Sometimes you read something so obvious you can’t believe you didn’t figure it out for yourself. Such was my experience when I read Russ Roberts’ piece on Medium titled “The Economist as Scapegoat.” Roberts doesn’t just punch holes in a habitual argument. Rather, he slams you between the eyes with a two-by-four. He presents data that contradicts the idea that life has gotten worse for many Americans because of Reagan era policies based upon the philosophy of Nobel-winning economist Milton Freidman. In other words, this convenient trope is not borne out by reality.
In reality, Freidman’s proposals have never been implemented. During the so-called Reagan era (the last 40 years), the nation’s budget has been managed more by the prescription of liberal politicians than conservatives, even – or especially – when Republicans are running the government.
Over the last 50 years, government spending has increased both in real nominal terms…
Government regulations have increased not decreased…
And, out-of-pocket healthcare costs have decreased while government spending on healthcare has increased.
Roberts argument motivated me to do some digging. What about other liberal tropes? Do they stand up to scrutiny. The press likes to trumpet that the wealthy don’t pay their fair share of taxes. Here’s what the Congressional Budget Office has to say:
Another persistent trope is the comparison to the economies of Europe and the progressivity of our tax code. This analysis compiled by Bloomberg from OECD data presents an interesting, if complex, picture.
The figures in the left-hand column are those most often quoted in the press. But the figures in the right-hand column tell the tale. The larger the ratio, the more progressive the tax code. The largest economies in Europe, including the Scandinavian countries, have tax codes that weigh more heavily on the middle class than the wealthy.
The Bloomberg article goes further to show how the generous benefits of European countries are financed in large part by consumption taxes (Value-Added Tax in Europe; sales taxes in the U.S.) that affect the poor and middle class more than the wealthy.
American politicians want us to believe the system is rigged against us. It’s only fair to tax the wealthy to pay the bill, right? Europeans follow a more moral path: citizens who want government benefits are willing to pay for them.
All of which suggests to me that what has failed us is not a decline in government investment but rather the persistent failure of the welfare state to address the needs of those who need it most while threatening to bankrupt the economy in the process. So, perhaps, it’s a good idea to examine what got us here and consider restructuring our efforts. The challenge, of course, is that doing so relies upon an overthrow of highly educated people who have promoted the idea they are omniscient and, therefore, worth every penny they are paid to spout nonsense. This faulty presumption leads to bold predictions about how a large, unmeasurable, complex system (the American economy) will respond to government inputs (fiscal policy and regulations). To be clear, I’m talking about how wrong our politicians and policy elites get things on an ongoing basis.
While the data support the idea that the welfare state has failed, the other side of the coin is perhaps more telling. Far from following the “starve the beast” philosophy defined during the Reagan administration, Republicans have hypocritically done the opposite. They have consistently voted for bigger and bigger deficits. Far from reducing the size of government, they have allowed liberals to tempt Americans into an addiction to government programs while promoting their own brand of addiction: lower taxes.
WHO WILL LEAD?
