Friday, August 24, 2012

One way or the other

Readers of this blog know that I've been a big fan of gridlock. It's kept my taxes from rising for quite a while now. But I'm starting to think that it's not a good long term strategy.

I'm starting to think the country needs to go one way or the other. All out or all in.

We either need to embrace big government and try to make it work, or get to a more minimal state.

America is now the Laodicea of modern democracies, and it's not working. I believe we'd get better overall economic performance if either party could put through their agenda and keep it in place.

Many on the left play down the importance of policy uncertainty, but I think it's real and important. The last 3 years have shown that.  I also think both parties contribute to this uncertainty. It can't just be pinned on Obama.

The big government path is pretty clear. A bit more re-distribution, a LOT more regulation, maintaining and expanding at the margin existing social programs. More and more areas of life become areas where people have a right to consume in excess of what their private incomes can afford.

The small government path is not so obvious. Axing Homeland Security, Amtrak, and the Post Office is not going to shrink Federal spending very much. The amount of cutting to entitlements needed to get spending to say 15% is a tough sell when you consider our demographics and the values of the median voter. There has to be a strong case made for why after the transition, America will be a better place with a smaller Federal Government.

Just invoking the mantra of "entrepreneurship" isn't going to get the job done.


Dave Hansen said...

But does going one way or the other lessen uncertainty?

If we take the left path, the certainty will be that there will be lots of regulation and a bigger welfare state. But I don't see why that guarantees more certainty for market participants. The specifics of the regulations could be constantly changing, and we should expect this. Government will create one failed regulation after another to adjust for the effects of the previously failed regulations.

I just don't see how overall certainty is improved by choosing one path (or no path) over the other, unless one of the paths is a path of certainty in which F.A. Hayek is brought back from the grave and elected as our all powerful leader.

Tim Worstall said...

This is a subject I'm particularly interested in. I even have a Kickstarter to try and raise the advance to research the point.

I think it's going to fail to raise the necessary amount which is a shame.

But the point itself needs exploring. The Nordics are pretty much the poster children for the idea of a high tax, high redistribution state. As seen by American liberals. Yet they very often fail to understand how they actually work.

"The big government path is pretty clear. A bit more re-distribution, a LOT more regulation,"

And that isn't it. To a very large extent the Nordics are *less* regulated than the UK or US. Scott Sumner has a paper out there pointing out that Denmark, by 8 out of 10 usual measures, is the most classically liberal of the advanced nations.

Another way of putting it is that you need the red in tooth and claw underneath so that you can afford the redistribution on top.

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Anonymous said...

I thought this during the health care debate. My liberal friend wanted a single-payer system. I wanted a competitive market system like other forms of insurance. I argued that either of our systems would work better than the ACA.

G Wolf said...

Which Laodicea are you referring to? There were like 8 of them in the ancient world.

Richard said...

Hold on: That's faulty logic.

The right question is: What costs less: The current gridlock or Big government?

Both will cost you dearly.

Jim Oliver said...

Much smaller Government is technically easy but politically impossible.

I do agree though that with the big government that we have the current divide is problematic.