Wednesday, April 22, 2009

Here's how I see things...

I had an email discussion with a good friend of mine regarding my political beliefs. He was skeptical about my limited government beliefs. He asked a series of questions, which I attempted to answers. I cleaned it up a bit, and reproduced the substance of the conversation below.


Q. The more time that goes by, the more I question the wisdom of the libertarians and free market types. Who knows, it might be the best way to go; I don't have another philosophy to offer. But I see some major holes in the line in thinking in consideration of modern day governments and economics.

A. Here’s an analogy, explaining why I don’t like mandated government meddling:

Sam is a terrible Mechanic. Sam rarely, if ever, fixes the problem. You previously hired him to fix your broken radio. He did, but in the process broke your headlights and speedometer. Then the radio failed again two days later, anyway. Oh, and his quotes are three times higher than any of the other, more competent mechanics in town. Even so, he usually exceeds the budget. And he doesn’t work on President’s day. Would it make sense to take your car to him?

Most people would say no. But what if Sam held a gun to your head, giving you no choice? This is how our federal government operates a number of its programs.

My views can be briefly summarized as follows: Government regulation rarely solves the problem, often makes it worse, and frequently causes negative unintended consequences, sometimes worse than the original problem. And we pay out the nose for this, despite such awful results.


Q. I see so many problems with this I don't know where to begin. Who is going to stop companies from putting lead in their peanut butter?

A. We spend millions, if not billions in order for the government to do this currently. Yet peanut butter still has salmonella, and children’s toys still have lead. Government telling companies not to do things usually isn’t much more effective than Government telling people they can’t do drugs. Take Enron, for example. A number of their executives committed fraud, which is already illegal. The people involved are in jail. But the political knee-jerk reaction led to rushing Sarbanes-Oxley into law. Compliance costs businesses huge amounts of money. Even worse, large corporations are more likely to be able to absorb these additional costs, disproportionately burdening smaller, newer companies trying to compete.

Q. Who is going to punish them when they do? The Courts?

A. Exactly. Numerous executives at Worldcom, TYCO, and Enron are sitting in jail right now. So is Bernie Madoff. Although the SEC certainly wasn’t very effective at stopping him.

Q. Good luck when the company is in China...

A. Let me know if you feel differently after reading THIS.

China didn’t do this because it was illegal under US law. They did it because of the cost to the Chinese economy. I don’t believe in capital punishment, but China’s economic self-interest is probably a lot more effective at keeping Chinese products safe than regulation passed by our federal government. Besides, we have a ton of regulation in this industry, and it hasn’t been very effective.

Q. Can the markets really be trusted to police themselves?

A. Not completely, of course. You’ll always have scams. But can the government do better? I don't think so, but even if it could, at what cost?

Consider Bernie Madoff. Heavy SEC regulation failed to stop his scam for decades. To the contrary, the regulations may have made the problem worse. Many people probably thought, “Well, if he checks out with the SEC, he’s probably OK.” If people hadn’t been conditioned to trust the government to look out for them, they would have been a lot more suspicious about his scheme. Likewise, people trust that food is safe because the government implies that it is, even when it’s not. A little suspicion is a good thing.

In a free market, you'll certainly have bad actors looking to take advantage of others. But bad companies wind up with bad reputations, and people ultimately don’t deal with them. Implied or express government approval causes people to let their guard down, because they think the government is looking out for them. Unfortunately, the government usually doesn’t do a very good job of it.

Q. Doesn't recent history tell us that actually most companies will happily exploit the people in order to profit?

A. Perhaps. But recent history, ancient history, and everything in between all demonstrate that governments will do the same. But when governments do it, it's far, far worse. If a business rips me off or does a bad job, I can sue them, or at least choose to deal with their competition instead. When government performs poorly, which it usually does, I don’t have the same options.


Q. Sure, the schools could be better, but I feel great about the education I received.

A. Do you feel good about how much it cost? I don’t. I spend over $600 a month on student loans, and I paid in-state tuition at KU. Although it seems counter-intuitive, school costs so much because of government meddling, specifically through student loans and grants. Government got involved to make college “more affordable.” The fact that I don’t have to pay anything while I’m attending doesn’t outweigh the fact that it’s increased in cost by something like 10,000%.

It’s analogous to buying a car with no money down, no payments for the first year, but afterwards the interest rate shoots to 2,000%. Sure, it was easier for me to get the car, but it’s certainly not “more affordable.” For a good analysis, check HERE. HERE’s my personal take.

Q. What would we do when South Carolina sets up a state school system that teaches things that are scientifically incorrect, or openly hostile to minorities?

A. If a school system decided to teach that the Earth was flat, it would develop a bad reputation, and businesses wouldn’t hire graduates from there. They’d face enormous pressure to chage. On your second point, state instituted racism is clearly unconstitutional, and the courts could, should, and would deal with it.

But your analogy only looks at half of the picture, and ignores the other side. While some schools’ curriculum might not be as good as a proposed national curriculum, both probability and commons sense indicate that some of them would be better. If, for example, New Hampshire had the nation’s best curriculum, and the best students as a result, other states would naturally emulate it. If you’re stuck with one approach, and it’s a bad one, you’ll never know. If you have 50 different approaches, some are bound to be better than others. The best ones will rise to the top, and everyone else will follow suit, in order to remain competitive.


Q. Free market. This sounds good, as the current system sucks, but I have a problem with this as well. I have similar objections about getting rid of social security for different reasons. But basically, I believe that the less people that we have who are sick without health care, the better off we all are. We can afford to create a system of universal health care, as just about every other country has done it. And like other countries, we could have the option of paying extra for extras. That would be fine with me.

A. I agree the system is broken. I don’t think this is a result of the free market. HERE’s what a good buddy of mine has to say about it.


Q. Sure, I don't like having money taken out of my wallet that goes to an inefficient program. However, I also don't want hundreds of thousands of broke seniors out on the streets. I think that society as a whole ends up better off by having a small safety net for the elderly. Maybe the program itself sucks, but I don't think the idea is without merit.

A. Giving old people a little money sounds good. So does giving everyone a free yacht. But both share the same problem: we can’t afford to do so. Whether we like it or not, Social Security is doomed to fail, and has been from the start. Supporting Social Security is like wishing that summer vacation would never end – an appealing, yet utterly futile pipedream.

But not only is it unworkable, it’s a bankrupt pyramid scheme that’s dragging down the economy, and contributing to unemployment. Even worse, in a perverse twist of irony, it’s greatly damaging the very ideal it was designed to protect – the ability for people to retire comfortably.

Consider this: the government withholds 7.65 percent of my check each week for social security. They do this to everyone. They tax my employer the same amount. If my firm didn’t have to give 7.65% of my salary to the government, they could afford to pay me 7.65% more. That means 15.3% of my earnings (before the other taxes) effectively go to Social Security. See HERE.

I currently designate 3% of my check for my 401k. Which do you think will have more value when I retire?

If our grandparents could have taken 15.6% of their lifetime wages, and set them aside for retirement, they’d be a lot better off than they are with their monthly checks from the government. They would have been able to retire earlier, and much more comfortably. I’ll be lucky if I collect anything from Social Security.

If my income increased by 15.3% because I was allowed to opt out of Social Security, I could triple my 401k contributions, and still have 6% extra left over to contribute to charitable causes, including struggling old people.

Even if businesses didn’t pass the 7.65% on to their existing employees, they could afford to increase their staff by 7.65%. The good intentions of Social Security don’t look so good when you realize they effectively contribute to unemployment.

Providing a “safety net” to old people sounds so noble. I look at it differently: the government forces everyone to choose between throwing this money down a rathole and prison. Well, that’s no choice at all.


Q. Basically, some of these points make me begin to question whether the philosophy isn't a bit naive. I disagree with the Iraq war as much as anyone, but I don't think that it is as simple as bringing the troops home and only using them to defend against an invasion. While perhaps Bush poorly applied the Bush Doctrine, there could conceivably be other rare situations where it is actually good policy. Our might keeps a lot of countries that might otherwise misbehave in check.

A. Our military might can’t and won’t stop countries from misbehaving. Look at history. Alternatively, you can look at a newspaper. Darfur, the Balkans, Israel, and hundreds of other examples throughout our history. From Afghanistan to Zimbabwe, there are simply too many problems for us to tackle. We should not try to control and police the world. We can't afford it, and even if we could, it's improper for us to do so.

North Korea will eventually get nuclear weapons. So will Iran. It’s inevitable, and we can’t stop it. We can, however, control whether these countries want to use them on us. It might be too late, but if we left them alone, they might direct their aggression elsewhere. Have you ever seen video of Iranians shouting “Death to Belgium”? Probably because Belgium has never covertly overthrown Iran’s democratically elected government and then installed a repressive dictatorship in its place.

These are rough numbers, but we spend half a trillion dollars on the military every year. Even if we merely cut that in half, applied it to the national debt, and made no other changes, we’d be in the black in no time.


Q. I believe open immigration would be a disaster. We already have too many immigrants in the country. As the Netherlands learned, when you allow a mass of immigrants into the country, eventually the country starts to lose its own identity. You may even let a Trojan horse into the country. You end up with residents who are openly hostile to the country they live in. Then things get really ugly. See Theo Van Gough...

A. Immigration isn’t one of my big issues, and I’m honestly not very informed about it. I realize some libertarians support open immigration, but I'm not sure how widely held that belief is.

Because of my opinion isn't very informed on this topic, I resorted to my magic formula I like to use to figure out where I should on an issue: a Google search consisting of the topic and "Ron Paul". As usual, his viewpoint seems very sensible to me.


Q. I know you are very much into libertarianism and I'm not trying to offend, I'm just curious how you see some of these issues. I'm not sure which ideology I identify with anymore.

A. You know me too well to think that I’d be offended by a political debate, much less by asking my opinion on a number of thorny issues. I'm always glad to discuss these things.

Feel free to weigh in with your comments.

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