How Big Should Government Be? Not Big Enough for Many.

Have we reached a critical mass of voters?  On what issue you might ask.  On whether big government is bad on the whole.  I have read a couple of articles recently, addressing that question.  I don’t honestly know whether or to what extent people may believe big government is basically good.  But here is a quote from the author of the article, Jim Geraghty, writing in National Review, January 21, 2016 (read it at http://www.nationalreview.com/corner/430104/many-americans-dont-seem-all-upset-about-big-government).  He quotes from research by the Pew Research Center back in 2013 (you can read the poll results here: http://www.people-press.org/2013/02/22/as-sequester-deadline-looms-little-support-for-cutting-most-programs/):

“Polling indicates that 70 percent want a smaller deficit . . . but the only spending cut that gets anywhere near a majority support is to foreign aid — about 1 percent of the budget — and even that’s close to an even split. ‘For 18 of 19 programs tested, majorities want either to increase spending or maintain it at current levels.’ People want smaller government right up until the point where it actually affects them.”

So it looks like those polled did seem to want smaller government, but not if it might affect them negatively.  That would make it awfully difficult to get politicians to vote to actually make cuts in any significant way.  It is a case of what political scientists call log-rolling (we might call it “back scratching” too).  Since any one politician would vote to cut other legislators’ programs but not his own, and since they all know this to be the case, they will collectively make a decision to vote for the programs favored by each on in return for a favorable vote on their own programs.  Presto!  Nothing gets cut—except perhaps a few token programs that no one apparently cares about.  That is merely a microcosm of the larger patterns by voters who are asked about cutting programs.  And if the voters don’t want a particular program cut, you can bet the politicians will not cut it.  Another quote from the article:

“. . . Congress’s apparently declining interest in deficits and debt is shared by most Americans. Fewer Americans now cite the federal budget deficit as one of their top priorities. According to PollingReport.com, in 35 polls taken between June 2010 and July 2015 that asked about the ‘most important problem’ or ‘priority’ for the country, the percentage of respondents citing some variation of the ‘federal deficit’ or ‘budget deficit/national debt’ steadily declined.”

What is going on?  Is this a case of Alexis de Tocqueville’s warning in Democracy in America, written back in the 1830s?  Tocqueville said that at some point in a democratic society, voters/citizens will become a majority who determine they can now consistently vote that majority to take from the minority and redistribute to themselves.  Only in this case, it could be a super-majority, in which case most everyone is taking from most everyone else to get what they want.  When 18 of 18 programs polled could not achieve a majority vote to cut them, it certainly looks like we have moved past a critical mass.

If you read the Pew results you can see that even Republicans only voted in the majority to cut spending on two programs:  unemployment assistance (56%) and foreign aid (70%).  This ought to be worrisome.  Deficit spending can only continue at its current levels so long before a huge debt service problem arises.  Of course I don’t know exactly how long that will take to occur.  But if it does we might default, and that would bring a lot of pain.  In the meantime, as long as the economy is prosperous enough, the problem is put off for another day.  But even that may be threatened more and more.  Many are talking about another recession.  But in addition, the number one obstacle to growth stated by small and medium sized businesses is government regulation, estimated to cost somewhere around $200 billion per year (the Federal Register now contains over 800,000 pages).  The problem is that when government grows, and the private sector does not, we are in a situation in which we have less tax revenue to pay the debt (unless, a la Bernie Sanders, Congress just raises all taxes), going to a government that does not produce income except through various kinds of taxes.

But if citizens want all this spending and are unwilling or unable to see the end result, trouble is ahead.  The ultimate problem may be a moral one:  people are persistently self-interested.  That is  not always bad, but if it lapses into selfishness, it makes them discount the problems caused for everyone by their own desire to continue government spending indefinitely.  There was a time when even our legislators understood these issues better, but that time seems long ago.  Politicians want votes and people want “goodies” that appear free (they aren’t of course).  The future is uncertain.

 

16 thoughts on “How Big Should Government Be? Not Big Enough for Many.”

  1. Well said. And very depressing (from the standpoint of political economy). James Buchanan, in a talk I was at 30 years ago, said the answer was constitutional amendments limiting spending, taxing, deficits. Great idea. But I asked why (and how) would we get enough actors in the amendment process (super-majorities) to WANT to do that when most voters (not to mention special interest organizations) do not want that ? He had no answer. I remember that brief exchange vividly–he had no answer. Could it be that the only way to change that now is to change people’s thinking ? And how is that going to happen ? Christian renewal and a thorough Christian worldview across the board ? That of course depends ultimately on the Lord. And even then it could take a long time. In the meantime, a complete economic collapse might wipe the slate clean–but for what ? Socialism ? Totalitarianism ? Or “sanity” ? We really are in a dilemma, as the writer posits.

  2. I greatly enjoyed your comments. I, for one, have not forgot about our mounting deficit.

    While increasing taxes on the rich will work for a while, it is not a viable long term solution. There is unfortunately a limit on the resources of even the very rich. Another problem is that the resources of the very wealthy are very mobile. In a recent documentary on Switzerland, I was surprised by how many wealthy Americans live there. What country wouldn’t welcome wealthy Americans who bring more capital to their country?

    Also, more people need to recognize that the world is a more competitive place and we will have to work harder and smarter to maintain our standard of living. An article in the 1/22/12 New York Times by Charles Duhigg and Keith Bradsher said “It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products. ” No government program is going to result in increased worker productivity. That has to come from each of us.

  3. “The problem is that when government grows, and the private sector does not,”

    This happened years ago, but has not been happening in recent years.

    Under President G.W. Bush, employment in the public sector consistently rose throughout his two terms. In the past several years, that trend has reversed itself; public sector employment has dropped like a rock since the 2010 census.

    As for private sector employment, we have now enjoyed 70 or so consecutive months of job growth, reversing the significant decline in the previous months.

    The trend seems to be going in the right direction, right?

    1. Sorry, but no. One has to look also at the actual numbers in the workforce. Plus, incomes have been flat. Also regulations still have a cost that stymies what could have been more capital formation and investment. Job growth has to be balanced with job loss and also what kinds of jobs are “growing.” And I am not defending Bush. Public sector Federal employment has most certainly not dropped like a rock since 2010 (“the federal government has added 62,700 non-postal jobs, the Postal Service has reduced its workforce nearly 18%, or 129,400 jobs.” Pew Research Center). So it is only the Postal Service that has caused Federal jobs to decline) My point was primarily the positive attitude of people in bigger government (which I think is unfortunate) and the growing debt (which I take as evidence of growing public sector). We are only going in the right direction if one says it is very sluggish and uneven. And even then, one has to drill down to what is happening beneath the aggregate numbers.

      1. Sorry, but YES.

        Nice job with the straw mans(“Public sector Federal employment has most certainly not dropped like a rock since 2010”–I didn’t SAY that) and the red herrings (“incomes have been flat” NOT the issue here).

        I easily see right through your tricks. In your bubble in SW Ohio, you might be able to get away with such sloppy thinking, but not with me.

        Did public sector jobs increased under W? Yes, according to BLS data.

        Have public sector jobs decreased under O, since the 2010 census? Yes, according to BLS data.

        Have we enjoyed 70 months of consecutive job growth in the private sector, thereby reversing the drop in the last months of W’s term? Yes, according to the BLS data.

        Is overall unemployment lower now than it was at the end of W’s term? Yes.

        In regards to regulations, you are forgetting that there both hidden costs and hidden benefits. You are only looking at one side and by doing so are not being completely honest.

        If regulations were so constricting, why has labor productivity increased so much over the decades? Although productivity growth is less now than it was, it still is increasing. One would think that productivity gains would be snuffed out if regulations were so harmful.

        I am all for eliminating needless regulations, and I do think that small businesses are often harmed by them. Nevertheless, regulations do have a role, sometimes, if not often.

      2. One of the smartest men I have known once told me ” you can’t drive a car effectively by constantly looking at all the gauges”. While unemployment measures, job growth, government employment and other micro-economic numbers are all important, you need to look at the overall direction for the economy. Which is growing faster: aggregate public debt or the economy (GDP)?

      3. Jeff,

        You can try using ad hominem attacks or try to disqualify arguments with your constant drone of fallacy terminology all you want but it has become so common place from you I doubt many people pay any attention to it.

        “The trend seems to be going in the right direction, right?”

        As Dr. Clauson said, “Sorry, but NO!” I could point out the major flaw in your thinking but as you have made it clear you do not care what I think, then doing so would be a waste of my time.

        Suffice it to say we are NOT economically better off today than when W. left office.

  4. The point of Marc Clauson’s article was that the Federal Debt is growing faster than the economy. Even the most optimistic economic estimate I have seen is that GDP will increase by 2.8%. The Federal Reserve’s estimate at their 12/15/2015 meeting was 2.4% and with the events occurring in China, they will probably reduce their estimate. With the interest on the debt and the planned increases in the deficit budgeted for the 2015-2016 fiscal year, the increase in debt will exceed GDP growth. That is unsustainable on a long-term basis.

    Also, State and Municipal debt is not included in the $18 trillion Federal deficit. I worked as a pension actuary at one time on public and private pension plans. Let me assure you there are a number of underfunded public pension plans that are not included in any of the projections of current debt–but, it is there. A Novemer, 2014 article in the LA Times said that the unfunded liabilities for CALIPERS is $198 billion. With the decline in the stock market, the unfunded liabilities must have increased. And, that’s just one public plan. When you add State and Municipal debt to our Federal debt, I am very concerned about the debt burden being passed on to my children and grandchildren.

  5. I appreciate your comments and use of the outside quotation. I actually never thought about it this way. I am curious; however, just to see what programs you might advocate to cut? I believe that the US government is too big and has honestly overstepped it’s bounds in certain areas. I guess I’m just not educated enough to understand what programs it would be beneficial to cut and why?
    I guess I’ve always viewed taxes as a key problem in this situation as well. Not only is the tax bracket not even close to fair or “right” but I feel like so many people just choose not to pay taxes these days. Now this is just opinion, I have no facts to back this up, but it seems like a flat tax of like maybe 12% across the board would solve a lot of problems, but only if everyone paid their taxes.
    This would allow small and medium businesses (who are being taxed heavily right now) to grow at a faster pace, maybe even keep up with the growth of the government?

    Thoughts?

    1. Kevin: You asked some excellent questions in response to Marc’s blog. I will give you my thoughts in response to your questions but Marc is clearly a better resource.

      Willie Sutton is rumored to have said that he robbed banks “because that’s where the money is.” So, looking at the Federal Budget to see where the costs are is probably the place to start.

      The 2016 budget developed by the White House proposed the following budget:

      Appropriated (discretionary) Programs Budget (Bill’s)
      Defense $584
      Non-Defense $569
      Sub-Total $1,153

      Mandatory Programs
      Social Security $947
      Medicare $569
      Medicaid $355
      Other Programs $739
      Immigration Reform $11
      Sub-Total $2,621

      Interest Expense $252
      Disaster Cost $6

      Total Outlays $4,099

      These costs are in billions of dollars.

      As can be seen from this budget, 64% of the budget is in mandatory programs. While it is politically popular to say that no entitlement programs will be cut, that is an unrealistic position.

      With respect to Social Security (the single largest budget expense), we cannot cut the program for those who really need the benefits. My opinion is that we need to go to a needs-based system, combined with a phase-out approach for younger people. Also, we need to remove the wage-cap on Social Security wages. I realize those are very controversial statements but thankfully I am not running for a public office.

      I know this will be unpopular with my Conservative friends (and I am a Conservative) but I believe that we need to take a new approach with respect to Medicare. I participate in Medicare and my supplement program costs (premiums, deductibles and copays) increased by over 20% this year. The 2016 Federal Budget assumes an 8.2% increase cost in Medicare costs versus a 2.4% increase cost in GDP–a 342% faster increase than GDP. Health care costs are clearly increasing much faster than the overall economy. The economy cannot afford continuing cost increases of this magnitude. We need to revise Medicare and the overall health care system to lower costs, or at least slow the rate of increase. This is totally a non-Conservative posture but my personal opinion is that we need to move to a single payor system. I admit that it is unlikely that a single payor system will ever be implemented in my lifetime because it is not politically popular. But, I have not heard any other proposals from politicians that will solve the problem.

      I am sure that there are savings in other large programs that can help reduce Federal expenses.

      With respect to taxes, I like the concept of a flat tax. While I was working, I saw our library of Federal tax regulations increase 6-fold. Anything that can be done to reduce tax regulations would be a breath of fresh air. I hate to be pessimistic but this is another reform that will probably never be enacted.

      I personally would favor more usage taxes. As an example, I would personally support an additional gas tax to support infrastructure improvements in roads, bridges, railways, etc. I realize these types of taxes are regressive but I think we need more consumption taxes.

      I would also like to see business taxes reduced so that we become competitive on a worldwide basis. That may reduce the flow of jobs and capital offshore, like the planned move of Pfizer.

      This is too long of a reply to your question. I apologize.

      1. Flat taxes and consumption taxes are regressive taxes that hurt working people. No wonder the wealthy like them, and why Southern states newly controlled by the GOP are adding new sales taxes while cutting income and inheritance taxes.

        The problem with the national debt has NOT been with SS or Medicare, which for most of recent time has been funded with surpluses. Rather, what helped the national debt expand so much during Bush’s terms was DEFENSE SPENDING, specifically, the ill-conceived, poorly-executed, arguably unjustified war in Iraq. The funds for those ventures were paid with borrowed money, money my children will be paying back.

        We should take care of fellow Americans before we spend overseas. If we had done that back in 2002, we would be much better off, both in terms of safety and in terms of fiscal prudence.

      2. Jeff,
        I appreciate your comments. I like having a dialogue on issues. It creates understanding between people with different views of the same issue.

        Let’s assume that our defense budget is unnecessary. Just for the sake of understanding, let’s assume the null point–we completely eliminate the $584 billion defense budget.

        What jobs do you suggest for the 2.7 million people in the military get now that they are no longer employed? Will those jobs have an equal pay so that their is no loss in tax revenues from those jobs?

        What jobs do the people who produce the goods that are used by the military (uniforms, food, housing, health care, etc) get to replace their present job? Will that be an economical equivalent change so there is no loss of tax revenues?

        Since most of the military manufacturing is done in the US, what jobs will all the employees at the private companies that support the military (aircraft manufacturers, humvee manufacturers, drone manufacturers, gun manufacturers, etc) get to replace their present job? Since many of these jobs involve more highly educated people (engineers, scientists, computer technicians, etc) are there equally high-paying jobs readily available in the private sector?

        What about all the secretaries, custodians, consultants and private contractors who directly support the military? What jobs will they get?

        Last put not least, from an overall perspective, if we were to partially or completely eliminate the military and its expenses, would that help or hurt our overall economy?

  6. “You can try using ad hominem attacks or try to disqualify arguments with your constant drone of fallacy terminology all you want but it has become so common place from you I doubt many people pay any attention to it.

    I am not using ad hominem attacks. Indeed, I have doubts you even know what an ad hominem attack even is. At the least you have not demonstrated a sufficient knowledge of it.

    “Suffice it to say we are NOT economically better off today than when W. left office.”

    You are making claims without any underlying evidence. Baseless claims can be categorically rejected. In the real world, not the bubble world, evidence is critical. So long.

  7. I think a problem with Americans is that they often think in the short term; they look for immediate rewards even if these come at the expense of a future problem. Applying this principle to economics explains why people ignore the mounting debt for the immediate pleasure of whatever government programs they think they are benefitted from. This demonstrates why people say they want a “smaller government,” and then go ahead and contradict themselves when commenting on what a “smaller government” entails. So, if lawmakers aim to satisfy the two desires of Americans, that is both lowering the debt while maintaining or expanding programs, then they are faced with the problem of having to raise taxes. Bernie Sanders’ call to do this may hurt the overall economy in my opinion, as I think that some of his policies should be left to the private sector, but if people want a lower national debt with all their government programs still intact, then they should vote for him. This might explain why a socialist such as Sanders is doing surprisingly well running for president.

  8. How can this cycle ever be changed, without the solution of raising taxes on everyone?
    Because politicians aren’t going to become less interested in being re-elected, and the citizens of our nation aren’t going to suddenly be happy about losing funding to programs that benefit themselves.
    I guess my question is, if there were a new nation starting today that was following the United States model. What is the one thing that you would change so that they didn’t end up in this situation that we are in right now?

  9. I really like the point you emphasized here about how people say that they want things but aren’t willing to work for them or take cuts of their own. I feel like this trend is becoming more and more common as new generations come into being. People aren’t as hard working as they use to be overall and expect more to be given to them. We should not forget that government was created to protect the people and keep order. Nowadays people expect everything out of the government.

Comments are closed.