The Real Burden of Government

Drawing on estimates of GDP and its components, it is easy to quantify the share of economic output that is absorbed by government spending. (See, for example, “The Commandeered Economy.”) With a bit of interpretive license, it is even possible to assess the cumulative effects of government spending and regulation on economic output. (See, for example,  “The Price of Government.”)

But the real economy does not consist of a homogeneous output (GDP). The real burden of government therefore depends on the specific resources that government extracts from the private sector in the execution of particular government programs, and on the particular products and services that are affected by government regulations.

Each new or expanded government program raises the demand for and price of certain kinds of goods and services, and channels rewards (claims on goods and services) in the direction of the businesses and persons involved in providing goods and services to government; for example:

  • Social Security rewards individuals for not working. The service, in this case, is the “good feeling” that comes to politicians, etc., for having done something “compassionate.”  The effect is to raise the prices of the goods and services that prematurely retired individuals would otherwise produce, therefore reducing the well-being of the working public.
  • Medicare — another of many feel-good programs — rewards retirees by subsidizing their medical care and prescription drugs. The upshot of this feel-good program is to reduce the well-being of the working public, which must pay more for its medical services and prescription drugs (directly, through higher insurance premiums, or because of lower wages to offset the cost of employer-provided health insurance).
  • R&D conducted in government laboratories and under government grants absorbs the services of scientists and engineers, thus raising the compensation of many scientists and engineers who couldn’t do as well in the private sector (the reward) and reducing the numbers of scientists and engineers engaged in private-sector R&D (the cost). Remember the private-sector inventors, innovators, and entrepreneurs who brought you the telephone, automobiles, radio, television, any number of “wonder drugs,” computers, online shopping, etc., etc., etc.?
  • A goodly fraction of the teachers and professors at tax-funded schools and universities are rewarded with incomes that they could not earn if they worked in the private sector. (Tax-funded education also provides feel-good rewards to the usual suspects, who worship at the altar of statist inculcation.) Given that the “educators” and administrations of tax-funded educational institutions are essentially unaccountable to their “customers,” it should go without saying that tax-funded education delivers far less than the alternative: combination of private schools (including trade schools), apprenticeships, and penal institutions. Moreover, tax-funded education deprives private-sector companies of the services of (some) teachers and professors who have the skills and ability to help those companies to offer better products and services to consumers.

That’s as far as I care to take that list. You can add to it easily, just by selecting any federal, State, or local government program at random.

All of those programs, onerous as they are, have nothing on the insidious regulatory regime that has engulfed us in the past century. Regulation often are the means by which “bootleggers and Baptists” conspire to protect their interests, on the one hand (“bootleggers”), while slaking their thirst for do-goodism, on the other hand (“Baptists”). The classic case, of course, is Prohibition, which enriched bootleggers while making Baptists (and other temperance-types) feel good about saving our souls. You know how well that worked.

Obamacare is a leading example of “bootleggers and Baptists” at work. Insurance companies and the American Medical Association, anxious to protect themselves, lent their support to a program that promises to increase the demand for prescription drugs and doctors’ services. It’s a pact with the devil, of course, because (unless, by some miracle, it is repealed or declared unconstitutional) insurance companies and doctors will find that they are nothing more than government employees, in deed if not in name. And guess who will end up paying the bill? The working public, of course.

Obamacare is not a purely regulatory regime, however, because it revolves around a feel-good giveaway program. For examples of purely regulatory regimes, I turn to the myriad mundane regulations that are imposed upon us for “our own good” and at our own expense, from make-work schemes for electricians and plumbers building codes to death-inducing delays in drug approval the Pure Food and Drug Act.

More notorious (though perhaps not more damaging to the economy) are the federal government’s misadventures in “managing” the economy. A good place to begin is with the Federal Reserve’s actions from the late 1920s to the early 1930s, which helped to bring on the stock-market bubble that led to the stock-market crash that led to a recession that (with the Fed’s help) turned into the Great Depression. A good place to end is with the recent financial crisis and deep recession — a creature of Congress, the Fed, other federal suspects too numerous to mention, plus Freddie Mac and Fannie Mae — their pseudo-private-bur-really-government co-conspirators.

Have you had enough? I certainly have.

The growth of government and its incursions into our personal and business lives during the past century has done far more than rob us of wealth and income. It has ruined our character and our society, and deprived us of liberty. What has happened to self-reliance, social networks, private charity, and civil society in general? What has happened to plain old liberty, which is a value unto itself? That they are not gone with the wind is due only to the tenacity with which (some of us) hold onto them.

Government grows in power and reach because every government program and regulation — even the most benighted of them — creates a vested interest on the part of its political sponsors (in and out of government), bureaucratic managers, and dependent constituencies. New suckers are born every minute who believe that they can join the gravy train without paying the piper (to mangle a few metaphors). And when the problems created by government become too obvious to ignore, the conditioned response on the part of politicians, bureaucrats, their dependent constituencies, and most of the public is to find governmental solutions to those problems. It is the ultimate vicious circle.

Government is the problem. And it will be the problem for as long as it does more than merely protect its citizens from domestic and foreign predators, so that they can enjoy liberty and its fruits.

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Related posts: Too numerous to mention. Begin with this list of posts at Liberty Corner, then start at the beginning of Politics & Prosperity, work your way to the present, and stay tuned.

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