With inflation comes the check for past ‘free’ lunches
With President Biden talking about employing the Defense Production Act to force petroleum companies to open the oil valves wider and produce more gasoline, we are reminded that there is no such thing as a government-provided outcome, environmental or otherwise, without cost. Consumer outrage at $5-per-gallon gas is evidently strong enough to get the attention of a president known for his commitment to improving the condition of the planet.
It’s another version of that old saw famously associated with Nobel laureate and economist Milton Friedman: There’s no such thing as a free lunch. Today, inflation is putting a price tag on past political actions that only sounded free at the time.
Friedman, known for his wit and unwavering free market critique of public policy, was making a simple point: If society’s scarce resources are being used to prepare this proverbial lunch (even if it’s to orchestrate cleaner air or some other worthwhile goal), then we can be certain that some people, somewhere, are paying the bill, voluntarily or otherwise.
Unwavering in his support of the freedom to choose, Friedman once led a march during the Vietnam War with much younger men and women protesting the draft and calling for an all-volunteer army. It was not defense policy that motivated him as much as the cost imposed when individuals have no choice but to go off to war without being fully compensated. Eventually, of course, his message was received, and our laws were changed. Today, we have an all-volunteer military.
That said, the free-lunch politics of most other issues are such that promises get our attention and, when placed in front of the people and our representatives, our approval. Through a pageant of presidents from Obama to Trump to Biden and in face of economic difficulties, we the people have been promised and have received subsidies and checks from the federal government that entered our bank accounts as if by magic.
At the same time, we were promised that only higher income individuals would face tax increases to help pay for the checks. Yes, it sounded a lot like a free lunch. But now, with all that extra cash circulating, every American is facing 8 percent or higher inflation, no matter what their income level. No amount of planning and promising could negate Friedman’s rule, and the bill for the free lunch hits most of us each time we go shopping.
Of course, political promises that sound like free lunches come in many forms. During the Trump administration, animosity toward China regarding respect for intellectual property rights and other trade matters led to the imposition of tariffs on a large variety of Chinese goods imported by the United States. The purpose, one could argue, was to provide “free” trade protection to corporate investors who were complaining about China’s abusive actions. No doubt plenty of investors had legitimate gripes, but the tariffs’ real costs were consistently downplayed by the administration.
All along, those involved in these matters had to know that American consumers would be picking up the tab for the higher priced Chinese goods. There is no such thing as free enforcement of trade policies on unwilling partners. Now, it seems, with inflation alarms ringing loudly, President Biden is giving serious consideration to removing some of the Trump-imposed tariffs, all in the interest of lifting the burden that was not so long ago imposed through active policymaking on American consumers.
Yes, sometimes the check for a free lunch is slow in coming, but eventually the buck will stop, and someone will have to pay the bill.
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business and Behavioral Sciences, and a former executive director of the Federal Trade Commission.