34 Paying for Government Services

In essence, in order to pay for a service, government must charge a fee, collect a tax, get a loan, convince people to make a contribution or volunteer money, get people to gamble, force the provider to sell at a fixed price, or inflate the currency.

Fees can be set to fund a specific service, used to raise money for other services, to encourage an activity or to discourage an activity. Toll both fees on tunnels and bridges are suppose to fund highways construction and road maintenance. In other places, they are used to subsidize mass transit. Some fees you can avoid. If you don’t have a car, you will never pay a tunnel toll unless you use a taxi. Others, you cannot avoid. You must pay your water fees or our water will be shut off. The city I live in is now vigorously enforcing fees to encourage water conservation. Also, an estimated 20% of the people have not paid these fees so other people are paying for them. I don’t feel this directly because I see no water bill when I pay my monthly maintenance. Some states raise money for specific activities through innovative ways. In Florida or North Carolina, depending upon the type of license play you buy, additional money will go to support the environment.

Taxes can be dedicated to fund a specific activity or go to the general fund. Automobile drivers like taxes going to build new highways but hate that it is used to fund other activities. Taxes on tobacco products are high because they are suppose to discourage smoking but in reality the government would lose money if people were to quit. If taxes become too high, an underground economy develops or people and businesses go elsewhere to avoid paying them. One economically illiterate candidate for mayor in NYC in 2005 proposed bring backing the stock transaction tax that New York City and New York State had abolished. He argued rich stockbrokers and investors could pay the taxes. The only problem was that in the age of Internet, people would go elsewhere to trade their stocks and bonds.

Government can borrow money. Some argue that capital projects that benefit many generations should be financed this way. Some governments borrow money to avoid cutting the budget or increasing taxes which would anger the voters. In the short run, this is a popular short-gap measure but too often is used to avoid making hard decisions. At some point, interest rates increase as people fear that the government carries too much debt and cannot pay it back. Orange County, California went bankrupt and then sued the bond brokers who helped the politicians that practice that chicanery. In the city I live in money, money was raised twice on various bond issues to build a subway line but the transit authority simply used it for other projects or to subsidize costs.

There are check-offs on state and federal income taxes to support the environment or publicly financing campaigns. Both McCain and Obama have gamed the public finance system when it has suited their advantage. McCain was able to borrow and raise money on the basis that he was going to apply to be publicly financed. Of course, someone is suing him that benefited from the public finance even though he did not a public dollar at that point in time. Obama who said he would use the public finance system, like all politicians, changed his mind when he could do better raising money privately rather than rely upon the public system.

States and local governments are in the lottery and casino business to raise money. They piously declare that the money raised will go to help education to get the public to approve state involvement. In reality, virtually all money raised goes to the general fund. Talk about bait and switch. In reality, it also a regressive tax on the poor plus the new gambling addicts created.

Then governments have to pay for services. In a free market, government has to compete with private businesses to pay for goods and services. However, government can create a monopoly in its own favor as a buyer. Now part of Hillarcare’s failed health legacy is flue vaccine and childhood vaccination programs. On September 19, 1993 - Pat Moynihan, speaking on Meet the Press, dismissed the economic calculations in the Clinton plan -- which has not even been formally launched -- as "fantasy numbers." When the plan was proposed in 1994, it was defeated except for its proposals to help the most vulnerable in our society – the young and the poor. There are fewer children now vaccinated against childhood disease than before Hillary’s plan. In case of flu vaccine, the Hillary health plan created problems because it made Uncle Sam the chief buyer of most of the flu vaccine at a fixed, low price. Unfortunately, flu manufacturers went of business when they could not make a profit because of legal lotto. When lawsuits occurred because of problems with the vaccine, their profit margins were not enough to cover the expenses. Instead of the 25 manufacturers of flu vaccines that this country had twenty-five years ago, we now have one!

Finally, we have inflation. Inflation when we have too much money chasing too few goods. The US went off the gold standard in 1971 when the price of gold was $35 per ounce. Today, the price of god is about $1,000 an ounce. In 1969, a Harvard College education cost $2,000 per year. Today, the cost is $50,000 per year. College inflation has been above the general inflation. Gasoline cost $.35 per gallon in 1969; today, it is $4.65 per gallon. Alexander Hamilton favored a central bank being in private hands because it would avoid inflating the currency because it would hurt their economic interests. Some economists argue that government has been inflating the currency in recent years because the price of gold greatly increased. I will say, Bernard Baruch always thought war bonds were consumer fraud because of inflation.

As you can see, there is no magic way of raising the money. It is all a pain no matter how it is raised.