Tuesday, February 22, 2011

When the Federal Government Gets out of the Business of.......

Consistently I've heard a steady cry that the Federal Government needs to get out of the business of ______________(you name it) almost instantly there is a willingness on somebody's part to pick up the slack. Because when the Federal Government get's out of any scope of responsibility two things usually occur: 1. Disaster and 2. Higher taxes.

I'll tell you why. There is such a thing as economies of scale. In the scheme of things America's economy is off the scale, so is it's government. It's 13 times larger than the next largest economy: China. 13 times! So in Government as in private industry (i.e. capitalism) the most efficient(cheapest) way to provide a service or product is to do it in a massive way, therefore spreading out the cost over many units than just a few. In truth the Federal Government is far more efficient and smaller than ever: there are now fewer federal employees as a percentage of the population than there were in the 70's. Of course this is counteracted by an explosion of state and municipal employees.

So let's say the Federal Government is going to get out of the business of, let's say Aviation. It can do two things: have private companies do it (and that would reduce costs and increase safety?) or have each state regulate it's own airspace. I've never been a fan of private companies regulating anything, or worse yet, self regulation. (Homes built by builders who "self-inspected" in South Florida before Hurricane Andrew literally had the roofs blown off because they weren't attached to the structure.) Could you image 50 different state aviation administrations?

In the 80's Republicans tried to get the Federal Government out of the business of Public Health. Attempts to close the CDC in Atlanta and the Public Health Service led to the worst epidemic of the 20th Century, HIV. If Reagan had succeeded, the epidemic would have raged across all 50 states unchecked since only a few of them have adequate public health systems. The epidemic nearly bankrupted hospitals in New York, New Jersey, Los Angeles and Miami until a national response could be created.

How about getting the Feds out of the business of protecting Civil Rights, Food Safety, Labor Standards or interstate business regulation? In each case states could decide for themselves what they wanted, sounds okay in theory until you go to another state and find out that the milk isn't homogenized, or you can't open a business because your product is made in another state under different set of rules, or that the water had more dioxin in it because in this state there are no minimum standards for water quality.

What about disaster relief? Every state for itself and hope that when there's a disaster like a hurricane or earthquake that each state will have a telethon and hopefully raise enough cash, quickly enough to rebuild a city or region.

Finally what if the Feds get out of the business of the Social Safety Net. No social security or medicare, or medicaid. It would be simple, states would pick up the By raising taxes on their citizens.