Saturday, September 24, 2011

Changing Our Expectations About The Role of Government

Ancient Chinese philosopher Lao Tzu wrote, "If you do not change direction, you may end up where you are heading."

With respect to the role of government and the responsibility of citizens, we need to change direction, because we surely don't want to end up where we are heading. That goes for most, if not all, of the rest of the world, too.

The Planning Fallacy is a recent editorial which summarizes its basic argument in the final paragraph:

"Over the past decades, Americans have developed an absurd view of the power of government. Many voters seem to think that government has the power to protect them from the consequences of their sins. Then they get angry and cynical when it turns out that it can’t."

We keep waiting for government actions to make things better, but that's simply not going to happen. Governments are not powerful instruments for solving complex problems, but as we've seen, they can do great harm.

Earlier in the article, the consequences of the "Planning Fallacy" are detailed:

"Over the past three years, the United States has been committing the planning fallacy on stilts. The world economy has been slammed by a financial crisis. Countries that are afflicted with these crises typically experience several years of high unemployment. They go deep into debt to end the stagnation, but the turnaround takes a while.

This historical pattern has been universally acknowledged and universally ignored. Instead, leaders in both parties have clung to the analogy that the economy is like a sick patient who can be healed by the right treatment.

The Democrats, besotted by the myth that the New Deal ended the Great Depression, have consistently overestimated their ability to turn the economy around. They regard the Greek crackup as a freakish, unlucky break, even though this sort of thing is a typical feature of a financial crisis.

Republicans, who should know better, also have an inflated sense of the power of government. In the presidential debates, Rick Perry, Mitt Romney and Jon Huntsman argue about which one oversaw the most job creation during his term as governor, as if governors have an immediate and definable impact on employers’ hiring decisions.

The reality, of course, is that the economy is not a patient. It is a zillion, zillion interactions. Government is not a doctor. Most of the time, it is a clashing collective enterprise that is occasionally able to produce marginal change, for good and for ill.

Democrats should be learning about the limits of social policy. As in the war on poverty, as in the effort to transform American schools, as in the effort to create prosperity in the developing world, it is really hard to turn around complex systems.

Republicans should be reflecting on the fact that if a Republican president were in office right now, and even if he or she did sensible things, the economy would still be in the dumps. It would be Republicans losing “safe” Congressional seats in special elections.

The key to wisdom in these circumstances is to make the distinction between discrete good and systemic good. When you are in the grip of a big, complex mess, you have the power to do discrete good but probably not systemic good."

We are in the middle of a complex mess. That much is certain.

Our multi-decade spending spree and resultant debt accumulation have produced a very complex problem, the solution of which will require a long term systemic approach.

In essence, the cultural willingness to adopt lasting change must precede the political action necessary to effectuate that change. If we have the will as a society, the politics will follow. In other words, I believe our real problems are more of a cultural nature than they are political.

If, as and when we the people are willing to enact common sense financial solutions to decades long spendthrift ways (both as individuals and as elected officials in local, state and national governments), the politicians won't stand in our way.

That said, the politicians won't lead the way either. As always, the hard work to form the parade for the politicians to "lead" must be done by us. And that's the way free people should want it.

First, we need to tell the truth to ourselves and to each other as well. And that truth is that it's going to take time to "change direction" if we don't want to end up where we are heading.

Depending upon societal willingness to face reality, it could take until the end of this decade to get things under control and fully back on track. We can and should hope for a much quicker solution, of course, but we also must accept that taking ten years to eliminate a problem which took several decades to develop isn't an unrealistic timetable.

What would be unrealistic would be to believe that our government can make our problems go away by their actions and/or the mere passage of time.

Thus, fundamental, systemic and cultural change is required to change direction. My view is simple---I sincerely hope that the only question will be when smaller government and more personal responsibility will come, and not whether it will come.

So we'll soon be answering the two related questions of what we want the future of America to look like.

(1) Will we choose to continue to follow Europe down the dead end path to democratic-socialism and overall collectivism, or will we move back in the direction of free markets and individual self reliance?

(2) Will we choose to become fiscally responsible, both individually and as a nation, or will we adopt collectivism?

Only time will tell which path we'll choose, but in the end, it will be we the people who decide. That's fair enough for me.

Summing up.

Why the need to change direction?

Right now we are in the midst of a unique and pivotal period in our country's history. Our habit of living beyond our means has finally caught up with us.

If we want to be big time spenders, we have to be big time competitors, too. That's the way global and free markets work.

The president and congress, no matter who holds those offices, can't make our competitive problems go away. In fact, the next gang of officeholders (and I hope we get lots of new faces) won't be able to help us quickly solve our problems either. The problems are too ingrained for quick and easy solutions.

Of course, the right political leaders can and would facilitate solutions, but the citizens must first lead the way. So if as citizens, lead we must, then lead we will.

It has taken us many decades to dig the many deep financial holes we've dug for ourselves. One shovel won't be enough to dig us out. We'll require many shovels in the hands of many hard working citizens to eliminate the operating deficits and begin paying off the debts we've accumulated. And in every respect, we'll have to be globally competitive, too.

The concept of "reversion to the mean" is perhaps an appropriate way to understand why the solution to our financial dilemma will take time. As we've consumed for far too long by borrowing from the future, it's now payback time. Nothing complicated about it.

As a result, we will live in a future which will be much different than what we've known. It can a better one if we choose to make it so. So we will.

Pogo said it best about our present condition, "We have met the enemy and he is us."

Let's now say this to ourselves and each other, "We have met the person who can and will solve our problems, and he is us."

Thanks. Bob.

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