Wednesday, February 16, 2011

Opportunity Costs and government overload

One of my friends1 posted on facebook this morning, decrying the HR 1 continuing resolution for funding the rest of the year on the grounds that it cuts funding for the NIH by 5.6% ($1.6 billion) for the year, and encouraging people to call their representatives and complain. I responded:
OK, so you call and demand that they not cut NIH. Someone else calls and demands that they not cut NPR. Someone else calls and demands that they not touch Social Security or Medicare. Someone else demands that Federal education funding not be cut.

Guess what NIH funding looks like when the Government finally defaults because there's just no money left and they can't print enough to keep the lights on. This is the result of making promises you can't keep and promoting unsustainable policies. Eventually, as Margaret Thatcher said of socialism, "you run out of other people's money..."
One of the fundamental concepts of economics that many people miss is Opportunity Cost. In a world of scarcity, which ours is, there is a cost to everything you do. Sometimes the costs are quantifiable in dollars, sometimes the costs are resources, sometimes, the costs are just time. But there is always a cost.

When the government spends time, money and resources doing something that is not one of its legitimate functions, that time and money and those resources cannot then be spent on its legitimate functions. Every dollar for NPR comes from somewhere, and can't be used for Cancer research. Every dollar for the National Endowment for the Arts can't be used for cancer research. Every dollar that disappears into the gaping maw of the federal education bureaucracy can't be used for cancer research. I can get a new car this year or I can have my house sided and my deck replaced or I can take my wife to Europe for a week, but I cannot do them all. If I go out and spend $25,000 on a new car, I can't then turn around and complain that I haven't got the money to replace my roof. That's the opportunity cost.

The Federal government long ago overflowed its constitutional banks, and the resultant flood is going to drown us all if it isn't contained. If cancer research is a legitimate government function (which could be argued, though certainly isn't self-evident) then those who are fighting for it need to fight against the illegitimate government functions that are consuming those resources. The resources are not unlimited.

1 - And it's worth noting, I think, that this is someone who supported the ACA [Obamacare], because that's part of the reason that I responded.

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