A Careful Look at Issues

The election was a clear choice, and the people have spoken. The people want free birth control, free abortion, and free just-about-everything from birth to death. They want it paid for by rich people. What they will get is slow death by regulation. It’s inevitable. Legislation is in place to control banking, energy, health care, education, and a myriad of the details of life. The script for the next four years is bureaucracy producing a rising tide of regulations to consolidate control over peoples lives. Congress will provide sideshow distractions, but the main event will be the growth of bureaucratic power.

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There are a three elements to economic recovery: people must need to buy things, they must have the money to buy them, and they must be believe that that the future is worth investing in. Every economic downturn leads to people postponing purchases of new cars, new homes, and new consumer goods. After a while, we expect people to be compelled to catch up with purchases; the old car cannot be fixed and must be replaced, and so forth. What’s remarkable about the current poor economy is how little of the automatic bounce back we’ve seen. We look to the factors of money and confidence to explain the lack of recovery.

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Taxes are explicit, so it is easy to sum them up. Total spending by government at all levels in the US is estimated at $6.41 trillion for 2010. [ 1 ] That’s about 44% of the gross domestic product. So that means that the private sector gets to choose how to spend the remaining 56% of the money, right? Not really. The government also requires us to comply with its rules, and the indirect costs are substantial. My partial list of indirect costs amounts to $1.8 trillion, more than 12% of the economy on top of the 46%.

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Recently Forbes.com columnist Joel Delman asked, Are Amazon, Netflix, Google Making Too Many Decisions For Us? He complained that “Are Amazon, Netflix, Google Making Too Many Decisions For Us? Mr. Delman observes that Amazon suggests what we products want to buy, Netflix suggests what movies we might like, and Google is developing a car that will drive itself. He suggests that assisting technologies ought to have an “off” switch, or that maybe the default should be “off” until we turn them on. I’m here to suggest the opposite, that we should embrace these technologies and push them hard. We are all at war with the complexity of the modern world, and computers are our ally. We need more help, not less.

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It’s a straightforward observation: when government is presented with a problem, there is a strong tendency to use some form of rationing as a major part of the solution. We see this in health care, water supplies, electricity, and many other aspects of government regulated or government-run operations. It’s is a reasonable to unexpected emergencies, like World War II shortages or hurricane interruptions, But it is an unreasonable response to chronic problems. So why is it the preferred tool? I think it is because it does not require long term planning, it enhances government authority, and it perpetuates an illusion of fairness.

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Is the current financial crisis the result of too little regulation? People asking that question often seem to suppose the total quantity of regulation at issue. If more regulation were always better, then North Korea should have one of the best economies in the world, because surely it is among the most regulated. If it is not that the maximum amount of regulation is best, then it may be that an intermediate quantity produces an optimum. Perhaps too little regulation allows chaos and too much produces strangulation, so that in between there is just the right amount.

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By torturing coach class passengers, airlines are able to sell wildly overpriced first class seats to people who have the money to afford escape. This is not a good situation. One possibility is for government to require minimum levels of service, for which airlines may compete with their pricing of fares. However, before leaping to regulation of that sort, let’s try just requiring disclosure of the level of service. Customers will know what they are buying at what price. Seat space is the most important thing being sold, so that ought to be the first thing disclosed.

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