Economics / Socioculture

Two articles from the other side of the aisle that make a few good arguments, but reach the same tired conclusions.

“We used to have a substantial government size advantage compared to other countries. But Figure 1 shows that while government spending in the United States was about 10 percentage points of GDP smaller than the average OECD country in the past, that gap has now shrunk to just 4 points. A number of high-income nations — such as Australia — now have smaller governments than does the United States.

“This is very troubling because America’s strong growth and high living standards were historically built on our relatively small government. The ongoing surge in federal spending is undoing this competitive advantage that we have enjoyed in the world economy.”

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Putting aside the fact that Figure 1. is labeled ‘Figure 2.’ (there is no Figure 1. in the article), this statement makes the standard assumptions that all government spending is evil, unless it’s military spending, and that small government is always, absolutely, preferable to larger; the perfectly content populi of Sweden, the Netherlands, and France might beg to differ; they’re pretty happy with their governments’ health-related policies (although France isn’t generally happy with their new military prowess). They understand they pay higher taxes, but they also have a clearer understanding of where the money’s going. Government social spending in those countries directly improves quality of life; there’s no profit incentive for the private sector to provide these services at the same cost. We always stick microphones in the faces of people who’ve had to wait a few months longer for particular procedures in these countries – no one ever asks them if they understand why they need to wait a little longer (they do), or if they think the entire system should be changed to accommodate their particular case (they don’t). The health care system in the U.S. is so arcane, so overspecialized, so pointlessly complex in order to maximize profit to its private-sector participants, that when you tell people how expensive health care is in the U.S., they don’t understand why; where do my taxes go, then? Well, they go to private-sector middle-men and the necessary bureaucracy needed to make sure the money funneling through them actually goes to real goods and services. Americans aren’t ‘entitled’ to those goods and services; they’ve earned them by surrendering taxes to have that provided to them. If our ‘larger’ government were more transparently administrated, Americans would have a clearer idea of how much of their taxes go to what they really need, and how much is misspent by propping up the middle men. You can still buy private insurance in France, in Germany, in Japan; they just provide a more supplementary function, but those insurance industries are alive and well. In 2009, seven of the top ten global insurance providers weren’t U.S. companies.

Health-care ‘entitlements’ (shitty word, but no better candidates have emerged – benefits? rewards?), along with military spending (a whole other column – *whew*) still make up practically two-thirds of U.S. government spending obligations. But going after ‘entitlements’ isn’t the ‘hard choice’ – it’s the expedient choice. It’s the attention-grabber, the loud noise, the shiny object. I won’t argue that our large government has handled health care policy well – it’s obviously a clusterphuck. But ‘repealing and replacing’ the AFCA is scorched-earth thinking – repealed, replaced (really? With what?) or simply defunded leaves absolutely nothing in its place. Name one genuinely constructive large health care initiative put forward by conservatives in the last thirty years. The Ryan plan? Please

My local office-holder relative is a little more skeptical of this than I am, but, I insist nonetheless; Americans don’t mind paying higher taxes to pay for government spending if they know, and trust, where the money is going.

“Cutting spending would boost the economy because many federal programs have very low or negative returns. Many programs cause severe economic distortions. Other programs damage the environment and restrict individual freedom. And the federal government has expanded into hundreds of areas that would be better left to state and local governments, businesses, charities and individuals.”

This assumes that the aims of government spending are identical to the aims of the private sector. But that’s not true. Businesses, charities and individuals won’t spend their own hard-earned money on these things if the government doesn’t set the example that These Things Are Worth Spending Money On. Progressive government programs don’t expect to profit mightily from promoting social equality, green industries, financial fairness, infrastructure improvement, health and welfare, and high-tech. They’re understandably delighted when the private sector makes their profits from these pursuits (admittedly, education is a whole ‘nother can of worms), and understandably worried when private money is disinterested in investing in them. Just because our government isn’t very good at this doesn’t mean it’s not a good idea in the first place. Would anyone, in any realistic proportion, support arts and culture in this country if not for the imprimatur of the NEA or NEH? Or general quality-of-life issues without the Cabinet departments of the Interior, Health and Human Services, Urban Development or Education? Wilmington, Delaware would become Dubai, and their theaters would almost exclusively offer Disney theme-park musicals, Adam Sandler movies and Toby Keith concerts. National literacy rates would plummet (they’re doing a fair job of that now).

Which government programs ‘restrict freedom’ and ‘damage the environment’ (referring to progressive programs, apparently) is beyond me. The pledge-signing, concealed-weapon-carrying invaders of bedrooms, bodies and oil deposits are hardly a constructive alternative to this apparent progressive scourge.

It’s a shame, because there’s a lot here that I agree with, albeit for different reasons:

“The reality is that Washington is very bad at trying to micromanage short-term economic performance. Its failed stimulus actions have just put the nation further into debt, which will harm our long-term prosperity.”

In the long run, inadequate stimulus was worse than no stimulus at all.

“On the revenue side, tax distortions rise rapidly as tax rates rise. On the spending side, funding is allocated to activities with ever lower returns as the government expands. Figure 2. (he means 3., or it should be labeled ‘2.’) illustrates the consequences of the ‘leaky bucket.’ On the left-hand side, tax rates are low and the government initially delivers useful public goods such as crime reduction. Those activities create high returns, so per-capita incomes initially rise as the government grows.
“As the government expands further, it engages in less productive activities. The marginal return from government spending falls and then turns negative. On the right-hand side of the figure, average incomes fall as the government expands. Government in the United States — at more than 40 percent of GDP — is almost certainly on the right-hand side of this figure.
“In his 2008 book, Stealing from Ourselves, Professor Browning concludes that today’s welfare state reduces GDP — or average U.S. incomes — by about 25 percent. That would place us quite far to the right in Figure 2, and it suggests that federal spending cuts would substantially increase U.S. incomes over time.”

I’m not sure how he equates ‘crime prevention’ with ‘high returns’ in terms of actual income – most of what he’s defending are the things that are feeding high crimes – the drug war, covert private-sector military actions, deregulation of financial markets –  but whatever… My problem is how quickly he labels the ‘lower-return’ activities ‘welfare,’ again reinforcing the belief that If It’s Not Profitable, There Are No Reasons To Do It At All. Like the Laffer curve, it illustrates real conditions, but posits the wrong reasons. But I agree with the general premise that if government’s not going to be better at HOW they spend our money, they shouldn’t be spending a lot MORE of our money.

“For example, labeling government spending as “investments” in so-called “green-jobs” is just political spin to cover money-losing investments by elite government bureaucrats with none of their own money on the line who, nonetheless, believe they have an ability to pick winners. But, squandering money on expensive energy gambits reduces our wealth, and therefore shrinks the economy and the number of jobs.”

Over and over, the same drumbeat – if government isn’t For Profit, it’s wasting it’s time and money. And forward-thinking foreign companies eat us for lunch.

“The path to more robust growth is first to stop doing what demonstrably has not worked for the past two years…studies by professors from Harvard to the London School of Economics are providing a growing body of empirical evidence that shows the combination of spending restraint and reductions in tax rates are the best ways to stimulate economic growth and employment.”

God bless those professors, but how is stimulating ‘economic growth and employment’ possible if there’s no demand for those ‘mutually advantageous’ goods and services? In the late eighties, people started talking about ‘B to B’ (business-to-business) and ‘B to C’ (business-to-consumer) business models. As long as we pump up the B to B model here, where the top 2% profit wildly, and let B to C migrate to China, then his proposition is true. But the only thing it’ll stimulate is already-embarrassing levels of income inequality here. And shifting the tax base to reflect that wholly organic outcome is, shamefully, panic-inducing to the B-to-B-ers. Being asked to pay their fair share is ‘punishment for success.’ Riight…

“A second important step would be to prohibit any new regulations, and to get rid of as many useless or counterproductive government mandates as possible. Regulations prevent economic activity that otherwise would take place. And although many are aimed at helping the middle-class and those with lower incomes, new regulations on credit and debit cards are driving up the cost of consumer credit and leading to new fees on checking accounts with less than significant balances.”

That’s because, like conservatives, major corporations won’t rethink and restructure to atone for their own self-inflicted troubles – they’d rather privatize profits and socialize losses, crediting themselves for their good ideas, and moving the burden of their screw-ups to people who had nothing to do with them. J.P. Morgan, just today, announced ‘surprising’ profits. Salaries and bonuses haven’t budged – those at the top are fine. ‘New regulations on credit and debit cards’ are primarily about protecting and ‘helping the middle-class and those with lower incomes’ – it’s the banks that decided to pass those costs onto consumers, rather than choosing to cut back themselves on the kind of ‘welfare’ and operating policies that bankers expect the government to eviscerate.

http://www.businessinsider.com/want-to-create-jobs-cut-government-spending-2011-3

I keep trying to see these problems constructively from the Right’s viewpoint – economically, socially, culturally, politically. And I’ll keep trying. And trying. And trying. And trying…

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