Thursday, October 24, 2013

Out of Sight, Out of Mind


Austin Frakt over at The Incidental Economist had a good post today about how Ted Cruz's spokeswoman argued that, because the Senator was on his wife's employer-provided health plan, it didn't cost taxpayers any money. In his post, Frakt points out the obvious mistake--all employer-provided insurance is taxpayer-subsidized (to the tune of about $180 billion a year). After reading his post, I realized that this mistake on the part of Cruz's spokeswoman was reflective of a larger problem, in which many people fail to realize (or, more often, deliberately mask) the fact that, just because a program or policy doesn't have direct costs to taxpayers, doesn't mean that it doesn't cost people any money. 

Take, for example, the sugar quota that the U.S. has, which strictly limits the amount of foreign sugar we're allowed to import. There's nothing sweet (I'm sorry, I couldn't resist) about this policy--in 2011, it cost U.S. consumers an estimated $3.86 billion. Yet the American Sugar Association has the gall to insist that "U.S. sugar policy ran at zero cost to American taxpayers from 2002 to 2012." Zero cost indeed. To reiterate my point, here's a graph of U.S. vs world sugar prices:



In any case, you get my point: Just because the U.S. government doesn't directly funnel taxpayer dollars to the sugar industry, doesn't mean that a quota doesn't cost Americans any money. These policies are quite literally everywhere in the U.S., and in every case, they were a clumsy attempt at avoiding a tax hike while still achieving the same goal.

The list goes on and on with this sort of thing: instead of taxing gasoline, we insist on higher fuel economy standards for automakers. Instead of using tax dollars to provide health care to workers, we instead insist that employers must provide health insurance to their employees. But not the smaller companies, because that wouldn't be fair. The problem with a lot of these policies is that they end up having unintended consequences and are far less transparent and far more complicated in their mechanisms than a simple taxes-and-transfers scheme would be. Milton Friedman was right when he said that there's no such thing as a free lunch, and it holds true in nearly all things, from the sugar quota to the employer mandate. The sooner we realize that, the sooner we can stop trying to get something for nothing and start crafting better policies.