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The Cost of Free Money

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Charles Mason
March 15, 2024

Public Finance is intricately linked with public policy and administration. Public policy decisions determine how government resources are allocated and what services are provided to the public. These decisions have financial implications, which are managed through public finance mechanisms. Public administration then oversees the implementation of these policies and contains the allocation of resources following them. So, general Finance is the financial aspect of public policy and administration.

Our political structures are stressed at this time, and communication is corroded due to the financial and economic crises brought on by unrestrained capital. The advantages of transparency that were formerly thought to exist have been disregarded, and it is now impossible to ignore the fissures in the American system. Interest rates or dividend payments on borrowed capital are examples of the cost of money.

Government Income and Outlays

As we evaluate our spending on social programs, infrastructure and public services, as well as revenue from taxes, fees and other sources of income. We see that the American government modifying its income by increasing taxes on the rich, notably the middle class, in an amount that would cover the expenditures. At the same time, we see that America is unwilling to lower its costs for social issues.

With the growing power of government at all levels, gone are the days of considering critical issues in Public Finance, such as: “When Should Government Get Involved?” The current consensus is always and at all times. The two main reasons for intervention have been to redistribute our income and wealth and resolve market failures (2008). Therefore, public Finance is critical to developing national policies, the distribution of resources and the economy’s stability.

Though the term “free money” may have many different meanings, let’s examine a situation in which funds are distributed without any upfront costs—for example, via government grants or stimulus programs. Even though there might not have been a direct financial cost associated with this money when it was received, there might still have been indirect costs or consequences.

Inflation may occur when significant money is injected into an economy without a proportional rise in goods and services. Prices increase when the money supply expands more quickly than the supply of goods (stop drilling in America for oil) and services because money loses value. When “free money” is given out through loans or credit, people or organizations may end up in debt. While there may not be a cost right now, future interest costs and payback responsibilities might add up.

Reliance on free money schemes may lead to a dependency mentality, in which people or things get used to getting help instead of aiming for independence (free college). In the long term, this may hinder creativity and production (socialism). Even if the money itself is free, opportunity costs may be associated with how it is used. For example, there could be long-term effects on economic development and prosperity if the money is spent on consumption rather than investments in businesses or education, which was the case during the COVID-19 crisis. Funding for free money initiatives often comes from taxes or borrowing. This implies that even while people may not pay for the money they get, they can indirectly cover its cost via taxes.

By artificially increasing demand for certain commodities or services, free money infusions may cause market dynamics to be distorted. Misallocation of resources and economic inefficiencies may result from this. Therefore, free money may have significant economic, social and opportunity consequences even if it may not have a direct monetary cost. Policymakers should carefully weigh the long- and short-term effects of such initiatives and consider their implications.

The Cost of Free Money

The cost of free money is freedom. People gave up their independence and self-sufficiency during COVID-19 to receive a check in the mail. We suffer as a nation when Americans depend too much on financial aid or subsidies. Americans lose interest in pursuing chances for personal development or self-improvement if they get used to receiving financial assistance or subsidies without working for them. Individual initiative and self-sufficiency were undermined by this dependence.

Government Control

Free money issued comes with appalling conditions attached to it, such as compliance with laws or scrutiny from the government. As the nation received financial aid, it was locked down not for 14 days but for months. Americans had to abide by guidelines (strip clubs good) or limitations (church bad) set out by the government officials funding the help. This not only restricted one’s autonomy but freedom of choice. The programs that gave out free money could not allocate resources fairly or evenly, which resulted in differences in opportunity and wealth. Fewer people had access to more funds than others, giving some disproportionate power and influence, further restricting their freedom. It is to be noted that the government that gives out free money can use it as a weapon for manipulation or control, violating people’s freedoms and civil rights. This might include authoritarian actions such as monitoring or limiting free expression; again, we saw this during COVID-19.

Author: Charles Mason, Ph.D., is a graduate of Walden University in Public Policy and Administration specializing in Criminal Justice. He is also a graduate of Barry University with an MPA and a graduate of Vincennes University with a Bachelor of Science in Homeland Security and Public Safety. He has over 30 years of experience in security, local law enforcement, state corrections and military service. He is currently president of Mason Academy. He can be reached at [email protected]. Twitter: https://twitter.com/DRCharlesMason

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