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Wednesday, December 8, 2010

The idea of "small government" as politically-induced bullshit -Someone (else) always has some control -

I will (narcissistically) start with a quote from my last Post, which started a train of thought - "Mr. Beck, however, apparently trusts everyone, except the government (which does not have a profit motive), to act in the public good."

Last week, I was talking to my (and I say this fondly) conservative wingnut partner Micheal about tax cuts and the deficit.  Michael admitted that his major concern was not the deficit, but his desire to shrink the government by "starving the beast" by cutting the money available to the government.  While he focused on the federal government, he believes that governments in general do not do anything (except the military) as well as the private sector, and that government should not "interfere" with people's lives.

I will concede that governments are not always "cost-efficient".  And, as readers of this Blog know, I value the rights of individual adults to act as they please, without government interference.

Let's roughly categorize "Government Spending" as follows:

1.  Defense from violent foreign threats
2.  Defense from violent domestic threats (includes police, courts, prisons)
3.  Infrastructure, which theoretically benefits all of us(in a broad sense-includes roads, bridges, air traffic control, electrical grid, national parks, education, the Post Office)
4.  Payments or other distribution or redistribution of wealth to or for individual citizens or entities (again a broad definition which would include things like agricultural subsidies and tax code provisions like the mortgage interest deduction which benefits one group of taxpayers over others)
5.  Regulatory (which overlaps with "criminal"), (the IRS, the SEC, the FDA, the FCC, state insurance commissions, banking regulations). 

I want to focus on this last, "regulatory" category in this Post, both because it seems to be a frequent target of alleged conservatives, and because looking at it really exposes the fundamental weakness about "small government" I allude to above.

My friend and his "drastically shrink the governments" compatriots are missing a really big point;  none of us lives in isolation.  Someone else produces and sells my food, my house, my electrical appliances and my clothing.  Someone else provides the train service that gets me to work.  Someone else tries to make sure that my my own food or garden tools or medicines do not kill me, that I can safely put money in a bank, and that people who sell me investments or whatever don't constantly cheat me. 

Of course, I have my own very significant responsibilities in all of these areas.  I have to be watchful and careful and not really stupid in how I live my daily life.  However, I am simply not in a position to protect myself in an adequate or even efficient manner from all "dangers".  I can avoid eating spoiled food, but I can't inspect meat-packing plants.   I can avoid sticking my hands under a running lawnmower, but I cannot create electrical or other safety standards for lawnmowers. I can put my money into an allegedly conservative mutual fund instead of going to the track, or even choose individual stocks or bonds, but I must rely on information and advice from other people (unless its my own company and I'm the CEO or CFO) when doing so.  None of us can do all of these things; we have neither the time nor the expertise, nor the bargaining position.

If the Government does not regulate these areas, they will be "regulated", but not by the individual citizen.  Rather they will be "regulated" by those producing or selling the goods or services and (sometimes) the "market" itself.  The producers and sellers are, naturally enough, usually more motivated by profit than anything else.  And while the market in an abstract sense may effectively regulate some things in a long term, it's really not an effective device at protecting us.  For example, the "market" would allow television and other advertising for cigarettes aimed directly at children. (also called shooting fish in a barrel).  A bad food producer or drug manufacturer might gradually get a bad reputation and would be driven out of business (or at least change its name), but a number of people would be poisoned in the interim.  If laws did not regulate insurance companies, they would not have to keep any reserves to pay claims.  Does anyone want to abolish the FDIC and its guarantees of depositors' accounts?

In many circumstances, the idea of a market adequately governing transactions is ludicrous.  For a market to work in those situations, there must be, among other things, some parity of both knowledge and bargaining position.  Take a mortgage or a stock offering or an insurance policy.  Anyone ever tried to actually negotiate the fine print with the bank or insurance company?  Yeah, right. (I would note that if you are sophisticated enough, and are borrowing enough money, you can negotiate some things with a bank - because of the possibility that you can get a better deal elsewhere).

There are situations where the market works wonderfully.  If there are two grocery stores in the neighborhood, the one offering cheaper prices or better produce will tend to get more customers on that basis.  I can look at the grocery store ads;  I cannot go out to South Dakota and Nebraska and inspect the meat packing plants.

It is not the individual consumer who is producing all of his own food, or running his own bank or deciding what medical services will be "covered".  It is someone or something else.  And that someone or something else usually has a strong profit motive that may incline, him, her or it to do "bad" stuff.

Perhaps the best and most topical example of this demonization of "government intrusion"is the debate about health care.  Small government advocates claim the government should not be involved in health care, and warn of "death panels".  I have bad news for them; we already have "death panels", and we've had them for a long time.  For those of us who have medical insurance as well as those who have government sponsored medical care, someone else (besides us and our own doctors) is already limiting our care by limiting how much we can spend on medical treatments and for what.  For those of us with private insurance, it's the insurance companies, whose power to deny claims is limited only by the (gasp!) government. (It's the (evil) government and its laws that requires group insurance to be "portable"; previously, it was very hard for someone with a serious medical condition to take a new job.  It's the (evil) government that requires COBRA benefits and the administrative burden it places on employers). For those of us with government sponsored health care, our care already limited by the government itself.

I would point to the recent situation in Arizona, where the Republican controlled state government eliminated transplant coverage for Medicaid recipients.  I am not blaming the Republicans; they were trying to cut costs and were apparently given incorrect or incomplete information.  Nor am I taking a position as to whether Medicaid should or should not cover transplants or anything else.  Similarly, private insurance companies deny coverage on a daily basis.  I am not saying these denials are right or wrong.  What they are, whether done by the Government or the insurance companies, is necessary.  If I (or one of my kids!) is sick, and particularly if it involves spending someone else's money, I'll spend whatever is possible, reasonable or not, cost effective or not, or whatever.  A wildly experimental and extremely expensive procedure?  You betcha. The best specialist and hospital available, whether they are in my "network" or not?  If it's serious enough, sure. As long as it does not actively harm me, I'll bet I can get a doctor or hospital to do it, as long as they get paid.

There are all sorts of legitimate reasons for and against what is called "Obamacare".  A fear of ggovernment "involvement" and "death panels", however, is simply politically induced bullshit.

Another topical example is the regulation of the sale and purchase of investments and financial instruments.  Despite at least some laws, the investment banking community was able to sell a lot of people (including allegedly very sophisticated investors) utter garbage for a lot of money.  Yet the investment banking industry (who took bailout money) and their political lackeys (hey, you know who you are) have been and are screaming about too much government regulation. Instead, they appear to say we should leave protecting the public up to them, an incentive system that rewards risk, and the "market".  (That's worked out well for the last couple of years, hasn't it?)  More politically induced bullshit, with "we need less government intrusion" as a cover story.  I would be more inclined to believe "the dog ate my homework".  Enough

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