Is TABOR Needed in Florida?

March 21, 2008

Lawmakers in the State of Florida are considering putting on the ballot in November a constitutional amendment that would explicitly limit the annual increase in state spending, similar to Colorado’s TABOR provision. As expected, liberal groups are crying foul, arguing that such a move would cut government services. Of course it would cut government spending. If it didn’t cut government spending, it would be pointless.

Under a truly benevolent government that was seeking to maximize social welfare, there would be no need for TABOR because government would be at its optimal size. But as the public choice literature in economics has taught us, government does not always seek what is in the best interest of the general public. Therefore, it is possible that limitations on government like TABOR could improve societal welfare. On the other hand, since the optimal size of government is greater than zero, it is also possible for a TABOR-type system to make society worse off.

So the answer as to whether TABOR is beneficial comes down to a question of second-best: Are the policies pursued by politicians so bad that a constitutional restraint on those politicians, even if it led to too low a level of government spending, is better than the alternative of too high a level of government spending?

Such a possible failure of the current representative democracy system in Florida is possible. It’s also possible for a political failure under a direct democracy system when it comes to voting on the proposed constitutional amendment in a world where voters have biased beliefs regarding optimal policies of public finance. When liberal groups oppose putting TABOR on the ballot in front of the voters, they are implicitly arguing that such a failure of direct democracy (in favor of too little government spending) is possible. But they should also be forthcoming in acknowledging that political failure is also possible under the representative democratic system that we have now in the direction of excess government spending. The question is, Which failure has worse outcomes for societal welfare?


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