Russ Roberts has an interesting post about the role that coddling paternalism from the state has on dulling our sense of self-preservation.
We have a natural incentive to take care of ourselves. But if someone takes care of us, our impulse toward self-preservation lapses and gets rusty. Pay for my losses and I’ll be less prudent. Cleanse the drugstore of anything remotely likely to have a side effect and I’ll be less prudent. Get rid of the alarm system and maybe I’ll hesitate to run from fire. Well, not really on that last one.
A common argument against libertarianism, and in favor of statism, is that people lack the sophistication to fend for themselves, and if the state did not take care of people, they would be suffer.
Consider the withholding tax. I hate the withholding tax. It was Milton Friedman’s worst contribution. The notion that I am giving the Feds an interest-free loan incenses me. I would much rather pay the exact amount I owe, or alternatively settle up with the government in April (as I just did by writing a check). At least I had that money during the year, and could do with it as I please.
When I tell people this, they are flummoxed. They beatifically rejoice when they receive their “refunds” in April, and proceed to spend it. I tell them, you realize that it is your money, minus interest, that you are getting back. They are nonplussed. I ask, wouldn’t you rather have that money during the year, say in December, when you have to purchase Christmas gifts? They reply that they lack the sophistication to manage their finances, and would likely blow the money, and be left with nothing to pay their taxes come April 15.
Part of me wants to mock these people for failing to plan their own finances. But, Roberts has a point. People become accustomed to the coddling of the withholding tax, and do not need to worry about this. They just accept it. As Russ said, “if someone takes care of us, our impulse toward self-preservation lapses and gets rusty.” Maybe I shouldn’t be so hard on them?
Update: In light of the pending government shutdown, where many federal services will cease that people rely/depend on, this post may become more poignant.