The following seven principles guide Reflections of a Rational Republican:
1. Data-Driven Decision-Making Produces Pragmatic Public Policy
One of the fundamental reasons our government is broken is that the political selection process favors ideological warriors over pragmatic problem solvers. For instance, each party’s primary process rewards candidates who toe the party line, and punishes those who sometimes favor practical solutions over partisan mandates.
Another major problem with our political system is that it is dominated by lawyers. According to Fox News, 203 of the 541 members of Congress are attorneys, and 218 have JD degrees. In other words, 40% of Congress has legal training, and 39% have practiced law at some point in their careers versus 0.3% in the overall U.S. population.
The problem with legal training is that it is focused on advocacy. Lawyers are imbued with a sense that they must provide their clients with the strongest possible defense. As such, they focus ruthlessly on the strengths of their clients’ cases, while downplaying the weaknesses. The American legal system is by nature highly adversarial. As a consequence, lawyers have a tendency to focus on winning their arguments rather than problem-solving.
In contrast, most first-time members of China’s political leadership were not lawyers, but engineers and administrators. In China’s 17th Politburo, 76% of members had experience as provincial leaders. Until several years ago, all nine members of the Politburo’s Standing Committee were engineers by training.
The contrast between the two countries today could not be clearer. The Chinese government has focused on problem-solving. After all, the pressure to create over 24 million jobs a year to stave off social instability is a very real motivator. The country’s economy continues to grow at well above 8% a year, and, as of October 29, 2011, it has accumulated massive foreign exchange reserves of $3.2 trillion. In contrast, the United States continues to be mired in partisan political bickering that nearly triggered a default on its federal debt in August 2011. It is then no surprise that America’s economic growth is expected to remain below 2% for the foreseeable future.
The only way to reconcile political differences is to find common ground. The easiest way to do that is to use data to drive decision-making. I believe that people generally fall into four buckets. They are either liberal or conservative, and they favor either ideology or data in policy developement. I believe every sound government should have some ideologically driven leaders from both political parties to inspire us. That said, I believe the government that governs best is one populated predominantly by data-driven decision-makers. For these individuals, ideology is important, but data is supreme. The problem today is that America’s government is dominated by data-fudging ideologues who care more for party than for problem-solving.
The figure above provides a useful framework to illustrate this problem, and is the primary reason I created this site. I call the funnel in the chart, the “Funnel of Futility.” The more ideological a decision-maker is, the wider the gap between him and his ideologically equivalent counterpart. As ideology becomes increasingly important in one’s decision-making process, the more futile working with an ideological opposite becomes. In contrast, as more data-intensive decision-makers interact, the partisan gap narrows, and government becomes more useful and efficient.
As such, the purpose of this site is to confront the facts, create a dialogue centered around data, and engage in problem-solving rather than political bickering.
2. Small, but Not Minimal, Government Is Best
Since 1901, federal government expenditures have grown exponentially. They have ballooned in recent years so much that one can no longer see pre-1940s values on the chart below. Furthermore, the chart also color-codes each year by the political party occupying the White House. It soon becomes abundantly clear that government has expanded regardless of the party controlling the executive branch.
Of course, American real GDP growth and inflation accounted for most of this effect, so it is more instructive to couch the expansion of government in more relative terms. The chart below illustrates federal government expenditures as a share of U.S. GDP.
From 1930 to 2011, federal government expenditures have averaged about 19% of U.S. GDP. However, if one excludes the last thirty years, that number declines to about 18%, on average. Additionally and despite popular opinion, there is little difference in this percentage between Republican and Democratic administrations. Under Republican presidents, federal government expenditures averaged about 19.0% of GDP, while under Democratic ones it averaged 19.1%. In terms of 2010 GDP, electing a Republican president might only save the country about $11.4 billion, which is roughly equivalent to cutting ethanol subsidies for about two years.
If one uses 19% (or 18%) of GDP as the “appropriate” size of government, it quickly becomes clear that the nation is currently on an unsustainable path. Massive deficit spending does indeed seem to work well for stimulating an economy – particularly military spending. Thus, it is no surprise that the top three years of federal government expenditures as a share of GDP were 1943, 1944, and 1945 when the nation was fully mobilized for World War II. However, the good thing about military spending is that when a crisis ends, there is little reason to continue to support a massive military-industrial complex indefinitely, and it gradually scales down over time. In fact, the DOD’s share of GDP has been in decline since the end of the Cold War and looks to decline even further over the next decade.
The problem with most other government spending, particularly entitlement spending, is that once government establishes an entitlement, it rarely goes away. The reason is due to a psychological human reaction known as the endowment effect. Once government endows people with an entitlement, people tend to perceive its loss as greater than acquiring another benefit of ostensibly equal value. Our representative system also tends to amplify this effect. Politicians who dare to speak of Social Security reform, for instance, tend not to get re-elected.
As a consequence, the federal government is projected to be 25.3% of GDP in 2011, one-third higher than the long-run historical average. 2011 and 2009 are the fourth and fifth highest years of federal spending as a share of U.S. GDP since 1930. Only this time, a World War is not driving these expenditures – rising entitlements for an aging population are.
Federal Employment Is Creeping Upward Again
Associated with rising federal government expenditures is the growing number of full-time federal executive branch employees. The absolute number of such employees reached its high in George Bush senior’s administration, but fell off rapidly during the Clinton years, due primarily to defense budget cuts following the Cold War. Under Clinton, 88% of the civilian executive branch jobs cut from 1993 to 2000 were from the Defense Department.
Net civilian executive branch jobs increased steadily under George W. Bush’s administration, driven primarily by the creation of the Department of Homeland Security. During that period, the Department accounted for 149% of these net new civilian positions.
During President Obama’s first three years in office, the president added nearly four times as many net federal executive branch jobs as President Bush did during his entire eight-year presidency. He also expanded the Defense Department by nearly eight times that of his predecessor. Additionally, he added roughly 15,000 net positions to HHS, Education and the Social Security Administration vs. approximately 3,000 net positions cut during the Bush presidency. The bottom line is that government is now expanding at an accelerating rate.
Government’s Leviathan at All Levels Is Bigger Than It Has Ever Been
But government spending does not end at the federal level. If one includes all government spending across federal, state, and local government, the expansion of government’s reach is even more alarming. Congress routinely passes unfunded mandates that force state and local governments to pick up the tab. While this avoids additional federal expenditures, the American taxpayers ultimately remain on the hook.
The chart above shows the level of total government expenditure as a share of U.S. GDP. Since 1948, the two highest years on record were 2009 and 2010 at shares of 36.5% and 35.0%, respectively, versus an average of 29.4% over the period.
Leviathan Is Drunk
The continued expansion of government results in massive waste, fraud, and abuse. According to a 2010 GAO report, duplicative government programs waste billions of taxpayer dollars. For instance, there are fifty-six separate programs dealing with financial literacy; twenty programs dealing with homelessness, costing $2.9 billion in 2009; eighty-two teacher quality programs; eighteen domestic food assistance initiatives, costing $62.5 billion; fifteen agencies administering 30 food-related laws; and 2,100 government agency data centers, which if consolidated could save up to $200 billion over the next decade. The bottom line is that the government continues to spend like a drunken sailor. These programs should be low-hanging fruit. Why government hasn’t yet addressed them is a clear sign of its failure.
Starve the Beast, But Do Not Hack Off Its Limbs
This site does not advocate stripping government away completely. Private enterprise has little incentive to produce public goods like roads, clean air, and a national defense. As such, government has a useful role to play in these areas. Government also has a role in upholding the law and enforcing contracts. That said, this site believes government ought not use taxpayer money to provide private goods to people when the private sector can nearly always do a better job.
The bottom line is that Reflections of a Rational Republican believes that government has overshot its equilibrium position in the modern U.S. economy, and Americans ought to make every effort to rein it in. That said, this site does not advocate a wide-ranging dismantling of every government department. To be sure, waste exists; however, the scalpel is always preferable to the hack saw.
3. Equality of Opportunity Does Not Imply Equality of Outcomes
The single most important piece of my advice my father imparted was that life is not fair. We cannot control where or to whom we are born, nor the personal circumstances in which we are raised. In many cases, these circumstances may prove insurmountable despite someone’s best efforts and prevent that person from becoming as successful as he or she would have been under more advantageous circumstances.
This site whole-heartedly and enthusiastically supports institutions that promote and recruit people based on a purely meritocratic system. The more data that an institution uses to measure its people, the better.
Reflections of a Rational Republican also supports government efforts to level the playing field in business, government, and education through prohibiting discrimination based on race/ethnicity, gender, religion, sexual orientation, and veteran status. There are certain occasions when government needs to make exceptions. For instance, women can not serve in combat arms positions in the Army. This policy is a good one, not because women are not qualified to serve in these roles, but because mixing men and women in a combat situation is an unnecessary distraction that reduces unit cohesion and ultimately results in a less combat effective unit.
That said, Reflections of a Rational Republican vehemently opposes government favoritism towards certain groups based on immutable characteristics. Two wrongs do not make a right. Rewarding certain groups who have earned their status, such as veterans, is acceptable since that is based on a person’s actions rather than something that one is either born with or not.
Piercing the Veil of Ignorance
Liberal philosopher John Rawls proposed the concept of the “Veil of Ignorance,” which roughly states that most rational people would choose to live in a society that provides the greatest benefit to the least-advantaged, if they did not know their positions in society in advance. I disagree with this contention, because it assumes that everyone is risk averse. I would rather choose a society that advantages the hard-working and competent.
I also believe that government should have a role in providing a safety net for its people, but should not be tasked with providing able-bodied adults with a comfortable life supported by others’ hard work rather than their own.
Furthermore, I believe practices that deliberately favor people based purely on the circumstances of their birth are abhorrent and destructive. I find practices like nepotism revolting, and will oppose them whenever they rear their ugly heads. In the same vein, I find affirmative action policies to be outright examples of reverse racism that ultimately favor wealthy members of certain groups and most hurt poor whites and Asians.
Working Towards a Colorblind and Meritocratic Society
Government does not exist to redistribute wealth by providing handouts to certain individuals at the expense of hard-working families. Government does have a role in ensuring that all demographic groups have access to a level playing field. We must strive to provide people with the opportunity to stand or fall, win or lose, based solely on the value of their own merit.
4. Free Markets Are Preferable to Tightly Controlled Ones…
Markets can be scary and chaotic because it is difficult for any one player to predict the final outcome of millions of individual transactions. However, chaotic they may be, markets are the single most efficient mechanism for price discovery in modern societies. Tightly controlled markets tend to be far more inefficient than free ones, because controlling entities like governments have no more information about that market than most individual participants. In the case of individual corporate participants, governments likely have far less information.
When governments impose too many regulations or try to maintain tight control of different industries, prices rise, and competition and quality tend to weaken. A key example is the American utilities industry. While the industry is highly reliable, it hasn’t innovated all that much in years. Furthermore, it has failed to build more clean, efficient nuclear power plants for decades because of the overwhelming regulatory hurdles that stand in the way of progress.
You Get What You Pay For
One major theme of markets is that a buyer gets what he or she pays for. If a buyer is cheap, the quality of the good he or she purchases will be lower certeris paribus than a more expensive good. For instance, when the market for unskilled labor became too expensive in the United States because of Big Labor-induced market friction, corporations outsourced it to China and other emerging economies. Today, companies like Boeing are building manufacturing facilities in right-to-work states like South Carolina so they can remain globally competitive. When government imposes more rules and procedures, these regulations increase the cost of doing business. Rising regulatory costs, in turn, lead to higher prices.
Markets Will Form When an Unmet Demand Exists
A second major theme is that markets will tend to form when demand exceeds supply, particularly when governments try to ban or to maintain tight control over a particular good. For instance, when the United States government instituted prohibition, there was a proliferation of organized crime as the black market rose to satisfy unmet demand. When the Los Angeles Unified School District stopped serving junk food in lieu of more healthy options, the market for school lunches collapsed. Students stopped queuing for meals, principals reported “massive waste, with unopened milk cartons and uneaten entrees being thrown away,” students began bringing their own junk food to school, and some even opted out of lunch entirely “suffering from headaches, stomach pains and even anemia.” It is perhaps no surprise that students have developed a thriving “underground market for chips, candy, fast-food burgers and other taboo fare.”
The bottom line is that the market is not a force of good or evil. It is like water. It will always take the path of least resistance.
5. …But Government Has a Role in Mitigating Negative Externalities and Market Failures That Unencumbered Capitalism Can Generate
Those with the most extreme libertarian impulses might argue that an ideal government is one that only provides for the legal enforcement of contracts, and for a strong national defense. I will not make such a strong ideological claim here. In fact, complete and unencumbered laissez-faire capitalism can sometimes be very harmful if one fails to account for business’ negative externalities. An externality is defined as a cost or benefit derived involuntarily by a party as the result of a transaction between producers and consumers. Pollution is one example of a negative externality.
Reflections of a Rational Republican believes government has a role in establishing systems and regulations that curb negative externalities when business has little incentive to do so. Government also has a role in helping reduce the negative impacts when markets fail.
That said, government regulations should balance their costs against their projected benefits. Heavy-handed and unnecessary regulation is worse than useless — it can result in real damage to the economy and people’s lives. In fact, Reflections of a Rational Republican believes that in recent years, the pendulum has swung too far toward overbearing regulation. That said, this site does not forswear all regulations whatsoever, and acknowledges that regulations can sometimes be very useful policy tools to address negative externalities and instances of market failure. Here are some examples of regulations that have worked well or better than their designers anticipated.
Food Can Kill You (In Some Countries)
When Americans sit down for a meal in the United States, they rarely if ever have to question if the food they eat will kill them. If they have allergies to peanuts, for instance, they can simply look at a food package’s label and act accordingly. In some countries, it is not safe to eat anything someone sells. In fact, it was not safe in the United States a hundred years ago.
A century ago, conditions in the American food and drug industries were unsafe. According to the FDA, use “of chemical preservatives and toxic colors was virtually uncontrolled”, sanitation was primitive as it became necessary to transport food to growing urban population centers, milk “was still unpasteurized,” and the farms did not test their cows for tuberculosis. Furthermore, medicines “containing such drugs as opium, morphine, heroin, and cocaine were sold without restriction,” and labels “did not list ingredients and warnings against misuse.” The public was literally at the mercy of the snake oil salesman.
As such, the FDA is a good example of government protecting the lives of its citizens against the negative externalities that can result from unfettered free market capitalism.
Annihilating Acid Rain
People first observed the impact of acid rain “in the mid 19th century,” when some “noticed that forests located downwind of large industrial areas showed signs of deterioration.” English scientist Robert Angus Smith first coined the term “acid rain” in 1872 after he observed “that acidic precipitation could damage plants and materials.” Scientists did not consider acid rain a serious problem until the 1970s, when they “observed the increase in acidity of some lakes and streams.”
Acid rain is a broad term referring to precipitation containing higher than normal amounts of nitric and sulfuric acids. The precursors to acid rain are sulfur dioxide and nitrogen oxide emissions. Electric power generation that relies on burning fossil fuels like coal accounts for roughly two-thirds of sulfur dioxide and one-quarter of nitrogen oxides emitted in the United States. In other words, acid rain is largely a negative externality related to coal-fired power production.
Acid rain is a serious problem because it “causes acidification of lakes and streams and contributes to the damage of trees at high elevations.” Acid rain also “accelerates the decay of building materials and paints.” Sulfur dioxide and nitrogen oxide gases also “contribute to visibility degradation and harm public health.”
To curb the negative externalities of coal-fired electric power plants, Congress passed the Clean Air Act of 1990, which provided for a cap-and-trade program to limit sulfur dioxide and nitrogen oxide emissions.
By most accounts the program has been a resounding success. The EPA estimates that the benefits of its Acid Rain Program are ~$50 billion annually, “due to decreased mortality, hospital admissions, and emergency room visits.” The program has also succeeded in dramatically reducing sulfur dioxide and nitrous oxide emissions since 1989 as the maps below attest.
TARP Intervention Necessary to Prevent Monumental Market Failure
“The strategy was a breathtaking intervention in the free market. It flew against all my instincts. But it was necessary to pull the country out of the panic. I decided that the only way to preserve the free market in the long run was to intervene in the short run.”
— President George W. Bush in Decision Points
Anyone who knows anything about the modern financial system knows that without faith, money would not work. The government can literally print as many dollars as it likes, but the moment that people believe the dollar is no longer worth the paper on which it is printed, it becomes worthless.
During panics, people and markets behave irrationally. In 2008, I worked at a Wall Street firm and lived through the irrationality. I watched the market value companies for less money than the cash those firms had in the bank.
It simply did not make sense. It was a panic.
By buying the big banks’ troubled assets, the government necessarily intervened in the market by putting a floor on market values. This action likely prevented a much more pronounced economic crisis. Without this intervention, the overall market could have collapsed. That said, it might not have. However, had you been President of the United States at that time, would you have taken that risk?
While the market is efficient most of the time, government has a role for softening the blows of more extreme market volatility, market failure, and the impact of business’ negative externalities.
6. Individual Rights Trump Communitarian Impulses
“Complaints are everywhere heard from our most considerate and virtuous citizens, equally the friends of public and private faith, and of public and personal liberty, that our governments are too unstable, that the public good is disregarded in the conflicts of rival parties, and that measures are too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority. However anxiously we may wish that these complaints had no foundation, the evidence, of known facts will not permit us to deny that they are in some degree true. “
— James Madison in Federalist No. X
The challenges with which James Madison struggled in November 1787 are very similar to the travails Americans face today. In Federalist No. X he argued that the existence of factions was a necessity for the pursuit of liberty, and that there ought to be curbs on the tyranny of the majority. Reflections of a Rational Republican continues to endorse this notion of representative democracy that James Madison so eloquently enunciated over two hundred years ago. Put simply, representative government ought to ensure that the rights of the individual trump communitarian impulses, so long as those rights do not harm the rights of others.
Madison’s words continue to ring true today in an America in which the political left increasingly demands that a small minority of the population pay an ever-increasing share of the tax burden. In fact, the top 10% of earners pay 45% of all taxes in the United States, a share larger than any other OECD country. The top 1% pay a full 40% of income taxes.
Nevertheless, Madison saw these conflicts in his own time as well:
“But the most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations, and divide them into different classes, actuated by different sentiments and views. The regulation of these various and interfering interests forms the principal task of modern legislation, and involves the spirit of party and faction in the necessary and ordinary operations of the government.”
He argued for a republic precisely because the representative government it provided helped mitigate these conflicts and blunt the tyranny of the majority inherent in a pure democracy. In the end, he maintained:
“The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.”
Reflections of a Rational Republican is committed to adhering to Madison’s principles. So long as an individual rights do not harm those of another, the government ought to defend these rights against communitarian impulses.
7. A Strong National Defense Is the Cornerstone of a Robust Republic
Free speech, property rights, and representative democracy are nothing without a strong national defense. Furthermore, it is critical that America’s military not only be able to defend the United States and its territories, but also that it be strong enough to guarantee access to critical geopolitical resources. America’s robust defense of free trade not only benefits its own national interests, but also promotes global stability and a rising middle class in countries like India and China.
Reflections of a Rational Republican supports a security policy based on the realist school of international relations — the same school that guided the actions of Reagan, Clinton, and George Bush, Sr. This view of international security policy posits that nations behave in a manner maximizing their vital national security interests. Any actions that do not further these interests are not worth pursuing.
Because Reflections of a Rational Republican subscribes to the realist school of international reflections it necessarily rejects both the isolationist wing of the Republican Party (e.g., Ron Paul and Pat Buchanan) and neoconservatives who believe America’s military should serve as an instrument of spreading democracy to undemocratic nations.
In summary, Reflections of a Rational Republican supports strong military power based on securing America’s vital interests around the world to ensure the smooth flow of international commerce, and to maintain access to critical commodities essential for ensuring American economic growth.