Small vs. Big Government

When was the last time you heard a liberal say ‘We want big government’?  That phrasing of the issue by the right is picked up and repeated by the media without it ever being asked whether that is the progressive message.  This piece sets the record straight.

By Bob Gerecke

We shouldn't be seeking either small or big government, but government which does what we need it to do -- whatever that may be.  In some cases we may add to what government does, in other cases subtract.  Each case should be decided on its own merits.  We the people, acting through our government, shouldn't refuse to do something just because we're doing other things, nor should we use our government to do something which duplicates or supplants what our other societal institutions are doing satisfactorily.  In addition, we should ask whether something which the government has been doing is still needed or can be improved, and whether we can utilize government to improve upon something which businesses and nonprofits aren't doing as well as is needed.  Case by case.

That being said, the increasing complexity of society and of human affairs and the increasing power of technology often require us to use government to do more.  A simple and concrete example is regulation of vehicles and their use.  When automobiles were first invented, the roads weren't paved.  When roads were first paved, there were no lines dividing the lanes, no stop signs or traffic lights, and no rules of the road.  Eventually we needed all of these things.  As vehicles became faster and accidents more dangerous to life and limb, we also wanted to improve the safety of the vehicles themselves.  As we filled the air with smog, we began efforts to reduce emissions.  Changing the roads and the rules could only be done through government.  Changing the vehicles could be done by producers acting on their own, but if costs would be incurred it was sometimes necessary to establish a requirement upon all producers or an agreement with them in order to maintain a level playing field, overcome the disincentive of cost, and make an impact.  And all of the rules needed enforcement. 

We can't go back to an earlier and simpler age in this case and in many other cases.  We can just try to create effective and efficient laws, regulations and enforcement mechanisms to the extent any are needed.  That's not easy work, and it often requires correcting mistakes.

There have been arguments over cost-benefit analysis.  It's appropriate, but sometimes it has been conducted inaccurately, by ignoring indirect costs or by considering only financial costs.  But the principle is correct: we should maximize benefits and minimize costs.

Small-government advocates sometimes describe money paid to the government in taxes or fees as money taken away from the private economy.  That's not true, because government spends what it receives, usually as quickly as it receives it, and it spends most of it here in the USA; unlike multinational businesses and affluent individuals, it doesn't invest much of it outside of the country (our foreign aid is around 1% of the Federal budget) except during wartime.  The money paid to public employees, contractors and suppliers in the USA enters our own economy the moment it's paid.

Some small-government advocates argue that government can't do anything right.  Both government and our other institutions make mistakes, but government's mistakes are usually public knowledge, whereas the mistakes of businesses and nonprofits are often unknown to outsiders or at least not publicized by the news media.  We also have a higher standard for government than we have for other institutions.  We expect government to get it "right"; we expect other institutions only to equal or outperform their competitors.  For example, we don't say that auto manufacturers can't get it right because their vehicles haven't always had turn signals, extra brake lights in the rear windows, seat belts and air bags, or because they've had recalls and keep redesigning their products, or because they don't meet every customer's desires.  We don't castigate every vehicle which isn't perfect, but we do that when considering government policies and programs.

The Soviet Union is usually held up as the example of how badly everything is run when the government is in charge.  However, it wasn't comparable to government in a democracy.  The Soviet government was a dictatorship, not responsive to the people.  Better examples of the role of effective government in providing both regulation and services can be found in the Scandinavian countries, which have blended the best of capitalism and socialism.

Whereas government agencies (and corporations which possess monopoly or at least dominance, according to management literature) tend to err by being too resistant to change, many businesses tend to err by incurring too many risks to themselves and to others or by sub-optimizing (seeking to maximize their own gain at the expense of others, or their short-term gain at the expense of the future).  In some cases caution is more effective, in some cases risk-taking is.  That becomes part of the analysis of which institution is better for us to use in a particular case.

Government's main weaknesses in deciding (at the policy level) what to do and how to do it are two-fold:

  1. Elected officials are too afraid to annoy the special interests which raise or can raise substantial sums of money to help or hinder re-election, even when those interests make demands which are contrary to the wider public interest.
  2. Elected officials and government bureaucrats don't look ahead; instead they react to public or special interest demands here and now.

The first problem can be remedied by major campaign finance reform.  That will help to remedy the second problem as well, because it will free officials to be less reactive to special interest demands and will increase the election of officials who have wisdom and integrity.

Some States have effective models of campaign finance reform.  They have avoided court rejection because they don't prevent fund-raising from private sources; instead they provide competitive public financing for candidates who reject private fund-raising.  Public financing of candidates for State office doesn't directly affect elections to Federal office, but it does affect the pipeline of State office-holders who move up to run for Federal office.  And it may be legal to publicly finance even Federal candidates, as long as it doesn't conflict with Federal laws and regulations for those who opt to remain in the private fund-raising arena.  Meanwhile, the Internet is providing an alternative source of publicity and funds for candidates who don't have sponsorship from the well-heeled special interests.  If this grows enough, it may provide some degree of reform in addition to any government action.

Corporations’ main weaknesses in policy-making stem from the disconnect between their executives’ compensation and the companies’ long-term health.  Salary, bonuses and stock options are tied too much to short-term results.  Because corporate CEO’s select their own boards of directors, and because these boards consist of other CEO’s or people who report to other CEO’s, compensation decisions are rigged to maximize CEO rewards regardless of how things turn out in the long run.  The gross size of these rewards ensures that a CEO will be wealthy even if forced to resign after a short tenure because of incompetence.  The lack of input from customers and employees in the decision-making process, and the obstacles to election of alternative directors, further ensure that the corporation is a dictatorship of, by and for the CEO.  Until corporate governance is reformed, corporations will continue to operate in a sociopathic manner, i.e., without regard to the wellbeing of others.

Nonprofits’ weaknesses vary from incompetent or self-aggrandizing board members to ineffective or domineering administrators.  They do best when attacking a narrow issue or problem but have difficulty with multi-faceted missions, and if financially successful they often become institutionalized, i.e., more interested in the size and wealth of the institution than in the achievement of its supposed mission.  It even happens to religious institutions.

No organization is perfect – governmental, business or nonprofit.  Politicians and commentators can improve the intellectual and practical level of the debate by avoiding grand philosophical arguments and slogans over big vs. small government and instead arguing over the merits of specific cases.