Extreme politics will make the US the biggest loser
The presidential election gives voters a choice between 2 very different philosophies of government.
The upcoming presidential election gives voters a choice between two very different philosophies of government. For Democrats, an activist government is necessary to keep markets functioning, and to smooth economic fluctuations. Without government oversight, markets would be captured by monopoly power, consumers would be at the mercy of unscrupulous producers, there would be distortions from adverse selection, information asymmetries, moral hazard problems, and so on. In addition, if government does not take action when a recession hits, the downturn will be much worse and much longer than necessary.
For Republicans, however, activism is exactly the wrong approach to take. They believe that the key to making markets work and smoothing economic fluctuations is for the government to get out of the way and let the private sector work its magic. In general, markets react faster, incorporate more information, and regulate commercial behavior better than humans will ever be able to do.
What is behind the stark difference in views about the role of government? Activists believe that market failures have large negative consequences, that these problems won't necessarily fix themselves, and that government is an effective way of overcoming these problems. Government isn't perfect, but neither is the private sector (see the bulldozed waste from the housing bubble), and on net it’s helpful for the government to take action when relatively severe market failures are present. Traditionally, those who take a more hands off approach do not deny that all markets fail to some degree – no market is perfectly competitive. But for the most part they do not see these failures as having large consequences, and even when they do, government intervention is rarely the solution. In many, if not most cases, that just makes things worse.
In the modern Republican Party, these views have been taken to the extreme so that government is rarely, if ever, supported. But there are some areas where private sector will not provide goods and services by itself, public goods for example, and even when the goods are provided market failures distort the outcome.
Who will build bridges, provide sewage systems, national defense, roads, airports, water systems, and so on if not the government? Who will force internalization of all costs of production if not the government? Who else can overcome adverse selection, information, and moral hazard problems in health and retirement markets? Conservatives can come up with stories about how the private sector will overcome these problems and provide goods in each case, but historically these goods simply haven't been provided, at least not at the scale and breadth needed. That's why government stepped in to begin with. To think it will somehow be different this time if government stepped out of the way is highly wishful thinking.
We cannot function economically without supporting infrastructure, we are already falling behind where ought to be and that will prove costly over time, and we cannot allow externalities, particularly those associated with global warming, to run rampant. Conservatives used to understand that government had an important role to play in these areas, and opposition to government was based upon coherent reasoning rather than a knee-jerk rejection of government.
This extremism within the Republican Party is hurting the economy. In the short-run, it makes it much harder to do anything about the recession. Even if you believe spending more on infrastructure will do nothing to help employment, letting infrastructure crumble will hurt our long-run growth, and presently the construction of infrastructure is about as cheap as it gets. Infrastructure is inherently a supply-side policy with attractive demand side effects in a recession, and the refusal of Republicans to support such spending looks far more like a political ploy than a well-reasoned position.
But that may pale in comparison to the long run consequences of failing to deal with global warming. Here we have a party that purports to be all about letting markets work their magic confronted with a clear market failure with considerable potential consequences, a problem that the private sector will not fix by itself. So what do they do? They know that there's no solution except government intervention if they admit to a consequential market failure, so they deny that a problem even exists.
There was a time when extremists were not the main voice of the Republican Party, a time when we had some chance of dealing with important issues. There were arguments about the precise location of the line separating when the government should and shouldn't step in, and there were debates about command and control versus market based mechanisms to solve problems. But both sides understood that the lines existed, and when both lines were crossed there was at least a chance the two sides would come together to solve our problems.
Unfortunately, those days are long gone, and if Republicans win big in November it will be a long time before we see them again.
Mark Thoma is a columnist at The Fiscal Times. Subscribe to The Fiscal Times' free newsletter.
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What an incredible bias view of the world, economics and politics. It is so far to the left that the author should be criticized for not even trying to present facts. This is a perfect example to illustrate what is wrong. Both sides, Democrates and Republicans are responsible for the mess we find ourselves in. They are very effective at creating rhetoric to pit one side against the other, but at the end of each day, they are basically the same. A bunch of political elitists who only care about empowering and enriching themselves.
For the past 100 years, our federal government has been chiping away at what made America great which is simple, total personal freedom with complete personal responsibility. You can not have one with out the other. Every time we accept a "payoff" from the government we lose a little of our freedom.
Although it is a difficult concept to accept, sometimes there are winners and losers and no government should try and equalize results. The good thing with freedom is everyone starts over the next day and winners can lose and losers can win.
Let's all stop buying into what this chump is selling and start thinking and taking care of ourselves.
Unfortunately our world is too complicated - we NEED fiscal policy.
Trouble is, fiscal policy has become so corrupted that the far right Republican viewpoint of, "get government out of the way," does have some appeal.
So, why do we NOT simply look at the corruption (legalized corruption that is... the pork, cronyism, etc) and get rid of that and see if perhaps that doesn't fix our problem? I believe it will go a long way toward solving our problems.
What we cannot afford to do, as a nation, is continue to allow a small group of people to hold this nation hostage while they push their agenda - an agenda too extreme to be successful.
"Extreme politics will make the US the biggest loser."
There is no doubt in my mind.
After two and a half centuries of compromise we are suddenly allowing a tiny group of people determine this nation's agenda - simply because they possess intrucive personalities. They don't even make sense... they simply possess intrucive personalities! WHAT THE FRAK!
But, so many people just hate confrontation so they just roll over and take one instead of standing up for themselves.
Trouble with that is, those are just the kind of people (who roll over and take one a couple times) who get fed up and then go, "postal!"
I see that coming. The intrusive right is going to push their agenda, and push, and push and push until they push people to the breaking point.
How many times do the rest of us need to hear how "they" would just as soon we all DIE as opposed to allow us affordable health care? After all... they can send jobs overseas or import labor... they don't NEED us, and they are making that message abundantly clear.
(they think they don't need you... if they let us all die and deport all the illegals, who's going to mow their lawns and drive their cars, take care of their kids, run the grocery, manage the service station....)
There ain't no global warming! I know it must be true because Fox News and Rush say so! Damn hippieliberalcommie MSN libtard reporters!!!!!!
The banking system is corrupted and run by irresposible criminals, they are all part of the same mafia that corrupts and buy off the politicians. Instead of lending money for business they gamble the customers money on derivatives, then they expect the tax payers to bail them out.
Typical Republican phylosophy, private profits and public losses, what a bunch of thieves.
No interest on deposits and all profits for the banks, the federal bank is part of the scheeme too.
With all the profits they they can keep buying off the politicians and rob the public.
They have no insterest on fixing the real economy or creating any jobs.
Americans never wake up, they keep voting for the republican mafia.
There is no free market when the big 7 banks contribute evenly among the two card Monti system. You have no Free Market when your in a Global Economy with the Number one Economy citizens can't even speak the Language; where the market is controlled by a select few. ie Rothschild, Central Banks, US Military/Politicians, and Royalty in Britain (Known Heroin Dealers ie Opium Wars) also the Netherlands Queen Beatrix ie Dutch Shell ie Big Oil..
There influence in the dumbing down of the Avg person is criminal in itself. They help promote things like Sex in the city, MTV tried to get teens to loose there virginity on TV, and the Avg person is drinking Sodium Fluoride; a bye product of chemical waste.
Then I have to read a article that is totally meaningless and only make the avg person in the dark dumber. Democrat or Republican? How about Harvenger of Death and Grim Reaper? They both only want your Souls in November... After that they both say, go away and die quickly!
Seems the same basic situation exists here, except the votes of both names on our ballots are counted because which ever person is elected, the predetermined philosophy and continuing direction remains the same, with just enough difference concerning perpetually debatable arguing points to make it look like one candidate is actually different from the other.
Given that there are approximately the same number of politicians serving under the constraints of 2 'different' parties at any given time, and that each minority party claims to have no power due to the minimal majority of the other party, it appears our so-called FREE elections are basically rigged from the start. By casting a vote based on a (D) or (R) party affiliation, one is effectively casting no vote at all.
This is a great argument except for the important fact that government activism got us into this mess by creating the housing/mortgage bubble from 2006 - 2007 AND the current Treasury bubble. It's time for governement to step back.
I challenge the author to man-up and rewrite the article based upon the real Republican position; to keep governments at a healthy level. Right now governement looks like is a 500 pound person hiding its gelatinous torso inside pink spandex with Obama shoving Twinkies down its throat.
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Breaking up big banks is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.
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