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Politicians live for today

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Tuesday, May 6, 2014, 9:00 p.m.

Suppose a physician tells you that you likely have only one month to live. He further tells you that the only way to get an extra month or two of life is to consume as much as possible this month. The more you consume, the greater are your chances of living a bit longer.

Do you think you would change your plans and behaviors? Of course. You stop saving for retirement, investing and otherwise preparing for the future. And since your only hope for living a few more months is to consume as much as possible now, you beg, borrow and steal all you can.

It's easy to see that our world would be far poorer and less civilized if everyone not only lived just for the present, but also believed that consuming as much as possible of resources belonging to others would delay death.

Yet the incentives facing elected politicians are much the same as those facing someone who expects to die soon and can extend his life only by consuming as much as possible as quickly as possible — including as much as possible of other people's property.

Each politician is constantly face to face with the political grim reaper because the next election brings the possibility of political death. And few politicians believe in life after political death. Each clings desperately to this political life — to this political office — and ponders electoral defeat with grave horror.

A politician facing re-election in one year has no interest in programs or policies that impose, say, $100 of costs on his constituents today but in return promise $1,000 of annual benefits starting two years from now. If the politician isn't re-elected next year, he'll not be in office to enjoy his constituents' gratitude for the $1,000 of benefits they begin to reap in two years. All that matters to the politician is the fact that raising his constituents' costs today by $100 will reduce his chances of re-election. This politician ignores the long-term benefits and acts only in response to the short-term costs.

Likewise, this same politician will vote to borrow $1,000 repayable two years from now if these funds can be used to generate even as little as, say, $100 of constituent benefits today. The $100 of benefits today improve the politician's chances of winning the next election. And at the same time, today's increase in government indebtedness does little to hurt him at the polls. The reason is that voters don't begin to feel the burden of that debt until after the next election.

Contrast politicians' incentives with those of owners of private property. Private property rights give individuals incentives to act responsibly over the long run. For example, even a homeowner who expects to sell her house in a few months has incentives to keep the house in good repair because the price she'll fetch will reflect how well the house has been maintained.

One of the greatest economic misunderstandings is the myth that government officials are more attentive to the long run than are private entrepreneurs, investors and other owners of private property. Private property rights cause us to live for tomorrow, while the need to win political elections causes politicians to live only for today.




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