Easing out of Big Government

In response to my post Welfare Not As Bad As Other Government Spending, Retta Fontana writes,

What's wrong with your basic premise, is that money is indeed taken from "A" but it is not given to "B." It is divided mostly among government bureaucrats "C" thru "X" and THEN a tiny bit is given to "B." At which point B's life is diminished for having become a little more dependent rather than independent. There's just no "lesser evil" forms of coercion and no way out of the suffering caused by the use of force.

Retta is correct. I simplified to make the point, but it is true that welfare recipients receive what they get only after the bureaucrats get their cut of the taxpayer loot. There are other problems with welfare, dependency among the big ones. Of course, any tax, and any government spending changes economic behavior for the worse.

What I was getting at, though I didn't word it this way because I hadn't thought it through, was that taking from the earth's limited resources to build unwanted and unneeded products is worse than merely shuffling money around. Money, even in the hands of those who didn't earn it, will still be used more efficiently than money that the government spends - because individuals will spend it on their wants and needs, not on battle tanks or bridges to nowhere.

This is an important point for the issue of government budget-cutting. Let's say you believe in small government or no government, and you are elected to an office that empowers you to make budget cuts. But you are checked by political realities and must take into account those who rely heavily on government income - either directly from government employment or welfare, or indirectly through working for a government contractor. Are massive lay-offs, canceled contracts, and elimination of welfare going to be on your immediate agenda, regardless of the devastating short-term consequences?

What I am suggesting is, we don't need to do that. We can instead continue to pay the welfare recipient for a time. We can pay the bureaucrat, or give him a generous buy-out package. But give him no office and nothing to do. No new computer for him, no new office furniture. That means one more computer and more furniture available on the market.

Going further, we could say to the firm with a billion dollar contract: "Keep the money. Continue to pay your employees. We won't cancel the contract we agreed to, but we will cancel our order. We don't want those fighter planes anymore. Feel free to build something else instead. But this is the last contract from us."

Resources that once went to government equipment and building projects would now be diverted to the market. Government would get smaller through hiring freezes and by not spending money on new programs and projects. This way, the economy could ease out of government dependency over time.