Sunday, October 27, 2013

Answers on Defense Spending: Voluntary, Mandatory, or Considered?

"The Free Rider Problem" is, whether admitted or not, problematic for advocates of most forms of libertarian society, particularly the various forms of voluntarism. The idea that no government on any level should have the power to coerce tax revenues means that any "taxes" paid will be more like donations.
The difficulty with removing the power to collect coercive taxes for anything is that "public use" goods such as national defense will be greatly under-consumed in a voluntary system. This will lead to not only a miss-allocation of resources, but in some cases a loss of the very freedom libertarians and others hold so dear.
National Defense is a prime example of a public good. You benefit from national defense (note: this argument applies to true national defense, not militarism masquerading as such) whether you contribute to the national defense or not. It would be impossible to exclude you from the benefits of national defense. That's the profile of a "public use" good. You can obtain full benefits even if you did not contribute toward the purchase.
Suppose the volunteer tax collector comes around and asks you how much you want to spend on defense this year. To reflect our real defense budget, excluding the wars in Iraq and Afghanistan, the share for the average family of four would be about $9,000 per year (you might not have known the burden was so high). The fellow tells you that to keep defense spending where it is, he needs you to write a check for $9,000, or actually $18,000 since your humble author decided things were a little tight in my household this year so I told them I didn't want to pay anything.
Who among you will honestly tell me that you will keep writing that check, year after year, knowing that it will just be one drop in a very big bucket that won't even notice that "drop" which is such a sacrifice for you?
I have heard it said that giant corporations like Coca-Cola, with so much to lose, would step up and pay the bills. Please, corporations don't care which set of government parasites is looting them, only how much they loot. "Meet the new boss, same as the old boss" would be their motto, unless the enemy nation made a deal with them, as China has done with many companies in other contexts.
Jefferson was right, merchants have no country. Corporations may even look on the unity of the two nations as an opportunity to expand their markets. Besides, if corporations were paying the bills, they'd be calling the literal "shots" even more than they do now- sending our troops overseas to protect their foreign property as a condition of their continued support. Don't count on them to defend your freedom, because that is not what they are there for. They have their own interests.
In a voluntary society, if we just go around asking everyone how much they want to pay for national defense, the answer would be "X", even when a citizen really thought the prudent level would be 2X, or 10X or even infinityX. Defense will be woefully under-consumed in a voluntary society, even dangerously so. It has been said, short of the Kingdom of God those who beat their swords into plowshares will plow for those who don't.
A society which funds its national defense this way will lose its freedom to a society which does not. The American revolution was not supported by the entire population, but the entire population was taxed to pay for it. Had we not done so, we would have lost and still be subjects of England. Could either side have won the first world war with such a tactic? How about the Second World War? That's the problem with voluntarism and public goods such as police protection and national defense. Resources are not rationally allocated because we all know we can be a free rider when things are tight, and things tend to always be tight!
But of course, it is not fair to compare a voluntary society with perfection. Comparing it to what we have now would be a much fairer comparison, and in that comparison it looks a lot better. Because what we have now is a massive over-consumption of goods- the opposite problem of the free-rider problem in public use goods.
That too is a result of the way defense is funded. The people paying for it are only distantly connected to those who decide how much to pay. And between them is a military-industrial complex which lobbies the people who pay. It lobbies them intensely. The Complex is focused on only one issue- how much money the defense industry is getting. For the general voter, a Congressman who spends too much on defense can make up for it in other areas. But for the Military-Industrial Complex, there are no other areas. Breaking it down to incentives for politicians, they have more incentive to overspend defense dollars than under spend them.
If that were the only economic incentive, it could be overcome. After all, they would just be another special interest group in Washington with few boots on the ground back home. Two things have enabled this special interest to successfully get America to overspend on defense, or really just one thing that has two components. Defense is over-consumed in our society today because the cost for it is shifted to others.
One way this is done is through the use of fiat currency debt to fund the purchases. This allows the politicians to essentially buy the favor of the special interest while shifting the costs unto the backs of the unborn. Taxing the next generation to buy support is a favorite tactic of politicians lacking in moral character. Since we don't have to write the check for it today, its all on easy, easy credit terms, we choose to tackle more immediate problems, and the debt bomb just keeps ticking.
The other way costs are shifted is that specific defense spending, which benefits specific localities where such systems are built, is paid for from general revenues. In other words, the politicians are taxing all the other states to pay for spending in their state. This is the old "if you are paying, I'll have the filet mignon" problem. When costs are shared evenly no matter how the benefits are divided, people tend to consume more than they would if they had to pay all of the costs themselves.
And of course, when you have all this excess military hanging around, there are a lot of interests that can find work for it- precipitating more "defense" spending on wars, bases, occupations, nation building, and "kinetic actions" which have more to do with protecting the foreign property of some global corporation than the actual country.
So while we could look down our long noses at voluntarism and castigate it for risking the freedom it claims to be protecting by under-consuming defense spending, we'd better be careful - because the way we are doing business now has just as big a problem- we are spending ourselves into debt slavery.
How can we find balance? If we place a mandatory tax on people for a public good, we put in place several factors which will insure we over-consume that good, in particular once a specialized industry has grown up around it. If we make taxes voluntary for a public good, we virtually guarantee that it will be irrationally under-consumed, risking our freedom to those less scrupulous about how they fund their military.
I believe the answer presented in Localism (e-book on Barnes and Noble (e-book on Amazon Kindle represents the best possible answer in a very imperfect world.
Neither the Voluntary answer on defense nor the Mandatory answer, in my view, adequately consider the unintended economic consequences of their policy. We need an integrated, and considered approach which balances the extremes of these two methods in a way that will produce optimal allocation of resources and maximization of liberty. Localism does that.
Yes, in Localism taxes are mandatory for public use goods (even here there are some possible ways around it in some places), but due to the manner in which the philosophy decentralizes not only the military, but money, debt, and corporations, the perverse incentives to over-consume defense spending are attenuated and balanced with the free rider problem which would under-consume such spending.
If sustaining liberty were easy, we'd have more of it. I urge readers to deeply consider how liberty is maximized.

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