"Whenever I go into a restaurant, I order both a chicken and an egg to see which comes first"

Tuesday, August 14, 2012

Let’s Listen To Paul Ryan

Joe Nocera writing in the New York Times http://www.nytimes.com/2012/08/14/opinion/nocera-let-the-real-debate-begin.html?_r=1&ref=opinion has expressed what many people on the Left and the Right have been thinking – it is time to reevaluate the role of government in American society.  Too frequently both sides have relied on knee-jerk reactions.  Either whatever government does is good because it is the only advocate for and defender of individual citizens, and the only institution committed and able to effect positive social change; or whatever government does is bad, crowding out the more innovative, entrepreneurial, investments of the private sector; setting sorry examples of waste and inefficiency, depriving citizens of their rights through enforcement of laws of social engineering, etc.

The argument, of course, is far more nuanced.  Neither government nor the private sector are right or wrong per se; but each should invest where the other cannot or where the other is more efficient and productive.  Few argue the role of government in national defense, for only such a politically coherent, unified, and disciplined fighting force with a recognized chain of command overseen by elected representatives can be successful against implacable enemies.  While a legitimate argument can be made for privatizing some of the services of the military, such as procurement or logistical support, few compelling reasons have been given for privatizing the whole effort.

Similarly, few cogent arguments have been made about the role of private enterprise in creating wealth and jobs.  While there is considerable discussion about the nature and extent of government support for or regulation of industry and tax laws and legal strictures come and go, few argue for a state-run, socialized system.

Most people understand the importance of some government regulation; and few would support an unregulated pharmaceutical industry allowed to put whatever it likes on the open market, buyer beware.

There the agreement ends.  There is legitimate and almost equally divided opinion on everything else.  Health care for the elderly is most definitely a good thing, but why should it be the government which provides it when all other health care is private?  Why do these citizens, many of whom are more wealthy than their younger compatriots, get a relatively free ride?  Why should Social Security be government-run when most people have pension plans or private retirement accounts?

As importantly, legitimate arguments have been made on the basis of efficiency and outcomes.  Social programs whether public or private should be subjected to intense scrutiny and evaluation.  If they do not have the effect intended; or if they were designed poorly and never can achieve results because of this flaw, then they should be abolished and taxpayer money saved.

Perhaps the most important element of this argument is that few people realize the extent of government programs or benefits in their lives.  The network of subsidies, including those for water, food, transportation, energy, have become a part of American economic life.  Public expenditures for education represent a significant proportion of municipal budgets.  The Bureau of Land Management owns and manages huge tracts of lands in the West.  Bridges, roads, tunnels, and other key infrastructure are owned and operated by government.  A quick web search for government programs, subsidies, and other support will show a long, scrolling list.  Most people have their government programs they wish to keep (those that benefit them personally) and those they wish to jettison (those who use their tax dollars for others).  The reason why no conclusions or compromises can be made regarding the subject of expenditures is because everyone has their favorite with which they are unwilling to part.

Another often-overlooked fact is that every administration has vowed to reduce the size of government, and none have.  Whether Republican or Democrat, government has increased.  Only we who live in Washington, DC, always recession-proof because of our nation’s insatiable desire for government, are happy.

On the one hand, talk about limiting the federal government and shrinking the deficit has been central to Republican rhetoric for years. On the other hand, historically, most Republicans haven’t really meant it. George W. Bush, for instance, pushed for a prescription drug benefit for Medicare recipients that added an estimated $300 billion to the federal deficit — not to mention two budget-busting wars.

Now, perhaps we all will be forced to look carefully at that long list of subsidies and direct expenditures and determine collectively what should stay and what should go.  We are burdened by impossible debt and hamstrung by huge deficits.  Paul Ryan could not have come along at a better time.

Ryan, however, means it. What sets him apart is that he is the rare politician who has been willing to put meat on the bones so that everybody can see what he has in mind. Ryan’s budget plan would reduce the size of government from the current 24 percent of gross domestic product to around 20 percent of G.D.P.

Most economists agree that 20 percent is a realistic and optimal figure.  At that level, there is a good balance between public and private expenditures, little distortion and crowding out of private money, and a reservation for only the most essential public expenditures with some margin added. 

So while the gap between the 15 percent of GDP on core functions and overall outlays of nearly 40 percent may provide a rough measure of unproductive outlays, we cannot therefore infer that 15 percent is the
right size of government. Such a determination requires a cost-benefit analysis that is, unfortunately, rarely a part of the political process (James Kahn, Can We Determine the Optimal Size of Government, Cato, 9/11).

Nocera, in this NY Times article clearly expresses his Left-leaning sympathies, but also insists that the time has come for rational debate and not the depressing spectacle of ‘he said, she said’ from the two candidates:

Ever since the campaign entered the post-primary and pre-convention  phase, with the two candidates turning their attention to each other, it has been a depressing spectacle. The Democrats have demanded that Romney release more of his tax returns — though we already know all we need to know. (Like every wealthy businessman, Romney works hard to minimize his taxes.) In bashing his role in running Bain Capital, the private-equity firm, the president and his aides have hammered Romney for doing what every company does: outsourcing and layoffs. Meanwhile, Romney and his team harp on the anemic economy — even though the Republicans have spent much of the past two years preventing the president from doing anything about it.

What would be good if Ryan – like Ross Perot before him – would lay out in a series of charts the many government programs in operation in the US today.  This would allow Americans to see where the 40 percent of their valuable GDP is going.  A second series of charts would show the programs ‘in play’, that is those over which considerable debate has been generated.  The third chart would summarize the costs and benefits of each one, alternative private and non-governmental options, and projected budget requirements.  Only a referendum-style exposition of issues and representative voting can possibly break this impasse.

In any case, I am delighted that Ryan has been selected as Romney’s VP candidate.  He should – unless his ideas are totally subsumed within his boss’ mishmash, fluff, and imprecision – be influential in moving the debate forward.

Already the Democrats are turning their fire on Ryan and his budget plan. Fine. He and Romney will punch back. No surprise there, either. But Ryan gives the Romney campaign a central idea about government, and, with any luck, the campaign will offer us a real opportunity to think hard about what kind of government we want.

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