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Paul Krugman makes an important case for bigger government at his blog this week. I’ll try to translate his point from economist to English.

Every time a conservative blames an individual for making bad choices, it makes the case for more government. When people are proven to make bad choices we need a “nanny state” to make good choices for them. Bad choices lead to bad outcomes, democracy demands we support good outcomes for the most people.

In The Fiscal Future I: The Hyperbolic Case for Bigger Government Krugman discusses the argument that “we should not only expect but want government to be substantially bigger in the future than it was in the past” because “government should do those things it does better than the private sector.” These “things” are “public goods” — things the private sector doesn’t do well — traditionally national defense, weather satellites, disease control, and more recently education, retirement, health care and environmental protection. Krugman says, “the changing structure of the economy will mean that we want more of these goods, hence bigger government.”

Here’s how this argument works. People are not very good at making long-term decisions. For example, a huge number of people have not saved enough — or anything — for retirement. This is partly due to people not being paid enough, but it is also the result of their own (usually uninformed) choices. As Krugman says, “our brains are designed to cope with the ancestral savannah and not late-stage capitalist finance.”

This is their own fault, say the conservatives. These people should have gone to college/studied finance/found (and paid) an honest financial adviser (who gave actual good advice and wasn’t in it for the commissions) etc., etc., etc. Krugman points out the flaw in their blame-the-individual argument,

But the usual argument for free markets is that they lead to good results — not that they would lead to good results if people were more virtuous than they are, so we should rely on them despite the bad results they yield in practice.

So because people aren’t good at long-term decisions, and because they make bad choices, the best outcome for the most people is for government to do these things for us.

Best Outcomes

Why do we have arguments between whether government or private companies do things better? The answer is (should be) because we want to arrive at the best outcome. In other words, conservatives say more people — and society — will get a better outcome if government gets out of the way and private companies manage things like education, health care, retirement savings, even fire protection. (Seriously, fire protection.)

Conservatives complain about the “nanny state” doing things for people. They say that society works better when individuals are left on their own with private companies taking care of society’s needs without government “interference.” So how has this worked out?

The country has experimented with these privatized “reform” approaches for some time, so we should be able get some idea of whether a government approach or a private approach works best for the most people. Let’s look at one of these: retirement savings.

Test Case: Retirement Savings

Thanks to the New Deal and labor unions, the country used to have a strong retirement savings system. Many jobs provided pensions. Plus, the government provided Social Security. In the 1950’s, 60’s, and 70’s America built up a solid middle class, and people expected to retire with security.

Then in the late 1970s the “free market” anti-government ideology took hold. The government set up 401K and IRA savings plans that required people to make their own decision to save for retirement using their own money, and to manage their savings themselves. Many (most) companies dropped company-funded pension plans. (Also in 1983 the conservative movement began the “Leninist” strategic attack on Social Security.)

Now almost 4 decades later the country faces a retirement crisis. Many people, if not most, made “bad choices,” and don’t have enough (if anything) saved. (Many didn’t earn enough to save for retirement, in jobs that used to provide a pension.) The outcome has been terrible. We are returning to pre-New Deal poverty for seniors. Heather (Digby) Parton explains in those days “The quiet Social Security revolution: How Democrats learned to stop loving benefit cuts,”:

Making the individual responsible for such choices was how it was done before Social Security, and it didn’t work out too well for a vast number of people. Neither was there any safety net for that 21 year old if he happened to become disabled. Those were the good old days for which conservatives have always waxed nostalgic — the days when sick people sold pencils on street corners and the elderly lived in grinding poverty and died before their time.

Less Government = Bad Outcomes For Most People

The experiment in “less government” has led to a terrible outcome for most people, when it comes to saving for retirement. People are not equipped to make “good choices” for themselves. This example shows how we need more government to take care of our retirement.

Retirement savings is just one example of the “bad outcomes” that result from a conservative “getting government out of the way” approach to solving our country’s problems. Other examples can be found everywhere we experimented with less government. A free market approach to public goods like education, health care, retirement savings, protecting the environment, etc., has led to bad outcomes. (And huge fortunes for a few. Was that the real plan all along?)

If you want the best results for the most people (democracy), you want government doing it. Getting government “out of the way” results in bad results across-the-board, and blaming individuals for making bad decisions only proves the point.

Democracy is about We the People deciding what’s best for the most people, and doing that. We want more of that, not less. Otherwise a few businesses and billionaires will decide to do what’s best for them, never mind how much it might hurt the rest of us.

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