Monday, January 16, 2012

Big government: What is wrong with it

Our problem is simple. Government, at all levels, has grown too big. It commands too large a share of the economy. It enforces far too many laws, policies, rules and regulations.

Big government, the kind set up to solve everyone's problems, is at odds with two things I like very much, individual liberty and a robust economy.

Fortunately, mega-governments always implode. They micro-manage what the people are doing and spend themselves to death. These things are interrelated because freedom and prosperity are related. Unfreedom leads in turn to unprosperity. By simultaneously demanding your money and making it harder for you to get some, government creates its own biggest problem. It mars the prosperity it depends upon to generate government revenue.

If you, as a businessman, have to carefully tiptoe your way through thousands of pages of rules to make sure it is really okay to start that new business or project you have in mind, you may conclude that the regulatory overhead is too costly. You don't try the new idea.

Or you may decide to go ahead. If you make a go of it, a big chunk of your profit is vampired away to support government. Your hiring and business expansion plans are not dependent on profit, but upon profit minus taxes, fees and regulatory overhead. Government is a cost of doing business. I suppose that is always true everywhere, but when the burden becomes too great, business stagnates. Cash is always tight and it's somebody's full time job to make sure you are not transgressing any rules.

There are also risks of direct government interference. Let us say that what you developed and brought to the market is a new and wonderful way of preparing French fries. Your fries are the best on earth, customers are wolfing them down, restaurant chains are bidding to licence your special process, and then--it hardly stretches the imagination to suppose this, especially given the current administration--the government launches a campaign against French fry eating. You did not see that coming, or the special tax placed upon french fries or the excise tax on potatoes, all to save the people from themselves.

Of course, your more sensible customers knew all along that your French fries were greasy, and delicious, so ate them once a week instead of every day. The real beneficiary here is government. They get  more rules to administer (and they hire more administrators) and they get two new tax streams.

Better luck next time. Got any recipes for arugula?

What happens in the end is the government, in trying to have a finger in every pie and rule books for all occasions, strangles the economy that supports it. The idea is to meet every voting bloc's needs and desires out of the profits of the actually productive, which is self defeating, if you think about it. At some point it becomes tempting to drop out of the rat race and become a taker, not a maker.

Do you think I'm making this up, painting my own fears atop the current scene? To the contrary; it is an old story.

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