Free Lunch For the Middle Class Now Causing Pain

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President Obama and his cabinet are busy scaring the American public about all the pain that the tiny budget cuts called for in the sequester are going to cause. Big delays in air travel due to fewer TSA agents and air traffic controllers on duty. Food processors shut down because USDA inspectors are not present to ensure what we eat is safe. Parks closed. Firefighters, teachers, and police laid off. The question everybody should be asking is why are these things paid for with general tax revenue or by the federal government?

In my book, Ending the Era of the Free Lunch, I point out that one of the dangers of a free lunch (when you get something off value and somebody else gets the bill) is that since you are not the paying customer the service could disappear at an inconvenient time. During the recession many mass transit systems had to cut back on their services right as demand was surging. More people wanted to ride mass transit, but most of the revenue comes from tax dollars, not ticket sales. Thus, when tax collections dropped during the recession, service had to decrease even though ridership was up. The free lunch was great until people really needed it, and then it wasn't there.

Firefighters, teachers, and police are all local government employees. The federal government never should have been paying for them. After all, why should taxpayers in New York City pay for teachers in Georgia? The answer is that they shouldn't. Now, a cut in federal spending may affect lots of non-federal government services because of the huge growth over the last ten (or fifty) years in the federal government paying for things it has no business paying for.

Food processors should be paying for food safety inspectors and passing the cost onto consumers in the price of food. Parks can be funded mostly or fully by fees collected from visitors. Airport safety used to be paid for by airlines, but the Democrats forced a federal government takeover after 9-11. Now the federal government has the power to make us wait at the airport any time they want to convince us higher taxes are a good thing.

Interestingly, there is no free lunch in air travel. The government charges a multitude of taxes and fees on every plane ticket to cover security, customs, takeoffs and landings. That means that travelers are at least theoretically covering the full cost of any government-provided services they are receiving (and if not, the taxes and fees should be adjusted). Therefore, one wonders why any cuts should be required in a service that is making money. After all, if fewer people fly because of long delays, the government collects less revenue. It is almost enough to make you suspect the government is going to slow things down at airports simply as a political ploy to gain support for more taxes and more government spending.

When we choose to depend on the government to pay for things that we depend on, we take a big risk. Even upper middle class and high income families that pay lots of taxes have no control over where those taxes go. As the sequester deadline approaches, we are all learning that means the government decides if we continue to receive those services that we most value or instead our tax dollars go to pay for things we don't benefit from or care about. This lesson is coming home to the middle class, since entitlements are generally protected and, thus, the poor have little to fear from the looming budget cuts.

The other lesson to be learned about free lunches is that they usually end up being low quality. When I am the paying customer, whoever is providing the good or service has to keep me happy in order to keep my money flowing into their cash register. When the government pays, the government is who needs to be kept happy.

If I pay private school tuition, the school will listen to me. With public schools, I pay property tax to the school system, income tax to the state and federal government, and then they send it back to schools. Even if I pay enough taxes to cover the cost of my child attending public school, the school sees the government as the paying customer, not me. Without needing to answer to a customer who actually receives the service, quality suffers.

Think about what sectors of the economy have problems and seem broken; they are the ones where the customer does not directly pay for the good or service. Health care, public schools, crowded roads; the common link is the customer rarely pays directly for what they get. The result is a diminishing of the customer's role in steering the marketplace to provide what is most in demand.

That means schools have to do what the government wants and demands, not what parents want or even what is best for the children, because the government is paying the bills. It means that TSA answers to the government rather than to air travelers or the airlines. So if the government wants the lines to be long, TSA will make it so because the government pays the bills. It means that the Department of Education will cut funds that aid kids instead of cutting bureaucrats, travel, or programs that indoctrinate instead of educate. It means USDA can cut safety inspectors instead of eliminating corporate subsidies.

If President Obama wants to maximize the pain felt by most citizens due to a few tiny budget cuts, he can make that happen. Perhaps doing so will have an unexpected benefit. Maybe people will learn that dependence on the government doesn't always mean free stuff. Sometimes it means disappointment when the free lunch buffet is removed while you are still hungry.

Paying for things directly means controlling your own destiny. When voters decided to go with big government and lots of freebies they also choose to live with what the government decides to give them. The middle class may be about to learn a painful lesson. They may find that you can't always get what you want.

Jeffrey Dorfman is a professor of economics at the University of Georgia, and the author of the e-book, Ending the Era of the Free Lunch

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