Governments take YOUR money and ....
Let's complete the sentence.
Sometimes folk-knowledge is just a phrase away from real insight. Take the often-used expression, “the government spends your money.” Sounds a bit like highway robbery? Add, though, “as your agent, buying what individuals can’t practically purchase for themselves.” We could then add an explanation of “public goods,” the valuable goods and services that cannot be denied to those who don’t contribute to their purchase, i.e. national defense. If this is a little confusing, and it was at first to me, google “public good” and read about it. I think I covered it in a past blog as well.
This key insight is that it is reasonable to view the government as an agent that takes your tax money and some of its own liquidity and buys things for the community that we need, like roads, justice systems, public health, libraries, parks, etc. The government buys most of these on the private market from for profit suppliers. The reason that we need such an agent is because some very important goods and services will not be purchased by individuals as they are products (like public roads) that cannot be withheld from those who did not pay. Again, these are called “public goods” and well understood and explained by economists, both conservative and liberal.
It needs also to be mentioned that there are debatable questions as which goods and services are theoretically “public goods,” some grey areas, and whether or not they should be offered. In our system of government, these choices are made by our elected representatives, as one of the principal activities of a working democracy.
And we need to understand that these legislators and executives are also strongly pressured by the suppliers of such products to purchase more than most of us want and at higher prices than would exist in truly free markets. Again, think of national defense and the military-industrial complex that Ike warned us about.
It seems also true that more of these special goods are available today and will be in the future as a result of advances in science and technology and that, as people tend to max out on private goods, the desired mix tends to tilt toward the public side. The last point is arguable.
In other words, the government doesn’t just take your money and keep it. And because it controls a sovereign currency it can actually, with caution, spend even more than it collects in tax money on what your elected representatives feel are appropriate public goods.
Of course, the price of such democratic choice is that many of us, it should be a minority, have to accept expenditures that we oppose, and the price of living in a free market economy is that private companies can lobby our representative to buy their products and services in excess or at inflated prices. (That, by the way, is a good argument against privatizing too many public services, i.e. prisons, as it puts an unwanted foot on the lobbying peddle.)