Government is Neither Friend nor Enemy

My new column, "Stop Denigrating Government: There is No Economy Without It," is now up on FindLaw. In it, I make two basic points: (1) The "left" in the United States is not pro-government but is, in fact, highly skeptical of all human institutions, understanding that government institutions can be used to counterbalance the excesses of non-governmental institutions (especially for-profit corporations); but the government itself is prone to excesses that must be reined in. (2) The notion that "government is the enemy of business" is incoherent, because business could not exist in any but a primitive form without a robust and reasonably reliable government sector. (Tax scholars know this as "the Murphy/Nagel point.")

It is surprising that those points even need to be made, but the current political moment is full of surprises. In this post, I want to expand on those points and to address a provocative question raised by the Murphy/Nagel argument.

In the context of global political beliefs, American liberals are government minimalists. No one with any standing on the left in this country takes the position that the government is never wrong. This point is often lost, I think, because the issues that come up in the political debate arise from situations in which something has failed. We do not need to debate how to fix a problem that does not exist, so the political arena essentially is filled with debates about what to do when there is a problem that people have not been able to fix on their own.

Forty-plus million people have no health insurance. Acid rain kills the forests in the northeast United States. Women are fired because they become pregnant. A Nazi government in Germany invades our allies and poses a threat to the United States. The Cuyahoga River catches fire. Black men are being lynched. In each of those situations, the problem is brought to the political arena, and the question is whether to do anything and, if so, what that should be. Even if the agreed upon solution is to study the problem further, it is literally accurate to say that "government has become involved." More generally, people who believe that there is a problem rightly conclude that the problem has not (yet?) been solved by private action or "natural" processes, making the possibility of public action salient.

The people who propose such a response need be neither "fans" of government as a first option nor Pollyannas who believe that the government will perfectly solve the problem. It is in all such cases regrettable that we have even reached the point where a response by government action might be called for -- especially because any government action brings with it its own potential problems, including the possibility of corruption, waste, etc. It is merely the most basic cost/benefit calculation to say: "We have a problem, and we need to determine whether there is a way to reduce the problem without creating new problems that are worse." Some people believe as a matter of deep certainty that any response "involving the government" will be worse. Liberals, as I understand that term, think that at least sometimes things can be made better by enacting changes in the law, sometimes including enacting laws that provide for direct action by government agencies and employees. Sometimes not.

The Murphy/Nagel point takes this further by demonstrating that there is no such thing as a response to a perceived problem that does not involve ongoing action by the government. Even the elimination of a government agency (such as the mothballing of the Civil Aeronautics Board during the Reagan administration) leaves private actors to act in an economy that is defined by government rules. Contracts are enforced, property is protected, injuries are compensated, crimes are prosecuted.

Because the government is (and must be) the enabling institution that makes a modern economy possible, it becomes puzzling to try to figure out what really is an "anti-government" position. Several years ago, for example, Dan Shaviro at NYU Law wrote a paper in which he referred to George W. Bush's tax cutting policies as "steps toward big government." His point was that Bush's tax cuts would put in motion a series of events that would lead to a greater involvement in the economy by requiring higher taxes in the future. The point can be generalized, a la Murphy/Nagel, to say that it is often difficult to describe an action as increasing or decreasing the size or reach of government. If, for example, we choose not to have universal health insurance coverage, this will cause the government to spend more money on emergency rooms, public health measures (such as coping with diseases and potential epidemics spread by people who do not receive preventive care), and potentially criminal activity if people become desperate or deranged.

Even so, it is true that American conservatives and liberals often agree on what counts as less vs. more government. A standard liberal description of the causes of the current financial crisis is that Wall Street was "deregulated," meaning the repeal of Glass-Steagall when a Republican Congress passed and President Bill Clinton signed the Gramm-Leach-Bliley Act in 1999. If that is deregulation, however, what do we make of the Murphy/Nagel observation that the financial markets were still regulated in the sense that the government was a necessary player in making it possible for financial markets even to exist and function?

As a tentative answer, I suggest that both conservatives and liberals are wrong to use the terms regulate and deregulate. Every change in the law will change the regulatory terrain within which people and businesses act, but there is frequently no meaningful way to describe one situation as "more regulated" than another. (I say frequently because one can certainly imagine an easy case where some extensive set of rules is repealed. Even there, however, it is not as if such a repeal leaves the private actors in a law-free zone.)

A reader on this blog once referred to a point that he was making on the comment board as somewhere between painfully obvious and embarrassingly obvious. To a certain degree, I have that feeling here. We have a system of government, and our ongoing enterprise is to figure out how to adjust its rules and behavior to enhance the general well-being. Even as a rhetorical ploy, "you're for Big Government" simply makes no sense. At the end of the Summer of 2009, amazingly enough, that point bears repeating.

-- Posted by Neil H. Buchanan