Tuesday, January 4, 2011

A Case for Near-Libertarian Government

My previous post made a case for redistributive "justice." Here I argue that, beyond a small amount, the liabilities of redistributing money from society's "haves" to its have-nots far outweigh its benefits. It:
  • Encourages sloth. Every time unemployment payments are extended, most of my unemployed clients say something like, "Good. Now I don't have to look for work for another 13 weeks." Conversely, when President Clinton set a time limit for welfare recipients, when their welfare checks were about to run out, most of the seemingly unemployable people managed to find a job.
And of course, there's the example of the Soviet Union. Guaranteed jobs, equal pay, and full benefits resulted in legendarily poor quality (Remember the Russian cars: the Lada, Moscvich, and Volga?). It also resulted in legendarily poor quantity: long, long food lines and rationing. The average U.S.S.R. woman spent two hours a day, seven days a week in food lines.) The photo above is a U.S.S.R food ration coupon, sometimes required even for basics like sugar.
  • Imposes high opportunity costs. Redistributive "justice" transfers wealth from the people and businesses with the greatest likelihood of creating jobs and life-enhancing innovations to the people with the lowest probability of doing so. Yes, in the short run, that results in more cash pumped into the economy--the poor spend a higher percentage of their money while the rich save more. But long-term, that's a negative: less saving means less money for banks to lend to businesses, which would create jobs and innovation.
Then there are the opportunity costs of the government's redistributive programs: an enormous amount of taxpayer money spent on programs already proven to be cost-ineffective programs from Head Start to job retraining; often $25,000 per job obtained and often the person doesn't hold the job for more than a few weeks. The total amount of waste, fraud, and abuse in government redistributive programs is, as reported in the Washington Post, incomprehensibly large.
That money would likely more wisely be left in taxpayers' pockets, thereby rewarding them for their productivity and allowing them to pump their money into more beneficial parts of the economy (the goods, services, and charities selected by the taxpayers) rather than the aforementioned money-down-the-drain programs.
  • Sends a destructive societal message. It's Psychology 101: you get more of what you reward, less of what you punish. Redistributive "justice" is an appealing-sounding term concocted by its advocates, but it in fact means that society's productive members have their money wrested from them and given to those who are less productive. What sort of message does that send to all of us? To our children?
Note: Of course, some people are productive but don't earn money--for example, volunteers--but, on average, the pool of payers for redistributive justice are more productive, even if non-remunerative productivity is included.
Many people thus believe it's foolish to work hard--After all, if you don't work much, the government will take care of you: The National Review reports a study that found that an American family of three has to earn $60,000 a year to net the same income as someone who makes just $14,000 a year and thus qualifies for all sorts of government handouts. Can you not see why the millions of people who are not intrinsically motivated make the choice to sit on their butt? "Why work at some dumb-ass job when you can get the same money for hanging out?"
I suspect that if there were no safety net for the poor, many such people would become more self-reliant and those who didn't probably would be sufficiently helped by private charity. But candidly, I'm not very confident in the previous assertion.

That's why my current thinking is that the best political/economic system is a near-libertarian government: a modest military, modest regulation, and a humane safety net for the truly needy, with those programs provided not by the wildly and unavoidably inefficient, fraud- and waste-filled government, but by the private sector.

Perhaps the wisest approach to that is, a la Milton Friedman, to spend the money saved in cutting those cost-ineffective government programs on a negative income tax--cash to the poor--so the poor could spend the money on the services and products they deemed most cost-beneficial.

Dear readers, what do you think?


Basil Fawlty said...

I vividly remember those coupons - I lived in Leningrad, Russia in 1989. The one in the picture is for SOAP. It makes me cringe.

I am afraid you are right, Marty. Any society without meritocracy will stagnate and collapse, like the USSR has demonstrated.

It seems that meritocracy is not working anymore here in the US. And the social contract is being violated by the authorities. My 401k for the last decade illustrates that.

Dave said...

On the failed Soviet socialist experiment:

I think that had more to do with the backwardness of Russian society, not socialism itself. All previous attempts to modernize Russia also failed. Despite its impressive space program and global political and military reach, the Soviet era was a continuation of Russian decline. Little has changed in the post-Soviet era.

Czechoslovakia built the Skoda Favorit, which rivaled the Volkswagen Golf/Rabbit and Dodge Omni/Plymouth Horizon twins.

Marty Nemko said...

Dave, if the best example of how socialism could compete with capitalism is the Skoda car, which rivals the bottom tier of U.S. cars,, it isn't the strongest argument. Perhaps if it rivaled the Toyota Prius. Or if Czechoslovakia created Google, the TV, cured cancer...

Anonymous said...


I agree with keeping the modest safety net and having a near Milton Friedman view of cutting programs and giving the cash saved as grants to those poor. Personally, I think we have to cut the cord on any of the inter-generational welfare recipients first. 'Cash grant, here you go now go get a job, any job. Your ingenuity should serve you well since you managed to game the system for so long.' Also provide higher cash grants for voluntary sterilizations and/or highly effective birth control. I'm not kidding. These are the last people (read: trailer park, drug addicted, pot smoking, negligent parenting etc.) who should be breeding. They damage another human being that didn't ask to be brought into the world.

The only people who I think need to be on "public dole" are: service men and their dependent families. They are often so damaged that they need all the help they can get. And the indigent elderly and developmentally challenged and the mentally ill.

The only thing we have to consider is this: this will cause mass rioting in certain communities. Others will further descend into chaos.

Anonymous said...

What do I think? I wish there were people like you running for office.

Regarding the safety net: YES. I have a family member who is mentally ill; he has been unemployed for most of his adult life.

Mental illness is a tragedy, no doubt. But the greater tragedy, me thinks, is the dependency that is cultivated.

(This is one of those "don't get me started" topics. When you watch the behaviors of 50-year-old toddlers you get this way.) I'm confident our mentally ill would have much to gain by giving back...in whatever measure they are able to do so.

I have often wondered about what would happen with paranoid schizophrenics in particular if they spent some time toiling in a garden and eating a wholesome diet. (Versus a diet of gov't subsidized crap and watching cable television all day long.)

Anonymous said...

You forgot two other famous Russian cars, which, by the way, weren't as crappy as the others: the Chaika and ZIL. At the risk of stating the obvious, those cars were built to ferry apparatchicks around and therefore rivaled the luxury cars of the West. The ZILs were specially hand-built and could run with Mercedes-Benz, Rolls-Royce, and Cadillac limos of their time.

Which leads me to this concern about socialism: The "apparatchiks" will take the best for themselves and leave everyone else with the rest.

Anonymous said...

The Soviet Union was neither communist nor socialist but followed a model known as state capitalism. Did the workers own the means of production? Of course not - the state did, as Basil remembers, I'm sure. The state was also the primary market driver, rather than the individual.

In the US, we see this model applied only to our most heavily subsidized, expensive and wasteful industry - defense. The energy and food sectors are also dramatically distorted, but not as far along the lines of state capitalism.

For many years I drove used Volvos exclusively, and I was quite happy with the product of a fairly competitive and relatively socialist state. I don't believe that Volvo employees owned the factory, but I do recall that until the company was bought, managers could be demoted by the vote of their employees.

Anonymous said...

oh, bugger. I forgot why I was here, which was to ask:

Why is the case for a near libertarian society cast so negatively? It focus on attacking one thinly drawn view of something else, rather than making a positive case for the benefits to the average person (average luck, skill and motivation) of living in the libertarian society.

Doug S. said...

Government is not as inefficient as you think it is.

Marty Nemko said...

Doug, those are largely apriori arguments made by someone who admittedly has a pro-government bias. I've seen MONUMENTAL waste in government. The most visible was when I went into the mammoth palatial (100-foot rotunda ceiling with massive skylights, marble and inlaid mosaic floor) twin federal office buildings in Oakland, went upstairs, where desk after desk were compleely clean, with people sitting at them, literally filing their nails, listening to mp3 players, etc.