Wednesday, September 01, 2010

The Fantasy Of Smaller Government


Everyone talks about smaller government, but the reality is that governments cannot easily get smaller once they have been instituted.  More than likely, governments will expand regardless of which political party to which politicians claim allegiance is in power.

Here is a perspective of what political philosophies claim and then... what is....

The reality of politics in the United States is that there are two fringe groups... Libertarian and Communist... that make a lot of noise, but generally get ignored when it comes to reality.  That leaves so-called conservatives and liberals, both of which practice government essentially in the same way.

Conservatives will argue that they want smaller government, but the reality is that conservatives simply want government to spend tax dollars differently... and, perhaps, less.  In practice, Conservatives have been more than willing to let the government purchase services from them rather than have the government purchase services directly from government employees.  That's outsourcing.  Think charter schools.  It is the notion that if the government spends tax dollars to purchase services from a for-profit entity, the services will be better and more efficient that if purchased from permanent employees.  There may be some degree of truth in some instances, but the effect is the same... government controls... taxpayers pay.

It all boils down to control.  Who controls the money and how is the money spent... not necessarily that money will not be spent... that government will get smaller.  It is a matter of degree and direction... and perhaps rate of growth.

Libertarians argue that their approach is the only alternative to large government.  Libertarians are correct.  Libertarians are also out of touch with reality.  Why?  Because most people want a government that provides structure, predictability, security, rules... people do not want to face the rest of the world simply as individuals.  Well, a few people are okay with that, but the vast majority are not.  Many specific agendas the Libertarians espouse are well-intentioned and might work in a world where corruption, greed, manipulation, and crime don't infest the economic world... but they do.  And individuals involved in economic transactions are not necessarily sufficient to deal with that... unless a 40 cal. Glock is in play.

It is a matter of being practical in a world where power is easily organized.  A million individuals, each going their own way without regard to the wants and needs of others, cannot compete against a million organized individuals... even if that organization costs more and may be restrictive on an individual basis.  The Libertarian might argue that a million individuals could simply hire those among them to provide protection and other services as needed.  But the reality is that, without organization, a million people could never create an efficient and effective pseudo-system because no one would be willing to give up their individual "liberty" to achieve a "group benefit."

It's human nature... from the time that the first proto-humans banded together and leaders emerged and a hierarchal structure was created.  Free-agent individuals in the absence of some form of government is a fantasy.  What is also human nature is to live with a situation until it becomes intolerable... and then destroy the root of that situation... and start all over again with another government that will eventually run amok.

"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. ... God forbid we should ever be twenty years without such a rebellion; what country can preserve its liberties if their rulers are not warned from time to time that their people preserve the spirit of resistance? Let them take arms." -- Thomas Jefferson to William Stephens Smith, 1787
That wasn't a threat; it was just an observation.  The faster central government grows, the more likely there will be resistance... whether in the form of protests and "voting out the bums" or in the form that Thomas Jefferson envisioned.  Then Libertarians will have another chance.  But watch out for the communist totalitarians as well.  Chaos breeds extremes.



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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)