Question

Given the importance of secure property rights, how can you explain that in the US there is widespread support for programs that take money from one group of people for the sole purpose of giving it to another group of people? What is the justification for this? How do these programs impact long term economic growth?

Answer 1

The role of a government, be it in any country like for example the U.S, among other things, is to define, establish, and enforce property rights. Property rights to a good or service include the right to exclude others from using the good or service and the right to transfer the ownership or use of the resource to others.

That being said, the government also provides an alternative method to markets for supplying goods and services when it appears that the benefits to society of doing so outweigh the costs to society. Not all individuals will bear the same costs or share the same benefits of those policies.

Current federal spending on public benefits is significantly directed toward those citizens who are retired or disabled and who often face subtle-yet-insidious workplace discrimination due to their age or disabilities. So programs like social security and even unemployment insurances are financed through the revenues generated through taxes. Taxes are compulsory contributions to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.

So the main reason behind the widespread support for such programs is that in the end, it is for the betterment of the economy. Federal programs help reduce poverty and helps the middle class grow, which in turn will ensure our nation remain strong and competitive.

These programs can boost economic growth in the long term by for example improving the private sector’s ability to invent, produce, and distribute goods and services. If done wisely, can contribute to private-sector productivity in various ways. Without public highways, for example, the cost to the packing & moving industry for delivering goods would be much higher; without government research and development (R&D), the Internet and whole segments of the economy would not exist; if not for receiving a public education (funded in part by federal spending), many workers would earn lower wages. In the view of the Congressional Budget Office, the government has made higher productivity possible in all of those cases by making investments that the private sector would not have made on its own or would have made in smaller amounts than their broad public benefits would justify.

The result of that higher productivity is a larger economy in the long term, all else being equal.