How Much Do Government Policies Really Cost?

David Kersten
David Kersten is an independent political consultant who lives in the Bay Area. Kersten is also an adjunct professor of public budgeting at the University of San Francisco.

It is often overlooked that the actual price tag of government policies extends far beyond their actual annual cost in terms of an annual government outlay or appropriation in the terms of public budgeting language.

Many government regulations, such as the state’s “cap and trade” program or other regulatory decrees, either technically have a negligible cost or actually raise government revenues. But this commonly masks the true economic costs of such policies to private actors.

In colloquial language we even increasingly hear our such things as “free health care,” “free child care,” “free community college,” and now even “free basic income.”

We are often told by the policy champions of all this “free stuff” that all these government benefits are great for the economy and this spending is actually an investment that will pay for itself many times over.

Other policy champions, such as presidential contenders Senators Kamala Harris and Bernie Sanders, often times don’t even appear to care what any of this stuff costs.

In response to a recent question from CNN about the $93 trillion estimated price tag regarding the cost of the “green new deal,” Sen. Harris said “it doesn’t matter what it costs,” adding that it’s an “investment.”

Now all this political rhetoric may play good on TV and in the world of sound bites, favorable media attention and crowds of friendly supporters but the reality is that that no economic good is actually “free.”

Every scarce resource has an economic value and the provision of or transfer of these resources to individuals through government intervention has an economic cost that can be calculated or at very least estimated.

Perhaps most importantly, all the costs paid by government for the provision of these so-called “free” economic goods comes directly out of the pockets of taxpayers, businesses, and other fee-paying interests that finance our government.

So nothing is really “free,” it is essentially a transfer of wealth from the private sector, via the government, to individuals—a redistribution of wealth. And no government policy or regulation that impacts private economic actors is actually without an economic cost, even if it does not impact the government’s bottom line.

One of the greatest tragedies of modern economics and the existing state-sponsored academic system is the unwillingness to analyze and quantify the economic impacts of government policies, which in the case of California, is synonymous with the California Democrat “progressive” policy agenda.

In California, this academic system includes the UC and CSU systems, as well as the array of government-sponsored centers, non-profits, think tanks, and advocacy organizations such as the UC Berkeley Labor Center.

When is the last time you actually saw a government-sponsored organization analyze and quantify the true economic impact of a government policy or program in anything other than a benevolent and favorable light that reaches a conclusion favorable to the given policy studied?

I am not saying that there are not any, but as a general rule, state-sponsored universities do not undertake any type of analysis that could be viewed as overly critical of an existing state policy or program, particularly a “progressive” policy.

This makes complete sense, it would be like criticizing your boss or the person who ultimately cuts your paycheck—self-defeating or just plain stupid.

There are some exceptions to the rule, but in general it is very rare for state-sponsored academic institutions to produce any study or analysis which departs from the “progressive” policy framing of major public policy issues.

At private universities in California, such as Stanford University and Chapman University (Orange County), more objective studies of government policies have been produced but these definitely represent a minority of academic research and the focus of our state’s academic institutions.

Take the state’s pension crisis for example, perhaps the most controversial yet most important fiscal issue in California politics today.

Apart from a handful of landmark studies from Stanford University academics, and the affiliated Hoover Institution, no state-sponsored academic will go near this issue except at their own peril (except perhaps one or two exceptions).

On other issues such as the minimum wage and taxing the rich, we commonly see studies from both inside and outside California that serve to justify minimum wage laws and conclude, in one way or another, that the benefits of such policies significantly outweighs the costs and have little or no negative economic impacts.   The same with the new “basic income” experiment in the City of Stockton, according to a recent study by UC Berkeley academics.

I don’t want to try to single any one issue or study out, my point is that this is systemic problem with the state-sponsored academic system (and nationwide, albeit perhaps less severely) as well as directly related fields such as economics and public policy.

To return to the initial question at hand, what are the true costs and economic impacts of government policies, or more specifically, progressive policies such as free health care, child care, education, community college and basic income?

The short answer is that we don’t really know in many cases because nobody has done adequate study, research and analysis.

The result is that analyses of the costs and impacts of most government policies in California are left to the media, private think tanks, advocacy organizations and other individual analysts, columnists and organizations such as Calmatters.org and the California Public Policy Institute.

But even here, we still rarely see such issues given a complete policy and economic analysis that includes a discussion of the issues from all sides of the political spectrum. Furthermore, what is commonly lacking, in almost all cases, is an objective evaluation of the full economic impacts and costs of our government’s broad slate of economic and regulatory policies.

This is why I believe independent sites such as Fox & Hounds Daily and the California Flashreport.org are invaluable resources for the media, policymakers and political stakeholders who may be interested in the full impact of the “progressive” policy agenda and a more balanced perspective on issues that are commonly complex and multidimensional.

As any good investigator will tell you—we must go where ever the facts may lead us. And in politics that is sometimes a very controversial proposition.

Most recently, to his credit, Governor Gavin Newsom (D) created quite a storm in the media when he questioned the financial viability of the state’s proposed high-speed rail line and said that it was time to get more realistic about the true costs of such a system.

But such an objective getting down to the facts and economic reality of the costs government policies is not done by political actors as often as it should be done—far from it.

Lastly, it must be noted that it is not uncommon for government officials and political stakeholders, as well as academics, to have some difficulty accepting the results of unfavorable independent analysis and/or constructive criticism of their policy agenda.

In many times, this is often the reason a particular analysis may have not been contemplated or completed in the first place.

But nothing is more critical to the pursuit of real progress.

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