28. On Government & Public Goods

The citizens, both voters and taxpayers, of Ocean City are often told that they will lose services if the Government doesn’t collect: 1) plumbing fixture charges, 2) water bills, 3) city tax on cable service bills, 4) excessive property taxes [up 50% after inflation in the last ten years], 5) excessive parking meter fees, 6) room taxes, and 7) other licenses and fees (like energy code and noise ordinance requirements) that add to our cost of living. This raises the question of “what government actions are truly public goods?”

Only if a clear majority of the taxpayers and voters desire the service and accept the cost can any service be considered a “public good.” What should be considered public goods for our seaside resort are bridges, bulkheads, gutters, roads, storm drains, sewers, sidewalks, trash pickup, water lines, and beach replenishment. The vast majority of taxpayers and voters agree that the government should provide these goods; therefore, they are public goods. However, when a minority of citizens determines that the government should spend on a project and then call it a public good or service, the tax expense becomes coercive theft against the majority. Madison warned about this in Federalist Paper No. 10. If scarce resources are taken from the majority by the political class to pander to a minority, the services are not truly public. These alleged public services should be reversed, and money should be returned to the rightful owners, the citizens.

Actions have been taken by this Mayor and a series of Councils to fund; 1) boat ramps, 2) a $5M purchase of Law property (Mayor’s Friend) by the City, 3) airports, 4) golf courses, 5) performing arts centers, 6) $1 million in EMT payments to West Ocean City, 7) empty buses in the winter that cost $2.2 million, 8) over $6M a year in advertising with no evident benefit, 9) Excessive year-round salaries for 3-5 months of business and 10) over 100 full-time police in the dead of winter. While the city strains to pay in declining home values and vacancies. Are these really public goods? I don’t think so. When voters are asked if they want these services, the answer may be yes. When voters are asked if they want to pay for these services, the answer is a resounding no. These services and others pander to minorities while foisting a great unwanted expense on the majority. These special interest projects cannot be viewed as true public services, for there never was a majority that consented to incurring their cost.

For the new Council, OC Taxpayers for Social Justice suggest the following: 1) Transition over the next six months to one or two meetings a month instead of one a week. 2) Instruct the bureaucracy to limit reports to at most 10 pages as opposed to 150 pages or more twice a week. Save the staff hours and trees! 3) Stop spending on false “public” goods and deferring needed repairs on real public goods. 4) Reduce excessive salaries and expenses to address a three-to-five-month high season, not a set of year-round tasks. 5) Make provisions to pay down debt. 6) Finally, sunset 10% of all ordinances every year. The Council has averaged 25 ordinances a year for 50 years, and they don’t even keep track of what they have passed six months ago. Guess what? Ocean City was fine 50 years ago. A reduction in senseless regulation would greatly reduce the workload on government and the costs borne by taxpayers. We need smart governance, not over-regulation.

The current economy will stimulate consumption in the short term. This gives us a brief window to get our house in order and reverse the decline in property values and residents by making the needed structural changes. We have a lot of work to do and a brief time to do it in. Please don’t blow this opportunity.

The ability to differentiate between public and private goods and activities can only be efficiently made in an “Open Economic System.” That is a system with merely five or six public goods and the rest left to the various jurisdictions and the public.

In closed systems, where leadership is not flushed every four years, the tendency is to find a “public” purpose for all sorts of goods and activities and to use coercive means (rules, laws, regulations) as opposed to supply and demand to determine the allocation of goods and services.

The current top-heavy system in China is flooding international markets with cheap products far above the demand for those products. By disregarding demand, although some of the products are economic and needed, in total the Chinese are making their scarce resources largely unproductive by ignoring demand. China must learn to produce in response to demand and not try to create demand by overproducing in order to experience an efficient allocation of their scarce capital. Although America is presently suffering from artificial stimulation by huge government spending programs, analogous to China's misallocation, they will change leadership soon and will stop coercive state spending through a new election.

The example above is cited in a seaside community resort on the east coast of the US. Nonetheless, this resort experiences misallocation of capital unnecessarily, too. However, in an open economy, other communities see this and can alter their allocations accordingly. However, in a closed system like China, the whole country often goes down the misallocation path until the loss of welfare becomes chronic or leadership gets the message or both.

The misunderstanding of demand-driven supply by China, coupled with our insane program of tariffs (restrictions on imports), reminds me of the Smoot Hawley tariffs in 1930 that cemented our depression, leading to the much-needed restriction of steel and energy exports to Japan before Pearl Harbor. Understanding “public goods” and, on our part, practicing free trade and comparative advantage will ensure future peace and prosperity.

Have a Blessed Week!

Tony Christ

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29. Comparative Advantage

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27. Ocean City’s Ethical Quandary