Many analysts have argued that the federal government should stop spen

Many analysts have argued that the federal government should stop spending money on programs such as agricultural price supports and should redirect that spending to such things as improvements in the nation’s roads and bridges.

Construct an economic argument that supports this proposed change in policy.

ANSWER

Government spending on agricultural price supports amounts to a transfer of money from one group, taxpayers, to another group, farmers. As such there is no real increase in productive capacity. Furthermore, one could argue that the subsidies further distort market prices and send the wrong signals to farmers. In contrast, spending on roads and bridges (other than the “bridge to nowhere”) contributes to an increase in the economy’s infrastructure and, as such increases the economy’s productive capacity over time.