Paul Ryan On Limited Government

In my last two posts I reviewed the deficit reduction aspects of Paul Ryan's Republican response [1] to the SOTU. But Ryan also placed considerable emphasis on the idea of “limited government” in his response. In this post, I want to evaluate what he had to say on this theme.

So I’d like to share with you the principles that guide us. They are anchored in the wisdom of the founders; in the spirit of the Declaration of Independence; and in the words of the American Constitution.

They have to do with the importance of limited government; and with the blessing of self-government. . . .

We believe, as our founders did, that “the pursuit of happiness” depends upon individual liberty; and individual liberty requires limited government.

I find myself in complete agreement with this position; but I think it raises a very big issue, and that issue is: in exactly what ways ought the Government to be limited? Unfortunately, the Constitution doesn't tell us that in a completely clear way. It leaves it up to us to figure it out. So let's see what Congressman Ryan thinks about this issue?

Limited government also means effective government. When government takes on too many tasks, it usually doesn’t do any of them very well. It’s no coincidence that trust in government is at an all-time low now that the size of government is at an all-time high.

There are a lot of factors that determine the effectiveness of Government. It's pretty clear that Government won't be effective if it's badly led and managed. So, since 1977 we've seen that Government wasn't very effective in many of its functions when managed by Ronald Reagan and the two Bushes. I wonder why. Could it be that these Republican Presidents wanted Government to be effective in the various areas of Government activity established by legislation they disapproved of?

It's also clear, that Government won't be effective if the people chosen to lead intend for it to perform poorly. So, when the Republicans have appointed Secretaries of Labor who were anti-labor, it's not surprising that the Labor Department performed poorly. Nor is it surprising that when they appointed people to head the FCC, or the Equal Employment Opportunity Commission that the work of these agencies suffered. Or take the EPA, the Republicans keep appointing EPA Directors who are opposed to environmental regulation. Clearly, they are there to stop the Government from performing not, to manage its enforcing the law.

As to the Government having too many tasks to do anything very well, it's quite clear that the size of the Government is not as important as the size of the units of Government performing the tasks it needs to perform, and as the communications among units that need to coordinate to perform tasks well. Also, whether units perform well is a function of the resources available to the units performing particular tasks.

For years Republicans and, to a lesser degree, Democrats, have been trying to shrink the Government, so that much of its work, has to be contracted out to the private sector. Of course, this introduces incentive problems, and also communication problems which interfere with both efficiency and effectiveness. There is no evidence that this policy of shrinking Government's permanent civil service employees, and contracting out to the private sector has been either less expensive for the Government, or more effective than Government operations in the 1950s and 1960s, which used many more civil service employees, and fewer private contractors to perform Government's work. In fact, it's likely that contracting out has been far more expensive and less effective than the old way of doing things, because private contractors have a tendency to stretch out work, and continue it as long as they can so that their billings are extended.

In any event, the size of the Government doesn't necessarily correlate with effective performance. We can see this by comparing national governments across the World. Many nations spent more, and some far more, as a percentage of GDP [2] than the 34.6% the United States spent on Federal, State, and local Government in 2007; for example: France; Sweden, Denmark, Sweden, Belgium, Norway, The Netherlands, Austria, Finland, the UK, Germany, Canada, New Zealand, Australia, and Switzerland. Arguably all of these Governments performed more effectively than the US Government in that year. But, even if you don't believe that, it's hard to deny that they performed at least as well.

On the other hand, many nations that spent more on Government as a percent of GDP than the US, performed much more poorly than we did. My point is that there is no clear, strong, correlation between nations whose Governments are obviously effective, and nations with a particular size of Government, and certainly there is no empirical evidence that smaller Governments work better than larger ones.

Finally, the size of Government, viewed in terms of Government spending as a percent of GDP, is not at an all time high relative to the rest of the economy. It was larger in WW2 for one thing. For another, its recent increase is due to the effects of the recession and additional Government expenditures made to combat it.

Trust in the Government may be at or near an all time low, but that is due to the failures of the Bush Administration, the crash of 2008, and the Federal bailout of the banks without a corresponding bailout of Main Street. That is, the Federal Government hasn't performed very well, in large part due to the role of the Republicans, including Congressman Ryan, in opposing the passage of Government spending sufficient to create full employment, and in supporting the continued bailout of the banks, the payment of undeserved bonuses to FIRE sector personnel, and in opposing investigations of the mortgage and accounting control frauds that have put so many out of their homes.

This lack of trust, isn't due to too much Government action, and won't be fixed by Mr. Ryan's preferred policies of ineffective, or no regulation of the FIRE sector and fiscal austerity. On the other hand, it may be fixed by an effective Federal Job Guarantee program, a Federal Revenue Sharing program saving state and local jobs, a payroll tax holiday for employers and employees including Federal reimbursement of the Social Security account, ending the wars in the Middle East quickly, and passing a Medicare for All bill

The President and the Democratic Leadership have shown, by their actions, that they believe government needs to increase its size and its reach, its price tag and its power.

What planet does Congressman Ryan live on? The Democrats have done very little to increase the size of Government. The measure of that is that Federal Government spending as a percent of GDP is still extremely low compared to National Government expenditures by the nations mentioned earlier, and has only risen about 5 percentage points from Bush Administration levels.

In addition, the President, much to his discredit, has done all he could to keep Government expenditures revenue neutral or revenue positive, beyond expenditures for defense, and increases in social safety net expenditures resulting from the recession. His health care reform bill is a disgraceful attempt to bailout the insurance companies without taking them over, because he would not entertain Medicare for All.

We believe a renewed commitment to limited government will unshackle our economy and create millions of new jobs and opportunities for all people, of every background, to succeed and prosper. Under this approach, the spirit of initiative – not political clout – determines who succeeds.

Millions of families have fallen on hard times not because of our ideals of free enterprise – but because our leaders failed to live up to those ideals; because of poor decisions made in Washington and Wall Street that caused a financial crisis, squandered our savings, broke our trust, and crippled our economy.

The history of America is largely the history of extending initiative from the economic sector to politics and gaining advantage in both sectors. We've seen that with the railroads, the steel and oil industries, coal, the mass media, telecommunications, the software industry, the FIRE sector, and most other industries that have scaled the economic heights in this country. There is no way to separate economic initiative from its extension into politics. The idea that these two can be separated is a myth.

So, unfortunately, as much as we would like to believe that a company's success in America has nothing to do with politics. It, most often, is intertwined with either favorable political conditions, political influence, or both. Congressman Ryan knows that very well because he, and his Republican and Democratic colleagues, are the recipients of attempts to fix the political system, so that certain private sector businesses can profit. So, I don't know whether Congressman Ryan thinks that's the “spirit of initiative” or not. But I think it's just as much, if not more, about buying political clout.

Ryan goes on to blame Washington and Wall Street for decisions that caused the financial crisis. I certainly agree; But I also think that the wrong decisions made by Washington include de-regulating of Wall Street so that the spirit of “free enterprise” reigned supreme. That happened during the Clinton Administration under the influence of Robert Rubin and Larry Summers, and then the Bush Administration saw to it that the SEC would not enforce the inadequate regulations that still remained. Unregulated “free enterprise” produced unprecedented accounting control frauds and bubbles in the Real Estate markets which eventually led to the crash of 2008. Then the Obama Administration bailed out the banksters/fraudsters and until now has refused to investigate and prosecute the perpetrators, while moaning about how we have to look forward and not backward.

Meanwhile, Paul Ryan is responding to all this by telling us that we need to back off regulation of the private sector, and that will make everything all right. But anyone with an ounce of common sense knows that the only thing that will clean up the banking system, and restore public faith in it, is cleaning up the frauds and punishing the people responsible. Why isn't Paul Ryan calling for that if he wants people to have faith in “free enterprise” again? He needs to keep in mind that there's no freedom without responsibility and accountability, and that his prescription, and that of the Republicans is to put responsibility and accountability aside, and to let working people bear the burden of the failings of the Wall Street FIRE sector and the corrupt Congresses and Administrations that failed, and still fail, to regulate them.

Finally, Congressman Ryan's plea for a return to limited Government would be far more credible if he were as much concerned about limitations on the size and intrusiveness of Government when it comes to privacy, civil liberties, rights of habeas corpus, protections against torture, and the right to a speedy trial, as he is about the non-existent rights of businessmen to subvert markets through fraudulent activity hiding beneath the skirts of the ideal of “free enterprise. He would also be much more credible in his concern for liberty, if he were concerned that “necessitous men, are not free men,” [3] and were willing, in the interests of liberty, to strengthen, instead of weaken, the social safety net by making its provisions as generous as the safety net in other civilized nations. He would, further, be still more credible, if his concern for liberty were great enough that he would support Medicare for All, so that employees in the United States would no longer be tied to jobs that they don't like, and were free to move to other employment without having to worry about interrupting or degrading their health care coverage.

He would, further, be even more credible, if his concern for liberty extended to providing a Federal Job Guarantee to everyone who wanted to work, so that they had the freedom to do so. And he would, finally, be even more credible that that, if he recognized that liberty is not about small sized Government or big Government, but is, instead, about Government that is the right size, to do those things that will maximize the liberty of as many people as possible in our nation. It's about recognizing that the liberty of individuals is often in conflict, and that you can't maximize liberty by giving some people (big business people and FIRE sector people) complete economic liberty from any reasonable rules, when that means removing or restricting the liberty of many or most of the other people in the United States, by chaining them to the wheel of extreme economic insecurity.

Government does need to be limited, but only a simpleton can fail to recognize that its limits have less to do with its size, and much more to do with its having processes that are just and fair and maximize liberty, rather than processes which enshrine arbitrariness, favoritism, exposure to political influence, and special favors for one group, placing them above the law. If Congressman Ryan understood that it is not about size, but about justice and activities that maximize liberty, then he would be worth listening to when he talks about limited Government, and his Party would gain the trust and honor among the American people that it has not had since the time of Teddy Roosevelt, and before that Abraham Lincoln. But don't hold your breath waiting for that understanding to happen. It's just not in the DNA of the 21st Century Republican Party.

(Cross-posted at All Life Is Problem Solving [4] and Fiscal Sustainability [5]).