Happy Cost of Government Day to all

[digitalpoetry]

Today, July 16th, is Cost of Government Day - for the average american worker, all the work you've done up until today has gone to pay your share of government spending for the year. The next two months, you'll be working to pay off the cost of government regulation of markets

Comments

[digitalpoetry]

First of all, I should be clear that this is directed solely at the federal government, not state and local - states have the right to tax their citizens according to their own internal laws. The vast majority of road maintenance and public transportation funding happens at this level, and that's fine. As for scientific research - we've only taxed incomes in the modern sense since 1913 (there were income taxes used in the last half of the 19th century off and on, but they applied to a small percentage of the population) so how did any research get done before then if it requires government funding? Paying for health care costs is the job of insurance companies - and in the absence of heavy government regulations the cost of insurance would be lower, and more people could afford to have it. It used to be the case that people would pay out of pocket for general medical expenses, and their insurance would help them pay for the large unexpected ones. They could afford that because the costs were lower before the government began intervening.

I absolutely agree with your statement about freedom vs. responsibility. An individual's or an organization's rights extend as far as possible without infringing on the rights of others. At that point, they stop. I'm not sure I've seen a solid argument from the Paul camp on pollution, to be honest.

The problem with the idea of government doing good is that an unrestricted government tends to grow until it becomes an authoritarian state. History has borne that statement out - that's why this country was set up with a constitution that restricts the power of the federal government. A lot of the issues we're facing are a result of that government acting outside its legal boundaries, and convincing the people that it was in the name of good. Even if it is at the time it's a step down the road to totalitarian government. All the good intentions in the world don't change the fact that it's unconstitutional to do a lot of the things you're talking about. The powers of the federal government were limited so that the state and local governments and the individual people would have as many rights as possible. If we want to assign more powers to our federal government, we have a built-in method for doing that in amending the constitution. If the constitution doesn't matter, then we're no longer a republic, we're an oligarchy, and the people have no rights.

That certainly doesn't prevent people from agreeing that there are problems that we should take collective responsibility to fix - we can do that through state governments and private charities, and a lot of people would use those tools for just that purpose if the federal government were put back in it proper place in the structure. I agree with you that some people wouldn't - but again, in the absence of the market interference the federal government engages in, not as much money would be required for such things.

I admit I haven't examined the numbers behind Cost of Government Day, but it's not saying that you've payed your share of taxes by July 16th - it's saying that you've payed for your share of the spending. Our federal government spends far more than it brings in, and instruments like the Federal Reserve are quietly allowing them to spend more by causing the inflation that's ruining our economy.

Here's a quote from Ron Paul's book on the subject of income taxes:

What we should work toward, however, is abolishing the income tax and replacing it not with a national sales tax, but with nothing. Right now the federal government is funded by excise taxes, corporate income taxes, payroll taxes, the individual income tax, and miscellaneous other sources. Abolishing the income tax on individuals would cut government revenue by about 40 percent. I have heard the breathless claims about how radical that is - and compared to the trivial changes we are accustomed to seeing in government, I suppose it is. But in absolute terms, is it really so radical? In order to imagine what it would be like to live in a country with a federal budget 40 percent lower than the federal budget of 2007, it would be necessary to go all the way back to...1997.

[lmpshd]

First of all, I should be clear that this is directed solely at the federal government, not state and local - states have the right to tax their citizens according to their own internal laws. The vast majority of road maintenance and public transportation funding happens at this level, and that's fine.

OK... the issue of state vs. federal is one that I've never been able to get very worked up about. There are cases where I think it's clear cut: many issues are fundamentally local and one shouldn't have people in DC deciding what's best for everyone. On other issues there are universal questions that supercede states' rights, e.g. clearly the US Surpreme Court should be able to tell the state of Texas they can't outlaw sodomy. And I have no problem with the federal government imposing taxes that apply throughout the country to use (at least in theory) for the general good: we're all one country, and some responsibilities should be shared. As an example (while this may be a bit of a stretch): Alaska has a lot of oil and therefore a lot of money... it is, despite the difficult climate, naturally richer than the rest of the country. It's citizens (even those who don't work in the oil industry) benefit from that financially but still have to pay some amount of taxes for the rest of us, and I don't see any moral justification to let them not do that: what could they say, "we have all this oil and you don't, so we don't have to worry about your problems?" No, they're part of the United States, so they share some measure of collective responsibility. If that weren't so, what we'd have up there would be sort of a colder, bleaker United Arab Emirates, where everyone's rich and it's hard to see exactly why. (Yes, a stretch... I'm writing this off the top of my head without any research, so I'm doing my best.)

Here's what you also have to keep in mind about the Constitution: not everyone agreed in the late 18th century that America should all be one big country at all. They tried and failed with the Articles of Confederation to produce a workable union with less central authority. So the delegates at the Constitutional Convention had learned that a federal government was necessary, but they still had some inate suspicion of the very idea, resulting from the fact that they'd only recently broken free from the authority of a much larger and less democratic central government (i.e. Britain). We always must view and interpret the Constitution within the context in which it was written, and with a healthy dose of skepticism -- it isn't a holy book. Those were different times... for a simple illustration of how different, I only need mention the way the Constitution deals with slavery.

As for scientific research - we've only taxed incomes in the modern sense since 1913 (there were income taxes used in the last half of the 19th century off and on, but they applied to a small percentage of the population) so how did any research get done before then if it requires government funding?

Much less research did get done then... society was less advanced, there were fewer scientific directions to pursue, and we didn't have pressing issues like global warming or AIDS (there were other pressing issues, we just usually had no hope of doing anything about them). Aside from that, a far larger proportion of the American populace in 1913 lived in abject poverty with substandard (for the time) medical care, had no hope of getting a decent education and basically didn't have the economic means to enjoy the freedom they had. I hardly think it was a better world. A lot of those problems didn't begin to look any brighter until FDR's New Deal.

Oy... it seems I'm already over the length limit, I'll have to divide this into two comments.

[digitalpoetry]

The issue of federal vs. state is an important one because our country is set up as a federal republic - a collection of states under a single central government. You're exactly right that the writers of the Constitution wanted to grant as little power as possible at the federal level because they were only recently out from under the heel of an authoritarian state, but also because of the lessons of history. They specifically designed the Constitution to strictly limit the powers of that government because they'd read of countless examples throughout history of governments gathering more and more power to themselves until the people had no freedom left. They wanted the citizens of this new country to have the power of self-determination - the federal government is important to hold the states together and provide for common defense, but government at the state and local levels is important precisely because the moral standards in Texas aren't the same as those in Massachusetts. Instead of forcing our values on them, or vice-versa, our system allows us to live in a society that best reflects the views of the people in each area.

As for interpreting the Constitution, it's pretty straightforward. There's not a whole lot of room for contention about the meaning - people generally speak of the Constitution as if it's a complex document full of arcane legalese, but it's really pretty clearly laid out. Some of the highlights include Article 1 Section 8, which enumerates the powers granted to Congress, Article 4 Section 4 which is a "guarantee to every State in this Union a Republican Form of Government", and especially the 10th Amendment, which I will include in its entirety:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

That's pretty plain - any power the Constitution doesn't explicitly grant to the federal government is reserved for the states or the people. If you read Article 1 Section 8, you'll see how limited a set of powers are explicitly granted.

If times have changed, and the Constitution is no longer relevant, then we have a mechanism to change it - and if it's that clear cut, then that amendment should be ratified with no trouble. If, instead, (as we're doing now) we just wave aside the Constitution by saying that it was written in a different era, then what limits are left on the power of our government? None - and look at what happens when that's the case: a government that continually nibbles away at the edges of the rights of its citizens. The more accustomed that that we become, the faster they can remove those rights, until soon enough we don't even have the right to stand up and complain about it.

And it's not a one-party problem - getting a Democrat into the white house won't change things as much as we'd all like, because both parties are primarily interested in maintaining the status quo.

[lmpshd]

This has all gotten rather abstract, and I'm confused. In what specific ways would you say the federal government has expanded its powers beyond what the constitution allows? I can certainly think of some things -- Bush's tendency to tell Congress to fuck off and put things through by executive order is a good example -- but what's it all got to do with income tax and corporate regulation?

[digitalpoetry]

Didn't notice this comment when I was replying yesterday - I agree with you that using executive orders the way this administration has (and I'd include signing statements and line-item vetos as well) is pretty clearly outside the Constitutional boundaries for the executive branch. As for the legislative branch, Article 1 Section 8 enumerates the powers granted to Congress. A large number of the bills passed by Congress deal with issues not on that list. A bill called the Enumeration of Powers Act has been put before Congress every session for over 10 years now, and it's never even made it out of committee - all the bill says is that any bill coming before Congress needs to include a clause explaining where in the Constitution Congress derives the authority to pass that bill. I'd say that's a pretty clear indication that even the members of Congress are fully aware that they're working outside their limits, and don't want to have to deal with being restrained.

That's related to corporate regulation, but not to income tax. Despite some people arguing to the contrary, I do think that a federal income tax is perfectly legal, thanks to the 16th amendment - I just don't think it's necessary or right.

[digitalpoetry]

To the issue of research: there's always a solid incentive to innovate because inventors reap the rewards of their work - materially and societally. When the government helps fund research, they can decide which causes are worthy and which aren't, which sounds fantastic - but people are notoriously bad at determining which inventions will provide the most benefit to society. Who could have predicted the discovery of penicillin, for instance? It was a surprise even to it's discoverer.

An AIDS vaccine surely would be of incalculable benefit to the entire world - but we don't need the government to tell us that. On the other hand, the government is doing what it can to prevent stem cell research, which also might provide amazing benefits.

Surely private/corporate investment can do the job being done by the government here just as well as in other areas - if for no other reason than that the National Science Foundation is one of the least-funded government agencies in existance - they just barely edge out the Corps of Engineers, the Office of the President and the Legislative Branch. It's somewhere around 1% of the funding given to the DOD. I don't have numbers on hand, but I suspect that's dwarfed by corporate and private funding.

[lmpshd]

(I'm so glad I get to use this icon now!)

The NSF doesn't seem so small to me because at the moment that's where more than half of my income originates. I do pure math, you see... no private investor will pay for it. But fortunately it doesn't cost that much (I don't need much equipment, only books, food and housing.)

Yes, there always is incentive to innovate and you're quite right that usually no one can predict from what direction the greatest advances will come... that's actually precisely why I'd argue that government support for research is crucial. To put it bluntly, private investors don't have much incentive to invest in projects whose outcomes they can't predict -- there may be a few visionaries among them who can, but that's the exception. Without some amount of investment that's disconnected from any concern about profit (which can come from the government as well as philanthropic sources), there'd be very little "pure" research, i.e. research that's designed to advance knowledge without a specific practical goal in mind. It's a natural thing for the government to undertake because it's something that's for the good of us all and basically wouldn't get done otherwise. Here again: private investment and market influences can sometimes play a beneficial role, but they're very far from being the answer to everything.

[digitalpoetry]

I see you point - I'd agree that there are benefits to government funding in cases like this, just as there are drawbacks. The benefits probably do outweigh the problems, but in the end, we don't actually need income taxation to fund this. We could very easily pay for programs like this even if we completely got rid of the individual income tax, by reducing our military budget (among others). We have troops stationed in over 130 countries right now, and it costs a lot of money to keep them there.

[lmpshd]

No argument from me on the last part, certainly.

Of course, I won't easily go along with abolishing the income tax, as there are plenty of other things I'd love to use it to pay for. :)

[digitalpoetry]

And yes, that's a great icon :)

[lmpshd]

They could afford that because the costs were lower before the government began intervening.

I don't know what kind of government intervention you mean or why it should raise medical costs -- I've really never seen any convincing argument for government intervention being the source of so many ills (in isolated cases sure, but not generally). Medical costs are higher today because there's much more that medicine can do... e.g. many illnesses that used to be terminal are no longer so. And... I'll admit I'm not an expert on this, but I have an awfully hard time believing that the private insurance system helps: having insurance companies driven by the profit motive and thus constantly struggling to find excuses not to cover one thing or another does very little good for the patient. Yes, costs need to be kept down, no I don't know how to do it, but I think that as potential answers go, the free market has been tried and has failed.

The problem with the idea of government doing good is that an unrestricted government tends to grow until it becomes an authoritarian state. History has borne that statement out - that's why this country was set up with a constitution that restricts the power of the federal government. A lot of the issues we're facing are a result of that government acting outside its legal boundaries, and convincing the people that it was in the name of good. Even if it is at the time it's a step down the road to totalitarian government.

I'm torn between saying this is a red herring and that you're melding two important issues that ought to be distinct. I think first of all, the statement that you say has been borne out by history -- it may have been borne out by 18th century history, but has very little to do with the realities of the Western World after 1945. I think that expansion of federal power is a danger in the same sense that expansion of any power is a danger: of course we don't want governments intruding into our private lives, and I'm upset about wiretapping too. That sort of thing is one important feature of our current national troubles, but I don't think it's the source: the fundamental problem has more to do with our leaders having terrible judgment about what's good for the country and the rest of the world. Then they expand their powers as far as they can get away with to put their ideas into action, and I agree, that's terrible, but after you've prevented them from doing that, the fundamental problems won't go away. None of this proves that government can't do good -- in Western Europe, plenty of governments have been doing plenty of good for their people for over half a century. It's nothing to do with abuse of power or restricting individual liberty... it's about doing things to shape the environment we live in so that some baseline quality of life is attainable for everyone.

I'm not sure I've seen a solid argument from the Paul camp on pollution, to be honest.

That's the one feature of the Libertarian movement that most consistently irritates me: they have a tendency to speak as though it's all a very simple issue of freedom and that's why regulation is bad... and just ignore the fact that these regulations were created for good reasons, that in some cases we'd all be doomed without them. It misses the big picture.

Our federal government spends far more than it brings in, and instruments like the Federal Reserve are quietly allowing them to spend more by causing the inflation that's ruining our economy.

A fair point, and of course fiscal responsibility is a necessary thing that's currently lacking. It does strike me that defining Cost of Government Day in this way again confuses two different issues: are we complaining about fiscal irresponsibility, or are we complaining about how much of our income we don't get to take home? Would we all be happy then if we got to take home exactly the same amount but the rest were used in a fully responsible way?

Eek... I need to do some work.

[digitalpoetry]

Economist Ludwig von Mises said, essentially, that government interventional always bring about unintended consequences, which then prompt calls for further interention. That's exactly what's going on now with the economy, for example - government intervention, partially via the federal reserve, brings about unfavorable conditions. People start to complain, and the government blames the problem on someone else - predatory lenders, in this case. So they promise to fix it by adding more regulations. But what happens when those regulations cause other unexpected problems?

As for the historical basis for thinking that power begets power, why is it that this isn't true in the modern world? It's exactly what the government is doing right now. The fundamental problem with the idea that it's just the current set of leaders having bad judgement, and that things will be better when we get the right person in power, is that they can't stay in power forever. If we grant the government unlimited powers, then sure - maybe the leaders with judgement, vision and humility can do great things for us all. But what happens when the next Neoconservative is sitting in the oval office? The restrictions placed on power by the Constitution are there because we won't always have someone in power with our best interests in mind.

We can certainly give our government the power to accomplish things that will benefit us all - but the states already have that power. Granting it to the federal government can have very dangerous consequences for us as individuals.

The reason that Libertarians "ignore the big picture" is that markets can solve a lot of problems if allowed to work. Your saying that the free market has failed isn't really true - yes, in the total absence of regulations, people will do terrible things. But especially today, we live in a society that's increasingly conscious of the environmental and other consequences of industry. If a company has a reputation for polluting, they won't do as well in the marketplace and will eventually go under.

The problem with regulations are that they're very easily used by one company as insurance against competitors - this happens all the time. The company with money to spare can lobby congress for regulations that increase the barriers to entry in their industry. Sure, maybe they don't make as much profit but now they have no competition, so who cares? With less regulation, we get more options, more innovation, more choice.

The issues of fiscal responsibility and of how much money is left in our wallets at the end of the day are interrelated - especially with a government with a history of fiscal irresponsibility like ours, how can we expect that with a new administration, we'll suddenly have responsible spending? That might last through one administration, but what about the next? They have more incentive to spend that money irresponsibly than they do to spend it wisely. Again, trusting that we'll elect people with our best interests in mind has proven to be a vain hope. Besides, what one person considers responsible and reasonable the next might consider frivolous. There's no single consensus on how to spend, so we'd be better off having control over that money ourselves. That way, we could each support the causes we believe in, and unworthy causes won't see any funding. You want to take the politics out of spending - that's how to do it.

[lmpshd]

Economist Ludwig von Mises said, essentially, that government interventional always bring about unintended consequences, which then prompt calls for further interention. That's exactly what's going on now with the economy, for example - government intervention, partially via the federal reserve, brings about unfavorable conditions. People start to complain, and the government blames the problem on someone else - predatory lenders, in this case. So they promise to fix it by adding more regulations. But what happens when those regulations cause other unexpected problems?

I'm sure there's some truth to what Mises said, but there are varying flavors of arguments from various economists, and this kind always strikes me as forgetting that at the root of this great big abstract machine we call the economy, there are actual people. Predatory lenders aren't a scapegoat, they're a serious problem that has been enabled by overzealous pseudoreligious belief in the good of the free market -- in Europe they have regulations that have prevented it from becoming such a crisis. Ask me how I know it's honestly a crisis: because among the millions of people whose unfortunate economic circumstances have lured them into putting their homes on the line by taking out loans that the fine print doesn't tell them they can never repay, there is my mother. This is why I have no disposable income to speak of.

As for the historical basis for thinking that power begets power, why is it that this isn't true in the modern world? It's exactly what the government is doing right now. The fundamental problem with the idea that it's just the current set of leaders having bad judgement, and that things will be better when we get the right person in power, is that they can't stay in power forever. If we grant the government unlimited powers, then sure - maybe the leaders with judgement, vision and humility can do great things for us all. But what happens when the next Neoconservative is sitting in the oval office? The restrictions placed on power by the Constitution are there because we won't always have someone in power with our best interests in mind.

We can certainly give our government the power to accomplish things that will benefit us all - but the states already have that power. Granting it to the federal government can have very dangerous consequences for us as individuals.

For the first paragraph, I completely agree with you. On the second, I just don't see it... why is that power more dangerous in the hands of the federal government than the state?

The problem with regulations are that they're very easily used by one company as insurance against competitors - this happens all the time. The company with money to spare can lobby congress for regulations that increase the barriers to entry in their industry. Sure, maybe they don't make as much profit but now they have no competition, so who cares? With less regulation, we get more options, more innovation, more choice.

I would say that your problem here is not with regulations per se, it's with lobbyists and politicians' dependence on corporate money. That's why I'm 100% for campaign finance reform, in a somewhat radical sense.

Yes, regulation causes some problems too. But if you throw out all the regulation, you create a lot more problems than you fix -- it has been tried, let's talk about the 19th century. You really think the market will penalize companies that pollute more? That assumes that the consumers are alert and well informed... personally, I think they'll buy whatever products are cheapest until some disaster on the scale of Chernobyl makes them realize they shouldn't.

These optimistic theories about the benefits of the free market... there are people in corporations with an awful lot to gain from those theories who are throwing an awful lot of money at the thinktanks that produce them and try to make them sound reasonable to ordinary people. The market isn't good or bad; it's just a machine that works by certain principles, and we have to see it for what it is.

[digitalpoetry]

"among the millions of people whose unfortunate economic circumstances have lured them into putting their homes on the line by taking out loans that the fine print doesn't tell them they can never repay, there is my mother."

I'm sorry to hear that. :(

I do agree that issues like this are problems in their own right - some level of regulation is probably a good thing, to prevent people from defrauding each other. However, I'd argue against your claim that predatory lending is enabled by free markets. The market conditions that led to this "crisis" were caused by interventionist policies: mainly, the federal reserve manipulating credit markets and expanding the housing bubble. If the free market was responsible for these practices, why haven't we been subject to this crisis for decades?

A lot of people have a similar view of "the free market" to the one I was taught in school - child labor, massive pollution, and other disastrous societal ills, while the people in charge of the companies get fat on the suffering of the common man. Yes, during the industrial revolution the level of pollution drastically increased - and as technology and society have progressed, we now have many ways of alleviating that problem. We have the technology to drastically cut down the pollution from factories, and we have a level of social conscience that would result in heavily-polluting companies making less sales. The industrial revolution also saw the standard of living of the average laborer rise drastically from the pre-industrial standard. And despite all the stories of child labor during the same time frame, those children would have been working on farms in the absence of industry - living lives at least as hard.

Free markets can create problems, but they also provide solutions. Markets work to reduce costs, increase efficiency and raise standards of living. Government intervention tends to do the opposite in all three cases. Yes, it can solve problems, but the solutions almost always create more problems elsewhere that require "just one more fix". The advantage of markets over governments is exactly that the market is made of of innumerable individuals each working for their own benefit - they can react to situations almost instantly, and because they have a personal stake the outcome, problems get solved faster. If one solution doesn't work, they can try something else - new laws aimed at solving the problem are harder to get rid of, especially if people don't recognize the cause-and-effect that creates the next problem.

"why is that power more dangerous in the hands of the federal government than the state?"

Power in inherently more dangerous in the hands of the federal government because if your state government begins to become oppressive, the other states and the federal government can work to ensure the freedom of the oppressive state's people. If the federal government starts to oppress its citizens, who do we appeal to to stop it? The courts are the obvious answer, but they aren't always effective - look at what's going on around us over the last 5 years or so.

In the end, I think we do need a minimal level of regulation to prevent fraud, destruction of public resources like the environment, and exploitation. However, most of that can be covered by a small number of fairly general laws. In the end, it should be up to the people - if a company is defrauding its customers, don't give them your business. If they're polluting, help bring a class-action lawsuit against them. And yes, there are people in corporations who have an awful lot to gain from freer markets - we ALL have a lot to gain.

[lmpshd]

The big thing I need to point out here is that large corporations are at least as good as politicians at spreading propaganda and misinformation to make the common man believe they're on his side when they may be quite the contrary. Given the way the media is today (and the fact that I have no clear idea how to change it for the better), I would not expect average people by and large to have much solid information as to which companies are causing harm to the environment or defrauding their customers, and in fact I wouldn't even blame them for not knowing. Finding out is indeed possible, especially now that we have the internet... but there's so much that one COULD potentially worry about, sifting through all the information takes far more time and effort than most people have to spare. It needs to be someone's full time job, as opposed to being every consumer's hobby. Now, we do have independent nonprofit organizations and people like Ralph Nader (back when he was doing something constructive) to help us out, but they're always fighting an uphill battle against the corporate public relations machine. Without some fairly serious regulation, the risk we run is that every transaction becomes a matter of "buyer beware", or at least threatens to damage the karma of any consumer who isn't incredibly on top of things.

I think that as long as there are things we can almost all agree are clearly harmful for companies to do, we ought to be able to live free of the worry that the people we buy all our stuff from are doing those things. That is in fact one of the important "freedoms" that I value, and part of what I think it means to live in a developed country.