Wednesday, November 10, 2010

Big government and economic reality

The New Republic writer Jon Cohn has a new column which provides some remarkable insight into the statist mind. Attempting to make the case for big government, Cohn reveals himself to be utterly divorced from the realities of basic economics:
Sometimes addressing our society's needs really does require increasing the role and size of government. There is just no getting around that. You can ask private employers to pay everybody a decent wage, but it won't happen unless the government establishes and enforces a minimum. You can reduce carbon in the atmosphere by asking corporations to buy and sell the right to pollute, but first government has to create the permits and the rules for trading them. And so on.
I'll grant Cohn the second point, because regulating a tragedy of the commons type problem, of which air pollution is one, certainly falls under the purview of government. But his first example is just stunning in its naïveté. Cohn actually seems to believe that worker pay is simply a function of the whims of the employer, unrelated to things like employee productivity or labor market conditions. And what is a "decent" wage anyway? That isn't exactly a legal term. Are not all wages that are voluntarily accepted decent wages? If they weren't, the worker wouldn't agree to it.

Cohn then describes the answer he wishes President Obama would have provided when queried whether he is a big government-style liberal:
I know Americans say the government is getting too big. But sometimes we need government. If the federal government hadn’t spent money to build public works and keep the states from going bankrupt, if it hadn't stepped in and saved the auto industry, we’d be in the next Great Depression right now. If the government doesn’t force insurance companies to act differently, millions of Americans won’t have insurance and millions more will have insurance that covers too little for too much money.

If the government doesn’t get tough with the banks, they’ll keep ripping off consumers and get us into yet another financial calamity, just like they did before we took office. Government can be wasteful and inefficient, just like the private sector, and we need to be vigilant about that. We can't be wasting the taxpayers' money, whether it's on giveaways or programs that just don't work. But we still need government to look out for our interests.
The economic myth-making and wrongheadedness flies so thick and fast one hardly knows where to begin. Leaving aside the counterfactual-filled argument of whether government spending staved off another Great Depression (hell, government spending during the Great Depression didn't stave off the Great Depression), the other examples are rather mind-boggling.

It would appear that in Cohn's worldview that companies, such as the insurance and banking examples, are both capricious and malicious in their dealings with customers. Insurance companies do not extend coverage or charge prices based on economic realities but due to arbitrary decision making. No consideration whatsoever is given to the factors which determine insurance prices (let us recall yet again that health insurance is a not especially profitable industry), rather Cohn elects to simply shoot the messenger. While the factors which determine health insurance rates are beyond the purposes of this column, suffice to say they are rooted in more fertile soil than the mere whims of the company's executive.

As for alleged malfeasance on the part of the banking sector, let's remember that these misguided efforts conducted in the name of consumer protection have actually negatively impacted consumers through the reduction of free checking and credit card rewards programs. Government intervention has served to improve matters not at all.

Cohn and his fellow travelers wouldn't be so insufferable if they freely acknowledged their lack of familiarity with basic economics, but the fact that they consider themselves among the country's most enlightened and seek to press their views upon the rest of society through the levers of government while spouting utter nonsense makes them simply unbearable.

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