Dwight R. Lee is the Ramsey Professor of Economics at the University of Georgia, Athens. Robert L. Sexton is Professor of Economics at Pepperdine University.
Special interest groups have been quick to tap the public till. Of course, they usually aren’t so blunt as to demand tax money for their personal benefit. They have found a more effective strategy: obtain government subsidies for their pet project by arguing that it will benefit everyone in the community. Their project, in fact, is something we all “need.” It’s amazing what a person will “need” when someone else is picking up the tab.
A natural response is: “If your project is so desirable, why do you have to come to the government to get it funded? If everyone needs a good or service so much, why aren’t they willing to pay for it?” (In which case some enterprising entrepreneur will gladly supply it.)
Most special-interest advocates have a couple of answers. They argue that most people aren’t aware of all the benefits they will receive from the project, or that the project is a public good and deserves support on that basis.
The first answer should persuade very few. If you don’t benefit from a private good, it’s because you don’t care enough to purchase and consume it. Of course, there are always people who feel that you aren’t very bright if you don’t like the same things they do. But how you spend your money is your concern, not theirs.
If the lobbyist claims public-good status for his or her proposal, at least two questions need to be asked. Does the project convey important benefits to the community at large? Is it impossible to deny these benefits to anyone once the project is completed? Few projects meet these standards. But you would be amazed at the number of projects that are funded at public expense because they are supposedly public goods.
For example, many big cities have built large sports arenas at taxpayer expense. Supporters claim that a sports arena, with the major-league teams that usually go with it, brings recognition and fame and revenue to the city. Furthermore, supporters assert, this will benefit everyone in the city, whether they are sports fans or not, because they will be living in a more prestigious community. And this justifies coercing everyone to pay for it.
Clearly, this is a weak argument. The people who benefit the most from a sports arena are the fans who use it. But it’s easy to prevent someone from receiving this benefit if he doesn’t buy a ticket. And it isn’t true that everyone will benefit. For example, sports arenas create traffic congestion that many find objectionable.
It’s probably true that some people who never attend a sporting event may feel a little better just knowing that they can, or knowing that their city makes national news occasionally for something other than a rising crime rate. But does this justify commandeering funds from everyone in the city to build a sports arena? What about fine restaurants? Certainly fine restaurants enhance the reputation of a city. Many people are happy to know that one is nearby, waiting to serve them, whether they visit it or not. But most people would find a proposal to build publicly financed restaurants a little farfetched. If desirable side effects justified government subsidies, then well-kept yards, hair styling, pretty dresses, face lifts, car washes, toothpaste, deodorants, smiles, ice cream parlors, and athlete’s-foot medication would all qualify for a handout.
We need to recognize that special interest groups expend a lot of effort to get subsidies for things that they enjoy. The sports arena is only one example. The more “cultured,” and usually wealthier, denizens of many cities have managed to obtain government support for symphonies, operas, ballet, and the performing arts in general.
The justification they give is similar to that for subsidizing sports arenas. Supposedly, everyone in a community will benefit, even those who prefer to sit home with a can of beer and watch all-star wrestling on television.
There are many other examples of special interest groups seeking public funds for goods and services that primarily benefit them. Just follow the proposals and requests that come before meetings of locally elected officials. You probably will be surprised at the number of “socially concerned” people who have identified some urgent public “need.”