Daily Archives: June 1, 2017

May 31, 2017 by Ed Dolan

In a recent New York Times essay, Will Wilkinson berates conservatives for a failure to think clearly about the relationship of big government to economic freedom. The heart of conservatives confusion is the notion that fiscal austerity is the only path to freedom and prosperity. Cut taxes, cut spending, and the economy will be free it will grow, we will prosper.

False, says Wilkinson. A free economy is entirely consistent with something that looks a lot like the much-maligned welfare state. The seemingly oxymoronic free-market welfare state would bundle together deregulation with policies that provide the security people need to take prudent risks when opportunities arise, and that protect them from risks they cannot avoid.

The key to reconciling economic freedom and the welfare state is good government, as opposed to small government. My own research finds a strong empirical basis for that proposition, but this post sets the data to one side. Instead, it takes a qualitative look at what good government means.

The essence of good government is a package of institutions that establish the rule of law, protect judicial independence, defend property rights, and combat corruption. The United States has a respectable record in these areas, even if it doesnt quite make the top of international rankings. Open bribery and theft of government funds is less prevalent here than in most countries. On the corruption front, our biggest weakness is the openness of the government to pressure from special interests what economists call rent-seeking abetted by our system of campaign finance.

Shrinking government in dollar terms, despite the fervor with which conservatives pursue that goal, does not automatically make it less open to the corrupt influence of special interests. Consider, for example, the problem of excessive occupational licensing. In the 1950s, fewer than 5 percent of all jobs required a license or certificate. Now at least a quarter do, and the number is growing. The original idea of licensing was to protect consumers from incompetent practitioners, but as it spread to manicurists, interior designers, florists, and many other occupations, it became more about protecting incumbent practitioners from competition by new entrants. As the licensing apparatus has become captured by incumbents, it has increasingly undermined the fluidity of the labor market by making it harder to change jobs and harder to move from state to state. That, in turn, has made it harder for displaced workers to cope with trade and technology shocks. At the same time, consumers end up paying more for the services that are now licensed.

Examples like this support the view that big government should be defined not only in fiscal terms, but also in terms of its regulatory reach. This does not mean, however, that all regulations are equally undesirable the thinking that seems to have inspired the Trump administrations executive order requiring agencies to eliminate two existing regulations for each one issued. That willy-nilly approach to slashing regulations is especially counterproductive when the regulations in question are intended to protect property rights or prevent fraud. The administrations executive order rolling back regulations on pollution of streams by coal mining is a case in point, but not a unique one. As libertarian economists have long argued, measures to control air and water pollution can be thought of as protecting the property rights of pollution victims in situations where transaction costs preclude negotiating over damages. The environmental regulations we now have sometimes impose excessive burdens, but our aim should be to relieve these by replacing obsolete command-and-control regulations with more market-friendly measures based on the principle that the polluter should pay. Replacing administrative fuel-economy standards with fuel taxes and clean-energy mandates with carbon taxes are examples.

The same approach should apply to reform of the social safety net, but to become effective, it will have to overcome the resistance of a coalition within the Republican party that seems dedicated to shrinking the safety net at all costs. That coalition consists of certain libertarians, who see any aid to the poor other than private charity as philosophically suspect; tea-party conservatives, who view all entitlements as part of a war between makers and takers; and a wealthy donor class whose principal interest is a reduction in their own tax rates. The American Health Care Act, passed by the House and pending in the Senate, is a typical product of that coalition.

In contrast, classical liberals in the tradition of Friedrich Hayek or Milton Friedman have always seen a social safety net as a necessary element of a free society. Applying that tradition to the issues of our own time means looking for ways to make the safety net work better, rather than just hacking away at what we have whenever the opportunity arises.

Reforming the safety net is a harder project than shrinking it, as many conservatives would like, or expanding it without reform, as many progressives would like. But there are alternatives, such as replacing the clumsy, improvised structure of the Affordable Care Act with something that both provides universal protection against catastrophic medical expenses and exposes health-care providers to market discipline. Proposals to replace the work disincentives and personal humiliations of the current welfare system with some form of basic income or negative income tax are another example.

In a rational world, Republicans would embrace these initiatives. As Wilkinson puts it, doing so would liberate them from the bad faith involved in attacking the welfare state and then, to protect their constituents, breaking their pledges once in office.

Continue reading here:

Good Government Can Reconcile Economic Freedom and the Welfare State - Niskanen Center (press release) (blog)

We should see the Trump budget as a cultural as well as fiscal initiative.

It attempts to restore fiscal sanity while restoring individual freedom and personal responsibility to our culture. (Starr Parker, Trump Budget fixes our Broken Culture)

I think the most disturbing thing the present partisan discussion of the Federal budget is that its predicated on a patently obvious lie. As Starr Parker observes in the article quoted above, at present we are not dealing with Federal budget cuts. At best, were dealing with cuts in the rate at which overall Federal spending increases. So-called budget cutters (including Donald Trump) pretend they achieve that goal by proposing cuts here and there, affecting the activities of this or that agency or Department. But these cuts are not expected, or ever intended to reduce Federal spending overall.

Implicitly, this understanding of the budget process leaves our nation wallowing toward bankruptcy, with the implied day of reckoning seemingly postponed by expedients and jerry-rigged projections of future results. This is far from anything like what is needed actually to reduce the governments spending and indebtedness. For that result, we would have to look to the example of past generations, for instance, in the aftermath of Americas war for independence. Put simply, they drew up a plan to discipline the governments spending, curtail any increase in its debt, and increase inflows of revenue. Then, in each budget cycle, they set aside a fixed portion of the surplus this discipline produced, and used it exclusively to reduce the governments indebtedness.

Of course, such plans were implemented before the American people ran afoul of the delusions of the so-called welfare state. Those were times when people didnt just talk about individual freedom and personal responsibility, they, perforce, accepted the fact that living according to those concepts required self-disciplinei.e., the willingness to keep their behavior within boundaries of right they could not whimsically disregard. This is reflected in the thinking expressed in Americas Declaration of Independence. It speaks of unalienable rights, with which all humanity is endowed by our Creator. This thought refers to necessary activities, inseparable from our existence as human beings, which we are bound to undertake in order to preserve our humanity.

Liberty, as it is listed among these God-endowed rights, retains the sense of freedom. But by listing it among the rights with which God provisions humanity, the Declaration makes liberty a distinct species of freedom. It involves doing what right requires, according to Gods prescription of right. That prescription distinguishes human beings from others of Gods creation. As part of that distinction, God endows us with a capacity for deliberate choice, along with the inclination (good conscience) to use it rightly.

The Declarations logic, in this respect, implies that, unless we rightly limit our use of freedom we cannot perpetuate our exercise of rights. For there can be no exercise of rights when the premise of right (which is the standard of God that makes it right) is no longer observed. In concrete terms, for example, do we not accept that it is right to preserve and perpetuate humanity? But to do so requires that we undertake the different activities required to do so. But, whereas it appears to us that other creatures have no choice but to respond to the imperatives of self-preservation, we humans have a choice. We may accept or reject our natural programming, going so far even as to deny and reject the limitations that serve humanity, in order to pursue, instead, activities that satisfy our own passions and self-conceits.

In our day, this goes so far as to reject what even our empirical science verifies as the natural distinction between male and female. Humanity conceives and perpetuates itself in terms of this distinction. Nonetheless, we now being forced to pretend that individuals can change from man to woman, from woman to man, as easily as alchemists once thought to change lead into gold. But if we may thus whimsically change our nature, why not change from man to wolf, from woman to eagle, or any other flight of fantasy? It sounds harmless enough until we contemplate what may be the consequences of these self-conceits. For if, by our own conceit, we change from human to wolf, when we rip out someones throat, as wolves are inclined to do, should we be held accountable as a beast or as a human being? The human must be tried for the crime. The beast we may shoot on sight.

But what of those who look like the self-conceived wolf, but choose to act as humanity requires? Will the confusion we encourage, by obscuring the difference between them, excuse those who see someone who looks like the self-conceited wolf, and shoots on sight; only to find the appearance was deceiving, with no mad, wolfish mind attached to it?

People who are pushing for this species of individual freedom pretend that they are serving humanity. But they may. In truth, be returning us to the days when human beings, mistaken for beasts on account of how they looked or publicly behaved, could be treated like beastskilled and/or enslaved according to the powerful whims and self-conceits of those powerful enough to do so.

Think this through and we begin to see the common sense involved in insisting that, for public purposes, people must be brought to behave according to a common standard of what humanity entails. Whatever people may fancy themselves to be in private, shouldnt they be required to conform, in their public lives, to a general standard of humanity whenever they interact with others? If not, isnt it society itself that, in the end, must pay the consequences?

Time and again Ive read articles in which people lament the costly results of the breakdown of family life. Our present budgets are burdened by those results, especially in respect of poverty, ill health and criminal behavior. Thanks to the delusions of the so-called welfare state. we have become inured to budget discussions that take it for granted that these costs must be met by public expenditures This, despite the fact that it means bankrupting our constitutional self-government. This makes no sense except to those who will benefit from its collapse, and are counting on positions of power in the oppressive regime that replaces it.

There is no way to avoid this tragic prospect but to end the delusion that makes it inevitable. Public monies should be spent for the good of the community as a whole. As for individuals, instead of encouraging their insane fantasies of unfettered existential freedom, we must confront them with the truthIndividual rights are rooted in responsibilities, responsibilities that are not personal to ourselves, but applicable generally to all humanity; responsibilities not toward our own conscience but toward the demands of human conscience as informed by our Creator, God. We will never end the nations spiral toward bankruptcy until we acknowledge that its true cause is our abandonment of the true meaning of rights, including liberty.

Excerpt from:

The Delusion That's Bankrupting America - The Daily Caller

George Mason University economist Tyler Cowen has just published a timely new book, The Complacent Class: The Self-Defeating Quest for the American Dream.

Cowens message is that America is a nation that has lost its edge.

Entrepreneurism and the willingness to take risks key factors that once defined the American economy and made it the growth engine of the world are in decline.

Income is stagnating; productivity is down; startups as a percentage of overall business activity is down; the percentage of Americans under 30 who own a business is less than half of where it stood in the 1980s; the percentage of Americans who stay in the same job is up; the interstate migration rate declined 51 percent from the 1970s to 2013.

Cowen attributes this stagnation to a complacency that now grips our culture. He offers a number of explanations, but key factors include adversity to risk and a sense that a society can be created in which risk is eliminated.

Its a dangerous illusion and were paying a dear price for it.

Cowens book is timely. It has arrived at the same moment that President Trump has submitted his new budget to congress.

Its a courageous budget designed to turn around a ship of state that is sinking from fiscal excess.

Whats the connection to Cowens book? Our federal budget is bloated with social spending programs that have expanded massively over the years, whose real objective is to take any risk out of life.

Few would argue that the government should provide some temporary safety net for citizens that fall on hard times.

But these spending programs arent that. They are the product of an illusion, the result of a culture of rampant materialism, that all of life is a social engineering problem. If designed correctly, the thinking goes, society can purr like a well-oiled machine with all pain and suffering engineered out of it.

This great lie is bankrupting us and producing a culture of victimhood, and, as Cowen defines it, complacency.

Regarding our federal budget, heres what the Congressional Budget Office says: If current laws remain generally unchanged, the United States would face steadily increasing federal budget deficits and debt over the next 30 years reaching the highest level of debt relative to GDP ever experienced in this country. ...The prospect of such large debt poses substantial risks for the nation...

Liberals are crying about cruel budget cuts in the Trump budget.

But as Diana Furchtgott-Roth of the Manhattan Institute points out, what liberals call cuts are not cuts at all they merely slow the rate of spending. The Trump budget increases federal spending over 10 years by $1.7 trillion.

Medicaid, one of the largest items in the federal budget, increases from $378 billion in current spending to $524 billion. Not exactly a cut. And consider that Medicaid spending in 2000 was $118 billion.

Or consider food stamps. Spending has increased from $18 billion in 2000 to $71 billion now. Or Social Security Disability spending, that has increased from $56 billion in 2000 to $144 billion. Reforms are being proposed to add a work requirement to qualify for these programs.

American Enterprise Institute economist Mark Perry notes that direct payments to individuals have increased from less than 30 percent of the federal budget to 70 percent today. He says that the federal government has essentially transformed into a gigantic wealth-transfer machine.

We should see the Trump budget as a cultural as well as fiscal initiative.

It attempts to restore fiscal sanity while restoring individual freedom and personal responsibility to our culture.

This is essential if we are to restore badly needed economic vitality to America.

Star Parker is an author and president of CURE, Center for Urban Renewal and Education. Contact her at http://www.urbancure.org.

Read more here:

Trump budget fixes our broken culture - Times-Enterprise