Saturday, April 29, 2006

Ohio's TEL Amendment

Isn't it ironic that at a time when government officials are looking to investigate rising gas prices, some of these very same officials claim that they can't live within budgets capped at the rate of inflation?

While gas prices soar, computer software and hardware prices are falling - despite inflationary monetary policies. Both of these price changes are due to market forces. The economist Ludwig von Mises noted that it is the consumer who captains the economy. Petroleum companies can no more sustain high profit margins than computer companies.

In an unhampered economy, one that exists without government interventions, high profits signal new entrepreneurs to enter that specific market. These new entrants increase supply and cause profit margins to fall.

In the hampered economy, such as exists today with regard to petroleum, government regulations hinder entry into markets. The bottom line; government interventions in the oil and gas sector are a major cause in the rise of US gas prices – other causes being the continued demand for gas despite rising price, increasing demand overseas, and the US-lead mess in the Middle East. Conversely, the ease of entry into the computer sector keeps driving computing costs ever lower.

Enough economics, now irony. Ohio government officials at all levels are crying that they cannot live within budgets capped at the rate of inflation. Why? Simple, instead of minimal budgetary increases, Ohio governments have continued to spend at a rate of expenditure growth that far exceeds the rate of inflation. Instead of investigating petroleum companies, governments should be investigating themselves.

The TEL amendment would force Ohio governments of all sizes and shapes to limit their spending increases. That government officials cannot fathom such a loose rein of growth – loose since government should be reduced from its current size and expenditure-level – shows the inefficiency of government at all levels.

Jim Fedako

2 comments:

Anonymous said...

Not to be obvious, but many local goverment functions depend on materials (like fuel, health care, ect) whose costs are increasing at rate significantly greater than inflation (I assume you mean the CPI). So if you like your roads plowed and patched and your courthouses heated, you might want to give your LG a little more flexibility in setting its budget. After all, these are the people you elected. If you don't like how they budget, maybe you should pick up another board membership.

BTW, most of the costs for building the infrastructure that leads to prosperity are increasing faster than inflation.

Oldsmoblogger said...

Part of the reason those costs increase faster than inflation is because there is no discipline enforced at the demand side--they can always just take more from the taxpayer. Asphalt companies and health care providers can't charge more than the market can bear. Take some of that money out of the system, and the inflation effect diminishes or disappears.

It's a matter of priorities and fiscal discipline.

(Jim, I found my way here via a link from the Old Whig.)