State and local governments are lurching into insolvency because of their previous profligate spending. In the current economic downturn they are now turning to lobbyists, to beg money from Washington. Money they should be spending on services they now spend in a sort of cargo-cult frenzy, hoping against hope for a bailout.
That’s what happens when the government gives away HUD grants, for instance. Cities around the nation spend more money preparing grant applications than they actually get in federal money. It would be better had HUD never existed. But, once in play, most cities cannot stop themselves from bidding for HUD’s handouts.
Yes, I said the word “bid.” From an economic point of view, that’s what the grant-writing and lobbying businesses are: bidding auctions in that most peculiar market for “free money.” Economist Gordon Tullock showed why this kind of auction is so different from trade auctions. There’s no theoretical upper limit. It’s crazy.
And it’s how federal government handouts work in our society.
How much better to not bid in such auctions at all. How much better if the federal government were prevented from giving away taxpayer funds to state and local governments entirely . . . better simply to follow the limits in the Constitution.
This is Common Sense. I’m Paul Jacob.