Posts Tagged role of government

Myth v. Fact: Eliminate the Government!

“Look, I get that you don’t like the government, but how do you plan to pay the cops if we abolish all taxes?”

Conservatives are regularly derided by liberals–from bloggers to Presidents–as wanting to tear down the entire government and stop all government functions and programs. I’ve been attacked for this myself.

If the charge is not, “You hate the government and want to close it down,” then it’s, “You’re a hypocrite because you say you hate the government but you still drive on public roads!”

Are either of these charges accurate?

This attack often presents as evidence either 1) the conservative desire to lower everyone’s taxes, or 2) conservative opposition to particular projects.

Let’s take these one at a time. Issue one is taxes. The reasoning goes that since government needs money to function, if conservatives want to cut taxes, then conservatives must want the government to stop functioning.bridge2

But while lowering taxes might mean having to cut or scale back some government programs or services, the idea that conservatives want to eliminate ALL taxes and cease ALL programs does not follow. If I’m spending too much in my personal life and decide I ought to cancel my cable TV, this does not mean I secretly want to stop wearing deodorant and become a hermit.

Then what about Republican opposition to specific spending projects? Do conservatives want to eliminate roads and schools? I’ve been hearing that charge my entire life, along with the claim that Republicans want to fire all the cops and firefighters. Or, opponents will point to conservatives’ desire to eliminate certain federal programs or departments–the Department of Education, for example, or the Affordable Care Act.

The answer to these attacks lies in two related principles: Federalism and Subsidiarity.

Federalism means that governing power is shared and divided between central and local governing bodies (e.g. states or provinces). Subsidiarity is the organizational principle that the smallest, most local authority that can effectively accomplish a task, should be the authority responsible for it.

We all know these concepts instinctively. We recognize that individual employees are capable of walking to the supply room and taking a box of staples when they run out, and we react against micromanagerial policies that require a manager’s signature to requisition staples and pens and a supervisor to open the supply room. It wastes the time of both manager and employee, it saps morale by treating people like children, and that all means a waste of money.

Subsidiarity does not say that local government should do everything and the federal government should do nothing. A staple czar is a bad idea, but a company can’t function without a chief at all. So of course there are things that only a central government can manage well, and subsidiarity says that the central government should do those things. Subsidiarity simply means that we ought to direct our efforts where they will be effective.

Within this framework, conservatives believe that the federal government, and local governments, and businesses, and individuals are all going to be good at certain things; and, if we’re smart, we’ll avoid making any of those groups responsible for tasks to which they are not suited. The point is to avoid wasting money and effort.

So it’s not that I don’t want public roads. I think that’s something government can be relatively good at, as long as we keep an eye on corruption. It’s not that I don’t want schools. It’s that I don’t think the federal government is at all good at running them. State and local governments are handling it, so let’s not waste effort where it’s not needed. Let’s not send money from Illinois to Washington, D.C. to pay for an expensive building full of expensive bureaucrats who will then decide how much of that money comes back to Illinois and how we should spend it.

Yes, I bristle when conservatives are called anti-education for taking issue with the Dept of Education, a federal, Cabinet-level Department with a nearly $70 billion budget whose mission is to “promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.” What does that mean? It means the Dept. of Education doesn’t educate a single student. State and local government handles this.

Back to the beginning. Why, then, is this presented as, “Conservatives don’t want the government to do anything at all, ever!”? Because it looks that way from the point of view of today’s liberal Democratic party. The left today acts as if every social issue can and should be solved by a new shiny federal office full of federal workers. Progressives today argue without irony that a government’s effectiveness is defined by the number of laws it passes, and that when conservatives say, “Let’s cut this program because it’s not helping the poor,” they must really mean, “We don’t want to help the poor.” But subsidiarity means not doing things that won’t work. And I think that’s a reasonable principle to follow.

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Stand Up For Freedom Tomorrow

Tomorrow, starting at 12 noon in every time zone, in 160 cities (and counting) across America, there will be major rallies in support of religious freedom, about which you may not hear a peep from the mainstream media.

The movement is a massive, nationwide, concerted protest against the new HHS mandate, which is a regulation contained within Obamacare. If you haven’t heard yet of this mandate, it’s a requirement placed upon all employers, including religious groups, to pay for their employees’ contraception, sterilization, and abortion-inducing drugs under their insurance coverage. There are very narrow exemptions that would not exclude religious schools, hospitals, or charities.

So a non-profit Catholic hospital, under this mandate, is faced with the choice of either paying for contraception for its employees, in direct contradiction of Catholic teaching, or simply closing its doors.

If you think this doesn’t matter because you’re not Catholic, or not Christian, or not even religious, keep reading.

This is not an issue that only affects Christians. This is an issue of freedom of conscience for every single American.

I defer to the clear and succinct summary at stophhs.com:

The HHS Mandate violates the United States Constitution and statutory law.  The HHS Mandate violates the free exercise of religion and the freedom of speech – both guaranteed under the First Amendment of the United States Constitution.  It also violates, among other laws, the Religious Freedom Restoration Act.

The HHS Mandate isn’t simply a Catholic issue.  This is an unprecedented attack on religious liberty.  The HHS Mandate allows the government to define whether an organization is religious enough and leads the way toward redefining religious liberty as freedom to worship.  As Americans, our Frist Amendment Right to the Free Exercise of Religion is much more than the right to worship privately in a church building or pray in our homes.  Our right allows us, as Americans, to live our faith publicly through our religious ministries and to serve others precisely because of our religious beliefs.  The HHS Mandate dictates that religious employers can only employ their own and serve their own or be forced out of ministry due to hefty fines. (emphasis added)

This goes far beyond the issue of contraception. Ask yourself what the role of government is in this case. Should the federal government be dictating to every employer every detail of every benefit package offered to every employee? If you accept that, should the government be able to tell a faith-based school that they must provide their employees with something that violates the tenets of their faith? Does free exercise of religion mean nothing?

Should the government tell a vegetarian business owner that he must provide lunch for his staff, and it must contain meat?

This is a dangerous intrusion into the rights of each of us to follow our own conscience. Dangerous in itself, and dangerous for what it would mean for our rights in the future.

Today’s attack is against the rights of Catholic organizations. Forgetting tomorrow’s dangers for a minute, let’s think about that danger. The Catholic school system is the largest private school system in America. 2.5 million students are educated at thousands of Catholic schools across the country. Catholic high schools have a 99% (!) graduation rate and save the taxpayer over $19 billion a year, as they are funded by tuition, donations, and their local parishes. There are 221 Catholic colleges and universities in America, 615 Catholic hospitals (12.5% of the nation’s hospitals), and 1600 local charitable agencies including food banks, soup kitchens, and homeless shelters.

The HHS mandate threatens to shut them all down.

Who is on the right side here?

So go to standupforreligiousfreedom.com. Find your nearest rally tomorrow and GO. Tell your friends.

Stand up.

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Why Government Decisions Matter

There’s an annoyingly common belief that taxes and regulations have no effect on what a business can and cannot do. The standard argument for increased taxes and heavy regulations on businesses is based on a premise that raising said taxes or changing regulations won’t change the business. For example, Sen. Dick Durbin (D-IL) was behind recent legislation that capped the amount that banks can charge retailers for processing debit card transactions–then, nonsensically, he flipped out on the Senate floor when banks started charging consumers for the transactions instead, as if banks ought to be able to provide their services for free.[1] One wonders where Sen. Durbin thinks Bank of America gets the money to pay their 288,000 employees (not to mention the irresponsibility of a Senator publicly calling for a run on the nation’s second-largest bank).

In some people’s heads, it seems like every business, every business owner, every CEO has millions of dollars of pure profit coming in daily, and that it can’t cost much to run a business, so this is all just going into that CEO’s bank account. So many people, when they think about business owners, picture Scrooge McDuck swimming in a pile of gold coins.[2]

The thing is, this belief comes from these media and cartoon sources, and not from reality. Businesses and CEOs live in the margin. Let’s look at numbers rather than cartoons. If a corporation takes in $50 million in a given year, and pays its workforce of a few hundred people a healthy $30 million (including payroll taxes), and spends $20 million on materials, manufacturing, and distribution of its product… this $50 million dollar company makes zero profit that year.

If that’s our starting point, then check out the effects of a new regulation on this big, evil corporation that provides millions of dollars in payroll to hundreds of workers. If the government creates a new regulation that costs this company $500K a year to comply with, the company will have to find $500K worth of expenses to cut, or raise their prices to compensate. There was no profit margin to work with.

Pay no attention to the fact that it’s a $50 million dollar company. It doesn’t matter. Here’s the real effects. This means:

  1. a few people laid off, or
  2. everyone in the company losing some benefit, or
  3. trimming overhead (i.e. salaried employees now have to work unpaid overtime, etc), or
  4. raising prices (which means inflation, which means everyone in the world is poorer).

None of these options is going to lead to increased hiring or productivity.

Or, say the company was profitable. Say they were $1 million in the black. Now, the new regulation means their planned million-dollar construction project will have to wait, or they will have to cancel plans to expand your department and hire 10 more people, or whatever they were going to do.

Now imagine that we’re not talking about one company, but about a regulation that affects every business in America–say, the Affordable Care Act. Conservatives think it’s a bad idea not because we don’t want to take care of sick people, but because we understand its effect on the rest of the economy. This new regulation and others are partly responsible for our current high unemployment and the oft-referred-to $2 trillion or so that businesses are afraid to spend at the moment.

It’s important to keep these things in mind when listening to people complain that nobody is hiring or building, and that the government ought to regulate more to make things work better. That’s like opening your fridge to cool off the kitchen. Sounds like a good idea, but it will actually make things hotter overall. [3]

But back to the hypothetical company. There’s another possible outcome. Maybe the new cost imposed means there’s simply less profit going to the shareholders. People say, so what? They’re just the rich fat cats not doing any work. Thing is, that’s not true. For one thing, shareholders often means you and me. Anyone with a 401K holds stock in dozens or hundreds or thousands of companies.

And even when we’re talking about the rich company owners, what’s happening is that they are getting properly rewarded for funding and creating productivity. That’s a good thing. Remember productivity? Productivity is critical. The more the economy produces, the more jobs are available, the cheaper goods become, the more able we all are–rich and poor–to get the things we want. You’re not going to move someone in poverty to the middle class by giving them welfare–but you might if you give them access to a job and allow them to acquire real wealth themselves. It’s productivity that does that for people. We’re going to help the poor more by growing the economy than by handing out checks.

If we want more productivity, the last thing we want to do is remove incentives to be productive. Our system ought to reward the things that move society forward. It’s good when there are incentives to innovate, to be more efficient, to lower prices and get your product to more people.

And we’re absolutely not going to create more productivity or make people wealthier by making business more expensive. Conservatives understand that it matters when the government steps in and creates new, expensive regulations and taxes. That’s never going to make business easier or get more people working. How much the government allows a company to keep obviously and directly affects that company’s ability to hire you and me. Government decisions change everything from how many employees a company can hire, to how much it costs to swipe your debit card when you buy a Big Mac. Government decisions matter.


[1] http://www.politico.com/news/stories/1011/65038.html
[2] Vaguely annoyed that I drafted this Scrooge McDuck swimming in gold coins reference a couple of weeks before it was in the recent Family Guy gag.
[3] Then you’re just running a motor in the middle of the room and making it hotter. The fridge moves heat from the inside of the box to the radiator on the back–that’s all. It doesn’t move it outside, and it certainly doesn’t create cold by magic–just like the government can’t create wealth by magic. It can just move things around.

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The Government Isn’t Magic

Limited Options

The government is necessary. I will never claim otherwise. Conservatives will never claim otherwise. President Obama argued irresponsibly when he said in his jobs speech to Congress a few weeks ago that conservatives want to “dismantle government, refund everybody’s money, and let everyone write their own rules, and tell everyone they’re on their own.”[1] This is the argument of just about nobody.

More to the purposes of this blog, he’s also arguing for government intervention based on false premises. One belief in particular comes to mind. His entire argument calling for a new stimulus is based on a belief that the government can, if people don’t have jobs, simply create jobs for them. It sometimes seems this is supposed to happen by magic. Economicus reparo. Poof. Don’t look behind that curtain.

To understand conservative solutions, you must understand that this premise is flawed. Conservatives understand that the government can never truly create jobs in and of itself. All work the government creates is offset by a reduction in the ability of the private sector to create.

Think about the economic actions that are actually available to the government. The government can regulate; that is, make laws saying that activity X is illegal and activity Y is only allowed to happen according to format Z. And the government can make programs that distribute money or confer various benefits, sure–all funded by taxes, the government’s only source of income. It all, with few exceptions, comes down to those two things: regulation and taxpayer-funded programs.

Here’s the rub: both of these options are inhibitory actions. Both of these options make business more expensive. And if business is more expensive, then less business will occur. This is just shy of being a law on par with gravity. If something is made more expensive, less people will do the something. Slapping a heavy tax on each pack of cigarettes leads to lower cigarette sales. When gas prices doubled, people took less long car trips.

Look at the two options, taxation and regulation, in the context of starting businesses or hiring new employees:

Taxation- Any new government program means a new tax. Nothing is free. Increased taxes–whether they are taken directly from the businesses, or indirectly by taking it from you and me–either way, it means businesses have less money to expand, hire, or in some cases, exist.

Regulation- Increased regulations means the businesses have to pay more money to remain compliant, or to pay experts to find ways to get around the regulations, or sometimes, to pay lobbyists or outright bribe officials so that they don’t have to be compliant. Ultimately, the same thing results–the business has less money to expand, hire, or exist.

Obviously, starting a business or hiring a new employee costs money. Take more money away, businesses will start and/or hire less. So that’s:

  1. More regulations, less money available to hire… less private hiring.
  2. More government programs, more taxes to pay for the programs, less money available to hire… less private hiring.

Regulations make it harder to do business–sure, that’s readily apparent. But let’s look more closely at the other point. Even government programs which (claim to) hire people to build bridges and roads lead, at the end of the day, to less hiring overall–because that hiring is paid for by taking away money that other companies would use to hire, and build, and expand. We might all agree that we want the new bridge or road and it’s worth it, but we must never neglect the fact that it’s paid for out of the same pocket that businesses reach into when they want to pay their employees. Government programs which hire people and support businesses and individuals do so by reducing the ability of the private economy to hire people and support businesses and individuals. You can have a great campaign line about the government stepping in and hiring if businesses won’t do it themselves, but it won’t actually have an effect on employment. Taking money out of the economy to put it in to the economy is a wash at best. And that’s only if the government is 100% efficient (ha, ha).

This is why George W. Bush’s stimulus of sending everyone a refund check for a few hundred dollars had no real noticeable effect on the economy. This is why Barack Obama’s 800 billion dollar stimulus had no effect on unemployment. This is why the proposed new 400 billion dollar stimulus will, if passed, also have no effect. The government cannot create, it can only get in the way–attempts to intervene generally make things worse.

Before I overcomplicate the explanation, here’s the overall logic again.

If the government’s only options for interacting with the economy all make business more expensive,

And the more expensive business becomes, the less business will occur,

Then the more the government wades into the economy, the less business will occur.

Simple enough, right?

Now let’s put this all in context before you all get up in arms about Crazy Marc the Right-Wing Anarchist.

For one thing, I mentioned that there may be other things the government can do outside of the tax-and-regulate model. The list of exceptions is small, but there are a few government services that attempt a fee-for-service model, or quasi-governmental agencies that don’t claim full public status, but are still run by political appointees and are often largely publicly funded. Some are more effective than others. For example, there are agencies such as the US Postal Service, and Fannie Mae/Freddie Mac. These exceptions, while a tiny fraction of the government’s real activity, illustrate a point coming in a further post about the effectiveness of government-run versus privately-run services. For now, I will leave it to you to decide if you think Fannie and Freddie, and the USPS, are stunning examples of government efficiency and productivity. Or not.

Then there are some things that virtually everyone can agree it’s necessary for the government to do. Certain things can only be effectively handled by a central government, simply because private solutions wouldn’t work. It’s a good thing that (be it local, state, or federal) roads are planned and constructed by the government. It works. I don’t want to see a private police force or fire departments. Certainly, national defense can only be effectively run by a central government. And, arguably, these things are real goods and services being produced—the government, in these cases, is not simply a parasite, but a productive part of the overall economy. Without getting into the government’s competence or lack thereof, if there are no other options for these necessary things, then we should have the necessary taxes to do these necessary things.

However, what I’m talking about here relates to the government’s interaction with businesses and the economy. And I even grant that when it comes to business, there are necessary regulations. Various business practices are rightfully illegal. Society is better off if things like usury and false advertising are not allowed. This is good and necessary, and you will never hear me say otherwise.

Here’s the but (you knew it was coming).

Let’s say the economy is a car. That was everyone’s favorite metaphor a few months ago, I can certainly beat it to death a little more. At its most basic, the car in this particular example is just an engine, wheels, and a seat. The engine of the economy is every business in the country, producing and selling goods and services. They want to. They NEED to, they live and die by selling something for a profit. The more profit, the better for them.

So this car, unlike a real car, wants to go pedal-to-the-metal, all the time, of its own accord. This car will always be trying to go as fast as it can. This is its natural state. If you sit back and do nothing, it will race forward as fast as possible, driven by the high-octane fuel that is the human desire to make a better life for ourselves. It’s a car with the accelerator strapped down.

The government can’t do much of anything to goose the car and make it go faster, if its natural state is to go as fast as it can. The government can, however, get in the way through various means. Remember when I talked about perfectly reasonable business regulations? Now the car has seatbelts, airbags, brake lights, anti-lock brakes. These are things, if left to our own devices, we might choose not to put in our cars—but we can all reasonably agree that we’re all better off if everyone has these things. And this is good government; we’re better off with certain reasonable regulations than without them. These are not things that keep the car from driving.

Where we get into trouble is when the government goes too far. There are regulations and taxes that, rather than giving us a smooth ride, are more akin to filling the trunk with lead. Confiscatory taxes—for example, taking fully half or more of someone’s income—remove incentive to be further productive. This is like attaching a parachute to the back of the car. You can get so much, but then the parachute inflates, and you’re not going any faster than that. Regulations that, say, prevent domestic oil exploration simply let the air out of the tires.

So now the car is objectively safer—now we can’t go faster than a walking pace. But we’ve also eliminated the usefulness of the vehicle, since we were already going that fast simply by walking. It’s gone too far. If the government can only slow the economy down–though we all agree that some restrictions are healthy–problems still arise when necessary restrictions give way to destructive ones.

On the surface, the disagreement lies between people saying, “We need more regulations,” or, “All regulations are bad.” I don’t think that’s really what conservatives argue, but regardless, we should all be able to agree that the right question is, “Which regulations are necessary?” Conservatives, rather than wanting to “dismantle the government,” simply want to keep the necessary regulations and toss the unnecessary ones that are only slowing us down. We don’t want the government to try to magically create jobs, because we know that it can’t. There is no magic spell for this.

Instead, we want to allow the private economy to provide jobs, because it’s the only way it ever really happens. Unlike the attacks against the GOP and Tea Party assert, the goal of conservatives is to actually look at reality and create a situation where everyone can find a job and take care of themselves. And that’s something we should all strive for.

[1]  http://www.politico.com/news/stories/0911/63043.html

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