Deficit Reduction Commission — Good Aim; Wrong Target

Writing at Hot Air, J.E. Dyer has some interesting thoughts about the Report of the President’s Deficit Reduction Commission.  In short, she says the proper focus should be on government reduction, not deficit reduction:

Virtually all the federal agencies would remain in place. Entities like the Environmental Protection Agency, the Departments of Education and Health and Human Services, and the Food and Drug Administration would retain their current portfolios to regulate, litigate, and spend federal tax dollars in ways not envisioned by their charters from Congress. Ukases from the federal regulatory agencies have a significant and growing impact on the people in their economic lives, something small businesses have dealt with for years and individuals are now beginning to understand.

* * *

Our contributor benefits are unsustainable. But they are part of a larger problem of unsustainability created by holistic, prophylactic government. We could actually afford both Social Security and Medicare a lot better if government regulation weren’t actively suppressing business formation today; if government regulation didn’t drive every aspect of the cost of medical practice up; if government regulation didn’t drive consumer prices up and make COLAs necessary; and if government regulation didn’t divert so much worker compensation from worker income to employers’ other mandated, per-worker remissions (non-Social Security/non-Medicare) to the government.

A presidential debt-reduction panel should not be proposing to us that Americans accept a reduced lifestyle so that the current footprint of government doesn’t have to change. As we say in the military, that’s bass-ackward. It’s what this panel has just done. I’m sure the panel did what it was asked to do, but it was asked to do the wrong thing.

She’s right.  The primary focus should be on reducing the size and economic impact of government intervention and regulation rather than simply reducing the deficit. 

Excessive regulation interferes with market efficiency, picks winners and losers, imposes massive friction costs on the system, and is inherently bad for innovation and robust growth.  A recent example is Obamacare, under which those who are able to influence the regulators can obtain waivers from expensive requirements and therefore an unearned advantage in the market over competitors who have to meet those requirements.  Entrenched incumbents have an inherent advantage in the regulatory jungle.

Excessive regulation is also anti-democratic.  Legislators pass the buck on difficult decisions to unelected regulators, who then move billions of dollars around based in large part on lobbying by industry, activist groups, and other special interests. 

Next in line after reducing the size and impact of government should be a focus on reducing government spending rather than reducing the deficit.  Government at all levels has an out-of-control spending problem, not a deficit problem, per se.  The deficit is a symptom, not the sickness that ails us.  Rather than seeking additional revenues — a misleading euphemism for extracting additional taxes from citizens — the government needs to restrain its spending. 

So while the Deficit Reduction Commission may have some good ideas, the recommendations should be viewed from the perspective of whether they would assist in achieving the real goals that will put us on the path of long-term robust growth: (1) reducing the size and power of government, and (2) reducing government spending.  If they do, conservatives should probably be for them.  If not, they should definitely be agin ’em.

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Published in: on December 1, 2010 at 4:35 pm  Leave a Comment  

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