New Ways to Spend ‘OPM’ (Other Peoples’ Money)

An earlier edition of this column focused on government waste due to gross mismanagement and fraud on the part of California state and local governments.  The argument then, as it is now, is that elected representatives should be spending much more of their time and energy on oversight of existing programs, rather than posture for a photo op or press release announcing a “new” program that, in all likelihood, is redundant with a dozen or more existing programs covering the same subject matter.

The problem, of course, is that elected officials and bureaucrats have no incentive to be cautious regarding how they spend our tax dollars. Here, the observations of Nobel winning economist Milton Friedman are instructive. He noted that there are four ways people can spend money:

  1. You can spend your own money for yourself. (Being careful both about how much you spend and on what you buy);
  2. You can spend your own money for somebody else. (Being careful about how much you spend but less careful about what you buy);
  3. You can spend somebody else’s money for yourself. (Being careful about what you buy but less careful about how much you spend); and
  4. You can spend somebody else’s money for somebody else. (Where you care less both about how much you spend and what you buy).

Friedman’s thesis is that what government does is spend money in the fourth way. And that is why any discussion about California government spending needs to include the question of whether taxpayers are getting value for the tax dollars we send to Sacramento and local governments.

But let’s consider another way that government spends “OPM” or, Other People’s Money. Sure, they can waste our money directly. But they can also force us to spend money on things we would otherwise not. Two recent examples will help to clarify.

First, as everyone now knows, California has passed a law imposing the highest minimum wage in American. Over the next few years, it will rise to $15 per hour.

The devastating impact this new law will have on California’s business climate, the state’s already below average employment numbers and to the economy generally is understood by all except the economically illiterate. Indeed, just a few months ago Governor Brown himself acknowledged how a rapid rise in the minimum wage would hurt California’s economy and cost taxpayers billions. His concerns were confirmed by a host of studies and analyses, including from the Legislature’s own Legislative Analyst.

But the majority party in California doesn’t care what damage it inflicts by having employers pay a premium for hiring. This way, politicians can claim credit with the interests that give them buckets of campaign cash while, at the same time, have someone else pay for it. What could possibly be better than to please a valued special interest by giving them OPM?

Second, California’s ill-fated effort to deal with climate change has not only resulted in no measurable impact in helping the environment, but it has been horribly expensive for California’s drivers. According to the Legislative Analyst, because of the cost this year of California’s one-of-a-kind “cap and trade” regulation, motorists will spend an additional $2 billion more than they would but for this controversial program.

But again, this is just another example of government agents using OPM to satisfy their own bureaucratic desires. Not only that, well financed interests who have invested heavily in “green industries” desire to keep that gravy train rolling. And what better way to pad their own investments than having other people – i.e., hard working California citizens – pay to prop up business interests that would not be nearly so lucrative in other states.

As California continues to see an exodus of businesses, young people and retirees to other states, we can only hope that our political leadership begins to understand that the reservoir of OPM is limited. And you can’t extract money from a business or person who has made the very rational decision to leave the once Golden State to a place where they are not treated like an ATM.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.