# ok how much would the economy shrink if all state and federal assistance stopped **URL:** \ **Category:** Factual Questions\ **Created:** [November 17, 2019, 12:05pm UTC](https://boards.straightdope.com/t/ok-how-much-would-the-economy-shrink-if-all-state-and-federal-assistance-stopped/843571 "2019-11-17T12:05:28Z")\ **Posts on this page:** 4\ **Page:** 3
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [November 20, 2019, 6:50pm UTC](https://boards.straightdope.com/t/ok-how-much-would-the-economy-shrink-if-all-state-and-federal-assistance-stopped/843571/41 "2019-11-20T18:50:12Z")
> [@RioRico](#): > > [Washington establishment freaks out as Modern Monetary Theory gains currency](https://boingboing.net/2019/10/09/shattering-overton-window.html) at Boing-Boing, blogging [Economists Worry That MMT Is Winning the Argument in Washington](https://www.bloomberg.com/news/articles/2019-10-07/economists-worry-that-mmt-is-winning-the-argument-in-washington) on Bloomberg. I admit mis-remembering the details - sequestration occurs when government bonds aren’t redeemed. > > I stayed in barracks in my US Army years, not renting off-post, so I spent little of my meagre paycheck. What didn’t buy beer or cameras went into US Savings Bonds. I sequestered thousands of bucks! I kept 1970’s inflation down! I’m a hero! Then I cashed them in and the economy went to shit. Don’t you hate when that happens? Your cites do not mention taxes being able to sequester money.The only mention of sequestering was people sequestering money in war bonds in ww2. MMT is a fringe theory only advocated by crackpots and believed by the ignorant. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [November 21, 2019, 6:26pm UTC](https://boards.straightdope.com/t/ok-how-much-would-the-economy-shrink-if-all-state-and-federal-assistance-stopped/843571/42 "2019-11-21T18:26:02Z")
> [@md2000](#): > > If a program draws from general revenue rather than being net neutral or producing revenue, it’s a subsidy to someone somewhere. The same arguments about the societal value of air traffic control or Underwriter Labs safety standards testing or CDC research on disease - can also be made about the value of feeding and housing indigents so they don’t become a roving mob of desperate starving people. Ditto the value of running police and courts, rather than leaving it up to people to dispense their own brand of justice. (“Quick, round up a posse!”) Giving money to Medicare doctors or the FBI agents so random people on the street receive an unpaid benefit - is a subsidy. If it’s funded by people who have no choice but to fork over their income to the government and may not see that benefit - so a subsidy. I don’t see a benefit to paying the FBI large sums to safeguard New York if I’m in, say, in rural Montana. Certainly a large number of taxpayers would prefer a system where they could avoid paying taxes for services they disapprove of - pacifists and the armed forces comes to mind.) > > It’s not impossible to define what’s a subsidy but - poh-tay-toh, poh-tah-to. > > (Hint - if you want to define subsidy more specifically, maybe start with the same concept courts use to define someone’s standing in a lawsuit. You cannot sue if you are no worse harmed than the average member of the public. That would at least validate paying out of general revenue for some of the services.) Again I think that lumps things together where it’s actually pretty easy to see the differences. Not that it’s _always_ easy, not that people who want to make a certain argument can’t take refuge in the fuzzy margins, but saying that funding the FBI is a ‘subsidy’ in the same sense as housing assistance, hard for me personally to see how anyone honestly believes that. The core role of govts is to make and enforce laws to achieve basic security and order. Nobody is saying democratic govt’s can’t take on any wider role the voters want them to take on, but functions like the FBI are clearly a core govt role. But a govt which doesn’t enforce basic order isn’t a govt, by any example in the real world so far. The purpose of the housing assistance does not in fact rest on the theory that it would be impossible to maintain order without it. There used to be no such subsidies. There was basic order. Practically everywhere, for centuries. The reason for those subsidies is a subjective judgement that it’s a better, fairer society with those _subsidies_ than without them. It’s quite easy to distinguish from the FBI, if we’re not being obtuse. Also, arguments about how revenue should be raised to perform core govt functions (taxing one group or region v another based on how much the govt performs that core function for their specific benefit) is not the same as a real debate as to what is or is not a core govt function. Then once again there are economic activities which might be undertaken privately or publicly (again US ATC is public, Canada’s is privatized) as shown by real world examples of each (there’s no reason to waste time evaluating theories like privatizing the FBI of which there are no real world examples). Those efforts are not themselves subsidies Often they contain an element of subsidy as actually implemented, but their proponents almost always deny that or claim it’s only temporary. Because once you admit subsidy is an integral part of the implementation, it’s hard to address arguments that the subsidy part should just be broken off and done separately (eg. people in expensive to deliver rural areas could get $'s to pay the higher prices a private postal organization would charge in those areas to cover their costs)…because basically everyone realizes at some level that conducting an economic activity via govt because govt can do it better is not the same thing as a subsidy. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [November 21, 2019, 8:15pm UTC](https://boards.straightdope.com/t/ok-how-much-would-the-economy-shrink-if-all-state-and-federal-assistance-stopped/843571/43 "2019-11-21T20:15:42Z")
> [@Corry\_El](#): > > Again I think that lumps things together … > > The core role of govts is to make and enforce laws to achieve basic security and order. … Ok, I concede you can define a core mission for government of obvious goals and then say for that they can spend without breaking even - peace, order and good government was I believe the goal of British parliamentary governments. So laws and law enforcement are things a government would do without hope of direct reimbursement. Presumably this includes enforcing the tax laws and the border laws, regulating the airwaves and traffic laws, etc. We can add defence and the minutiae of government - having offices for the administration and legislature, printing laws (or contracting to print them), etc. until recently, welfare was the problem of Church organizations and charities, not the government. the privatized ATC is a prime example of “user pays”. You want to fly in controlled airspace, you pay for the privilege on a scale based approximately on resources used. Airlines pay bigly, but for small planes there should be an appreciable cost too. the post office is a grey area. For ATC, for example, they might charge by the number of landings, the miles inside ATC airspace, or some such criteria - because putting a metering process such as “how many minutes did you talk to ATC?” and allocating costs - is not worth the complexity. For some such services, you get to a point where metering costs is more expensive than the actual service. But the post office - countries existed for centuries without one. It is a convenience and an aid to commerce, like roads, canals, subsidized housing and legal aid. It is not necessary for the core function of government, unless we add delivering mail to their mission statement. The post office falls under the category of natural monopoly. Like land line phone systems, electricity, and public roads, it makes no sense to have two or more parallel systems. Logically, governments should either run these or franchise them out. The “no handouts” rule would suggest such services should break even. Then you can debate whether mandating a fee structure is in effect a subsidy? If the government forces XYZ Cable to charge more for urban customers so rural customers don’t have to pay a fortune - it’s still government mandated assistance - just from cable subscribers, not the taxpaying public. Depends on your definition of government assistance. If it’s mandated by the government but not from the taxpayer, is it still “government assistance”? Which means, we can go whole hog libertarian on the economy, or recognize some support is required for a civilized existence. Everyone says “get rid of wasted subsidies” but then declares their pet subsidy is money well spent. tax breaks encourage (some) business. Infrastructure attracts business. Welfare of various sorts means fewer desperate starving people roaming the streets and committing petty crimes. But how much would the economy shrink? It’s all handwaving, but the start on an answer would be to figure out how much is going out as subsidies and where the money would go otherwise. But if by your definition 10% of government spending is subsidies, let’s say, then there would be 10% less spending by government. what replaces it? One of the bizarre things about America, to a Canadian, is all these fund-raisers for poor sick kids and such. Nobody need to beg for the cost of a liver transplant in Canada, medical bills are covered. So some hypothetical money saved by the government would be raised in other ways, it still comes out of the pockets of taxpayers - or at least the generous ones. ---
**Author:** ![bob\_2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bob_2/32/3341_2.png) [@bob\_2](https://boards.straightdope.com/u/bob_2)\ **Post date:** [November 21, 2019, 8:34pm UTC](https://boards.straightdope.com/t/ok-how-much-would-the-economy-shrink-if-all-state-and-federal-assistance-stopped/843571/44 "2019-11-21T20:34:27Z")
> [@md2000](#): > > The post office falls under the category of natural monopoly. Like land line phone systems, electricity, and public roads, it makes no sense to have two or more parallel systems. Logically, governments should either run these or franchise them out. The “no handouts” rule would suggest such services should break even. The PO already has competition - UPS, FedEx, OnTrack to name but a few. All that’s needed is to allow them to carry mail as well as parcels; maybe bid for a district or something. I am not saying that is desirable, just that it’s possible. [Previous page](https://boards.straightdope.com/t/ok-how-much-would-the-economy-shrink-if-all-state-and-federal-assistance-stopped/843571.md?page=2)