Austrian economists, most notably Ludwig von Mises, have written about the business cycle (and the booms and busts that result) and the role that easy credit, created by low interest rates, plays. Government intervention such as artificially low interest rates, or confiscatory taxation, the spoils of which are awarded to certain connected players in the game, causes “investment” in activities that would otherwise lack the resources necessary for their existence. Thomas Sowell once said that if there is truly a need for anything, even charity, the market will provide for it. If the government is paying for something, it has displaced the market’s proper role, or no need existed in the first place. Whatever you think about Sowell’s statement, I think that this concept is helpful to those attempting to ascertain for themselves what government’s proper role in society is.
“Investment” or spending, the result of inappropriately low interest rates or taxation, invariably leads to mal-investment, if you believe the Austrians. Hint: their economic model is the only one that has predicted every economic downturn. Austrian economists shrug, say “DUH!,” and never seem to be surprised by anything that happens in the economic world. Bottom line: if anything is supported by tax dollars, or cheap debt, it is not stable and has a correction in its future. This is the boom and the bust.
Years ago, I began to view Medicare in this way. Since the source of Medicare money was a robbery, I felt that my neighbor would always push his legislator to cut physician reimbursement. All my neighbor knew was that he was being robbed to pay some doctor for the care for someone across town he didn’t know. This is not a stable business plan. Making my long-term plans based on this revenue source seemed a bit foolhardy. I believe the same instability characterizes anything subsidized by the taxpayers.
This instability also applies to medical research funded by the government. Grant writing is an art, one that is aimed at securing federal funds with little-to-no concern with the utility of the planned “research.” The most imaginative grants are the ones that in a premeditated fashion plan for incomplete results, requiring “further study.” This keeps the money rolling in. Sure, there are serendipitous discoveries occasionally, but the goal is always the money.
State governments, including Oklahoma’s, where I live, dole out taxpayer money to “research groups,” hoping to help them along, as this “creates jobs.” Readers of this blog are by now familiar with Bastiat’s “What Is Not Seen,” his irrefutable point that this money, had it been left in the taxpayers pocket would have gone to other uses, sadly never seen or known, due to this theft. Gifting these research companies this taxpayer loot also bestows a credibility of sorts on them, one which helps these companies more likely to successfully make application for and receive…ready?…federal funds, the source of which is yet again, another stick-up. I always find it bothersome when state level actions, such as those here in Oklahoma, result in federal funds raining down on Oklahoma. Legislators are basically using the loot from their stickup to lobby for an even grander larceny of their constituents by Uncle Sam. We can do without these “favors,” I think.
G. Keith Smith, M.D.