Tuesday, May 06, 2008

The Perversity of Rules

One thing the Dems promised in 2006 was, if they gained the majority, they would reinstate the "pay-go" rules--the procedural rule saying that any law authorizing new expenditures must also include a means to pay for it (raising taxes or cutting other programs). All right-thinking good government types applauded this, and the Dems carried through on their promise.

So what's the problem? Well, as Dan Owen at Blog for Rural America explains, it creates an incentive to maintain old programs: "What's the response of those writing the farm bill? "We need to protect our commodity program baseline"." In other words, it's true enough that most crop farmers today are doing well, but if the ag committees cut direct payments in the new farm bill, that reduces the "baseline". A reduced baseline down the road means reduced ability to increase payments if that were needed. So, a good rule encourages a bad result--there's no such thing as a free lunch.

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