Thursday, November 22, 2012

Municipal Funding 101

OTTAWA — The Federation of Canadian Municipalities is calling for a new 20-year plan, which would include increasing current federal spending on infrastructure by $2.5 billion annually.

The federation also wants municipalities to be able to spend federal money as they see fit, rather than having to apply for funding for each project.

It's unlikely that anyone apart of the Federation of Canadian Municipalities is a Rothbardian or fluent in Austrian economics. Ergo, they have absolutely no clue on how to actually "fix" the municipality problem.

One answer should be quite obvious: all taxes imposed on Canadian individuals should be levied by municipal governments. Municipal governments, in turn, could distribute these taxes "higher" up the bureaucratic hierarchy to the provincial and federal governments. Therefore, funding for more centralized bureaus (the greatest danger to a free society), must come from municipal politicians. These politicians, being members of smaller communities, are subject to greater scrutiny by their constituents. Even within large cities, all politics remains local.

Now there are many objections to this proposal. What if the individuals of small Saskatchewan community are contributing a larger share of their income than the individuals of Halifax, yet the level of social services must be "equal" among all ten provinces and three territories? Or if individuals of Alberta want less federal government than the individuals of Ontario?

The best solution is also the most (subjectively) radical: have all levels of government stop imposing taxes. Taxation is theft, after all. If it is immoral for a private citizen to coerce money from his or her neighbour -- even for altruistic purposes -- then it is also immoral for a centralized bureaucracy calling itself "democratic government."

Funding for all levels of government, including municipal governments, must be based on voluntary payment and association. If payment is voluntary, then a profit-and-loss structure arises within government services so that if resources are squandered or put to uses contrary to citizen wishes, bankruptcy becomes a foregone conclusion. Likewise, the transition of government services from a coercive monopoly to a free market provides the opportunity for entrepreneurs to compete with each other for funds voluntarily provided by consumers. Competition rewards those who adapt to changing market conditions and provide consumers with what they demand.

Contrast this to the bureaucratic nature of allocating resources based on the arbitrary whims of a bureaucrat's value judgement. Forced payment destroys the profit-and-loss structure and practically guarantees that citizens will receive the short-end of the stick when dealing with the bureaucracies.

All this is a long way of saying that everything should be privatized. Not into the hands of crony capitalists, but instead homesteaded by local communities and individuals refusing to accept the coercive nature of the state.

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