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I have been thinking a lot lately about the many ways that government has become a provider or enabler of many economic activities. We take it for granted that government should provide for our retirement (Social Security) which is why we have a looming crisis. We hardly consider, let alone actively question, the necessity of having government subsidize the production of various foods (Farm Subsidies). The idea of having a private industry for educating our children sounds like class warfare (Public Education). We think it irresponsible that anyone should have to rely on the support of family, friends, and neighbors – instead we blindly expect them to rely on help administered by complete strangers (Food Stamps and Unemployment Insurance). We can’t imagine that anyone besides the government can fund our exploration for new energy sources and now we are sure that government needs to nationalize our health care system.
I have concluded that, if Social Security and the 1930’s was any indication, the problem that caused this mindset was that we enacted a permanent solution to solve a temporary problem. The result is that our attitudes have changed so that we are willing to preemptively create permanent government solutions to perceived potential problems. The only solution that I can see is to automatically have an expiration date for government programs (excluding the three branches of government) so that they have to be explicitly reauthorized on a regular basis (perhaps every decade as the default and shorter if the authorization specifies a shorter time period). We could then stop looking for ways to make Social Security solvent forever and look at reasonable ways to phase it out, just like Senator Lugar is trying to do with farm subsidies (and he’s a farmer by birth).
4 replies on “Sunsets for Subsidies”
Actually, there had been a strong push from outright supporters of socialism for a Social Security program and a number of other socialist programs for a number of years prior to the 1930s. The Great Depression gave them the opportunity to implement many of these programs.
The GOP was blindsided by the depression. At first they tried to ignore it. Then they wasted precious time squabbling over whether to even convene a special session of Congress to deal with it. Hoover signed the Smoot-Hawley Act (whose main sponsor was a senator from Utah), which only made matters much worse.
Hoover seemed dour, aloof, and uncaring. FDR seemed confident and happy. He openly campaigned on many of the socialist programs conservatives deride today. They derided them back then, as well, to their political detriment. FDR’s substantial victory carried vast numbers of Democrats into political positions throughout the nation, all the way down to the local level. Most new government programs (FDR’s New Deal) whipped through the heavily Democrat Congress with zero debate.
At that time, many openly admired the socialist regimes in Germany and Russia. Few were cognizant of the atrocities occurring or that would soon be perpetrated by these states. Many of the ‘enlightenment’ held the German and Russian socialist systems up as positive models for the U.S. to follow — the next logical step in the advancement of civilization. Without the perspective of the evils inherent in strong socialist systems, it was easy for FDR to get almost everything he wanted (except for firing the Supreme Court and packing it with his cronies).
Some of the New Deal programs actually were temporary. Some that were designed to be temporary later became permanent. Some were established as permanent programs from the outset. Many (somewhat ignoring gains in worker productivity and increases in education) point to these programs as salvation for the unemployed, the elderly poor, and other unfortunates. Some reliable economists argue that these programs merely prolonged the depression. However, overt socialism was so discredited by WWII that it took two more decades before the political mix was right for the substantial expansion of socialist programs under Johnson’s Great Society plan.
I like the idea of sunsets on subsidies. This would kill some subsidies, while others would be automatically re-authorized for fear of angering contituents and lobbyists. At least it would put a damper on the incessant government incursion on individual liberties.
I can see that you and I have quite similar perspectives on this topic. People that I know believe that the New Deal ended the Great Depression, but I find it interesting to contrast the Great Depression with more recent depressions. In every case we have never reacted as extremely in any economic intervention and so far as I’m aware no depression has ever been more than 1/3 as long as the Great Depression.
That evidence suggests that those interventions did nothing to solve the underlying problems that led to the depression. I would really like to know how it would have been different if the U.S. had reacted differently to that economic downturn. The other question I would love to find an answer to would have happened with people had not speculated so rampantly in the stock market to cause the crash.
Today’s economics vocabulary lesson is on “implementation lag” and “effect lag”. When discussing policies designed to stimulate/adjust/fix the economy, these two terms are extremely important. Implementation lag refers to the amount of time it takes for a policy to actually take effect after politicians have passed and signed the bill. Sometimes they happen immediately or even retro-actively. Most often, however, they take months to years. Effect lag is the amount of time the overall economy takes to adjust to the change – for the trickle down or trickle up effects to occur. This is very difficult to measure directly, but can be estimated. Many economists, including a few I studied under, believe that these two lags can stimulate the economy after it’s already on it’s way to recovery, thus over correcting and leading to inflation. Some speculate that this was the case with the Great Depression – that we were already beginning to recover even before Roosevelt took office, and that without New Deal, the economy would have done alright.
Econ lesson over. Now my somewhat harsh opinion. I think sunsets on subsidies are a good idea, simply because they would end existing subsidies. However, I think subsidies are a bad idea in the first place. Subsidies, in my mind, amount to theft. The government takes money from private citizens, then gives it to other private citizens they deem worthy. If I took your money and gave it to someone else without your permission, I’d be locked up as a thief. But the government, with it’s powers justly derived or delegated by it’s people, steps way out of it’s bounds when offering subsidies. I say we should end them all and let government do what it’s intended to do – protect our life, liberty and property.
In theory-land I agree with Jason completely. The government should not be in the subsidy business. Period.
In real life, we have an electorate which has been conditioned to want subsidies, especially if they can be the beneficiaries. Even those who talk about wanting lower taxes are generally more likely to re-elect the Senator or Representative who is seen as bringing the most money back to their state or district. (Pork is bad, unless I get to eat it. . .) In this environment, I think that sunsets on subsidies might help to reduce the waste found in the subsidies we have and might wean our society off of the false notion that government can make it all better if they get to control more of our money.