Big Government?

Last month we looked at the issue of how to pay for government when some folks refuse to raise the revenue needed. Today I want to take a slightly deeper look. Let’s start with the conservative talking point that liberals favor “Big Government” and they do not. A standard ploy at election time is to attack Democrats as “Tax and Spend” liberals with the implicit assumption that they are not and anyone who is, is very bad. The ideologically fixated Grover Norquist, founder of Americans for Tax Reform, came up with the infinitely quotable line that his goal was to “shrink government down to where he could drown it in a bathtub.” Norquist has been remarkably successful in gathering literally thousands of Republicans in both Federal and State legislatures to sign on to his pledge to never raise taxes. As he often remarks with a smirk, if tax revenues are reduced then government must reduce spending and government must shrink.

All this is great fun in the game of politics but no one seems to stop and ask what would seem to be two reasonable questions:

a. Are conservatives consistent in holding this purist position or are they more pragmatic and flexible depending on circumstance?

b. Are there reasons for thinking that a smaller government and lower taxes is better (in the sense of improving the quality of life) than larger government with a larger tax-revenue stream?

The first is pretty easy to answer. Saint Ronald, after seeing the looming economic mess that was arriving on the fast track after his tax cuts (the debt ballooned and, over his presidency, jumped from roughly $700 billion to over $3 trillion), reversed course. Contemporary conservatives who have canonized Reagan conveniently forget but over the course of his eight years in the White House taxes were raised a dozen times. He also expanded the size the Federal government significantly and presided over huge spending increases, mainly in the military. You can look it up. Google “Reagan taxes debt government” and sit back and do a little reading.

Ronnie wasn’t alone, of course. Bush I also raised taxes, famously, after he ran on that other classic line “read my lips, no new taxes.” It likely cost him re-election.

To round out the picture Bush II damn near broke the country because he only embraced half the standard message. He did cut taxes (and was praised by conservatives) but he expanded government and increased spending by truly astonishing amounts. Most conservatives today, so focused on blaming Obama for the ongoing economic woes, forget that Bush II started two wars and signed an enormously expensive expansion of Medicare that was little more than a gift to the pharmaceutical industry. The debt expanded by roughly $5 trillion while he was in office.

It continued to grow under Obama but not because of any “tax and spend” profligacy. Obama actually cut taxes. The stimulus package was largely tax reductions for middle-income earners which conservatives rarely acknowledge. The sizes of both the government and the deficit have been dramatically reduced since 2008 which, no surprise, is virtually never mentioned by Republicans. The debt continues to grow because the GOP refuses to even consider revenue increases — many of them having signed Norquist’s astonishingly stupid pledge. [It’s stupid because it commits an elected representative to a position established by a private individual that forces you to ignore the needs, wants and desires of the people who elected you — not exactly what I’d call “democracy in action.”]

So the answer to the first question is “No” — resoundingly. How about the second — and here I’m limiting the focus to democracies like ours.

Let’s begin with a simple question: What is government for? Essentially government is what people do when they get together. The larger a group becomes the more difficult it is to organize and run things using informal means. So groups began developing formal structures. Historically the direction is obvious: government expands as the needs of a growing, complex society increase.

This isn’t complicated. You need to get from one place to another so you and other locals lay down a path. Soon lots of folks are using it and need other ways to get around. Your path runs into your neighbors’ paths so you cooperate on a larger set of interlocking paths. Same kind thing happens with teaching your kids how to live in your group, farming and moving produce around, defending your territory, dealing with illness, holding folks to societal standards, etc. Eventually providing these services becomes too complex so your group incorporates and forms a government. You (s)elect people to take care of these issues, provide the services — and collect taxes to pay for it.

When your “group” is some 350 million people spread across a vast continent the organization governing it has to be “big.” And it has to be paid for. Taxes pay for services. It’s misleading to argue that taxes fund government. They fund services and the most efficient and cheapest way to provide services is to have a government do it. Yes I know, conservatives like to claim that private industry and privately held corporations can do these things better but the data do not support them. Take health care where the US is, even with Obamacare, the most privatized health care system in the industrialized world. What do we have to show for it? Just awful stats on health and we pay twice as much per capita for them. In the few areas where health care is run entirely by the government things are surprisingly cheap and well-run. Medicare, Medicaid, the VA are among the best run and most cost-effective health care programs in the country.

Two overarching factors make it clear that privatization of governmental systems cannot work. One, the private sector needs to turn a profit and once the profit element is folded into the bargain we’re going to run into problems. Two, the privatization model depends on the outmoded and misguided economic assumption that humans are rational decision-makers. We’re not and, interestingly, Herb Simon and Daniel Kahneman have won the Nobel in economics for convincingly explicating the psychological principles behind this. The principle of the “silent hand” held dear by the Austrian school also fails because it, too, was based on rational decision-making.

In short, there’s really nothing wrong with Big Government. In fact, every social, economic and political indicator screams that it’s far better than Big Business. And, funnily, even the conservatives know this. All you have to do is examine what they’ve done when they’re in control. Now if they would embrace the “tax” gambit as lovingly as the “spend,” we might get out of the freakin’ mess we’re in. We could end up like virtually every other industrialized nation on the planet — all of which are rapidly outstripping us in longevity, education, productivity, health and almost every indicator of the quality of life there is.