Economists Make Everyone Mad

March 23, 2011

A family has come on hard times. Both mom and dad are unemployed. Although the mortgage is paid-up (for now) and there is enough food in the pantry to last to the end of the month, two service disconnections are scheduled for today. The first is for a cable television bill of $88 and the second for a natural gas bill of $102. The unemployment checks are coming in 10 days but only $122 is available.  

Dad walks downtown to pay the gas bill. He sees a poster about a government program that helps unemployed families with their “essential” utility bills. He enters the government office, provides the necessary identification and fills out the required paperwork. The agency issues a check payable to the gas company for $102. Overjoyed, he immediately surrenders the check to the gas company and promptly pays the $88 cable bill.

Is the government program paying the heating bill? Well, yes. However, it is not outrageous to note that its effect frees up other resources so as to keep the cable service on. The government dollars are what economists call fungible. Payments to beneficiaries directed to support one activity facilitate other activities.

A women’s health organization provides both routine health-care services and abortion services to low-income households. Client fees are subsidized by private donations and government funds. Government checks are never used to pay for abortion procedures but it is plausible that government funding for medical services frees up other resources available to the organization to provide more abortions.

A church runs a food pantry and an evangelical program to save lost souls. The church is supported by private donations but also receives government funds for its food pantry. It certainly is plausible that the government funding for the food pantry frees up other resources to the organization to expand its evangelical outreach.

So are government dollars keeping the cable TV on, promoting abortion and funding sectarian religion? Or do they keep the furnace on, provide health services and feed the hungry?

You make the call, but this pesky economist reminds you to be consistent, you cannot have it both ways.

And yet, both conventional conservatives and progressives do want it both ways: Government dollars directed to my causes do not support controversial activities, while government dollars directed to your causes most certainly do.

Cecil Bohanon, Ph.D., an adjunct scholar of the Indiana Policy Review Foundation, teaches economics at Ball State University. Contact him at editor@indianapolicy.org

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