n our last post, we laid out how old-style top-down governments cannot keep up in a world where change can come from anywhere at any time. Lumbering bureaucracies must become increasingly repressive to maintain the control that has only provided “Less”. Moreover, you can’t be part of a worldwide trading system and supply chain while intimidating and undermining your more liberal neighbors. Threatening supply routes whether it be the South China Sea or the Straits of Hormuz just doesn’t denote a commitment to world trade. Top down just isn’t compatible with the continued growth of “More.” Yet even countries once appearing to follow the liberalizing path (in the classical sense) to”More” somehow found a way to be increasingly top-down and moved in the opposite direction. Venezuela surely has made the trip. Turkey seems headed in that direction. China is at the crossroads. Could others follow? Could we actually get off the highway that has brought us so much “More”? There is always a danger of backsliding and unfortunately, there are worrying signs.
But don’t we need Laws and rules? Of course, all civilized societies have to have them, but there are rules and laws and there are rules and laws. In order for us to flexible and adaptable they have to be needed, fair, level playing field, workable, and reviewable. A good example of this is how we approach energy in light of a warming world. Presently we have a hodgepodge of mandates and subsidies favoring some while penalizing others. A tax subsidy to the producers of luxury electric cars puts competitors with a much different solution at a disadvantage. Many think a better way is to have a carbon tax and let everyone choose what is the least costly way to have energy in light of the tax. Definitely, this would be superior to what we have today, but how do we determine the proper amount of the tax. Once the tax is collected what do you do with the money? Spend it or rebate it? However, the biggest negative is even if it works and we reduce our emissions further unless the rest of the world does the same it will hardly move the needle. However, it would raise our relative costs putting us at a huge disadvantage. Even if the rest of the world buckled under and adopted high cost Zero carbon emission energy sources it would doom a billion plus people to continued poverty. How moral is that?
Well, what do we do? We have to do something. Why? Everyone knows the problem and people worldwide given the choice between a carbon emitting energy source and something that doesn’t at the same price would adopt the latter. If it’s cheaper people will move even faster. This is a huge market prize. If we stay out of the way someone will find the solution if there is one. Given the amount of connected brain power now available, we’d bet there is one or more. We just don’t know what and right now nobody else does. When the cry goes up for the Government do something, the right answer is the government will maintain a fair and level playing field for all solutions. You get after it.
When we had the oil crisis in the 1970s we panicked and subsidized all sorts of stuff including the eternal corn-based ethanol. We rationed gas and waited in long lines. The price went to over $100 a barrel in today’s dollars and everyone was convinced it would go much higher. Then in 1981, President Reagan took an unthinkable step, he deregulated our oil market. Funny thing, instead of oil soaring and oil companies gouging the public, money was invested, innovation found new supplies of oil worldwide and the price of oil in 1986 was $26. Again early in this century, the price of oil was rising rapidly with millions of new customers coming online due to China and others adopting more capitalistic policies running us up against what the elites called “peak oil.” Everyone who was anyone predicted oil production had no place to go but down and the price up. Opening up new areas for exploration were blocked as not worth the trouble. Subsidies for favored substitutes and mandates pushing us to drive tiny cars were Washington’s response. Yet the price of oil went from over $160 a barrel to $36. If the reward is perceived to be great enough people will wring oil from rocks. This is literately what happened. In the US we wrung it out of shale and the Canadians did the same with bitumen. This was without government help. In the US it was the opposite. Shale oil and gas is produced for the most part on private property, not government lands. Yet today we’re driving the big cars and trucks we want to be filled up with reasonably priced gas. The point is it given the potential rewards, it may be better for the government to stand back and let people and markets solve the problem. Isn’t that better than all the wasteful subsidies and mandates? Maybe the government should stand back and see what people through free markets come up to solve problems like Global Warming.
What is needed today is a government that avoids reducing flexibility and adaptability by actions that even with the best intentions actually gum up the works. Many business people are of the opinion the regulatory restraint shown by the present administration has contributed as much as tax cuts to our robust economy. This may be overstated, but commerce is better when it’s treated fairly and with respect than where there is an adversarial or a perceived unfair relationship with the government. “Crony Capitalism” where a business receives favored treatment from the government is anything but Capitalism, it’s Anti -Capitalism. A tariff on steel favors domestic steel producers but raises costs for all steel users. Tax breaks and other special subsidies to lure a certain company to a particular government area not offered to all should never be allowed. Not all business people are capitalists. Some are out and out rent seekers.
As we have pointed out change through innovation is coming at an ever-increasing rate. It’s imperative for the government at all levels to up its game. In our 2016 post “Time is Money and Does it Pencil Out” we offered a triage system to speed approvals or denials on projects involving different l governments and multiple interested parties. Simply a lead agency would set the timetable for all involved to assemble all the data needed to reach a timely decision. For or against a project it’s owed a timely decision.
We found an interesting recurring theme through the first round of the Democratic Party debates, the economy is good for the rich but not so good for ordinary people. We have the lowest unemployment anyone can remember and there are far more unfilled jobs than job seekers. Why isn’t all this working to benefit everyone? Well, if there are plenty of good paying jobs vacant, there are only two possible reasons, job seekers skills don’t match the jobs offered or the jobs and the seekers are in different places. It’s no secret, the modern world demands a more skilled better-educated workforce. With change happening at an ever-increasing rate, the ability to learn and continue learning has become mandatory. As education is dominated at every level by government, especially K-12, our failure to provide a large part of our people needed skills and education to fill the jobs of today and tomorrow rests squarely on every level of government. At a time when knowledge has never been more accessible, we are paying record amounts on education and yet are nowhere near the top of national performers. Yet those ahead of us spend less on average. The left is always pointing to Scandinavian countries to emulate. Well, Sweden operates its educational system on vouchers, so the people decide where and how their children are educated. They have school choice. Maybe we should do what we’ve done in the past when the government failed to deliver, deregulate.
We’re a nation where the vast majority of our fore-bearers left the life they knew and traveled great distances to seek a better future in a new world. The idea that we can’t move a distance to have a better opportunity just doesn’t mesh with our heritage. Yet we actually have less mobility. People are reluctant to leave a dead end job that provides healthcare and other benefits such as a 401K plan. This is one of the reasons we proposed “Dave’s Plan” (series on this site under Dave’s Heath care Plan) where you own your health insurance and retirement plan and your employers pays into them rather than the other way around. When a better opportunity becomes available, no worries about losing coverage or becoming uninsurable. Just compare the present and future income and professional possibilities. In the same vein government programs often tie people to a certain location. Housing subsidies and medical arrangements make the poor reluctant to move. Perhaps they too could get their benefits paid into personal accounts giving them support wherever and whenever a better opportunity arises.
Another major restraint on mobility across state lines is licensing. You might be licensed to provide a service in New York but your spouse or significant other is offered a better opportunity in another state. To make the move you most likely will have to wait and go through a costly time consuming licensing process in the new state. This is a big disincentive to moving. However, if that new state was Arizona, your New York license or any other state’s would be recognized and transferred immediately. Gov. Doug Ducey signed this common-sense legislation in the past year. Now we aren’t convinced all licensing is really necessary, but this is a great way to go and we hope this will be adopted by all states.
We would add an overhaul of our courts at every level for us to attain 21st-century speed. One only has to observe what is taking place in Hong Kong to realize how important a fair and efficient judiciary is to everyone. Judge shopping and district court judges making ruling applying nationally are symptoms of unfairness that has crept in messing up our judicial system. A case in point is the one about adding a citizenship question to the census. Now the census was considered so important to everyone it was included in our constitution. Over a year ago the Commerce Dept. the one charged with taking the census added back in citizenship for the 2020 census. This is a question asked on the census on and off throughout our history. Some opposed filed suit in New York and the district judge blocked the question from being included. Now, this case needed a timely final adjudication as the forms needed to printed well before 2020. Instead, the Supreme Court after a year sent the case back to the lower court for further argument. Apparently, this will effectively ban the question because the ban is left in effect leaves no time for the forms to be printed with the question, even if the Commerce Dept. ultimately prevails. It would be mute for the 2020 census. This is justice? Remember Gladstone’s admonishment “Justice delayed is Justice Denied.” Reform should start with the Supreme Court. It is obscene it takes the summer off when there so much held in abeyance waiting for decisions one way or the other. A few major decisions a year just doesn’t cut it in the modern era. It should get to work and demand the same of the lower federal courts. Hopefully, this will set an example for the state courts. Judges starting with Chief Justice Roberts need to stop thinking of themselves as some sort of philosopher-kings and do their work in a timely fashion. We pay them and they need to perform like the rest of us. Perhaps if the courts need more resources, we could gain them by adopting the “Loser Pay Rule” in place in almost all the rest of the world. This would go a long way unclogging our courts.
Just because we’re doing better than Venezuela is no reason not to whip ourselves into better condition to thrive in a faster-moving future. While we’ve improved lately, we still only rank 17th in Forbes’ latest rankings of the best countries to do business. In our next post, we’ll try to tie all this together.