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Monday, September 22, 2008

Lemieux: The rabbit in Mr. Duceppe’s hat

Politicians like to pretend. Stéphane Dion pretends that he can impose a carbon tax on Canadians in a way that won't leave most of them substantially worse off. Barack Obama pretends that an endless series of new laws and regulations can usher in an era of "hope" and "change."

(For a rather hilarious and cynical take-down of Obama's "politics of hope", see John Derbyshire here. My favorite line: "'Yes we can!' No, you can't, you bloody fools.")

The pretensions of politicians are sometimes so audacious that one wonders if they fancy themselves as wizards -- capable of bringing about heaven on earth with hand-waving and smiles the way Gandalf stopped a Balrog in its tracks with his magical staff in Tolkien's first Lord of the Rings book.

But even Gandalf knew his powers were limited; politicians, not so much.

Gandalf the Grey: still not half as  arrogant as Gilles Duceppe(To the right: Gandalf the Grey -- not even half as arrogant as Gilles Duceppe, despite being a much cooler guy.)

In this week's column, Pierre Lemieux exposes the would-be magicians in our midst. Gilles Duceppe, leader of the Bloc Québécois, recently boasted how the federal government receives $40 back for each dollar it spends to put on a western-themed festival in Quebec. My reaction to this about the same as Lemieux's: "Egads, where can I get a return like that on an investment? There's a ten dollar bill in my wallet right now just itching to be turned into -- what, about $400?"

Student loan repayment, here I come!

Of course, when politicians and pundits brag about the rate of return on federal arts subsidies, they're ignoring something crucial. Frédéric Bastiat called it the "broken window fallacy."

Every dollar the government takes from us to spend on arts subsidies is a dollar we don't get to spend on other things. Unfortunately, the state has no interest in letting us know exactly how much of each person's tax bill gets directed to arts subsidies and similar programs. Maybe it's not even that much, as a portion of the whole. But it was money I would have spent or saved, i.e. it would have been put to productive use, if only I'd been allowed to keep it.

Who knows what the economic benefits would have been, had we been allowed to keep our money? This is why Bastiat discusses the broken window fallacy in a work entitled "That which is seen and that which is unseen." None of us know, really, what would get produced or invented, what investments would be made, what businesses would exist, if only the government left more money in our pockets instead of diverting it to special interest groups.

We just don't know the fortunes that could be made if the state would simply get off our backs a little. But the state hides all that from us and tells us that the rate of return to its coffers makes the sacrifice all worth it; some people even believe it. That's the real magic trick.

Excerpts from Lemieux's column are below the fold. 

"Why not increase the St. Tite Festival’s subsidy to $1 million, thereby producing $40 million in tax revenues? Yet, a moment’s thought will show that we can do much better. Let the government give a $1 million annual subsidy to each of the 5,600 municipalities in Canada (the number of census subdivisions). This would cost $5.6 billion, just 2.5% of federal expenditures, and would generate $224 billion in federal tax revenues, enough to cover the entire federal government’s budget. For a tax of less than $200 per person ($5.6 billion divided by 33 million Canadians), all federal expenditures will be fully financed."


"As impotent as they are at creationism, politicians are very efficient at taxing a large and diffuse group of taxpayers and redistributing the proceeds to small groups of concentrated interests. Each Canadian worker pays less than a cent to finance a $100,000 subsidy to a few people in St. Tite.

The problem, of course, is that this process is repeated over and over again in all kinds of government transfers and “investments”, and the Canadian taxpayer ends up paying nearly 40% of his income in miscellaneous taxes. In return, he gets bad services, stupid subsidies, and a pile of regulations, controls and prohibitions."


Posted by Terrence Watson on September 22, 2008 | Permalink


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Ok, I do find it amusing that Google Ads on the left is linking to websites where you can find out more about getting a government grant.

Posted by: Terrence Watson | 2008-09-22 1:09:03 PM

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