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This House prefers its government Big and Beefy
This House prefers its government Big and Beefy
The issue of big versus small government is a significant in the election campaigns of many countries – and has recently been the subject of many hysterical pronouncements in the US. In reality no incoming government does that much to change the overall size of government as there are, in practice, only so many savings that can be made or new initiatives that can be launched within the confines of acceptable levels of taxation.
This argument is a particularly interesting one to study in the US as it is so ripe for the pricking of illusions on both sides of the political divide.
Even arriving at a definition of what is meant by ‘the size of government’ is problematic. As this debate will focus on the United States, it may be worth dealing with a few popular misconceptions before they take hold, although there is plenty of room to work around these, as will be demonstrated in the substantive material itself.
One of the reasons why giving definition to this debate is so difficult is the lack of clarity in what is meant by government. Usually cutting the size of the Federal Government means that the work – and expenditure - is just picked up at the state level instead and vice versa. As this argument is likely to be most vociferous in relation to the Federal Government in the context of an election, the focus will be there, but it is a slightly meaningless distinction. To take two famous examples[i]:
- Ronald Reagan (President 1981 – 1989) is treated as the patron saint of small government Conservatives. Despite this the size of the Federal government increased faster under Reagan than almost any other president in history – as measured be either the number of staff on Washington’s payroll or by the total expenditure of the Federal Government.
- Bill Clinton (President 1993 – 2001) is considered the ultimate big government Liberal of Democrat dreams and Republican nightmares. However, by the same measure the size of government actually shrunk and reduced spending resulted in a balanced budget for the first time in decades.
Partisans on both sides would find explanations for these figures, which, in reality, would have little to do with reality. Instead it should be noting that this debate has more to do with (in addition to Sophistic rhetoric) the attitudes and intentions of the two great tribal herds of US politics than it does with anything else. It is, ultimately, a debate about political philosophy rather than political economy. The fact that the cost of government has increased under every single successive president is one universally ignored. Such counter-intuitive realities can be observed in a huge number of political situations; it really say anything surprising about politics but is a good reason to double check the facts relied on by participants in a debate.
Essentially the philosophical differences are these: those in favor of small government believe that individuals, their families and communities are better placed than the state to help themselves and those around. By doing so, individuals learn valuable skills of self-reliance and self-respect. By contrast those who favor government-led action tend to believe that society as a whole should take responsibility for ensuring a certain quality of living for all its members and that by ensuring that there is a safety net people are better able to overcome transient crises or social inequalities in order to become helpful members of society.
The other key aspect of the debate is the role of taxation in society. Those in favor of small government tend to believe that reducing the overall tax burden will stimulate the economy as a whole, by promoting enterprise, investment and entrepreneurialism. They say that this, in turn creates jobs and “wealth”. Small government conservatives generally abide by the mantra that individuals know how to spend their money better than the Federal Government does.
Those associated with a Big Government approach tend to favor the use of tax as a redistributive system arguing that by taking a small amount from those who can afford it (obviously one person’s ‘small’ is not that of another) the government can use it to improve services such as education across the board, to everyone’s benefit.
[i] For the purpose of these comparisons, FDR has been removed from comparisons simply because the cost of WWII and the Big Society response to the Great Depression mean that his time in office is simply not representative of general trends.
|Points For||Points Against|
|Ultimately government has a responsible to provide a level playing field to ensure that everybody gets a far start in life and can at least survive throughout it||Government has a tendency to be inefficient as it has no need to compete in an open marketplace, and jobs in state institutions are safe because of the guarantees both of the tax base and government’s greater borrowing capacity.|
|Government was required to drive through major changes such as drives for equality within society, universal education, and preservation of the environment. Mostly in the teeth of big business||Reducing the size of government and, therefore, the amount it takes in tax frees up money which consumers can spend on goods or for companies to expand: Both create jobs|
|Big government can provide the stimulus the economy needs in the bad years as long as surpluses are not squandered during the boom years||Excessive regulation on the private sector puts burdens on free enterprise both in terms of administration and cost. By doing so it reduces consumer choice and acts as a drag on innovation and growth|
Remember to choose a winning argument!
Ultimately government has a responsible to provide a level playing field to ensure that everybody gets a far start in life and can at least survive throughout it
Government, especially in a developed nation and even more so in the wealthiest nation in the world, should be able to ensure that children are not hungry, the mentally ill are not living on the streets, borders are policed, veterans don’t live in squalor, the population can read, crime is controlled, the elderly don’t freeze to death and a million other markers of a civilized society.
This is particularly true of children but most people need a helping hand at one time or another in life. However, the obscenity of children destined to fail before their lives have even started- condemned to schools that offer no hope and communities that offer no safety- would be disturbing anywhere in the world.
In a nation that prides itself as having the highest standard of living on the planet- and is unquestionably the richest and most powerful- levels of poverty and despair that are seen nowhere else in the developed world are simply obscene. By every measure, infant mortality, life expectancy, educational standards, child poverty, percentage of incarcerated adults, homicides per thousand deaths and many more, America lags considerably behind Japan, Canada, Western Europe, Australia and the rest of the developed world[i].
All of the indicators mentioned above have been adversely affect during the thirty year obsession with pushing the government back in the name of handing unfettered control over to big business and the vicissitudes of the market.
Americans pay lower taxes than Western Europe and get, as a result, a much worse return on their money[ii].
[i] Newsweeks Interactive Graphic of the World’s Best Countries. Hosted on the Daily Beast and elsewhere.
No country can pay its bills or increase the prosperity of its citizens if it is wasting money on unnecessary programmes. The principle problem with government funding is that it is not addressing any of the problems that Proposition raises. In many countries, The ideology of state intervention is has made government ever larger, building ever more excessive and bloated bureaucratic empires with fiefdoms and sinecures for every busybody and apparatchik more interested in monitoring change than making it, and more concerned with process than people.
It is not uncommon – indeed it is not even unusual - for private sector organisations to shed ten percent of their workforce when the judge themselves to have become uncompetitive, unprofitable or administratively unwieldy. Both the governments of France and Canada have done that in recent years and yet maintain high standards of government support[i].
For average public sector wages to be out stripping those of the private sector (who ultimately pay them) is ridiculous. It becomes more worrying when preferential health and pension plans – where the public sector outstrips the private by nearly four to one are taken into account[ii].
There is no question that it would be great if everybody could earn more, have more lucrative and more secure pensions, the world would be a nicer place. However, to penalise those who are making the money to subsidise those who aren’t simply makes no sense.
Typically a government’s solution to an issue like child poverty is to establish a commission to discuss it – when it reports several years later it informs the waiting nation who paid for it that the solution might well be if their parents had a job. Most people could have figured this out in two minutes and at no cost[iii].
[i] "Big government: Stop!" The Economist. January 21st, 2010
Government was required to drive through major changes such as drives for equality within society, universal education, and preservation of the environment. Mostly in the teeth of big business
Nobody would deny the role that remarkable individuals have played in the major social changes of history. They have, however, ultimately required the actions of government. Many of these have been achieved despite, rather than because of, the interests of business. Critically they have tended to be to the benefit of the weak, the vulnerable and the neglected.
Governments have been responsible for social reforms ranging from the abolition of slavery and child labor to the removal of conditions in factories and on farms that lead to injury and death, in addition to minimum wage regulations that meant that families could feed themselves. By contrast, the market was quite happy with cheap cotton sown by nimble young fingers.
In turn profit was given preference over any notion of job security or the right to a family life, the market was quite happy to see water poisoned and the air polluted – and in many cases is still happy with it. The logic of the market panders to slave-labor wages to migrant workers or exporting jobs where migrants are not available. Either way it costs the jobs of American citizens, pandering to racism and impoverishing workers at home and abroad. Although the prophets of the market suggest that the only thing standing between the average American and a suburban home - with a pool, 4x4 and an overflowing college-fund is the government, the reality could not be further from the truth.
The simple reality of the market is this: the profit motive that drives the system is the difference between the price of labor, plant and materials on one hand and the price that can be charged on the other. It makes sense to find the workers who demand the lowest wages, suppliers who can provide the cheapest materials and communities desperate enough to sell their air, water and family time. Whether those are at home or abroad. The market, by its nature has no compassion, no patriotism and no loyalty.
The only organization that can act as a restraint on that is, in the final reckoning, government which has legislative power to ensure that standards are maintained. It is easy to point to individual acts that have been beneficial but the reality is that the untrammeled market without government oversight has had a depressing tendency to chase the easiest buck, ditch the weakest, exploit where it can, pollute at will, corrupt where necessary and bend, break or ignore the rules.
It requires government as the agent of what the people consider acceptable to constrain the profit motive.Improve this
There is the world of difference between establishing basic rights and interfering in matters that are best agreed at a community or state level. That is the reason why the states collectively agree to constitutional amendments that can be considered to affect all citizens.
However, different communities regulate themselves in different ways depending on both practical needs and the principles they consider to be important. Having the opinions of city-dwellers, who have never got closer to rural life than a nineteenth landscape in a gallery instruct farming communities that they cannot work the land to save a rare frog is absurd.
Trying to establish policies such as a minimum wage or the details of environmental protection at a federal level simply makes no sense, as the implications of these things vary wildly between different areas of the country.
Equally local attitudes towards issues such as religion, marriage, sexuality, pornography and other issues of personal conscience differ between communities and the federal government has no more business banning prayer in Tennessee than it would have mandating it in New York. These are matters for the states and sometimes for individual communities.
The nation was founded on the principle that individual states should agree, where possible, on matters of great import but are otherwise free to go their separate ways.
In addition to which, pretending that the hands of politicians and bureaucrats are free of blood in any of these matters is simply untrue – more than untrue, it is absurd.
If the markets are driven by profit- a gross generalisation - then politics is driven by the hunger for power and the campaign funds that deliver it. Business at least has the good grace to earn, and risk, its own money whereas government feels free to use other peoples for whatever is likely to buy the most votes. Likewise business makes its money by providing products and services that people need or want. Government, by contrast, uses other people’s money to enforce decisions regardless of whether they are wanted or needed by anyone.
Ultimately it is the initiative and industry of working Americans that has provided the funds for the great wars against oppression as well as the ingenuity to solve environmental and other technical solutions to the problems faced by humankind.
Pharmaceutical companies produce medicines – not the DHHS; engineering companies produce clean energy solutions – not the EPA; farmers put food on families’ tables – not the Department of Agriculture.Improve this
Big government can provide the stimulus the economy needs in the bad years as long as surpluses are not squandered during the boom years
Government expenditure is the single biggest tool in times of economic difficulty. Those that are the quickest to complain about taxation and regulation during the good times are also the fastest to rush for a bailout during the lean times. Likewise, those that call for tax cuts in a boom also tend to be the first to criticize a deficit or public expenditure during a recession.
There is in all of this one simple economic reality: the government acts as the banker of last resort.
This only works, as Keynes understood, if the government holds on to reserves in the good years so that it can spend them in the tough ones to stimulate jobs and growth. On the other hand, where surpluses are blown on tax cuts- or expensive wars for that matter- then will be nothing left in the bank and government cannot fulfill its most useful role of using its own financial clout to balance the economy over the course of a financial cycle.
So-called small government Conservatives have been consistently profligate in recent history and have tended to leave fiscally cautious liberals to pick up the pieces. The party of small government never seems to find itself short of billions of dollars for expensive white elephants like the SDI missile shield or asserting American military power overseas in pursuit of yet another doomed cause – whether that’s’ propping up Latin American dictators or settling familial grudge matches in the Middle East.
The military adventurism of the Reagan presidency as well as those of both Bush senior and junior were conducted not just at the cost of domestic social stability, but also fiscal security.
Instead of preserving a budget surplus from the Clinton presidency, the Bush administration spent it recklessly – not, as is widely declared, on the War Against Terror – on tax cuts for the wealthiest in society. As a result Bush, his cabinet and his backers robbed the country of the possibility of reserves when the economy was in a less positive situation.
As far as the War On Terror is concerned, the total cost of two international wars, $1.283tn, stands in stark contrast to the relatively cheap police-style operation that actually caught Osama Bin Laden. It is also worth noting that of that huge sum an entire 2%, according to the Congressional Research service, has been spent homeland security – anti-terror surveillance and enforcement within the USA’s borders[i].
So called ‘Big Government’, withholding surpluses for a rainy day, provides financial security for American businesses and workers. So-called ‘small-government’ presidents spend trillions of dollars on free money to the super-rich and on military adventurism in other countries and, apparently, in space.
[i] Amy Belasco. “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11”. Congressional Research Service. March 29 2011.
The primary difficulty with governments retaining surpluses is that the government has no proprietary right to the funds in its coffers. The taxpayer effectively subsidizes the government, on the understanding that it will undertake functions necessary for the defence, continued operation and normative improvement of the state and society.
Clearly defense has to be one of the core functions of government and there are a few others, such as maintaining law and order. For government to say that the only way of securing its own finances is running a small surplus in its current account budget is palpably not true when there is astonishing waste in government expenditure, which is in turn already bloated and intervenes into areas of public life where it simply does not belong.
In terms of using government expenditure as a tool to respond to recessions, there may well be a role in terms of how government uses its own purchasing power and it makes sense that should be used for domestic purchasing wherever possible, however there is little to be gained by government creating imaginary jobs undertaking roles that simply don’t produce anything.
Instead the most useful role that government can play during a recession is not expanding its own size and, therefore, the final cost to the taxpayer, but reducing it. Cutting the size of government reduces the tax burden on business and individuals and cuts back on regulatory pressure. Both actions free up money for expenditure which creates real jobs in the real economy, producing real wealth, in turn spent on real products, which in turn create jobs. This beneficial cycle is the basis of economics, creating imaginary jobs simply takes skills out of the real economy and reduces the pressure on individuals to take jobs that they might not see as ideal.
The most sensible response to a government surplus is not to hoard it on the basis that it might come in useful at some undefined point in the future but to give it back to the people who earned it in the first place. Doing so means that it is spent in the real economy, creating real wealth and real jobs and thereby avoiding the prospect of recession in the first place.
Ultimately it comes down to a simple divide as to whether you believe governments or people are better at spending money. The evidence of waste and incompetence in government expenditure is compelling and it seems an absurd solution to governments mismanaging the money they already have to give them more.Improve this
Government has a tendency to be inefficient as it has no need to compete in an open marketplace, and jobs in state institutions are safe because of the guarantees both of the tax base and government’s greater borrowing capacity.
Governments both as a whole and in terms of individual employees have a tendency towards astonishing inefficiency, because state institutions are not subject to any meaningful competitive pressures. Indeed, many government employees earn as much or more than those in comparable jobs in the private sector, have preferential pension and benefit plans, lower hours and longer vacations. It is of course unsurprising that anyone in possession of such a job would be reluctant to give it up but also suggests a lower level of competition for keeping it. In the private sector such preferential returns would suggest that a worker would be likely to work longer hours to keep them.
Equally, because senior managers are not spending their own money and rarely have their salaries indexed to efficiency and effectiveness- in a way that is automatic for most companies- there is little pressure to find cost and operational efficiencies. As a result it is usually cheaper and more effective for services to be provided by the private sector wherever possible and appropriate. Although there are some areas which must be managed by the public sector, such as elections and the criminal justice system, it is difficult to see the benefits in other areas.Improve this
The myth of the greater efficiency in the private sector is one of the enduring fallacies of the politics of the right. Even the slightest glance at those areas where governments routinely outsource capital projects- defense procurement, major infrastructural projects and IT projects- there is astonishing inefficiency and it seems questionable as to how the public sector could be any less efficient.
It is an innate aspect of private companies that they need to make a profit, which is by nature an inefficiency, in that it takes resources out of any system. It is a strange thing that those who most passionately support the efficiency and effectiveness of the private sector become meek when it comes to the most important elements of public life- defense of the nation, policing the streets, educating the young. Equally when the astonishing levels of inefficiency and, frequently, incompetence that exist within the private sector come to light in the collapse of companies, be those banks or auto-giants, apparently it becomes fine for state to intervene to pick up the pieces and put things back together again.
It is equally wrong to suggest that the lack of culpability of senior managers has an impact on efficiency: the ultimate senior manager of a public service is a minister- either elected or appointed by someone who is- and is therefore accountable at the ballot box for the services provided. By contrast senior managers, in the shape of boards of directors, in the private sector seem relaxed about paying themselves huge salaries and bonuses even when their companies are running huge losses and shedding jobs: this scarcely suggests a high level of personal responsibility for success or failure.Improve this
Reducing the size of government and, therefore, the amount it takes in tax frees up money which consumers can spend on goods or for companies to expand: Both create jobs
Government costs money. That’s an indisputable fact. So that raises the question of whether that’s the best way of spending it. It is clear that money could be spent in other ways and so if this is the choice there is an opportunity cost in that decision as there is in any other.
There is compelling evidence that reducing the government’s take of total GDP stimulates the economy through freeing up funds to create jobs especially in manufacturing.
There is compelling evidence[i] that reducing the tax burden and unleashing the dynamism of the market by cutting regulation has a far greater effect than government massaging unemployment figures by expanding its own employment base. Indeed it also appears to be the case that the relatively high level of government salaries in fact just puts greater pressure on employers in the private sector to compete the resulting wage inflation has a dampening effect on the economy as a whole at a time when it can least afford it.
It’s further worth noting that jobs created during a recession tend to morph into permanent positions thereby building in an ever-continuing expansion in the size of the state unless it is periodically and deliberately culled.
Conversely the investment directly into the private sector creates wealth producing jobs that are paid at a level that is sustainable and is responsive to the health of the wider economy.
[i] Alesina, Ardagna, Perotti, Schiantarelli. “Fiscal Policy, Profits and Investments”. National Bureau of Economic Research. 1999
Were the theory put forward true, and that is debatable, it would require tax cuts to benefit the lowest paid individuals and the smallest companies. However the political reality is that it never does. Poor people and small companies do indeed spend money which has a stimulating effect on the economy, but spending only stimulates the economy if it is spent in the right way. It is not possible to guarantee that the funds that flow into a state’s economy as a result of tax cuts will benefit that economy exclusively. Most forms of good and commodity now exist within a global market; manufacturing and production have become concentrated within states such as China. Useful and productive business activity will always require that a proportion of a business’s funds be spent overseas.
The advantage of government funding is that it can be directed into the weakest areas of the domestic economy, with a degree of dynamism and control that the markets will never be able to achieve. However, recent history has suggested that tax cuts have tended to be directed to the wealthy and to large corporations who are under no obligation to spend or invest either domestically or immediately.
There is little benefit to any economy in allowing wealthy individual and organizations to further expand stagnant wealth or to invest in high end products bought internationally.
There is also a matter of scale, government has a capacity for borrowing against its own security of wealth that is simply not matched by any private individual or corporation. Equally government is uniquely placed to undertake infrastructural investment such as house building projects which directly supports sectors that are otherwise the hardest hit during times or economic downturn.
Even where tax cuts are directed or fall evenly across all income ranges there is still no control over the areas of probable expenditure and are also unlikely to stimulate sectors such as construction.
Most importantly tax cuts have no direct benefit for the unemployed which, of course, the creation of jobs by government itself does.Improve this
Excessive regulation on the private sector puts burdens on free enterprise both in terms of administration and cost. By doing so it reduces consumer choice and acts as a drag on innovation and growth
Government regulation assumes not only irresponsible companies but also stupid consumers. Although, realistically, very little regulation has any direct impact on the consumer but tends to involve time-consuming paperwork demonstrating compliance so that some civil servant can tick a box to prove that something that was already being done can be shown to have been be done.
The effect of this tends to fall hardest on smaller businesses that don’t have large financial or legal departments. As a result it not only takes up valuable time that could be spent developing the business itself but more importantly acts to discourage people from starting in the first place. This is particularly so when it’s considered that many people who start up a new company do so after many years of working for someone else within the same sector. As a result they see the pressure that needless and time-consuming regulation puts upon that company.Improve this
This again is a myth routinely put forward by the right. Governments already distinguish between regulations that should apply to all companies and those, more onerous ones, that apply to larger companies only. There are certain standards in terms of health and safety of foodstuffs, products and so forth. However, there is clearly a different role when it comes to regulating larger companies such as banks, insurance companies and major employers.
There are particular sectors that require more regulation than others but the bulk of regulation is there to protect both staff and customers and it is part of the reality of doing business.
The idea that regulation harms small business is simply absurd as they benefit from the regulation of larger businesses who may be either their suppliers or customers are also regulated.
Equally start-up companies benefit from the fact that regulation evens up the playing field with more established competitors. If nobody is allowed to cut corners or perform other mildly criminal acts it is clearly an advantage to the new starters.Improve this
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