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Want Less Government? Demand Higher Taxes
The most basic economic principle is that the more something costs, the less of it you buy. Supply and demand curves are as applicable to government as they are to any other service provider. The price signaling mechanism is essential for curbing excessive demand and for ensuing that supply can be produced on a sustainable basis.

The budget deficit, however, has broken the price link between demand and supply of government services. Instead of people paying for the services provided, they pay an artificially reduced price with the difference being borrowed.

Lowering the price the public pays for government, raises the demand for its services. It?s no surprise that the demand for highways, farm subsidies, Medicare prescription drug benefits and other services is so high when taxes cover only a diminishing fraction of the cost.

There are two ways in which the price link between supply and demand has been broken. One is in aggregate because the gross amount of taxes paid does not cover the cost of services provided. Another break in the price signaling link occurs when the cost of providing a service is passed, via the political process, to a set of taxpayers that are distinct from the service beneficiaries. This process was encapsulated by Senator Russell Long?s rhyme, ?don?t tax you, don?t tax me, let?s tax that fellow behind the tree.?

As the Greek and Irish debt crises have illustrated, there are limits to how long the supply of government services can exceed the willingness to pay for them. The United States is fast approaching the limit of how far borrowing can substitute for cash payment.

There are calls across the country for reducing the role of government in people?s lives. Unfortunately, many of those favoring less government also favor reduced taxes, a form of cognitive dissonance that fuels budgetary dissonance.

Put in simple terms, if you want less government, raise its price. People and organizations that favor reduced government should recognize basic economics and insist that everyone pay higher taxes.

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