How Big is Too Big?

There may be a certain community size where a pure governmental system can exist. Maybe 100 people could live together in a perfect socialist society, or a perfectly democratic society. But when the community gets large, they necessarily live under a mix of several governmental types. I believe that America is still predominantly a representational democracy living under a free market system. There is a good bit of socialism going on, some egalitarianism, and a bit of libertarianism and anarchy thrown in for good measure.

Accepting that the government needs to be a certain size to govern this people, it is important to ask how big it needs to be. And, how big is too big. CATO has an article on their website today discussing a study about the optimum size of government. The study shows that the optimum size of government is about 25% of GDP. The bad news is that the U.S. Government today is about 36% of GDP, and getting larger by the day. To read the article, click here.

Mr. President, that is not true.

Recently, the President made the following statement:  "There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy."  Today, the CATO Institute ran a full page in in the New York Times that contained the following statement, and signed by many top economists including Nobel laureates and other prominent scholars:  (To see the full page add, click here.)

"With all due respect Mr. President, that is not true.

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's "lost decade" in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth."

Quote of the Week

"In the midst of all the exactions of government, capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress of England towards opulence and improvement in almost all former times...

It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense... They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will."

Adam Smith
The Wealth of Nations, Book II, Chapter III

Legalized Plunder

Imagine ten people living on a desert island.  Nine of the them are very poor, living in squalor.  The other is very wealthy.  Through hard work and industry, the tenth person has built ten fine homes, surrounded by productive farmland.  Most would agree that the nine have no legal right to forceably take the property of the tenth person.  That would be theft.

However, what if the nine other persons decided to form a government.  They band together, and elect themselves to various offices.  Despite best efforts, the tenth person is not elected to any office.  After forming this government, the nine decide to pass a law, imposing a 90% "tax" on the property of those in the top 10% income bracket.  The new law is voted on, and passes by a strong majority, 9 to 1.  After the vote, the nine each move into, and take possession, of one of the homes and surrounding farmland of the tenth person.  Is this "legal?"  What say ye?

Quote of the Week

"To summarize: it is a well-known fact that those people who must want to rule people are, ipso facto, those least suited for it. To summarize the summary: anyone who is capable of getting themselves made President should on no account be allowed to do the job."


— Douglas Adams (The Restaurant at the End of the Universe)

Obama Stimulus Bears a Closer Look

There is a new article by Will Wilkinson today at the CATO Institute site with a short review of and recommendation for Obama's proposed stimulus plan.  The article is entitled "Obama Stimulus Bears a Closer Look."  A tax cut to individuals and businesses would be an immediate stimulus to the economy.  The author proposes a Social Security Payroll Tax cut.  This would be easy to do, and would give tax breaks to both individuals and businesses.  Also, when the crisis is averted, the tax could be easily reinstated.

The part of Obama's plan that involves building infrastructure is a different story.  This would not act as an immediate stimulus, and would allow for plenty of corruption.  I am never comfortable when the government thinks it can do a better job spending my money than I can.

Unassailable Tyranny of a Minority

New article by George Will entitled "Of Judges, By Judges, For Judges." The article discusses the problems generated for individuals, families and society when judges are creating law instead of enforcing law.

Newspaper Bailout Would Undermine Political Freedom

Check out the article published by the Ludwig von Mises Institute discussing  the potential effects of a proposed government bailout of the newspaper industry.

World's Freest Economy

The numbers are out this year, ranking the world's economies from the most free to the least.  I think most of us would generally expect the United States to stand securely at the top of that list.  Turns out that the Heritage Foundation has ranked Hong Kong as the world's freest economy, for the fifteenth year in a row!  Take a minute to review the article.  You may or may not be suprised to see that the United States slipped to sixth place this year, because of "increased government spending and tax revenue as a percentage of gross domestic product."  Must say that I am not a little disapointed.

Quote of the Week

"Every election is a sort of advance auction sale of stolen goods."

-- H. L. Mencken 

(1880-1956) American Journalist, Editor, Essayist, Linguist, Lexicographer, and Critic