The Role of Government

            Americans have mixed emotions about their government. On the one hand, they want their government’s help when they are victims of a natural disaster like a hurricane, tornado, earthquake or flood; and they want their government to protect them from their enemies, both foreign and domestic.  They also want their government to repair the roads in their communities and provide their children with good schools.  On the other hand, they resent it when their government tries to tell them how to conduct their lives, compels them to buy liability insurance in order to drive their cars and to wear a mask when they visit a restaurant or retail establishment.  They also detest having to wait in long lines at the Department of Motor Vehicles or having to make additional costly renovations when they make repairs to a building they own. Some even fear that their government is going to take away their firearms, impede their efforts to live a better life or even do them harm.

             While all Americans believe that their federal, state and local governments are large cumbersome organizations, prone to misuse their tax dollars and plagued by inefficiencies, they also recognize that there are many things which are vital to their daily lives which even giant corporations and large groups of individuals cannot or will not do for them.  In short, governments at all levels are generally viewed as necessary evils.  Thus, the relevant issues are (1) what should be the roles of our federal, state and local governments and (2) what restrictions should be placed upon their actions and those who are in charge of formulating those restrictions and implementing their activities.

            In a nutshell, the role of government should be to facilitate and organize collective actions in order to maximize the productivity and well-being of all of its citizens.  In a very real sense, governments are the glue that bind their citizens into a nation, emphasizing their common belief that America is a land of opportunity in which all citizens, including immigrants like Steve Chen (co-founder of YouTube), Elon Musk (founder of Tesla and Space-X) and Sergey Brin (co-founder of Google), can achieve great success and wealth.  Governments also serve as the nerve centers which coordinate the activities of their citizens and enterprises to achieve important common goals.

            Of course, not everyone agrees how their governments should go about maximizing the productivity of their citizens.  In fact, the nation’s two major political parties have widely differing views as to which activities should be performed by governments and which should be performed by private industry. There is little question that private enterprises tend to operate with greater efficiency than governments. Stated another way, there is nothing that private enterprise can do that governments can’t do more inefficiently.  This is because business leaders tend to be less risk-adverse and their employees tend to be paid more and have a greater incentive to work harder and be more creative. In addition, governments invariably operate on tight budgets which often results in their not having the latest and most efficient equipment with which to carry out their tasks. Private companies also have a different mission than governments.  Their mission is to generate a profit for their owners. Accordingly, their operations must be confined to those activities which can be performed profitably. In contrast, governments have the responsibility to serve all of their constituents irrespective of profitability. This means that they must possess capabilities that are only infrequently used; and possessing that capacity adds to their inefficiencies. These considerations lead to the conclusion that the role of governments should be minimized.

            There are, of course, limitations on using private enterprises to fulfill all of the needs of the public.  First and foremost, private enterprises are responsible to their shareholders and not to the public.  Therefore, they cannot be counted on to act in the interests of the public. For this reason, private enterprises are generally ill-suited for providing services related to public safety (such as dispute resolutions and fire and police protections).  We are currently facing this same issue with respect to the U.S. Postal Service.  As noted above, private enterprises, unless regulated by the government, get to choose whom they will serve and on what terms they will sell their products and offer their services.  While this is perfectly feasible where there are many enterprises offering competing products and services, it does not work in situations which will only accommodate a single provider.  Nor does it work where the market for a product or service is controlled by a small group of companies that conspire with each other to the detriment of their customers.  There are also situations in which private enterprises simply lack the resources to satisfy a public need such as constructing a major bridge or tunnel, the cost of which can only be recovered over a period of many years.  Similarly, there may be situations in which the need cannot be economically satisfied, such as developing a cure for a serious illness that only affects a small number of persons. 

            With few exceptions, most national governments have adopted hybrid systems in which private enterprises are relied upon to provide most goods and services required by their citizens and the government regulates their activities to assure that the needs of its citizens are both well-served and protected.  Thus, the issue is not whether private enterprises should be regulated, but rather the extent to which they should be regulated and what government should do to assist those whose needs are not being served by private enterprises.

            Every regulation on commercial activity imposes certain additional costs or lost opportunity for sales.  If that were not the case, there would be little need for the regulation.  The issue is one of balancing those detrimental effects with the extent to which the public at large will be protected or otherwise benefitted by the regulation.  It is for this reason that the administrative procedure laws of the United States and most of its states require that a cost-benefit analysis be undertaken before any regulation is adopted; and the courts are generally quick to strike any regulation for which such an analysis has not been undertaken. Such cost-benefit determinations are particularly problematic when the potential detriment to the public involves health issues.  In such cases, the regulatory agency may be forced to decide what is the economic value of a life or the pain and suffering of an injured person.  In many cases, the regulatory agency might conclude that a mandatory warning of the dangers posed may be preferable to prohibiting the potentially dangerous activity.  It’s not that regulations are good or bad per se as some politicians might argue, it’s generally an issue of how the cost-benefit equation should be evaluated.  Thus, it is pure demagoguery for a politician to declare that he/she wants to remove two regulations for every new one that is imposed, especially when you consider that the speaker has never evaluated the evidence presented to the regulatory body that promulgated the regulations.

            Although the question of the government’s providing services not commercially available to some members of the public also involves judgmental issues. More often than not, they are approached on ideological bases, rather than by balancing costs and benefits. Thus, Democrats tend to argue that it is simply inhumane or worse, a violation of “God’s law,” to allow the poor to go without food, shelter or healthcare. On the other hand, Republicans are inclined to argue that providing the poor with those necessities will remove all incentive for them to become productive citizens. Briefly stated, Democrats focus on their citizens’ ability to achieve, whereas Republicans focus on their incentive to achieve. Treating this as an ideological matter, however, is impractical as it provides no basis for compromise.  The fact is that the economic approach favored by Republicans often leads to the result favored by Democrats.

            There have been studies which find that persons who grow up in poverty have a significant likelihood of living their entire lives in poverty, and that adults living in poverty will not add to the nation’s productivity. On the contrary, on average each adult living in poverty will cost the nation’s taxpayers approximately $230,000 over the course of his or her lifetime.  These costs will be in the form of lower personal productivity, higher crime rates and publicly-borne healthcare costs.  Thus, just as businesses can enhance their profitability by investing in machinery and equipment, nations can enhance their productivity by investing in their citizens living in poverty. For this reason, helping those living in poverty need not be deemed a humanitarian, or even a religious, endeavor; it can just as easily be justified as an economic undertaking. This was the underlying rationale for President Johnson’s “War on Poverty.”

            Republicans frequently express a preference for “small government.” One Republican theoretician, Grover Norquist, has put it this way, “I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” Ronald Reagan went even further, stating “Government is not the solution to our problems, government is the problem.” Such statements should not be taken as a preference for a market-driven economy (such as our own) wherein consumer demand determines which products and services are to be produced, as opposed to a state controlled economy (as currently employed by China) wherein the government determines how its nation’s productive resources are to be utilized.  Such statements are simply “code” for how the nation’s wealth is to be shared. 

            “Small government” refers to a government with a highly limited budget which has two important wealth-transfer aspects.  First, a government with limited resources cannot provide the type of safety net programs (such as Social Security, Medicare, subsidized housing, etc.) that Democrats believe are essential to maximizing national productivity.  How many times have you heard Republican politicians complain that the nation simply cannot afford these programs?  It’s not that the nation can’t afford them; it’s more a question of who is going to pay for them. Since these programs are largely funded with tax dollars and tax dollars principally come from those with the greatest wealth, these programs essentially provide for a transfer of wealth from the nation’s wealthiest individuals to its poorest.

            Secondly, every governmental regulation requires the regulated entities to incur costs that will prevent public harm for which others will have to bear the costs. For example, raising auto emissions standards requires auto manufacturers to incur additional manufacturing costs. The trade-off is that this will decrease respiratory problems caused by the harmful emissions, the costs of which will have to be borne by those adversely affected by the emissions.  Thus, the regulation becomes a vehicle for transferring wealth from the manufacturers to the affected members of public unless the manufacturers are able to pass their additional manufacturing costs on to their customers in which case the wealth transfers take place between the car buyers and the affected public.  Regulations, however, not only impose costs on the regulated entities, but also on the government that must monitor and enforce compliance with its regulations. A government with limited financial resources is simply unable to do what is necessary to assure compliance.  Limiting the size of government also limits the transfer of wealth from the regulated to those who benefit from the regulation. Doesn’t this make you wonder why Congress tends to be so stingy when it comes to fixing the budget for the IRS, especially since taxes for wage earners are automatically collected by their employers, whereas taxes imposed on the wealthy have no automatic collection feature.

            The nation’s founding fathers, after revolting from England, were rightly concerned with the power possessed by their government and those who wield that power.  For that reason, the federal government, as outlined in the Constitution, was to be a limited government with only the powers expressly granted to it.  All remaining powers were to be left to the states.  In addition, the U.S. Constitution created three separate branches of government, each with certain powers to control the actions of the other branches.  In this way, the drafters of the Constitution hoped to avoid the unbridled rule of any single individual.  Although this plan worked reasonably well for the first 200 years, more recently it has started to break down, a process that has accelerated during the Presidency of Donald J. Trump who seems to envy the dictatorial powers possessed by Vladimir Putin, Xi Jinping, Mohammed bin Salman and Recep Tayyip Erdogan.  The questions that remain are whether the American people will allow this trend to continue and will it result in a change in the way the government of the United States operates.

            There is another danger currently being posed to our nation’s governmental structure and that is the growing level of division among the nation’s citizens and their elected representatives.  As noted at the outset of this article, one of the principal functions of government is to unify its citizens into a single nation.  President Lincoln put it this way, “A house divided against itself, cannot stand” (well, at least for not long).  This statement, was made in the context of the divisions that led to the “Civil War.” Unfortunately, those divisions have never been fully resolved; and President Trump never misses an opportunity to sew discord among the people he undertook to lead.  If this trend is allowed to continue, it will diminish this nation rather than make it greater.  Partisan politics and its impact on our nation will be discussed in my two succeeding articles about our national government.