This is always a never ending argument of raising or cutting taxes, and a ciclical reaction that will bring them up or down, depending on current circumstances.

I still believe in the fact that we as individuals can spend our money more efficiently in our own hands, than give it to the government and rely on them to waste it on failed programs (obviously those mentioned above are necessities of taxes, but there are many others that are not).

If given a rebate check, many people don't have the restraint to save it, but even then, they are using it to pay bills, buy new things, or even if they do save it, invest in companies. This gives a freedom to at least make your own decisions about your money, rather than have it being taken from you and letting the government decide how it will be spent for you.

NO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Read the "enumerated powers" to understand when and how the federal government should spend our money.
Ignore "general welfare clause" and the "commerce clause" which have been used to support all manners of chicanery.

This is an extremely shortsighted analysis of government procurement of goods and services. If you analysis what it costs to get my tax dollars to procure the goods and services government provides, you would find that the government is extremely inefficient and bureaucratic in collecting my taxes, let alone spending them.... I am a business owner with two employees. I file a federal tax return and a state tax return... i have federal and state payroll tax returns for my employee and I have a state personal property tax return and sales tax returns.... not to mention, if I own a home and so does my employee...more tax collection. I can either take my own time to prepare and file all the necessary returns or I can pay others to do it for me... the government must pay employees to process all this information as well... therefore the incremental revenue generated is substantially reduced because of bloated government... if the government would streamline the process utilizing technology instead of people, it could process transactions much more efficiently. Also, instead of taxing everything that moves, choose to tax one relatively stable revenue source, i.e. property or sales. This of course will never happen because unemployment would be 30% and public sector employee unions would lose their clout in the political system. I agree, I can't do everything on my own, but I can certainly do a whole hell of lot more efficiently and effectively than the state and federal government.

Leave it to a Hopkins professor to ignore Bastiat and Hayek in one post.

Last winter I asked a retired economist friend, who had known Hayek, how statists get around his observation of the epistemic disadvantage of centralized decision-making. He said, "They ignore it."

Bastiat's observation of the seen and the unseen, too, apparently.

Was the Interstate highway system a sound "investment"? We'll never know, because we'll never see the other things that might have been done with that capital; or what the rail industry might have looked like today absent generations of regulation ("public goods") or competition from long-haul trucking subsidized by government spending on highways.

Is regulation of the financial markets a "public good" from which we benefit? Absent recent examples of an unregulated market for comparison, who could possibly claim to know that it is? It's presented by the Hopkins prof as self-evident, and that's the only way it can be presented successfully. Pick apart the costs, the unintended consequences (e.g., the luring in of suckers by the illusion of a level playing field), the subsidizing of risk, and market regulation becomes a less evident value.

As for the public sector taking over where markets have "failed," there's an interesting double-standard here. Markets are held to a platonic ideal of perfection. Intervention, operating from a narrow information base and historically loaded with failures, is given a pass after each disaster. You need look no further for a demonstration of this than the current economic plight. It developed in a substantially centralized, minutely regulated environment, rigged this way and that to advance "public" purposes (home ownership, GDP expansion, etc.) that no would would mistake for laissez faire.

More to RRT's point, there are 2 separate questions about government spending: 1. How much? and 2. At what level?

Libertarians are often misrepresented as being opposed to all gov't spending. I've never heard a rational libertarian (I know many) argue that there should be no police, public roads, or public schools. The problem is that the federal government gets its claws into those items which, according to the 10th Amendment, are solely the responsibility of the States.

So then the question perhaps should be asked "Can the Federal gov't spend money more wisely than my State gov't?"

John: I am not ignoring Hayek. My point was that there are some goods that cannot be procured by private citizens acting alone. In these cases, the question whether decentralized private decision-making would be better just doesn't apply.

It is of course true that when we undertake some alternative, we do not get to observe what would happen had we chosen to do something else. Sometimes we can look at something comparable (which is why there are such things as scientific experiments), but in the case of national economies, it can be pretty hard to find a genuinely comparable control.

But this does not imply that we should not make these choices, any more than the fact that someone doesn't know what would have happened had she not married her husband means that she should not have married him. Sometimes you just have to choose. I can't think of a better way to make these choices than: via democratically elected representatives who are accountable to their constituents.

"Ignore "general welfare clause" and the "commerce clause" which have been used to support all manners of chicanery. "

You mean we can ignore the parts of the basic law that we feel like ignoring? Cool! I'm going to ignore the part that relegates to Congress the power to issue litters of marque and reprisal. Enemy shipping, here I come!

RRT-MD, ignore the general welfare clause? Why don't we "ignore" the second amendment while we're at it? Perhaps the tenth as well? We know folks on the right want to ignore the first amendment, fourth amendment, 13th amendment, etc.

This is a basic tenet of conservative "philosophy" now. Ignore the parts of the constitution you don't like.

Had the professor used the word "most" as opposed to "a lot" she would have been incorrect. The truth is 60 cents of every dollar the government spends goes to pay for private consumption via various entitlement programs, the #1 being Social Security. Throw on defense spending which has doubled even accounting for inflation since the end of the Cold War and we're at 75 cents of every dollar. With interest on the debt eating up 5 cents of every dollar, a mere 20 cents of every dollar is left to spend on any kind of public good. If you don't believe in public money being used for private consumption or empire building, you are quite justified in your belief that we are already over-taxed.

Josh: Very nicely said. Now go tell the tea partiers that Washington is getting out of the Medicare and Social Security business, and gauge the reaction. The fact is that even people who think "government is too big" don't want to give up their entitlements. JH

I was a detractor of the method Prof. Henderson used to try and make his points.

I would be remis to not inform he DID say the governemnt perfomrs some functions better than the private sector. He did include some of those exact items. It is not fair to attack him saying he did not make that allowance when in fact he did. There were hundreds of comments over three blog posts that made up the entirety of the discussion.

For reasons that Hilzoy set forth, the concept that "I can spend my money better than the government" is essentially false. More importantly, the percentage of federal expenditures that are truly discretionary are really quite small.

Take a look at the chart for 2009 expenditures here: http://bit.ly/m5zP

You will discover that non-military discretionary spending is only 12% of the entire federal budget. However, most discretionary spending is not discretionary at all. I doubt seriously whether very many would want to unfund the FDA, SEC, Justice Department, federal courts, FAA, etc. My guess is that less than 1% of this 12% is really discretionary (I rather suspect it's really about half of that) as we commonly use that term.

In 2009, federal expenditures were 27.2% of GDP. That's considerably higher than it's been in recent years and the percentage is expected to drop to about 22%. However, let's use the higher figure. If only 1% of the federal budget is truly discretionary, that means that only 0.272% of "our" money is subject to the "better in our hands than the government's" principle.

In other words, the principle is nothing more than a red herring, since it applies to a trivial amount of the nation's total income. Yet it's used as an argument to oppose virtually any tax enactment. (Oddly, of course, it's rarely invoked when the issue is whether any particular spending program is at issue.)

Every politician looks at We, The People as an endless source of cash. We, The People, who actually have to balance our budgets look at politicians as if they are a bunch of clueless idiots. We are right. They are wrong.

If I'm relatively poor and have very little savings, probably so.

If I'm a saver and can fund my own retirement fully (including health care), probably not.

My guess is that 80% of the population falls into the first category. So for most, yes.

If I'm relatively poor and have very little savings, probably so.

If I'm a saver and can fund my own retirement fully (including health care), probably not.

My guess is that 80% of the population falls into the first category. So for most, yes.

Mr. Hancock,
I'm curious -- how do you define a public good?

BA: 'Public good' is a technical term from economics. See here.

For John: so is "market failure."

RE: Try telling Tea Partiers that SS and Medicare are the proximate causes of our impending insolvency.

I did. Given my poll results I conclude the message was heard by some and firmly rejected by the vast majority of those who heard it. The experience evokes a famous Jack Nicholson line from "A Few Good Men": http://www.youtube.com/watch?v=UXoNE14U_zM

Thanks, Prof. Bok. I'm actually familiar with the economics definition of public good. I just wonder how it fits into your and Mr. Hancock's argument. Of the four largest spending items in the federal budget -- SS, Medicaid, Medicare, defense -- only defense seems to fit the definition of public good. And you can't give a free pass to all defense spending either. Much of the money we spend in the name of national defense makes us no safer, such as building ships/planes/vehicles that are unwanted by the Pentagon and pursuing foolish foreign policy endeavors.

I don't think things can be considered public goods simply because we cannot buy them or regulate them ourselves.