Other People’s Big Government

We humans are a funny lot. Most of us can see the flaws in others and miss our own; “do as I say, not as I do” generally being the rule of the day. For my part, I am publishing this blog to attempt reasonable discussion of political issues in spite of my own tendencies towards well, being unreasonable.

Taxes and “Big Government” are my two favorite examples of what my wife tenderly calls, “what’s mine is mine, and what’s yours is mine”. Everyone, and that means you Mr. and Mrs. John Q. Conservative, wants big ticket programs from your governments, federal, state and local. Everyone, and now I am writing of you Mr. and Mrs. John Q. Liberal, despises the notion of paying ANY tax. And so, one of the fundamental obstacles of our democracy is the endless attempt to win the argument over what we the people buy and who pays for it.

Living in rural Illinois has helped to make this problem clear to me. The area in which I reside is among the most conservative in the country, even while it maintains a bewildering array of local governments. By way of comparison, my home state of Nevada has perhaps 15% of the sum total of government of Illinois. As an experienced practitioner of, and student of business, the dilution of responsibility and effort represents a shocking violation of the rules of scale economics and a monumental waste of money. The irony of course is that the conservative residents wouldn’t have it any other way. Despite the additional cost, the citizens largely fight for the arrangement because it is how they maintain their voice in the democracy.

The rational middle believes that the final point is the critical issue, that the cost or tax must serve a fundamental purpose to the participants in the democracy. Restated as a question, is your government giving you value for money? When we allow ourselves and our representatives to get away from that question and get lost in the contradictions, we do a disservice to the democracy. The current debate that involves health care, energy/climate change, bailout, and stimulus devolved quickly into a battle of contradictions. If we could get the politicians to put their collective slogans down, we might solve some problems..

The first issue they have to get past is debt. I can almost guarantee you that there is not a single financial advisor or guru in this country who will advice you to delay purchasing your home until you can afford to pay for it in cash. Most homeowners have a mortgage with a value 2 or 3 times (or greater) than their household income, and will pay substantially more than that in interest over the term of the loan. We as a nation borrow money at a rate that would make we the individuals jump for joy. Countries like China buy our debt, not because they want to own us, but because the act of buying our debt helps to keep their currency undervalued. A lower value currency helps them export more goods to us. If they stopped buying our debt, our currency would fall in relation to theirs and their export-oriented economy would suffer (and our manufacturers would be able to send more to China; kind of like “fire hydrant pees on dog”). The critical issue for debt is twofold; that the interest payments servicing said debt remains manageable, and that the nation either improves its productive capacity or protects its citizens and property.

To illustrate that point, I will point to a pair of Republican presidents in contrast. Ronald Reagan’s budgets dramatically increased the federal debt, as did President George W. Bush’s. Considering Reagan first, there is a good argument that the dismantling of the large top marginal tax rate helped to stimulate growth, and the military spending served two purposes; combined with the diplomacy of Reagan’s second term it helped democratic forces in the Soviet Union open that nation to economic reforms, and the scale of the spending (done mostly within the borders of the U.S.) served as a Keynesian stimulus to the economy. President Bush’s efforts were decidedly less focused. His tax cuts cost $1.8 trillion, and focused as they were on the top tier of American earners contributed little to the economy while falling short of the Laffer Curve (the theory that a substantial tax cut will spur an economy such that tax revenues end up staying even despite the lower rate). The war in Iraq damaged U.S. security and will cost more than $3 trillion by the time its done.

The current debate surrounds President Obama’s agenda and its affect on U.S. stability, financial and otherwise. To this point, the debate between right and left has looked much like a duel between two blind snipers; both sides expertly firing their weapons in the general direction of what they think is their opponent. The right yells about size while the left yells about need, with neither adequately making a case that pairs purpose with value. The initial steps towards health care reform were a good start, then the lobbies got into the fray. What began as productive discourse degenerated into dueling ad campaigns about the uninsured poor and the importance of insurance companies in our daily lives (irony intended). The climate change/energy independence mess should be a discussion on how to make this country the leaders in 21st century energy and business efficiency; it has become a struggle between two competing sets of unrealistic and narrowly focused numbers regarding household cost. Is the number $15 per month or $70 over the 20 year period? Nobody is referencing the historical fact that household energy costs rose $41 per month in the period between 1981 and 2001, or the reality that current fossil fuel sources will become more expensive as they get more scarce.

Room for debate exists aplenty, but discussion would be more productive. This is, after all, our government, big or small. Our engagement in rational discourse, and our demand that politicians follow our example will define the effectiveness of our democracy.

The rational middle wants to hear your opinion……