Thursday, March 03, 2011

Addicted to Big Government

The heck with oil addiction. We are addicted to big government. Like any addiction it has gone from something that we had control over to something that threatens to control us. It is ruining our finances.

A recent poll shows what I am talking about. People are worried about the deficit but they want programs that affect them preserved. They are only willing to cut services or raise taxes on other people.

The most popular: placing a surtax on federal income taxes for those who make more than $1 million per year (81 percent said that was acceptable), eliminating spending on earmarks (78 percent), eliminating funding for weapons systems the Defense Department says aren't necessary (76 percent) and eliminating tax credits for the oil and gas industries (74 percent).

The least popular: cutting funding for Medicaid, the federal government health-care program for the poor (32 percent said that was acceptable); cutting funding for Medicare, the federal government health-care program for seniors (23 percent); cutting funding for K-12 education (22 percent); and cutting funding for Social Security (22 percent).

The trouble is that the cuts that people are willing to make will not fix the problem. The things they want saved are the real causes for long-term budgetary problems.

How did we get here? In the late 19th and early 20th centuries the popular wisdom was that we could fix all of the world's ills through central planning. By using scientific methods, we could make everything work more efficiently. The ugliness of free markets would be tightly controlled by government and unions. Income would be redistributed from the undeserving rich to the deserving workers.

The ultimate expressions of this movement were communism, socialism, and fascism. The Progressive movement was closely involved with this movement, also which is why many of these themes are still part of the Obama administration. Of course, we never took the plunge into full-fledged centralized government. Instead we have made incremental steps.

One consistent tactic has been to create a limited program then make it grow. When it was established, Social Security only covered half the country. Medicare and Medicaid were much smaller when they were created. Many supporters of Obamacare were open about their goals. They were playing the long game. They are convinced that, once the public starts to receive the benefits of Obamacare it will be impossible to repeal.

At the same time, any time something bad happens there is a rush to "fix" it with new laws. After toys manufactured in China were found to contain toxic materials, Congress passed new laws to protect our children. They also essentially outlaw resell of children's clothes or small-scale domestic manufacture of toys because the required tests are too expensive. This happens constantly on all levels of business. The newest requirement for cars is likely to be a back-up camera which will add $100-$500 to the price of new cars, depending on whether the car already has a video screen or if one will have to be added.

Expanding government is easy. It is always someone else's money. The problem comes when "someone else" turns out to be future taxpayers and the bills come due. That time is rapidly approaching for Medicare, Medicaid, and Social Security. All of these have "trust funds" but these are nothing but bonds that have to be paid from the general fund.

So where do we go from here? People spent decades planning their future around government promises of pension and medical care in their old age. There isn't enough money to pay for these promises but it isn't right to renege on our promises, either.

Like any addiction, quitting will be painful and there are likely to be relapses. But the first step is admitting that we have a problem.

No comments: