Driven by data; ridden with liberty.
Imagine a law that would confiscate a penny from everyone in Britain and give it to one person. The proud new owner of £631,000 would undoubtedly notice the law’s effect, but the trivial amounts are too dispersed to arrest any taxpayer into action. The stamp on the letter to the MP, or the time spent writing an email, costs more than the tax itself, and the recipient would use their fortune to defend the policy. This law is a constructed example of concentrated gains and diffused costs. Policies such as quotas, strict regulation, minimum prices, subsidies and occupational licensure benefit a select number of incumbent producers, at the expense of their consumers.
For sugar, the United States has a potent concoction of loan rates, allocations, tariff rate quotas, with the Department of Agriculture purchasing ‘surplus’ sugar for ethanol production. Back in 1990, the Chicago Tribune reported that the sugar policy was “facing the most serious challenge in recent years”, and was costing “consumers as much as $3bn a year”. Returning to 2013, the policy remains just as sweet, with an Iowa State University paper estimating its customer costs in higher to be about $4bn annually. This amount is approximately $12.84 for every person in the United States, but represents millions for large sugar corporations. Many Americans may not even know about the programme. Defence of these policies is veiled in protecting a nation’s jobs, and hermetically sealing off ‘unfair’ competition, usually meaning subsidised companies in foreign lands. Jobs do not acquire nationalities, and the National Confectioners Association believes the scheme has eliminated “more than 14,000 confectionery jobs and more than 75,000 food manufacturing jobs” in the United States. If another nation directs their own taxpayers’ money to cheapen sugar prices, then consumers across the world will gain through those lower prices.
HS2, the planned high-speed railway from London Euston across the spine of England, is another example, as the benefits will be primarily accrued by the contracted companies and London businesses, with a cost of £1,000 for every family in the UK, spread over decades. Specific companies, like AgustaWestland in Yeovil, breathe through government contracts. The reduction in public spending through seeking cheaper helicopters and aerospace equipment would be small for each taxpayer, so they would not be thankful, but those contracts represent familial livelihoods. Those families would be rather unforgiving if those contracts were reallocated, and AgustaWestland lobbies aggressively to retain its position as the Ministry of Defence’s preferred producer of helicopters.
More generally, the incremental increases in taxes and borrowing required to support inexorable spending are dispersed throughout the population, but each line of spending has concentrated prosperity, its recipient. There are few remedies to this political problem, as inheritors may have the time, money, specialised knowledge and lobbying power to continue their favourable treatment. Asymmetrically, citizens do not have the vast resources or particular information required to scour each scintilla of spending, but may object to its general level. This phenomenon helps illuminate why government spending escalates.