Why can’t we all just get along?

Dylan Matthews has a brilliant post up on the Washington Post‘s Wonkblog where he’s taken a piece written by liberal Jesse Myerson for Rolling Stone and rewritten it as a conservative wish list, while keeping the underlying policies the same. The five policies are (liberal / conservative):

  1. Guaranteed jobs / Making welfare recipients work for the government
  2. Universal basic income / Replacing welfare with a single payment to all taxpayers
  3. Government land ownership / Land-value tax
  4. Nationalisation of US businesses / Sovereign wealth fund
  5. Nationalised banks / Enterprise investment banks

While Dylan uses his post to show how important tribalism is in politics, it also highlights what I think is a more fundamental division in politics: pragmatism vs idealism. All of these policies fail, at least in the way they’ve been presented, either because they are politically untenable or because they grossly oversimplify all of the underlying issues:

  1. ‘Make-work’ programmes are inevitably inefficient, because if the work needed to be done (and/or needed to be done by the people being employed to do it) then, apart from very limited cases, it already would be. The same principle applies to government policies to encourage full employment. Britain tried this in the 1960s and 70s and, to say the least, it didn’t work. The idea of paying some people to do nothing may be distasteful to conservatives, but forced labour (whether it’s the individual forced to work or the company forced to employ) is almost always a bad idea.
  2. Universal basic income is an example of a policy that would work economically but wouldn’t survive for a second in the real world politically. From a conservative perspective, there is a wonderful idealistic simplicity to abolishing all of the various government aid programmes and replacing them with a single payment to each resident. And, as Charles Murray has shown, the potential savings are incredible: we could give every American $5,000 a year (with those earning less than $50,000 getting up to $10,000 each) with the savings from dismantling the welfare bureaucracy alone. But you can see what starts to happen almost immediately: $10,000 is not really enough to live on, especially if you have children, so let’s give people with children a bit extra; and $50,000 is a decent income, especially where the household has another member earning $50,000, so let’s not give them quite so much; and what about people with catastrophic medial expenses? The list goes on. By the time you take all of these exceptions into account, you either end up back where you started or with the existing system, plus an extra $5,000 payment to everyone. There’s too much political incentive to meddle with a universal benefit for this idealist policy to work.
  3. Whatever else private land ownership may do, it at least guarantees that land that is in demand (i.e., land that is valuable to people, for whatever reason) will cost more. If the government owned all land, it would have to recreate what the market does naturally through a bureaucratic process. This would not only cost more to administer, but would likely drive up the overall cost of land for individuals. In any system for transferring land the current tenant will want to be compensated for vacating the land, and such compensation will inevitably vary based on the land’s value. Add this to the premium you pay to the government for your lease (which must also be based on the land’s value, because there’s not really any other way of allocating a limited good without impossibly sclerotic bureaucratic systems), and you’re paying just as much as you are now, if not more. The same principle applies to the land-value tax: if the government soaks up all capital gains from land sales, the system of land allocation will either become incredibly inefficient, or buyers and sellers will work out other ways to realise those gains. Governments should do more to divert capital away from rent-producing assets and towards productive investment (taxing income and capital gains from finance, insurance, land at much higher rates for a start), but government land ownership / land-value taxes are not the answer.
  4. The idea here is that the government could generate income by investing in US companies (as an alternative, for example, to individual retirement savings accounts). Sovereign wealth funds work best where a country has surplus income from natural resources, the country already has a balanced budget, and the political system is either authoritarian or coalition based (because both limit the incentives for politicians to appropriate money for political purposes). It is impossible to imagine politicians in the US or Britain, with their adversarial political systems, leaving such a huge pot of money untouched. Just look at how the US government frittered away the stimulus money on Solyndra and the like, or its track record with other ‘independent’ government financial institutions, like Fannie and Freddie. There is also the question of where the money is going to come from. Social security is a ponzi scheme: Social Security isn’t paid out of  interest earned on a capital amount, but from taxes paid by workers today. Sovereign wealth funds require capital to invest, and there is no capital in the Social Security system. There are potential untapped sources of capital out there (the Economist this week is advocating for a $9 trillion sale of assets), but there are major political hurdles to unlocking these.
  5. Our mess of a banking system is probably a topic for another day and another post. At the moment we have all the disadvantages of nationalisation without any of the benefits: we are on the hook to bail out banks for their indiscretions, but don’t enjoy any of their profits. We are effectively subsidising bank’s profits, and so, indirectly, their shareholders. Before we start beating up on bankers, we need to remember that most of those shareholders are institutional investors like pension funds, who are desperately seeking sufficient investment returns to remain solvent in the face of underfunded pension liabilities. So, in supporting bank’s profits we indirectly subsidising individuals’ private pensions—the politics are a lot more complicated when you realise that government guarantees are helping grandma stay in the family home. The problem with nationalising banks is that, again, having such wealth at the disposal of politicians is an irresistible temptation to political meddling. Enterprise investment banks do work in limited circumstances (when they are designed to support specific development zones) but not, generally, at the national level.

In general, conservatives tend to be more pragmatic and less idealistic that liberals, as is suggested by typifying Burke as right and Paine as left. But that’s not always the case. The problem with Washington, DC these days isn’t simply a polarisation of right and left, but that idealists on both sides are exerting more and more control about increasingly trivial points. When even the smallest questions become tests of ideological purity, not only can nothing get done, but, as I’ve described above, we often end up working towards the wrong goals. Conservative and liberal idealists might even be able to agree on a universal basic income (if you could overcome the tribal aspect), but that wouldn’t actually be a good thing.

There is a danger, of course, that too much pragmatism can lead us to countenance entrenched wrongs. And a complete lack of vision leaves you with unloveable, technocratic David Cameron. But most political problems aren’t things like slavery or segregation—they are more prosaic questions about how to ensure economic opportunity and care for those in need. And even great wrongs often have to be tackled piece by piece: Lincoln’s Emancipation Proclamation only applied to slaves in the Confederacy, and it was another three years before he was able to build sufficient political support to ban slavery throughout the US. For most political problems, what’s needed is high-level vision and effective, pragmatic execution.

This combination has been in short supply in recent years (witness the Obamacare debacle). Politicians need to fix their eyes on an idealistic horizon precisely so that they can be pragmatic about how to get there. What we’re experiencing now is the opposite: a lack of vision and corresponding focus on the trivial. It’s as if we’re stuck in a forest and don’t know where we’re going, so that every single step is of crucial importance lest we lose our bearings. This is why Reagan was so successful as a politician, and why Obama has been such a disappointment: both set out grand visions, but while Reagan found a pragmatic way through, Obama quickly got lost in a forest of petty idealism, spending his presidency taking us on counter-productive, ideologically-driven detours.

I used to go to a church in Houston where the minister’s favourite turn of phrase was talking about “the world in which we find ourselves”. I always thought this begged the question what other world we might possibly have woken up in, but many of the policies being mooted today (on both right and left) make me wonder whether their proponents might have expected to find themselves somewhere else. Let’s stop thinking about how we might like to have designed the world, and start looking ahead to how we can improve the one we’ve got.

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