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What are the ten most harmful government programs?
Human Events offers a list based on a poll of conservatives. Social Security comes in first, number five is "contraceptive funding." Foreign policy aside, what should such a list look like?
At the top I will put our aggregate of health care policies, including Medicare, but without pretending that removing any one of them would solve the major problems. Many smaller decisions, taken together, have painted us into a box where the incentives are for cost-escalation and burden-shifting at the same time.
It is hard for me to see social security as such a huge villain. I'm not going to push Ricardian neutrality, but a lot of it is just dollars slushing back and forth. It would be better as a welfare program but as is I just don't see how it has wrecked us.
Farm subsidies are terrible but quantitatively they don't amount to much in the broader scheme of things. Therefore my second pick is the aggregate burden of many small regulations. As with health care, we have no single identifiable villain. Again many small policies, taken together, make entrepreneurship less dynamic and lower long-run economic growth. "Small steps toward a much worse world," as they say.
My third pick is the public quasi-monopoly on education.
Your ideas?
Posted by Tyler Cowen on April 27, 2006 at 06:44 AM in Economics | Permalink
Comments
Number one for me is easy--drug prohibition, including the vast resources wasted on law enforcement, the organized crime networks that are created, the countless lives wasted in prisons, the developing countries wracked by the corruption and violence of the drug trade. Compared to the harm caused by all of this, nothing else comes close.
Posted by: Slocum at Apr 27, 2006 7:35:03 AM
#1 has to be education. If more voters were capable critical thinking and holding coherant policy opinions, all the other problems would be that much closer to being solved.
#2 would be our first-past-the-post voting system which encourages division and polarization at two (artifical) ends of a political system which only exists within its own framework. If politicians existed in a political environment where they could (practically) compete for a "middle" on multiple axes, we would be that much closer to solving all other problems.
In no particular order after that I would agree that pharmaceutical regulations, and over-reaching commerce clause, prohibited substances laws, and the national penchant to nationalize things which do not need to be (e.g., airport security) are all worthy challenges for political reformers.
Posted by: Brock at Apr 27, 2006 7:47:16 AM
I'll second slocum's nomination of drug prohibition for number one. All other bad domestic policies pale in comparison, so number two is bound to be a distant second.
The FDA perhaps?
Posted by: Brock at Apr 27, 2006 7:47:59 AM
Oops, I guess I should have posted that comment as "The Other Brock." How was I to know that bmcusisk was going to post on this thread 43 seconds before me.
Posted by: Brock at Apr 27, 2006 7:51:30 AM
I'd have to agree with brock on accounts 1 and 2.
For education I think the best policy is to simply create a simple decentralized framework with a truely independant oversight comitee. There should only be general required guidelines as to what has to be taught, but not methodology or material choices. Likewise the existant hierarchial structure is primarily a way to enrich a truely assinine management class that shouldn't even exist.
Another good way to improve education would be to take property taxes accorded to education and aggregate them into a state-wide pool, thus ensuring schools which are in areas with low property values still have students which recieve good education.
I'd say a good #3 is related to what I mean by "truely" independant governmental oversight bodies. I think congress and the executive branch should be forbidden to appoint anyone to them.
Instead they should be able to hire their own people, with congress and the executive operating as an overisight via bully-pulpit. I think political appointments are one of the major reasons we have so many defective government agencies in the first place.
Posted by: UberIcarus at Apr 27, 2006 8:01:03 AM
I'd put drug prohibition in the top 5 as well. I'll also nominate governmental incompetence in crisis management (ie Katrina).
Posted by: brian at Apr 27, 2006 8:02:34 AM
The above choices are all good. I'd choose, for a top 5,
1) public education
2) drug prohibition
3) safety net (both fails to prevent poverty and overly costly, do something like Kling and Murray propose)
4) medical system
5) lots of good candidates...the tort system, the election system, zoning laws, NIMBY, the tax system, sex laws, Tyler's "little regulations", agricultural subsidies, tarriffs, immigration law...but I want to say something speculative, so I'm going to say direct elections. We used to have indirect Senatorial elections. Why did we give those up? Why have *any* direct elections?
Posted by: michael vassar at Apr 27, 2006 8:13:18 AM
Interesting idea, but if you look at the historic record it does not agree with your conclusions. The modern corporation and modern capitalism in the US came into being around 1840-185, or so. From 1850 to 1950 the modern system operated without most of the regulations you are talking about. Over that era real per capital gdp growth averaged around 1.4%. Since 1950 when the private secotor has had to suffer all these budens you discuss real percapita gdp growth has been 2.1%. So the historic record shows that with these budens the private capitalist economy has experienced about 50% higher growth then without them.
Posted by: spencer at Apr 27, 2006 8:17:34 AM
Michael,
are you serious on that last part? We should be having more transparent, and direct elections.
Personally I'm in favor of adopting a switzerland like polity.
Posted by: UberIcarus at Apr 27, 2006 8:18:43 AM
I have two programs that I wouldn't necessarily call the most harmful, but cetainly the most pernicious, 1) the use of eminent domain for private use 2) smoking bans. Both are not federal programs but are exercised at the local level. The first represents the evisceration of private property. The second, while on its face may appear sensible, represents the most recent face of the advance of petty tyranny and ultimately is similar to eminent domain as it is a diluted takings.
Posted by: Richard at Apr 27, 2006 8:30:40 AM
I'll put in, for the fourth time, drug prohibition as currently implemented as number one.
It has the following harmful effects:
1) Increases the violence of some neighborhoods greatly, preventing many people from living in them safely.
2) Distorts criminal law; civil asset forfeiture, reliance on coerced testimony and informers, low standards of proof of guilt.
3) Distorts international relations: anyone who is anti-drug is our friend, regardless of the general thuggishness of their policies
4) Destabilizes drug-growing areas: anyone willing to sell drugs can fund a private army, and needs to.
Second on my list would be public educations as currently stuctured; it distorts land-use decisions in favor of sprawl and uniform neighborhoods, it significantly disadvantages stay-at-home parents, and it provides a poor education to those who need and want it.
Third would be the mass of regulations and quasi-regulations; in this category, I would place anti-discrimination law as applied to non-government actors at the top of the list, and strict liability tort second.
Fourth would be the tax system, particularly the corporate tax system. It is incredibly difficult and costly to comply with, and provides very bad incentives in several areas (pensions, financing methods), while raising relatively little revenue. Switching to a system based on GAAP accounting would provide huge savings in compliance and compliance-monitoring, and would reduce the incentives to bad behavior.
Posted by: SamChevre at Apr 27, 2006 8:49:18 AM
My #1 is the earmark/rent-seeking sweepstakes. In addition to the direct financial cost, the washington lobbying game has an even larger effect in shifting attention away from solving or even discussing any of the real problems mentioned above, and in driving down the quality of people interested in running for office.
For #2 I nominate Moral Hazard. i.e. the consequences of the federal government overly insuring or appearing to insure risks that are better handled by localities or the market (Katrina levees/flood insurance, Fannie Mae, Savings and Loans, pensions guarantees, airline bailouts, etc.)
My #3 is education. Which is sometimes a form of moral hazard -- the government often appears to guarantee a good education without actually doing so.
My #4 will be either price controls on gasoline, price controls on pharmaceuticals, mass deportation/felonization of illegal immigrants, or something new and equally stupid.
Posted by: DK at Apr 27, 2006 8:52:04 AM
I disagree about farm subsidies. I believe that in the broader scheme of things, to include impacts to non-Americans, farm subsidies are extremely harmful by depressing prices and acting as de facto barriers to trade.
Posted by: vtconomist at Apr 27, 2006 8:53:52 AM
Spencer,
Your point misses an important component: after the growth of the modern corporation, what would economic growth have been in the absence of the (presumed) drag of inefficient government programs? That's the correct counterfactual to ask, albeit difficult to estimate.
Don't underestimate the pervasive, foglike reach of farm subsidies; part of the reason for our current $3 gas is agricultural lobbying.
Posted by: Lynne at Apr 27, 2006 9:11:07 AM
A concept so dear to the right and Libertarians in particular. About as useful as Mr. Blackwell's list of the ten worst dressed celebrities.
Posted by: Martin at Apr 27, 2006 9:18:15 AM
"From 1850 to 1950 the modern system operated without most of the regulations you are talking about. Over that era real per capital gdp growth averaged around 1.4%. Since 1950 when the private secotor has had to suffer all these budens you discuss real percapita gdp growth has been 2.1%."
Damn those corporations for causing the Great Depression! How was 1850 to any date prior to 1929?
Posted by: Dylan at Apr 27, 2006 9:54:28 AM
Don't confound the two-party system's benefits and the duopoloy's negatives. Tour the multi-party states, and examine the business risk associated with the policy upheavals that result. Two parties--electoral college and majority elections--is a good thing. The duopoloy, however, is all bad. Both direct--taxpayer-funded primaries, no signature requirements for nominess of "major" parties--and indirect (incumbent protection)--gerrymandering and most campaign finance laws--policies are direct assaults on popular sovereignty.
Interesting that the title of the article limits the discussion to "programs" while much of the discussion has strayed. I'll try to do better.
1) Gov't education (primary & secondary). Violates freedom of association & freedom of religion.
2) Gov't "charity". Held unconstitutional for 150 years. Robbery by majority vote. Indolence by statute.
3) Incumbent protection. "Who rights the election code" is such a tough problem that the founders didn't directly address it.
4) Federal "safety". While I might be convinced that OSHA or the FDA are on net beneficial, the concept of the federal government as a guarantor of safety at the individual level is dangerous. Strong property law would cover most of this.
5) DARE. I support the concept of impared consent which is behind the outlawing of (many) mind-altering drugs. Teaching children to turn on their parents will destroy society.
6) Federal insurance. Arguably covered by 2), but worth a separate notice.
7) Social security. Separate notice for its destruction of privacy and the implementation of a national ID.
8) Peace corps. Turning patriots of good will into security risks for most of a century.
9) IMF & World Bank. Teaching the rest of the world how to rob the middle class blind.
10) NASA. I went to 10 just so I could put this one in.
Posted by: Nathan Zook at Apr 27, 2006 9:57:46 AM
1. The tax code in general and itemized deductions in particular, and the mortage deduction as a super particular. I think the ideal is a single tax on the unimproved value of land (excepting certain Pigouvian taxes)
2. Drug policy, what a mess.
3. The current health care system, I think universal catastophic coverage, means tested preventitive coverage, and default health care savings acounts that people can choose to opt out of is probably ideal.
4. Yes the education system is a mess, I have little idea of how to fix it. I think a 12 year liberal arts program is not the best thing for most students.
Posted by: Michael F at Apr 27, 2006 10:10:09 AM
Medicare??? Why? Because it's more efficient than private insurance?
Posted by: Anderson at Apr 27, 2006 10:13:55 AM
Medicare, like Social Security, should also be a welfare program.
Posted by: Tyler Cowen at Apr 27, 2006 10:17:09 AM
"From 1850 to 1950 the modern system operated without most of the regulations you are talking about. Over that era real per capital gdp growth averaged around 1.4%. Since 1950 when the private secotor has had to suffer all these budens you discuss real percapita gdp growth has been 2.1%."
Spencer, I think you need to think carefully about what's going on in the denominator of your variable of interest (per capita GDP) over the two time periods you're considering. From 1850 through 1950, population growth averaged about 1.9% annually, compared with 1.2% since, according to the data I just googled. You're also looking at a massive change in the fraction of activity that's marketized (and thus counted in gdp) since 1950, concomitant with women entering the labor force.
Posted by: Don at Apr 27, 2006 10:32:46 AM
Number One by a huge margin is the drug war. In addition to the harmful effects SamChevre points out, it causes an immense amount of harm to an immense number of otherwise harmless people - non-violent drug users that are incarcerated or that run the risk of incarceration. (There's also the distortion in market prices of recreational psychoactive substances caused by government intervention, but if people don't care that drug users are getting put away for twenty years then they certainly won't feel their heartstrings tugged over the deadweight loss of higher prices for coke and weed.)
Number Two has to be immigration quotas. The economic harm done by restricting the free flow of labor is important, but like the drug war, the true harm is done to the millions of people whose lives are made miserable (or more specifically in the case of immigration, forced to remain miserable) for no good reason whatsoever.
Bryan Caplan would probably disagree with you about the health care system being harmful. It might be a mess, but since he's doubtful about the benefits of health care anyway, an inefficient system for delivery of something that's not very helpful can't be very harmful. I'll agree with him enough to say that health care policies won't take my number three spot (but we might as well fix them anyway as long as we're daydreaming). Likewise, I'll take your word on Social Security and leave it out of the top spots.
I think third place has to go to the tax system. Not taxation in general (although the anarcho-capitalist in me says that the number one harmful government policy should have been "the existence of government") but rather the method of collecting taxes. For discussion of the harms done by the current tax system see the Fair Tax proposal, but the short list includes: progressive taxation distorts incentives, complex tax codes distort incentives and create immense compliance costs, complex tax codes create opportunities for special interest lobbying, and corporate taxes hide the size of the tax burden on the economy from the voter. Most harmful, though: taxes on income rather than consumption discourage savings, investment, capital formation, and economic growth.
Fourth place to the education monopoly. Fifth place to regulation, licensing, and price controls. Sixth place to subsidies and tariffs. That covers a lot of ground... maybe now we can include health care and social security as numbers seven and eight.
That leaves me just enough room to put speed limits at number nine and closing roads for parades and fundraiser walkathons at number ten. Maybe not all that harmful, but after taking care of the previous eight I think I can ask for some petty personal annoyances to get eliminated, right? As long as we're daydreaming.
Posted by: eddie at Apr 27, 2006 10:49:48 AM
Spencer,
I agree. I think much of our current growth is from the restrictions we place on what is allowable. One of the main problems with de-regulation is that we change from an enviroment where its well know what is inappropriate behavior and the punishment is essentially pre-ordained. Without regulations, we would end up going to court to decide individual instances of wrongdoing on a case-by-case basis. This is the inevitable result of lack of regulation.
When juries decide on a case-by-case basis, its much more difficult to predict if your entire lifes work will be taken away from you. I like to compare it to football. The regulations are what make that game interesting, otherwise it would just be some big guys wrestling in the mud over an oddly shaped ball. With the regulations, its the most interesting sport ever created.
Back on topic.
1. Drug Regulations - they don't work on a number of levels, and like the Onion has stated - 'Drugs now legal if you have a job.'
2. The income classification system for the IRS. Figuring out your tax rate is really easy. Figuring out how to classify income and losses if far too complex, and results in lots of fraud and tons of wasted productivity.
3. The mis-regulations of pension accounting. Its a national embarassment, and is hurting millions.
4. Our subsidy of the oil and gas industry. It didn't boost growth when oil was cheap and misdirected growth into an energy ineffecient society. The 60 years of a subsidies are going to seem very expensive by 2012. We need a Mahattan project level of commiment to alternative energy. If we can spend 200B a year on Iraq, we can spend 1/4 of that on AI. Making gas cheaper in the 60s and 70s is going to make the changes of the 2010s so much more difficult.
5. Our committment to bad public housing. Disenfranchised 2 generations of poor, killed inner cities. Its probably shaved .25 off of GDP for the last 25 years. No, I don't have a solution.
6. Our international tax laws. Encouraged corporations to move production overseas, encouraged them to keep profits in tax havens. A massive export of capital out of the USA
7. Whats legal for lobbyists in Washington, and that we allow former members of governement to be lobbyists.
Posted by: mickslam at Apr 27, 2006 10:55:47 AM
I will also chime in on drug prohibition. The FDA. Zoning regulations.
Posted by: Zac at Apr 27, 2006 10:59:57 AM
One more vote for the war on drugs.
Posted by: jon o at Apr 27, 2006 11:40:07 AM
