Imagine an upside-down university that gives its best students Ds and Fs, while the worst get the As. The best students will, of course, quickly notice and will seek to outdo the worst, by getting every question wrong, sitting slack-jawed in class, or skiving completely, in order to displace the worst students and capture the As. Realistically, no one would learn. A system that aggressively rewards the inept, while penalizing the most competent, reaches a sorry endpoint defined by broad indolence.
Our hypothetical upside-down university, courtesy of Art Laffer, comes to mind as we watch the current Congressional spending spree, which follows precisely this model. In the just-passed $1.9 trillion American Rescue Plan, $350 billion of wealth is distributed directly to our cities, states, and the District of Columbia. These funds are ultimately extracted from the private sector, even if the linkage is obscured by newly printed money. Most of that money is distributed in proportion to the states’ and cities’ recent rates of unemployment. The states that have inflicted the most damage on their citizenry will have proportionally more dollars to “invest” in whatever programs these hapless governments choose.
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