Extreme politics will make the US the biggest loser

The presidential election gives voters a choice between 2 very different philosophies of government.

By The Fiscal Times Jun 21, 2012 8:21AM
By Mark ThomaThe Fiscal Times

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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27Comments
Jul 23, 2012 3:12PM
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We don't have a two party system . We have a two team system and neither team is playing for our town. The fools that act , think , speak and vote on party lines and false values have turned the needed function of our government into a stagnant quagmire of wasted time and no forward motion. Our governments job is to usher in the future for our grandchildren, but these paid buffons are busy holding hearings and fraternizing, and we let them do it because of the childish "team opposition mentality" that pervades our society.
Jul 3, 2012 12:56PM
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When Communist countries hold elections, there is usually only one name on the ballot. If there are two names, only the votes of the pre-determined victor are counted.
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. 
Jun 29, 2012 1:19PM
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Too bad this article is based on a corrupt "redefined for the user's benefit"  assumption.  This author states the assumption that all Republicans what "no government" then tries to say how dumb this notion is.  The only thing dumb in the article is the opening assumption.    In fact the Republicans are simply pushing back on "big government"  no i would say that the Republicans are simply pushing back on "obese government"

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. 


Jun 28, 2012 8:03PM
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Well at least there was an article on here yesterday to balance this one out.  I think it was called "Supply-Side Economics Has to Go."  Now if they would just give real balance and publish my article.  It is called, "Karl Marx - Misunderstood Patriotic American."
Jun 28, 2012 4:21PM
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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.

Jun 28, 2012 4:19PM
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Our radical leftwing politics definately make us the biggest losers. But like Greece were getting close to running out of other peoples money!
Jun 28, 2012 8:21AM
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Mr. Thomas seems to forget one basic issue.   You can't continue to spend money that you don't have.  Why is that basic concept so difficult for the extreme left to understand?  
Jun 27, 2012 2:01PM
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Wishful thinking does best describe current Republican orthodoxy. It has tilted to a form of nihilism. No good can come from going down that path. It is incredible to think that the American people are even toying with jumping over the cliff in that manner. Electing Romney would bring on another steep recession, guaranteed. It is that simple. Why Americans would self-inflict such pain on themselves just boggles the mind. Current Republican thinking of the economy has zero chance of working and it could take a generation to recover from the damage. You can kiss Social Security and Medicare goodbye, for starters. And it goes downhill from there.
Jun 27, 2012 8:35AM
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Mark Thoma should be arrested for support the left, and right paradigm. The sad thing is the writer can only see what he is spoon fed. There are other options to break this monopoly. There is no such thing as a free Market when at the head is a Central Bank!

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! 

Jun 26, 2012 2:52PM
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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. 

Jun 26, 2012 2:40PM
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"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....)

Jun 26, 2012 10:09AM
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You aint seen nothin yet!  If Romney wins and puts 2 more right wing judges on the supreme court, this country will be dominated by church law. If fools like Santorum and the extreme religious right scare the crap out of any republican if they don't follow their demands, watch this country implode.   No birth control available at Planned Parenthood and then your local pharmacy. No choice or abortion no matter if your wife, mother or daughter has been raped. Gay rights all turned back or overturned.  No regulation when the banks again adding those fee and costs again. NO EPA. Who cares if fracking is destroying America's water table if Money is being made byn the billions. But there is hope. Even the fools who have been blinded and lead to the slaughter by the extremists thinking they the right is on their side will finally wake up and they have all the guns.  Mess with seniors, veterans, moderate Americans and duck because the fan will be spinning. 
Jun 25, 2012 2:24PM
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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.

 

 

Jun 24, 2012 3:41PM
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Yep the days of IKE are gone ! TRUE REPUBLICANS. Today ? The party has been hijacked by hard liners and uneducated people who need to read the US Constitution . Im 55 and i get to have some republican in the house named Cantor , ole Mitch in the senate are now going to tell me because the US Congress overspent on two wars when im going to retire? Lets see if REPUBLICANS in the house have any HUTs they will NOT RAISE the DEBT LIMIT this yr! I think 15 TRILLION is enough . It was last yr ! Right? Do not borrow any more than that ! They RULE THE HOUSE PEOPLE... If you read your US Constitution you all will find that its the CONGRESS that spends and gives the money for programs . POTUS can only accept or reject the WHOLE THING! He has no line item VETO like 50 US Gov have . To bad . Their is a lot of Pork that one stroke of the pen could save !!! Yep i think 15 trillion is truly enough!
Jun 24, 2012 6:43AM
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Republicans say tax cuts create jobs ? Well we have had tax cut after tax cut across this nation and i say where are all the jobs at ? Wall street and the private sector creates jobs , not the government. Bush tax cuts for over 10 YRs and still waiting ? I guess big government is ok with Repukes and the Mitt Witt's as long as wall street gets their government bailouts and big oil and Farmers get their tax subsidies , and they can tell woman what to do with their vergina , or when to retire ,collect your soc sec you worked for all your life . Thats ok with the TEA Party and repukes , "they want smaller government" ? LMFAO . Their attacks on public employees is great at creating more unemployment in this country! Gee just what we need ! Their Man running for President is a great thing? He made 20,000 dollars for every American he made unemployed while working for Bain ! And too good companies and ran them into the ground , bankrupt them and made a lot of money! He also thinks corporations are people ? And have constitutional rights ? Ya America needs him like a hole in the head ! Two unpaid for wars for over 10 yrs has bankrupted this country , do the math on the true cost of 9/11 ! But America is truly land of the free? Home of the stupid.
Jun 22, 2012 4:24PM
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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.

Jun 22, 2012 1:24PM
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Close your eyes and you can't read propaganda.
Jun 22, 2012 10:37AM
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It's just like a liberal to distort the viewpoint of the opposition.  Conservatives are NOT against ALL government, only AGAINST BAD GOVERNMENT...which is all we have seen from Obama.  He is spending money like diarrhea and we are left dealing with the mess.  Obama is incontinent.  And since you brought it up...let's talk about extremism...you liberals yell when we call you socialists...I don't call you socialists...I call you communists.   Let's call a spade a spade.  If it looks like a duck, walks like a duck and quacks like a duck...it's probably a duck.  Obama and all of his worshippers are communist. I do not need to prove it... I ASSERT it and let the evidence speak for itself.
Jun 22, 2012 10:10AM
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Socialism has only one end bankruptcy and we are there.
Jun 21, 2012 11:31AM
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You got that right, Mark Thoma. The GOP has gone absolutely insane, yet it's completely incapable of recognizing this. A GOP win in November would likely help the stock market in the short-term. But in the long-term, all we'd see is Bush/Cheney redux.
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