Why “We Have To Do Something About The Economy” Is A Bogus Argument
Throughout the depths of the recent financial crisis (perhaps somewhat less now that things seem to have stabilized a bit), a commonly-heard refrain in response to any cautionary comment regarding some newly-proposed government stimulus program was “well, we’ve got to do something about the economy,” to which my response is always “why, exactly, do we have to do something?” Why indeed? It seems to me that doing nothing is an equally plausible solution.
Rushing To Action Is Rushing To Trouble
A recent example involves a commenter on my article admonishing Obama regarding the newly-appointed Pay Czar. Simply put, I thought it was a bad idea and gave a few reasons why I though a Pay Czar was unnecessary. Later that day, a commenter left the following comment…
“I think coming up with [a] new technique in our economy is not so bad, it can come up with new result [sic] for our financial problem.. or if not, still we have to try doing something in our economy“
This comment expresses exactly the type of muddled thought process I’ve often noticed when observing strangers discussing politics or the economy. The idea is that whatever we were “doing” before the crisis obviously didn’t work (things are rarely as obvious as the speaker thinks), which justifies embarking on all manner of different courses of action. Things are already so bad (again, so they assume) that things couldn’t possibly get worse (dangerous assumption). Should the government spend billions of dollars or poorly-thought-out stimulus plans and interfere in the private labor market? Sure! I mean, what could possibly go wrong with that?
It’s Not That The Government Has No Place In The Economy…
It’s not that I think the government should never interfere with the economy. Far from it, I think government intervention is occasionally a good idea (I’m sure many of you out there will disagree with me). It’s just that I think the government has no business interfering with private commerce unless it has a really, really, really, really good reason to do so. For example, I think the Securities And Exchange Commission (SEC) has dramatically improved the quality and international competitiveness of American capital markets and has helped the middle class more fully participate in the nation’s prosperity. I think SEC regulation is a good thing, because it prevents us all from being scammed. That’s a good reason for the government to interfere. But the “we’ve got to do something!” argument? That one just doesn’t fly with me.
The last thing the economy needs is for the government to throw its weight around, heedless of the resulting unintended consequences. No Virginia, you can’t pump billions of dollars into some stimulus program or tell private companies what they are allowed to pay their executives without dramatic consequences. Simply put, rich people didn’t get that way by being meek: they will fight back. And you know what? They will inevitably win, eventually. Businesses will adapt and the rich will simply find new loopholes to exploit. And the rest of us? We’ll still be outraged that congress hasn’t fixed the unintended side-effects of the fix to the last problem we complained about.
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Having to do something is a political imperative. Doing nothing may be the right thing to do for non-political reasons. However, if you do nothing you get blamed for the bad and it is harder to take credit for the good. If you do something you can always say it would have been worse but for your actions (that’s the current argument). When things turn up (and they always do eventually) you can take credit.
It isn’t just government that is victim of this way of thinking. The medical profession makes a substantial amount of its money on the premise that it is safer to do something.
Fundamentally, anybody that others view as responsible for consequences is motivated to do something over nothing.
The government has been interfering for far to long and in the last year has taken over several entire industries. The government is fighting against capitalism, the one system that has brought prosperity.
Voters want it both ways. We want to elect politicians like Obama that say they will reduce taxes and increase entitlement programs. But there is nothing they can do in the short term. The nation is already broke.
Creating more money or borrowing more money only worsens the long term economic condition that we are in.
you say ” For example, I think the Securities And Exchange Commission (SEC) has dramatically improved the quality and international competitiveness of American capital markets and has helped the middle class more fully participate in the nation’s prosperity.” what’s you timeframe for making this observation? The SEC was the regulator for Bear and Lehman and certainly didn’t do too much to improve the quality of the capital markets relative to those two firms.
Bob, I meant since its inception. But I also strongly disagree the SEC didn’t do much to improve the quality of capital markets relative to those two firms, since the SEC isn’t actually the primary regulator of commercial banking activities. There actually isn’t one.