Government is bigger than ever and controls more aspects of American life than at any time in U.S. history. Last year, the federal government ate $3.52 trillion out of a $13.2 trillion economy. With the current trajectory of big government under the Democrats, the federal bureaucracy will devour as much as 50 percent of this nation’s economic activity by midcentury. To illustrate how wasteful that is, take a look at the empty space above this editorial. That’s what government creates - nothing.
A basic problem with a future dominated by ever-expanding government is that bureaucracies are hobbled by waste, fraud and abuse. Government simply does not work well. Freedom works, but the more government that exists, the less freedom we have. Under President Obama and the Democratic Congress, the United States is heading in the wrong direction. The big spenders are on a joy ride, and we’re stuck in the back seat on the road to dramatically less freedom.
The main battleground of the war between freedom and government is the marketplace. Markets work for a simple reason: They give people choice. Consumers know what they want, and businesses try to figure out how to produce and deliver the goods and services the best way, considering price, quality and service. Only the best firms survive.
Today is the first anniversary of the start of Mr. Obama’s term in the Oval Office. For the past year, Americans have been told that government is smarter than private industry and that more government intervention is needed to fix problems in the market. Central to this agenda is the canard that private for-profit companies have to charge higher prices than nonprofits to recoup enough to earn profits, thus making for-profit firms less competitive. This explanation is wrongheaded because it ignores that profits give an incentive to lower costs and improve quality. The greater the incentive to reduce costs, the less waste there is. That is why, despite all the tax advantages given to nonprofits, the economy is dominated by for-profit firms.
Politicians and bureaucrats in Washington don’t know what individual consumers want and certainly shouldn’t be the ones to decide what individuals need. If the government decides everything, elections will determine what businesses can produce and what options consumers will have. In a healthy market system, consumers wouldn’t have to persuade their neighbors to use the ballot box to determine what type of toys, computers, books, houses or cars they can buy. Those products will be produced as long as the value consumers get is greater than the costs of producing them. The government should stay out of the way of these inherently private everyday decisions.
A common justification for government intervention is based on the notion that individuals and firms don’t bear the full costs and benefits of their actions and that taxes and regulations are needed to correct the imbalance. The debate over global warming is an example of this idea. Climate-change activists argue that markets don’t take into account damage purportedly caused by carbon dioxide. Yet even if they were right that carbon emissions cause global warming (which is unlikely), there are many stumbling blocks that prevent effective government intervention. First, there is the pure numbers-crunching aspect: Government must figure out how much to tax carbon emissions to alter behavior, which is a difficult and error-plagued challenge. Other than taking wealth out of private hands, all the negative impact of higher taxation is rarely clear, and it’s a fair question whether the outcome is likely to cause more damage than the original problem.
Second, politics is a dirty business. Special interests twist programs into dole-outs for favored groups. Political machinations are behind every dollar of federal spending, and the interest of the taxpayer usually doesn’t have a seat at the table when the spoils are divvied up. Consider all the special favors to unions and particular constituencies in everything from last year’s $787 billion stimulus package to the Democrats’ government health care bills. So much of federal spending amounts to nothing more than a big slush fund.
Regulations are the second edge on the knife government uses to cut the heart out of private initiative. Bureaucratic red tape ties up markets with little consideration about its impact. Take the health care debate. Amidst government’s attempt to take over health care, politicians are telling American families that the suits in Washington know how to run health care at a lower cost and with better quality than what is currently being produced. If that were true, government wouldn’t need to pass a regulation. If Democratic ideas had any merit, companies would pay Mr. Obama, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid for advice to help provide customers a better product at a lower price. Democrats wouldn’t have to scheme behind closed doors to figure out how to ram through legislation to force Americans to accept a system they don’t want.
This gets to the heart of the matter. Markets are fundamentally different from government programs in that market transactions are voluntary. Government’s main tool is coercion. Consumers don’t buy a product unless they think it makes them better off. Firms don’t sell a product unless they think they can make profits. Telling people what to do doesn’t make them want to do it or like doing it. There’s no question which way works best. Countries with the most market-based economies have enjoyed the largest growth in wealth. The innovations generated in these places benefit the entire world. Messing with the market-based model slows the pace of progress for our children and grandchildren.
The massive “tea party” protests all across the land reveal how outraged Americans are by the direction of government. President Obama and Democrats in Congress are making government bigger than ever because they think bureaucracies make smarter decisions than individuals and the government is better than private business. But taxpayers aren’t hitting the streets for so-called smarter or better government - they want less government. A lot less. A new Congress will be seated a year from now. Hopefully that will bring real change to the nation’s capital.