public institutions. Some have paid more than others, therefore justice would demand they receive more shares than others, and net tax-consumers none at all. These shares would be tradable and transferable, so people would be able to keep them and run these functions themselves, or hire new management to run them and reap the profits or losses, or sell them to entrepreneurs who would then take over. This makes it sure that most of these organizations and institutions will be either put directly to productive use or sold off for that purpose, and if not, then the owners assume direct responsibility for them.

We should also obviously consider certain totally improper functions like “tax collector” or “department of XYZ regulator” not a subject of privatization, but abolition. It would also be inconsistent to follow some strategy like the one suggested of turning certain organizations over to their workers, staff, and/or management. These assets only exist because of the productive actions of individuals who are net tax-payers, rather than net tax-consumers, therefore there should not be anything like “turning the school over to the teachers and staff” or “turning the post office over to the postmaster general,” as well as automatically disqualifying civil-servants and welfare recipients from receiving any shares in ownership. However, there exists many roads and streets that governments own surrounding all our property. In this case, the only thing that can be done is immediately transferring ownership to those whose properties are on or adjacent to them.

Of course there are still complications involved in all of this, but if we are serious about a free society, these can be solved by accountants, lawyers, and arbitrators acting under objective law and through the court system.