Saturday, December 22, 2007

Response to Joel's Comment

This entry is a response to Joel's comment:
This is an argument most easily made by well-educated people enjoying a comfortably upper-middle class socio-economic lifestyle. "I'm doing well, leave me alone."
I think it's interesting to note that many of the people that propose government try to solve these problems are also well-educated people enjoying a comfortable upper-middle class socio-economic life style. In their case, the mantra is, "I am smarter than you so I should run your life and prevent you from making bad decisions." I don't know of any evidence to suggest that libertarians have a different socio-economic distribution than the population at large.
Let's now pretend that you didn't have that kind of education. That your biggest problem was where to get cash to buy your medication or the next meal for your children. Then, do you have the opportunity to read through all the fine print, to run your Excel model to understand the annual interest rate you are paying, or to negotiate the terms?

As a blanket statement, this a dangerous and more importantly, hopeless policy. Why can't we hold onto the hope that it's the role of government to create a better society?
So why can't we hold onto the hope that it's the role of government to create a better society? The answer is not complicated. The more government tries to create a better society, the worse off we are. In my previous entry on healthcare, I discussed how government made healthcare much worse in this country by creating a system of employer-provided health insurance that removed the natural pressures normally present in free markets to innovate and lower costs over time. Millions of Americans do not have access to healthcare today because of a bad decision made by FDR in the 1930's. This is a perfect example of government trying to make things better but making it much, much worse.
Of course, there is always danger in having someone else decide what a "better" society looks like and so I understand your perspective. But don't we have (some) answers to that in the form of Checks and Balances, Division of Power, and Democratically-elected leaders? Granted, these systems have come under real attack lately, which is a topic for an entirely different discussion. Nevertheless, advocating such a hands-off laissez-faire position seems defeatist and hopeless. And most importantly, it favors the well-off.
We don't have solutions to this. The GDP of the country is about $13 trillion. Last year, the government spent about $3 trillion. Consider that for a moment -- about 23% of the total amount of money spent in our economy is spent by the government. A few hundred people decide how a quarter of our nation's spending is made each year. This is a huge honey pot for special interests. This vast majority of this money doesn't benefit the people who aren't well off. It's exactly the opposite. Most of this money is given to special interests. It's given to the military-industrial complex who needs us to constantly be in state of fear and war to try to justify these expenditures with a War on Terror and a War on Drugs. If you look at the companies who lobbied for the Medicare prescription drug plan, it was pharmaceutical companies. If you look at who's lobbying for universal healthcare, it's the HMOs. We're in the midst of creating a medical-industrial complex.

As long as a few hundred people determine how an enormous amount of our nation's wealth is spent, this will always be to the benefit to the wealthiest and those most connected to the government. It does not benefit the vast majority of Americans. Only the free market which perfectly aggregates everybody's demands for products and services can efficiently allocate our resources. This type of central planning is inefficient and benefits those in power and connected to government It's the same reason why Russians had to stand on line for bread under their Communist government and the millions of Chinese people starved under Mao. The more money that we send to Washington for bureaucrats to allocate, the more we will head towards a communist system to the detriment of the exact people you want to help.
There will always be those less fortunate, less educated, less blessed by the outcome of the ovarian lottery. They may not know that seatbelts save lives. They may not know that cigarettes cause lung cancer (certainly there have been well-funded fraudulent messages, but even in the absence of those, there are people who just won't get the facts). These people may not fully understand macroeconomic trends that will cause their monthly house payments to spike beyond their ability to pay. Yes, it's a slippery slope, but one we much venture down. If we don't, together, as a nation (as a government), then individual members will slip down that slope on their own...
There will always be rich people and poor people. The government cannot fix that, but it can make us all poorer. This nation did not become well off because of what government did; it became well off because of what government didn't do. The Government does not provide the services and goods we need and want. Bureaucrats in Washington D.C. do not provide health care, do not build houses, do not create the next Google. This is a really simple concept, but it seems to be entirely lost. People have come to depend on government for so much that they think the government actually provides these things to us. All of these services are provided by individuals: doctors, construction workers, software engineers. They are often provided in the context of corporations that employ these individuals.

The best answer to help poor people is by having less government. Do you know that poor people pay more taxes than wealthy people? Oh, it's not done through the IRS or through payroll taxes. It's done by the Federal Reserve which prints money to fund all the corporate welfare and militaristic spending our Congress passes. See Federal Reserve and the Inflation Tax. The inflation tax is the most regressive tax of all. It transfers wealth from the poor and middle class to the wealthiest parts of our society. Read my post and you will see why no politicians discuss it, except Ron Paul.
You are not isolated: a person harming himself becomes a blight on society. Over-consumption of trans-fat causes cholesterol problems which leads to heart problems which turns people into a cost on the medicare / medicaid system (not to mention a lack of production in the workforce). The same argument could be made of credit issues, seatbelts, etc. Unless you are also advocating a drastic scaling back of social services (which you may be, but I didn't want to assume--maybe a topic for another blog post), a person harming himself does not have isolated impact on society.

Letting people harm themselves will continue a dangerous stratification which has already started. Maybe that's OK at the beginning (if you're on the right side), but a very dangerous national trend.

This is NOT to defend all actions, causes, or methods of any particular government (especially not our current one). But it does represent a Hope that society, in a dynamic and constantly evolving way, can work towards a place where we lift up ALL of us instead of those of us who are currently more fortunate, more well educated, or in a better negotiating position.

I believe that government can and should be much more than a wall than protects good people from bad people. It should offer each of us the opportunity (or at least the hope) to make a better life for our children than we have had for ourselves. It should be the force which allows the strong, the weak, the rich, the poor, the lucky, and the unlucky to work together to build a nation that is better for everyone tomorrow than it was yesterday. For everyone, not just those currently in a good position to make smart choices.
As I said, the best way to make people better off is for the total wealth of the nation to increase. If the government doesn't interfere, this wealth will distribute itself in a reasonable way. It's the government policies through the printing of money at the Federal Reserve that is responsible for the growing wealth disparity in this country. The solution to a problem that the government creates is not to have more government. It's to get rid of the parts of government that create the problem.

I have hope that our country can be a better place for everyone. But I have no hope that the government can do it. The government is for the most part incompetent. I consider my friends to be in the top strata of the most educated and capable people, but not one of them works for the government. Why is this? Because, for the most part, the government does not attract the most capable members of society. The most capable members work in industries where they can be financially rewarded. These industries, for the most part, make profits because they provide valuable products and services to the public. I say "for the most part" because this isn't true where the government interferes through government handouts (e.g. military companies) or subsidies granted by the government (e.g. the banking cartel and agriculture companies). So I have no hope that the government can solve our problems. The solution to our problems is innovation and competition in a free market that creates products and services at cheaper and cheaper prices over time.

Our brilliant government has left us with a $9 trillion debt and $60 trillion in financial obligations. We're going to be bankrupt at the state we're going. The people who are not so well off will be in really bad shape when the financial system of this country completely fails. It's not far off at the rate we're going.

2 comments:

joel said...

Responding to Jon's Post: "Response to Joel's Comment"... :-)

Jon: "I think it's interesting to note that many of the people that propose government try to solve these problems are also well-educated people enjoying a comfortable upper-middle class socio-economic life style. In their case, the mantra is, "I am smarter than you so I should run your life and prevent you from making bad decisions."

Either that or "I've been very lucky in this world and feel some obligation to try to give back to those who have been less lucky."

Jon: The more government tries to create a better society, the worse off we are. In my previous entry on healthcare, I discussed how government made healthcare much worse in this country by creating a system of employer-provided health insurance that removed the natural pressures normally present in free markets to innovate and lower costs over time.

Your original healthcare post is an excellent one, though you end with an unjustifiable conclusion based on some questionable comparisons. It's hard to justify a completely free market for healthcare on the basis of the success of the free market of luxury goods like computers, Dodge Neons, or Lead Generation machines (ie Google). Healthcare is a basic necessity, a public asset. Even if you pushed for privatizing police or fire (industries which I noticed you avoided), I think that you'd agree that these would need to be highly regulated, unlike markets for general luxury goods.

Jon: As long as a few hundred people determine how an enormous amount of our nation's wealth is spent, this will always be to the benefit to the wealthiest and those most connected to the government. It does not benefit the vast majority of Americans. Only the free market which perfectly aggregates everybody's demands for products and services can efficiently allocate our resources.

I won't attempt to defend pork-barrel spending or the role of special interests in the current system. At the same time, I don't buy the perfect solution for all resource allocation challenges. What's the Free Market answer to National Security? Or pollution? Or Education? Doesn't a Free Market educational system help create a virtual Caste system??

Jon: It's done by the Federal Reserve which prints money to fund all the corporate welfare and militaristic spending our Congress passes. See Federal Reserve and the Inflation Tax. The inflation tax is the most regressive tax of all.

This is another complex issue. Certainly the Fed policies have been far from perfect. However, the frequency and severity of recessions has certainly improved since the establishment of the Fed (though, of course, they have not disappeared). I suppose you'll argue that we're overdue for an economic tsunami, though only time will tell. Certainly, there have been benefits to the liquidity and monetary expansion afforded by the Fed, though it's difficult to justify how much is "appropriate" and the market certainly appears to agree with you that we've gone too far (as reflected in the value of our currency). It probably would not be such a bad thing if the Fed would be more conservative and allow for natural market corrections now and again...

As much as it's less sexy to take middle-of-the-road stands, I will not defend all of the actions of the existing government (or quasi-government institutions) but also refuse to throw the baby out with the bath water. Is dissolving the Federal Reserve or the Department of Education really the right answer? If something is slightly broken, shouldn't we try to fix it (saving the good parts, learning our lessons) instead of disposing of it altogether and starting from scratch (in a game where some people already have the lead)?

John said...

Hey Jon -- interesting blog.

I'm not sure I agree with the statement "The more government tries to create a better society, the worse off we are".

Collective goods like air quality, endangered species, and child labor/sex laws are examples where state-imposed limitations on our freedom has resulted in a world that is better off.