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An ongoing discussion about conservatism in New Jersey.
Peter, Paul, Mavis and the spending conundrum
Peter C. Hansen  (April 29, 2009, 3:29 pm)

Current federal deficit spending is doubtless cause for serious concern. At the same time, however, if strategic opposition to expansive federal spending prevents a tactical attempt by the NJ delegation to claw back more NJ federal tax, at least some of the "lost" money will go to subsidize the little empires of other states' politicians. This would not advance federal fiscal responsbility. Moreover, to use Murray's words (rather out of context), this would leave unremediated the "burden on [NJ] taxpayers who are trying to raise their families and improve their lives."

It would seem that the NJ delegation has in any event hardly been zealous in seeking federal spending from DC, since NJ is dead last in getting its money back (61¢ on the dollar). Paradoxically, a more vociferous and demanding NJ delegation could actually advance NJ conservative principles by sparking a serious inter-regional debate about the nature and purposes of federal spending. Moreover (although sadly less likely), if the NJ delegation were actually effective in clawing back a greater share of the federal tax paid by New Jerseyans, other states might be weaned a bit off the federal teat.

Now, a serious caveat must be raised at this point. Any tax "clawed back" from DC as spending would not go directly back to taxpayers, but would instead benefit politically favored persons and groups. Principled objections to this arrangement have already been articulated below quite effectively by Murray, Chris and Jim. Such objections are actually the same as those against NJ's subsidy of other states – i.e. no one has a right to take from another using the state. The objections articulated below seem, however, to include within their scope a blanket refusal to accept federal funds unless they take the form of direct and proportional refunds to individual taxpayers. In other words, if the feds rob Peter, New Jersey should not then pay Paul with the loot.

If Peter and Paul lived under a unified government, the discussion would be simple: should Peter be robbed to pay Paul, yes or no? In reality, however, Peter and Paul live under two governments, and this complicates matters since preferences and probabilities then come into play. Let us now introduce a third character, Mavis, who does not live in New Jersey. Once the feds rob Peter, they will give some of the money either to Mavis's state, or to New Jersey. If the loot goes to New Jersey, it will be given not back to Peter, but instead to Paul. Now, Paul may use some of the money to build a road that Peter will travel on from time to time on business. If Mavis gets the money and builds a road in her state, it is unlikely that Peter will ever zip down it.

In this scenario, would Peter be reasonable to prefer that Paul get the money rather than Mavis, since he is being robbed anyway? It seems reasonable that he would, since he is then more likely to benefit indirectly from his lost money. This wouldn't stop Peter from demanding that he stop getting robbed (or at least of so much). Nor would it stop him from hounding Paul to use every last dime for Peter's benefit. Would Peter be a poor excuse for a conservative, however, if he were to adopt this preference, or even actively to demand of the feds that New Jersey (and thus Paul) get the money? Alternatively, should it be a matter of complete indifference to Peter where his money ultimately goes, if he doesn't receive it back in full himself?

Put differently, should the mere fact that Peter is robbed determine Peter's mindset, or should he also be influenced by a desire to receive back at least some benefit from his lost money? I welcome any thoughts you might have on this question.