Moreover, each new subsidy skews the allocation of resources further from a free-market orientation—that is, further from an efficient maximization of benefit to consumers. Thus the cumulative effect of many subsidy programs is a general decline in the resources available to all human ends. In particular, each subsidized interest group will tend to expend funds in a less cost-effective manner in order to reap the full benefits of government programs. Suppose, for instance, that the members of a group can accomplish a certain end by either of two methods, as indicated in the table below:

 
Total Cost
Cost to
Taxpayers
Cost to
Special Interest
Method A $100,000$0$100,000
Method B $150,000$60,000$90,000

In a free market, the group would clearly choose Method A, since its total cost is much lower. This method, however, is not covered by the subsidy program. Consequently, the members of the group can accomplish their goal at less expense by Method B, thereby saving themselves $10,000. The taxpayer burden is $60,000, i. e., six times the savings realized by the special interest.      Next page

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