It’s a Big Government Mess

22 Tuesday Nov 2022

Posted by Nuetzel in Big Government, Uncategorized

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Campaign Spending, Carbon Footprint, central planning, Climate Risk, Compliance Costs, Cronyism, Debt Monetization, dependency, Diversity, Do-Somethingism, External Costs, Fiscal Illusion, Limited government, Malinvestment, monopoly, Price Controls, Public goods, Redistribution, Regulatory Capture, rent seeking, Wetlands, Willingness To Pay

I’m really grateful to have the midterm elections behind us. Well, except for the runoff Senate race in Georgia, the cockeyed ranked-choice Senate race in Alaska, and a few stray House races that remain unsettled after almost two weeks. I’m tired of campaign ads, including the junk mail and pestering “unknown” callers — undoubtedly campaign reps or polling organizations.

It’s astonishing how much money is donated and spent by political campaigns. This year’s elections saw total campaign spending (all levels) hit $16.7 billion, a record for a mid-term. The recent growth in campaign spending for federal offices has been dramatic, as the chart below shows:

Do you think spending of a few hundred million dollars on a Senate campaign is crazy? Me too, though I don’t advocate for legal limits on campaign spending because, for better or worse, that issue is entangled with free speech rights. Campaigns are zero-sum events, but presumably a big donor thinks a success carries some asymmetric reward…. A success rate of better than 50% across several campaigns probably buys much more…. And donors can throw money at sure political bets that are probably worth a great deal…. Many donors spread their largess across both parties, perhaps as a form of “protection”. But it all seems so distasteful, and it’s surely a source of waste in the aggregate.

My reservations about profligate campaign spending include the fact that it is a symptom of big government. Donors obviously believe they are buying something that government, in one way or another, makes possible for them. The greater the scope of government activity, the more numerous are opportunities for rent seeking — private gains through manipulation of public actors. This is the playground of fascists!

There are people who believe that placing things in the hands of government is an obvious solution to the excesses of “greed”. However, politicians and government employees are every bit as self-interested and “greedy” as actors in the private sector. And they can do much more damage: government actors legally exercise coercive power, they are not subject in any way to external market discipline, and they often lack any form of accountability. They are not compelled to respect consumer sovereignty, and they make correspondingly little contribution to the nation’s productivity and welfare.

Actors in the private sector, on the other hand, face strong incentives to engage in optimizing behavior: they must please customers and strive to improve performance to stay ahead of their competition. That is, unless they are seduced by what power they might have to seek rents through public sector activism.

A people who grant a wide scope of government will always suffer consequences they should expect, but they often proceed in abject ignorance. So here is my rant, a brief rundown on some of the things naive statists should expect to get for their votes. Of course, this is a short list — it could be much longer:

Opportunities for graft as bureaucrats administer the spending of others’ money and manipulate economic activity via central planning.
A ballooning and increasingly complex tax code seemingly designed to benefit attorneys, the accounting profession, and certainly some taxpayers, but at the expense of most taxpayers.
Subsidies granted to producers and technologies that are often either unnecessary or uneconomic (and see here), leading to malinvestment of capital. This is often a consequence of the rent seeking and cronyism that goes hand-in-hand with government dominance and ham-handed central planning.
Redistribution of existing wealth, a zero- or even negative-sum activity from an economic perspective, is prioritized over growth.
Redistribution beyond a reasonable safety net for those unable to work and without resources is a prescription for unnecessary dependency, and it very often constitutes a surreptitious political buy-off.
Budgetary language under which “budget cuts” mean reductions in the growth of spending.
Large categories of spending, known in the U.S. as non-discretionary entitlements, that are essentially off limits to lawmakers within the normal budget appropriations process.
“Fiscal illusion” is exploited by politicians and statists to hide the cost of government expansion.
The strained refrain that too many private activities impose external costs is stretched to the point at which government authorities externalize internalities via coercive taxes, regulation, or legal actions.
Massive growth in regulation (see chart at top) extending to puddles classified as wetlands (EPA), the ”disparate impacts” of private hiring practices (EEOC), carbon footprints of your company and its suppliers (EPA, Fed, SEC), outrageous energy efficiency standards (DOE), and a multiplicity of other intrusions.
Growth in the costs of regulatory compliance.
A nearly complete lack of responsiveness to market prices, leading to misallocation of resources — waste.
Lack of value metrics for government activities to gauge the public’s “willingness to pay”.
Monopoly encouraged by regulatory capture and legal / compliance cost barriers to competition. Again, cronyism.
Monopoly granted by other mechanisms such as import restrictions and licensure requirements. Again, cronyism.
Ruination of key industries as government control takes it’s grip.
Shortages induced by price controls.
Inflation and diminished buying power stoked by monetized deficits, which is a long tradition in financing excessive government.
Malinvestment of private capital created by monetary excess and surplus liquidity.
That malinvestment of private capital creates macroeconomic instability. The poorly deployed capital must be written off and/or reallocated to productive uses at great cost.
Funding for bizarre activities folded into larger budget appropriations, like holograms of dead comedians, hamster fighting experiments, and an IHOP for a DC neighborhood.
A gigantic public sector workforce in whose interest is a large and growing government sector, and who believe that government shutdowns are the end of the world.
Attempts to achieve central control of information available to the public, and the quashing of dissent, even in a world with advanced private information technology. See the story of Hunter Biden’s laptop. This extends to control of scientific narratives to ensure support for certain government programs.
Central funding brings central pursestrings and control. This phenomenon is evident today in local governance, education, and science. This is another way in which big government fosters dependency.
Mission creep as increasing areas of economic activity are redefined as “public” in nature.
Law and tax enforcement, security, and investigative agencies pressed into service to defend established government interests and to compromise opposition.

I’ve barely scratched the surface! Many of the items above occur under big government precisely because various factions of the public demand responses to perceived problems or “injustices”, despite the broader harms interventions may bring. The press is partly responsible for this tendency, being largely ignorant and lacking the patience for private solutions and market processes. And obviously, those kinds of demands are a reason government gets big to begin with. In the past, I’ve referred to these knee-jerk demands as “do somethingism”, and politicians are usually too eager to play along. The squeaky wheel gets the oil.

I mentioned cronyism several times in the list. The very existence of broad public administration and spending invites the clamoring of obsequious cronies. They come forward to offer their services, do large and small “favors”, make policy suggestions, contribute to lawmakers, and to offer handsomely remunerative post-government employment opportunities. Of course, certaIn private parties also recognize the potential opportunities for market dominance when regulators come calling. We have here a perversion of the healthy economic incentives normally faced by private actors, and these are dynamics that gives rise to a fascist state.

It’s true, of course, that there are areas in which government action is justified, if not necessary. These include pure public goods such as national defense, as well as public safety, law enforcement, and a legal system for prosecuting crimes and adjudicating disputes. So a certain level of state capacity is a good thing. Nevertheless, as the list suggests, even these traditional roles for government are ripe for unhealthy mission creep and ultimately abuse by cronies.

The overriding issue motivating my voting patterns is the belief in limited government. Both major political parties in the U.S. violate this criterion, or at least carve out exceptions when it suits them. I usually identify the Democrat Party with statism, and there is no question that democrats rely far too heavily on government solutions and intervention in private markets. The GOP, on the other hand, often fails to recognize the statism inherent in it’s own public boondoggles, cronyism, and legislated morality. In the end, the best guide for voting would be a political candidate’s adherence to the constitutional principles of limited government and individual liberty, and whether they seem to understand those principles. Unfortunately, that is often too difficult to discern.

Preserve the Separation of Google and State

28 Friday Sep 2018

Posted by Nuetzel in Antitrust, Censorship, Privacy

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Anti-Competitive, Antitrust, Biased Search Results, China, Do the Right Thing, European Union, FICO Score, Google, Government Monopoly, J.D. Tuccille, Limited government, Liu Hu, Personal Information, Privatized Authoritarianism, Social Credit Score, Surveillance, Unenumerated Rights

Little did we suspect that Google’s collection of personal data and manipulation of search results was mere practice for the job of censoring, curating, and providing behavioral surveillance for repressive governments (more on search manipulation here and here). Actually, some of us have expressed trepidation that our own individual liberty might face such a vulnerability, with Google working in concert with our own government:

“As a firm like Google attains the status of an arm of the state, or multiple states, it could provide a mechanism whereby those authorities could manipulate behavior and coerce their citizens, making the internet into a tool of tyranny rather than liberty. ‘Don’t be evil’ is not much of a guarantee.”

Now, however, the company is working with the government of mainland China to implement a version of its search engine that meets the needs of the Communist regime. J.D. Tuccille calls this “Privatized Authoritarianism”. Search results from Google’s Chinese utility might come back blank, or certain sites might be banned, or at least banned from the first page of results (e.g., Wikipedia, the BBC).

Not only that, the Chinese government is building a system of “social credit scores” for its citizens, essentially a one-number report card like the FICO credit score in the West. This one, however, is driven by more than financial transactions; it’s intended to account for a variety of behaviors including one’s record in criminal and civil matters, anything reflecting one’s “trustworthiness”, general comportment, and alignment with official doctrine. The country is building a gargantuan network of surveillance cameras with visual recognition technology and artificial intelligence that will be used to generate inputs to the social score. And Google’s Chinese search platform?

“… users’ interest in pursuing forbidden paths of inquiry will certainly become part of their permanent record. That’s no joke in a country that’s rapidly modernizing the hoary old mechanisms of the police state with a modern ‘social credit’ system that can effectively place people under house arrest with nary a trench coat in sight.

‘A poor Chinese social credit score can lead to bans from travel, certain schools, luxury hotels, government positions, and even dating apps,’ notes the Brookings Institution. Liu Hu, an investigative journalist, incurred the Chinese government’s wrath for exposing corruption among Communist Party officials. He’s among millions who have been punished with a tanked social credit score that prevents him from easily working or even leaving his hometown.”

Political search activity is one thing. What happens if you search for information on foreign news sources? Certain medications or certain disfavored goods? Movies? Books? Sex? What are the consequences of actually clicking on a particular link in a search result? Could the governments place “honey pots” into search results? Could the system be used by the government to entrap citizens? You bet it could!

The Chinese government is everything a liberal should hate, classical or otherwise. But they do what they do. Google, which takes pride in its “do the right thing” mantra, is most certainly not doing the right thing by contributing to this intrusive effort. And it could happen here in the West. In fact, it is probably already happening here to some degree.

Google was fined $2.7 billion by the European Union in 2017 for biasing its search results in favor of its own services. That ruling was made on traditional antitrust grounds: the bias in search results was judged to have anti-competitive effects on the searched-for service markets. But apart from a direct connection to some other form of commerce, traditional antitrust arguments are difficult to make against a free search engine. The company has a high market share but by no means a monopoly over search results, at least in the U.S.

Still, a partnership between Google and government is potentially troublesome, and more so than run-of-the-mill corporatism, though there is that, too. Many individuals are blasé about managing their privacy on social media, while many others seek a level of anonymity to those outside of their social circle. The latter may be wise, but it won’t do them much good if the government gains access to their on-line behavior. The real issue is ownership of our personal information, and that is an unsettled area of the law. Google acquires that information for free in exchange for providing a free search engine. But can Google or any other company with an online platform legally use your personal data as it likes? No, at least not in principle, but that’s no guarantee that the data won’t be used in ways to which you’d object. If anyone should have rightful monopoly rights over the use of individual data, it’s the individual. But strict data privacy might mean we’ll have to pay to use the search engine.

Government has a monopoly on force, but one can hardly bring antitrust action against government, Google partnership or not. That monopoly on force is why our constitutional rights are so critical. Those rights are primarily unenumerated in the U.S. Constitution, while the powers of the federal government are explicitly limited and enumerated. Individual liberty, including the right to privacy, must be respected and protected by our institutions. That should include data privacy. As the reach of government social programs grows, however, participation requires that personal data is increasingly shared with the government. That’s another good reason to keep government small!

Government As Hazard

10 Friday Feb 2017

Posted by Nuetzel in Big Government, Markets

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Asymmetric Hyperbole, Bryan Caplan, Coercive Power, Corporatism, Federalism, Limited government, Pareto Optimal, Public Employee Unions, Supermajority, Vilfredo Pareto

Lots of people think government can do good things, even if its always in fashion to wink about the state’s legendary incompetence. It can do lots of things, but the only way it can do them is by exercising its power to coerce. It’s simply impossible to form an effective government without granting it that power. We must hope it will do only good things, and there is reasonable consensus that its basic functions are good, at least in kind: national defense, law enforcement and protection of basic rights, and a judicial system. The mere performance of those functions requires coercive power, and funding them requires the coercive power of taxation.

To make things simple, for now let’s stipulate that all agree on both the necessary functions of government, some minimal scale and scope of those functions, and the taxes necessary to pay for them. We may all feel that we are better off. Anything in excess of that minimal portfolio as might be desired by an individual or group would necessarily make some feel better off and some feel worse off. Additional taxes would have to be collected to pay for it, and the activities themselves might be seen in some quarters as inappropriate, wasteful, or intrusive. Now, the coercion of the state becomes more binding on some individuals and groups. We no longer have a win-win proposition, and that is what distinguishes marginal government activity from marginal private exchange. The latter is always predicated on mutual benefits for the transacting parties. In the jargon of economics, these voluntary, private trades are Pareto-improving moves, meaning that some individuals are made better off and no one is made worse off. In general, if all mutually beneficial trades are exploited, the final result is Pareto optimal (after Vilfredo Pareto), because no further activity can make anyone better off without making someone else worse off.

The limited government described in the hypothetical sounds as if it might be Pareto optimal, but let’s add a little more realism. Are there additional government functions that would improve well being without doing harm to anyone? There is general agreement that government should provide for other “public goods”, which would otherwise be under-demanded in the market, and under-provided, due the nonexclusive nature of their benefits (think public parks). Once those are provisioned, the outcome may be Pareto optimal. There may be unanimous agreement, as well, that government should take actions to mitigate certain external costs arising from private activity. (If some of the costs of private activity are not internalized, then those market transactions fail the test of Pareto improvement). These additional government functions require coercive power, of course. Now we are into more complex issues of public choice. The provision of goods with at least some public benefits requires judgement as to degree, and judgement is necessary as to the appropriate degree of mitigation of external costs when they are an issue. In other words, Pareto-improving moves get scarce once government assumes responsibilities beyond those described in our original hypothetical.

As the scale and scope of government grow, its coercive force must advance as well. Therefore, unanimous consent for this growth, and even widespread consensus, will be impossible to achieve. Its size will reach a level at which a substantial share of the population will assume the roles of “public servants”, all having a vested interest in the state’s continued growth, if only to boost their own pay. The potential conflict of those personal interests with the public interest could not be clearer. That’s a good reason to support strict limits on the size and power of government, not to mention restrictions on the power of public employees to unionize.

Those who wish for government to play a dominant role in society might think it’s all for the good. They might support changes in the rules of governance that facilitate the dominance and coercive power it confers upon them. That might include, for example, pushing the use of executive authority to extreme levels based on interpretations of complex, but often vague, legislation. It might include changes in parliamentary rules that make it easier for thin majorities of legislators to work their will. No doubt these rule changes will lead to Pareto-degrading actions, though the ruling faction will be quite happy with their new powers.

But what happens when a shift in the balance of public opinion brings new leaders to power? Those leaders will inherit rules that facilitate their agenda and authority to exercise coercive power. No one at any point along the ideological spectrum should dismiss this sort of risk. That’s the spirit of a recent Bryan Caplan post, “Limited Government as Insurance“. Stretching powers in the service of particular policy goals may well backfire when those powers become available to an opposing faction:

“Imagine going back in time to January 20, 2009. Obama’s Inauguration Day. You’re a cheering fan. On that day, an angel appears and makes you this offer: If you give up on Obama’s best ideas, none of Trump’s worst ideas will happen either. Obamacare will never happen – but neither will Trump’s immigration policies. Would you take that deal?

I know, it’s a galling hypothetical. You want the good stuff without the bad stuff.“

Caplan characterizes strict limits on government as a form of insurance against the risk of swings in the balance of power. He also considers plausible reasons for rejecting such a deal: “the arc of the moral universe”, or, you think your side will ultimately win, and will win for all time; and “asymmetric hyperbole”, or, the greatness of your policies outweighs any damage the other side can do with the same powers. If you really believe those things, it might seem reasonable to take your chances on an expansive state with expansive powers! A preference for limited government, however, does not require the contorted logic required to reject this insurance.

The U.S. Constitution includes many provisions originally intended to limit government and the exercise of coercive power. Those protections from the state have eroded over time, a process hastened by increasingly flexible judicial interpretations of the founding document. Caplan notes that there are a number of mechanisms by which limited government can be made durable:

“Supermajority rules require more than a majority to act. Division of powers makes it hard for government bodies to accomplish anything on their own. Judicial review allows judges to invalidate acts of government. Federalism greatly reduces the cost of “voting with your feet.” If you think these institutions aren’t working, the obvious solution is to strengthen them. Impose more supermajority requirements. Divide more powers. Overturn legislation that fails to get support from six, seven, eight, or all nine Supreme Court Justices. Make states pay for their own spending with their own taxes, not federal grants.“

Then comes the most insightful, but most disheartening, part of Caplan’s post: real steps to limit government will never be taken:

“Limited government helps everyone in the long-run, but immediately hurts the ruling party. They fought hard to win power; now that they have it, they yearn to flex their muscles.“

We might see a federal department abolished here or there, and we might see certain regulations rolled back, but those steps will be selective. The powers that put them there in the first place can be reapplied in the future. We might see more “business-friendly” actions, but those will be selective as well. In other words, corporatism will persist. And we might see tax cuts, but that won’t reduce the government’s absorption of resources, which is driven by the spending side. While this sounds discouraging, I nevertheless admire Caplan’s characterization of limited government as insurance against the other side’s bad policies. If only we could pull it off!

Now, What About Trump?

25 Wednesday Jan 2017

Posted by Nuetzel in Trump Administration

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Ajit Pai, Barack Obama, Bill Weld, Donald Trump, Drug War, eminent domain, Entitlement Reform, Executive Authority, FCC, FDA, Fourth Amendment, Gary Johnson, Hillary Clinton, Industrial Policy, Jim O'Neil, Keystone Pipeline, Legal Immigration, Limited government, Paris Climate Accord, Protectionism, Scott Alexander, Slate Star Codex, Standing Rock Sioux, State's Rights, Trade Partnerships, Trans-Pacific Partnership, Trump's Great Wall, USA Freedom Act, Wilbur Ross

This guy I voted for… Hoo boy! I’m tellin’ ya’, this guy’s a real beaut! But now, it’s time for me to make an accounting of the good and the bad I see in a Donald Trump presidency. I’ll cover a number of policy areas and how well I think, at this point, the Trump Administration will match my preferences, which are generally libertarian. In posting this list, I’m reminded of a wonderful quote of the late guitarist Jerry Garcia on his ideas for a new project: “I’m shopping around for something to do that no one will like.” I certainly don’t expect many to agree with the entirety of my “scorecard”, but here it is. But before getting to it, a few preliminaries:

First, I’ve had mixed feelings about Trump since he first announced that he’d seek the republican nomination. A basic concern was the difficulty of knowing his real philosophy about the role of government and fundamental constitutional rights. Trump has a history of contradictory positions on big issues like taxes, health care, and gun rights. It was a gamble to count on him to follow any particular idealogical course, and some of it remains unclear even now. My misgivings about Trump’s inclinations as a whirligig were discussed on Sacred Cow Chips in “Trump Flaunts Shape-Shifting Powers” in 2015. Uncertainty still colors my views, though his cabinet picks and other alliances have served to clarify the direction of policy. My discussion below reflects this uncertainty. Also, Trump shows every intention of moving fast on a number of fronts, so I hope the relevance of this post isn’t too perishable.

Second, it’s worth noting that Trump’s policy statements and predilection to “keep-’em-guessing” are probably a by-product of his instincts as a negotiator. His bellicosity may be something of a ploy to negotiate more favorable compromises in international affairs, trade and domestic issues. Still, I can’t know that. Should I evaluate all those statements at face value as policy positions? I have to make some allowance for the reasonability of a bargaining position, but I’ll try to be consistent in my approach.

Third, revelations during the campaign of Trump’s past remarks about women, and some in-campaign remarks like his attack on Megyn Kelly, were highly offensive. I’ve heard plenty of “locker-room talk” over my years, but some of Trump’s statements were made well outside the locker room and well beyond the age at which “youthful indiscretion” could be taken as a mitigating factor. Trump has plenty of female defenders, however, and he has a record of placing women in key roles within the Trump organization and for paying them well. While I do not condone the remarks, and I doubt that complete reform is possible, he cannot change his history and he is now the president. Evaluating his policy positions is now an entirely separate matter. I only hope the exposure has taught him to be more respectful.

Finally, I do not buy the narrative that Trump is a racist. This “Crying Wolf” essay on Scott Alexander’s Slate Star Codex blog demonstrates that Trump’s rhetoric and behavior during his campaign was not racist when viewed in the broader context of his record of denigrating anyone who opposes him. He seems to be an equal opportunity offender! In fact, Trump made strong attempts to appeal to minority voters and succeeded to some extent. His positions on border security and immigration were boisterous, but they were not truly about race or ethnicity. Instead, they were rooted in concerns about illegal immigration and public safety. Efforts by the left to characterize those points as de facto evidence of racism are simply not credible. Nor are claims that he practiced racial discrimination at his apartment buildings early in his career. Today, I would call those cases garden-variety disparate impact actions, as when a business is challenged on the use of screening criteria that might be correlated with race, such as credit rating. A legitimate business purpose is generally a valid defense, though Trump did agree to settle out of court.

So what about Trump from a policy perspective? Here is what I expect of his administration thus far:

I’m Pretty Sure of the Following, Which I Rate As Bad

Trump is a protectionist. He is extremely ignorant of trade principles and favors import duties to punish those who wish to purchase goods from abroad. This would raise both domestic and import prices and directly harm employment in import-dependent industries. It would also discourage innovation by domestic producers, who would face less competition. I cover these protectionist tendencies here as an unqualified negative, but I have a more mixed view on his opposition to certain government-negotiated trade agreements (e.g., the Trans-Pacific Partnership ), which are covered below.

Trump is likely to be a drug warrior. He could do much to restore order in inner cities by ending the drug war, but he will not. He will thereby encourage activity in the black market for drugs, which produces both violence and more dangerous varieties of drugs. He might well interfere with the rights of states to determine their own policies toward relatively benign substances like marijuana, including medical marijuana, by choosing to enforce destructive federal drug laws. The possible appointment of marijuana legalization advocate Jim O’Neil to head the FDA looks decreasingly likely. That might be a game changer, but I doubt it will happen.

Big public infrastructure outlays. This is distinct from private infrastructure, to be discussed below. The latter is motivated by private willingness-to-pay. Rushing into a large public construction program with questionable economic justification will bring waste, and it will probably be sold as an economic stimulus package, which is unnecessary and dangerous at a time when the economy is finally operating near capacity. The decrepitude of American infrastructure is greatly exaggerated by those with a private interest in such projects, and the media eats it up. The breathless promotion of massive but noneconomic projects like high-speed rail is also greeted with enthusiasm by the media. And politicians love to boast to constituents of their efforts to secure federal funds for big local projects. We also know that Trump wants to build a massive border wall, but I’m convinced that border security could be achieved at lower cost by leveraging surveillance technology and other, less costly barriers.

Deficits: Increased defense outlays, a big infrastructure package, a “great” wall, tax credits and lower tax rates will almost certainly add up to ballooning federal deficits in the years ahead. That fiscal combination will be unsustainable if accompanied by higher interest rates and could very well have inflationary consequences.

Trump favors public and private eminent domain and believes it should be treated as a hallowed institution. He truly thinks that a “higher-valued use” is a superior claim to existing ownership of property. This is perverse. I have trouble accepting eminent domain action even for a public purpose, let alone a private purpose; it should only be motivated by the most compelling public interest, as a last resort, and with handsome compensation to the existing property owner. We can only hope that Trump’s public and private infrastructure programs do not lead to many takings of this kind.

Industrial policy. This is the essence of government central planning, picking winners and losers by granting tax and loan subsidies, lenient reviews, and other advantages. The most obvious example of Trump’s amenability to industrial policy is his penchant for trade protectionism, but I fear it will go much deeper. For some reason, Trump believes that manufacturing activity creates private and public benefits far beyond its market value. Moreover, manufacturers require far fewer workers now than they did in his youth, so the sector is not the job engine it once was. His appointee for Commerce Secretary is Wilbur Ross, an investor with a history of trading on prospects for government assistance. This article provides disturbing background on Ross, along with this quote: “We ought, as a country, to decide which industries are we going to really promote — the so-called industries of the future.” Trump’s plan to meet regularly with leaders of giant corporations is a sure sign that corporatism will be alive and well for at least the next four years… as long as they tow The Donald’s line.

Restricting Legal Immigration. I’m all for securing the border, but legal immigration is a major driver of economic growth. Many industries rely on a flow of skilled and unskilled workers from abroad, a need that will be more intense given Trump’s plan to tax outsourcing. Moreover, the country will face a low ratio of workers to retirees over the next few decades; short of massive entitlement reform, immigration is perhaps the only real chance of meeting public obligations to retirees.

Endangered Privacy Rights: As a “law and order” guy, Donald Trump might not be a reliable defender of the privacy protections enshrined in the Fourth Amendment. He has expressed a willingness to repeal the USA Freedom Act, which restricts the bulk collection of metadata and provides other privacy protections. Trump also has expressed an interest in forcing technology companies to enable “back doors” into the devices and programs they sell to the public. I’m concerned that we’ll see the creation of security databases with an excessively broad scope. As a likely drug warrior, Trump will support the sort of privacy violations in law enforcement that have become all too common.

I’m Pretty Sure of the Following, Which I Rate As Good

He’s not Hillary Clinton, and he is not a statist in the mold of Clinton and Barack Obama, though he does embody some statist tendencies as described above. I thought I would vote for Gary Johnson, but he made crucial mistakes, such as choosing Bill Weld as his running mate and fumbling at attempts to explain libertarian philosophy. At some point, my distaste for Clinton’s criminality and her advocacy of big government in so many aspects of life convinced me she had to be defeated, and that Trump was the only real possibility. But whether he can actually reduce the resources that the federal government absorbs is hard to say, as he has his own spending priorities.

Trump favors deregulation generally, as it places an enormous burden on society’s ability to improve well being. This covers aspects of the Affordable Care Act and reducing the role of the federal government in education. He opposes the costly Paris Climate Accord and other intrusive federal environmental measures, such as wetlands regulation.

Obamacare repeal and replacement with market-oriented delivery of health care, insurance with broad choices, and equalized tax treatment across the employer and individual market segments via refundable tax credits. There is a chance that Trump’s preferred alternative will assign excessive responsibility to the federal government rather than markets, but I’m optimistic on this point.

Entitlement reform is a possibility. Social Security and Medicare are insolvent. Ideas about how future retirees might take advantage of market opportunities should be explored. This includes private retirement accounts with choices of investment direction and greater emphasis on alternatives like Medicare Advantage.

Tax reform of some kind is on Trump’s agenda. This is likely to involve lower corporate and individual tax rates and some tax simplification. It is likely to stimulate economic growth from both the demand and the supply sides. In the short-run, traditional demand-side macroeconomic analysis would suggest that upward price pressures could arise. However, by encouraging saving and investment, the economy’s production capacity would increase, mitigating price pressure in the longer run.

Trump favors border security. No mystery here. My enthusiasm for this is not based on a physical wall at the border. That might come and it might be very costly. I favor a liberalized but controlled flow of immigration and vetting of all immigrants. The recent order of a temporary hold on refugees from a short list of countries will be of concern if it is not short-lived, and it remains to be seen what “extreme vetting” will entail. Nevertheless, I support enhanced integrity of our borders and our right as a nation to be cautious about who enters.

Education reform and school choice. Increased spending on public education, especially at the federal level, has made no contribution to educational productivity, and the country is burdened with too many failing schools.

Encouraging private infrastructure. This relies on private incentives to build and finance infrastructure based on users’ willingness to pay, thereby avoiding stress on public funding capacity.

Deregulating energy: This includes encouraging zero-carbon nuclear power, deregulation of fossil fuels, and lower energy costs.

Deregulating financial institutions. Repeal of the burdensome Dodd-Frank Act, which has imposed costs on both banks and consumers with little promise of a benefit in terms of financial stability.

Unabashed support for Israel. I strongly favor repairing our damaged ties with Israel and the proposed move of our embassy to West Jerusalem, which has been a part of Israel proper since its founding. Israel is the only real democracy in the middle east and a strong ally in an extremely dangerous part of the globe.

Trump supports Second Amendment rights. This is fundamental. Private gun ownership is the single-best line of self-defense, especially for those with the misfortune to live in areas rife with black market drug activity.

States’ rights and federalism. On a range of issues, Trump seems amenable to transferring more responsibility to states, rather than asserting federal supremacy on issues that are unsettled from region-to-region.

Ending federal funding for abortion. Tax dollars should not be used for a purpose that is morally abhorrent to a large segment of the population. This is not the same as the “right” to abort a child, as settled by Roe vs. Wade.

Putting the screws to the UN. This organization is not aligned with U.S. interests, yet the U.S. foots a large part of the bill for its activities. Sharp reductions in funding would be a powerful message.

Reduced federal funding for the arts. I’ve never been comfortable with allowing the federal government to disburse funds in support of the arts. Lower levels of government are less objectionable, where there is greater accountability to local voters. Dependence on federal purse strings creates a powerful line of influence that usurps authority and may conflict with the desires of local taxpayers. Individuals pay for art voluntarily if they find it of value, and people give privately to support the arts for the same reason. Federal taxpayers certainly have other valued uses for the funds. Art is not a “public good” in a strict sense, and its external benefits, to the extent they exist, do not justify a federal role.

Reversing the FCC’s net neutrality rules. Trump has appointed Ajit Pai as the new chairman of the FCC. Pai is no fan of net neutrality, a policy that rewards heavy users of network capacity and is likely to discourage the growth of network infrastructure.

I’m Not Sure How To Rate the Following

Foreign policy reset. I welcome several likely foreign policy initiatives from the Trump Administration, such as deemphasizing our role in the UN, restoring our relationship with Israel, and taking a harder line on nuclear development by Iran. I also favor greater scrutiny of outlays for foreign aid, much of which is subject to graft by recipient governments. However, I would not welcome a continuation of foreign policy designed around U.S. strategic interests that are, in fact, private investments.

Defense build-up. Our armed forces have suffered a decline in their ability to defend the country during the Obama years. I favor some restoration of the defense budget, but I am concerned that Trump will go on a defense binge. I’m also concerned about how aggressively he’ll wish to project American power overseas. Let’s not go to war!

Upending Trade Partnerships. I am a free-trader, and I abhor Trump’s belligerent talk about erecting trade barriers. So how could I be “unsure” about anything that promotes trade? Formal trade partnerships between nations are an aggravation to me because governments don’t trade… people do! And they do because they reap unambiguous benefits from trade. I’d much rather the U.S. simply eliminated all trade barriers unilaterally than get entangled in complicated trade agreements. These agreements are rats nests. They stipulate all sorts of conditions that are not trade related, such as environmental rules and labor policy. I therefore view them as a compromise to sovereignty and a potential impediment to economic growth. To the extent that trade agreements can be renegotiated in our favor, I should not complain. And to the extent that we’ll never see a government allow completely free and open trade, I should probably hope for agreements that at least reduce trade barriers.

The Keystone pipeline. I am happy with Trump’s decision to approve completion of the pipeline on its merits for energy delivery, and also because it is environmentally less risky than rail, barge and container ships. And yes, it is private infrastructure. But I am unhappy about the heavy application of eminent domain against landowners in the path of the pipeline. The Standing Rock Sioux tribe’s opposition is suspect because the path does not cross its tribal land, and the tribe originally gave its consent to the project. The tribe’s recent position could be an effort to extract rents from the process.

Executive authority. I am somewhat wary of Trump’s aggressiveness thus far. He seems eager to take actions that are questionable under existing law, such as seizing wire-transfer remittances by undocumented immigrants. Granted, he is busy “undoing” some of Obama’s actions, but let’s hope he doesn’t get carried away.

Summary

What we have here is a very mixed bag of policies. On the whole, I’m still pleased that Trump was elected. I believe he favors a smaller role for government in most affairs. But while the balance of considerations listed above seems to be in Trump’s favor, the negatives have the potential to be disastrous. He certainly wants to spend. My biggest fears, however, are that Trump will not respect the Constitution, that he will govern as a cronyist, and that he will succumb to the notion that he can actively manage the economy like a casino build.

Let’s Confine Statists to the State Level

17 Sunday Aug 2014

Posted by Nuetzel in Uncategorized

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Federalism, Limited government, Philip Klein, State's Rights

That Washington is divided is well agreed. Philip Klein asserts that abandoning federalism is a root cause of the division. There is no doubt that expansion of federal power comes largely at the expense of states’ autonomy over their affairs. Federalism allows most issues to be settled at the state level, allowing for the adoption of substantially different policies across individual states. This means that government can be more responsive to differing regional preferences, that individuals with strong preferences can benefit by migrating across state lines, and that states can serve as laboratories for policy experiments. Given that preferences differ regionally and certain protections of states’ rights established by the constitution, there is no question that a consolidation of government functions at the federal level will mean greater difficulty in achieving any legislative agenda. That is a good thing, and it is a good reason to return to the federalist principles of state autonomy and a weak central government. Too often, federalism is supported only when it suits one’s politics.