We are heading into our twenty-third deficit in the last twenty-six years. In the richest and most productive year in our history, with the most onerous taxation we have known until this decade, our federal revenue still does not equal our federal spending. That spending now runs to about $64 billion a year—20 times the rate at which we were spending, say, in 1928. Yet the Administration professes helplessly that it cannot cut this down. It is not merely defense but non-defense spending that is at record levels. From a hundred directions come demands for more funds for grandiose highway programs, federal aid to schools, flood control, more social security, more aid to the farmers, more foreign aid. And so on and on.
It now seems futile to criticize any specific spending program. For a general delusion has taken hold of the overwhelming majority of our Washington rulers. This delusion has been given what seems to me its most appropriate name by the European economist, Wilhelm Roepke. “When demanding assistance from the State,” he wrote, “people forget that it is a demand upon the other citizens merely passed on through the government, but believe they are making a demand upon a sort of Fourth Dimension which is supposed to be able to supply the wants of all and sundry to their hearts’ content without any individual person having to bear the burden.”
This name for the delusion is comparatively new. But the delusion itself, and correct descriptions of it, are very old. “The state,” wrote the French economist, Frederic Bastiat, a century ago, “is the great fiction through which everyone attempts to live at the expense of everyone else.” And in 1842 Macaulay declared: “It is supposed by many that our rulers possess, somewhere or other, an inexhaustible storehouse of all the necessaries and conveniences of life, and, from mere hardheartedness, refuse to distribute the contents of this magazine among the poor.”
This delusion thrives today as never before. Every morning our newspapers report statements that the government has not yet begun to meet our highway needs, our education needs, our farm-support needs, our hospitalization and health needs, and a thousand other “needs.” The tacit assumption is always that an increase in government spending will meet more of our total needs than were met before. But this comes from overlooking the obvious fact that the government has not a dollar to spend on anybody that it does not take from somebody else. When a pressure group says, “We demand that the government should pay for us,” it is really saying, “We demand that other people should pay for us.”
The net result of this process is that instead of meeting more of the people’s needs than otherwise, we actually meet fewer. This is true for several reasons. In 1829, the poet Robert Southey (who was a New Dealer a century before Franklin D. Roosevelt and a Keynesian a century before Keynes.) wrote that a “liberal expenditure in national (public) works” was “one of the surest means of promoting national prosperity.” Macaulay pointed out in a blistering retort some reasons why public spending is usually less needful and more wasteful than private spending.
We may add other reasons. For every additional dollar that the government spends, the taxpayers have one dollar less to spend. The situation is worse than this. Taxation erodes the incentives to produce and earn. It penalizes success and the production of marketable products, often in order to subsidize continued production of unmarketable products. It sets up an army of taxgatherers, taking them from more productive work. In the end it meets fewer real needs than before. People spend the money they themselves earn on what they themselves really want. The government spends money, not on what the rest of us want, but on what our paternalistic bureaucrats think is good for us.
The delusion of an economic Fourth Dimension flourishes not merely through stupidity, but because there is now an enormous vested interest in keeping it alive.
Newsweek, November 28, 1955
Additional problems initiated and intensified by each new law almost always exceed the problem which the law was designed to alleviate in the first place. This could continue until the taxpayer is extinguished and the government is in complete control. It has happened several times before in history.
W. C. Mullindore. How Government Grows
Henry Hazlitt
Henry Hazlitt (1894-1993) was the great economic journalist of the 20th century. He is the author of Economics in One Lesson among 20 other books. See his complete bibliography. He was chief editorial writer for the New York Times, and wrote weekly for Newsweek. He served in an editorial capacity at The Freeman and was a board member of the Foundation for Economic Education.