Bryan Caplan  

Does the Public Want Smaller Government After All? A Reply to Horpedahl

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Jeremy Horpedahl argues that you can make most public support for bigger government vanish simply by mentioning that more spending means higher taxes. I'd like him to be right. But I'm not convinced.

First, overall government spending passes Jeremy's Mueller test. The GSS asks:

If the government had a choice between reducing taxes or spending more on social programs like health care, social security, and unemployment benefits, which do you think it should do? (We mean all taxes together, including social security, income tax, sales tax, and all the rest.)
The public comes down about 60/40 in favor of more spending. (For similar questions where "keep the status quo" is on the list of answers, that's normally the median position; but I can't quite remember where I've seen those questions).

Second, the Mueller effect could be one of two things: An information effect or a question-wording effect. What's the difference? An information effect is when you tell the respondent something he doesn't already know (or pose a hypothetical that he doesn't take for granted). A question-wording effect is when you redescribe something known to make it sound better or worse.

Take for example the question: "Abortion stops a beating heart. Should abortion be legal?" I strongly suspect that you will get unusually pro-life answers. But is that because respondents do not know that fetuses have beating hearts? Or is it because you've worded the question to get a pro-life result? I say the latter.

In contrast, you could ask people "Would you favor or oppose raising the minimum wage if it resulted in fewer jobs available to low paid workers in this country?" Gallup once did just that; support for the minimum wage sharply falls. Since I'd never even heard about disemployment effects before I started studying economics, I say that this is an effect of information, not mere redescription.

I think the Mueller test is a lot more like the abortion question than the minimum wage question. Maybe the public doesn't realize that more government spending requires more taxes. But even I doubt that the public is that stupid.

Still, I'm open to persuasion. A dissertation on the Mueller test sounds like a great idea to me. Any takers?


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COMMENTS (13 to date)
Carl Jakobsson writes:

What if, at the moment you answer the survey, the respondent don't want to remember that the government needs higher taxes to spend more, and unless someone points it out he simply writes what makes him feel good? Then, stating that it costs taxes in the survey forces the respondent to take the increase in taxes in consideration.

It would not be a question of stupidity, since the respondent could choose not to think about the extra taxes because doing so would make him feel less good about his policy choice. One simply doesn't like to think about arguments against one's policy decision.

Daniel Yokomizo writes:

Isn't the Mueller test phrased in the other direction? If the question asks about increasing taxes instead of reducing them people would give a different answer (IMHO). On the whole I agree that the public seems to prefer a bigger, more invasive, government, but mostly because they think the alternative is a world ruled by rich corporations and chaos. An interesting poll would be: "If the government wastes more money (due to inefficiency, not corruption) to provide a service than the market (at the same quality level) should it still do it regardless?". People usually think the government isn't too inefficient when compared to the market, except when corruption is involved, if they knew better I think they would favor a smaller government after all.

Matthew writes:

Doesn't it make sense that when 75% of the public pays little or nothing in federal income tax (or else gets EITC rebates!), it doesn't give a damn about the cost of government programs?

The disastrous effect of "progressive" tax policies. . .

PJens writes:

A large percentage of people do not pay federal income taxes. Any talk of a tax increase presumably does not apply to them.

JimVAT writes:

Actually, what should be asked is if that person would be willing to be taxed more to spend more on those categories. Then start asking how much ($100 a month, $200 a month). My theory is that people don't mind taxes as long as they are paid by other people.

Unit writes:

The "information effect" might not last either. A bit like your analogy with a piece of plastic that you put pressure on. Namely, if you ask people a second question with more info as in "Would you favor or oppose raising the minimum wage if it resulted in fewer jobs available to low paid workers in this country?" and you see support for minimum wage go down, are you sure that if you wait a week and then ask the first question again without the extra info "Would you favor or oppose raising the minimum wage?" that you don't go back to the original levels of support?

spotcash writes:

I suspect that most people assume that the question is ceteribus paribus, i.e. if everything else is equal, do you want the government to spend more money on you. The assumption is that the government will be able to spend extra money because it has it not that the government will tax you for more money. In most people's views, the government could shift resources, get rid of government waste, or accomplish some other sleight of hand. I teach high school and get to ask this type of question. Most students answer yes unless I preface the question with a statement that the government will raise taxes [usually a sales tax because that they know] so that it can provide additional services to the public. When asked that way, the answers are very different.

Phil writes:

Isn't there a bit of endowment effect here? If you ask "do you want more services but higher taxes?" the answer might be no. But if you ask "do you want fewer services but lower taxes," the answer might also be no.

Grant writes:

A dissertation on the Mueller test sounds like a great idea to me. Any takers?

If I had a way out of this atrocious MSc. program I'm stuck in, I'd gobble it up in a second.

Daniel Reeves writes:

Some people actually like paying taxes. Without taxation, everyone goes by the dominant strategy, i.e. don't pay for anything (woo econ 101!). And I think a lot of people realize that. That's actually a pretty common excuse for people not to be more energy conscious or donate for stem cell research (so much for morally superior liberals being less greedy when many won't do things for the mere good of doing it unless others are (I don't even have a job (high school student) and I often donate to charity.).).

I think what we can do is show how a lot of that money is being spent. For example, to your typical liberal, we can argue that big government led to big spending in Iraq, and instead of spending all of that money, we could lower taxes in the middle and lower classes (or everyone), instead of resorting to taxing the rich. We could try something like this: "A lot of tax money is being spent on the Iraq war. If we got out of the Iraq war, should we pay back tax payers by lowering taxes [on the middle and lower class]?"

Floccina writes:

Interestingly I think that you can not only want but get more from government services for less taxes.

2 examples:

1. I think that it is entirely possible for government to provide medical care to all Americans for less that Government spends now between Medicare/Medicaid and other programs. Now same amount of care but it seems that marginal healthcare yields very little health benefit anyway. BTW France does this.

2. In education I think that we could, in theory at least, reduce spending on education while significantly reducing class size. Here in Florida the people voted in ballot initiatives for both significantly lower class size and for lower taxes. This sent the pundits crazy because education in the largest part of the state budget but when you add up the numbers at least in theory is quite possible to do both at the same time. In fact IMO if you could squeeze the system in this way it would be done. Many people may not like the resultant drop in funding certain programs but IMO it could be done.

One of the specific principles underlying Reagan's tax reform was to levy the cost of government on everyone. A broad tax base, and rates that stick (i.e., can't be side-stepped by shelters, etc) were thought to transmit to people the cost of government.

Another problem is that taxes are a thousand cuts, none alone worth considering. Withholding, sales tax, property tax, etc are each too small.
Instead of incremental taxes, I prefer rolling all taxes-- excise, sales, income, fees-- into a single payment that every American forks over once a year. That shock would inform people how much government costs.

John Fast writes:
If the government had a choice between reducing taxes or spending more on social programs like health care, social security, and unemployment benefits, which do you think it should do?

I don't like the way that's worded. It implies that one choice is to spend more on social programs without raising taxes.

Take for example the question: "Abortion stops a beating heart. Should abortion be legal?" I strongly suspect that you will get unusually pro-life answers. But is that because respondents do not know that fetuses have beating hearts? Or is it because you've worded the question to get a pro-life result? I say the latter.

I find it ironic that I believe you are overestimating the knowledge of the average citizen, at least on this issue.

I think the Mueller test is a lot more like the abortion question than the minimum wage question. Maybe the public doesn't realize that more government spending requires more taxes. But even I doubt that the public is that stupid.

I'm happy to assert that they do believe just that. For example, they believe we can spend more on social programs, or whatever, by redirecting funds from things like our supposedly-massive foreign aid budget -- you should understand this quite well -- or by "reducing waste" in otherwise-reasonable programs.

A dissertation on the Mueller test sounds like a great idea to me. Any takers?

Sure -- want to be my advisor? :-D

Seriously, though, this sounds fascinating because it involves both economics *and* political theory, which is my real specialty.

If I were doing this as a thesis, though, I would start out by trying to publish each chapter separately as an article.

One would be on the Muller Effect in general, exploring the literature and the existing data. Another would be on the philosophy behind it, meaning the psychology on one hand, and the political ideology (like Lakoff's work on "framing" and his supposedly objective explanation of why "progressivism" is better than conservatism) on the other.

I'd also want to tie this in with Matthew Miller's idea of "grand bargains" in his book The 2% Solution as well as the recent data showing that Starve-the-Beast doesn't work.

The big question is how the public will react when presented with a proper Muller Test, i.e. something like "If the government had a choice between keeping taxes and spending the same, or else raising taxes and spending more on social programs like health care, social security, and unemployment benefits, which do you think it should do?" and "If the government had a choice between keeping things the same or else reducing taxes and reducing spending on social programs like health care, social security, and unemployment benefits, which do you think it should do?"

I also agree with your student that there are plenty of programs which have public support, or at least aren't opposed by the majority, only because the public misunderstands them. Foreign aid (which people think is at least ten times as big as it really is) and farm aid (which people think goes mostly to small "family farms" but which goes almost entirely to large agribusinesses) are two prime examples. (I'd also add the War on Some Drugs, since I believe most people believe that drugs cause crime because addicts get violent when they are high, which is actually the opposite of the truth.)

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