The virtues and perils of gridlocked government and policy packages

With the dust somewhat settled I thought I’d take a look at a couple of interesting aspects of the seismic shift in government power in the United States.

In a surge of voter dissatisfaction at the state of the US economy, Republicans took back the House of Representatives in the mid-term elections last week.

So what can Americans expect from the new congress? At least a breather, according to distinguished American legal scholar, frequent visitor to New Zealand and past presenter of the Business Roundtable’s Sir Ronald Trotter Lecture, Richard Epstein:

The good news is that the incoming crowd could not repeat the blunders of the outgoing Congress even if it tried.  Divided government counts gridlock as one of its greatest virtues.  Even a long overdue political bed rest from the next round of Obama legislative mischief should provide a strong tonic for the economy.

But clearly something else has to be done.  Unfortunately, our complex system of divided government has a downside that will be difficult to overcome.  It is just as hard to repeal bad legislation once it is in place as it was to enact that bad legislation in the first instance.  Ties go to the status quo, which in this instance is not enough.

He goes on to suggest some stronger remedies:

The first and most obvious task is to find some political way to derail or postpone the introduction of the health care bill whose internal flaws become only more apparent with each painful administrative announcement. 

The hugely costly but ultimately ineffectual and unpopular health reforms seemed to be a major factor in the demise of many Democrats.  

He also advocates moves in the direction of a flat tax:

On a second front, Congress could opt again toward a flat tax by refusing to raise the top rates on the wealthy.  Only the New York Times editorial board—incorrigible after an electoral drubbing—could be so short-sighted as to think that some deep attachment to income redistribution should drive all tax policy, when incentives for production, labor and investment matter so much more.

and argues that a vigorous programme of deregulation is needed:

Start with easing all the restrictions on employment so that it actually makes economic sense to hire people on terms and conditions that make sense for workers and employers alike.  Then push forward a free trade agenda that removes all the bottlenecks to the movement of labor, goods and capital across national boundaries.  Then be relentless in the opposition to the continued dominance of public unions. And finally open up education to competition from the private sector, including the for-profits, so that entrenched public institutions do not continue to hold their implicit monopoly position. 

The economy and, in particular, government spending, was undoubtedly the defining issue in the US mid-terms.  Plenty of lessons there for New Zealand, and let’s hope it adds impetus to the New Zealand government’s efforts to pursue its 2025 goal.   

Another lesson for New Zealand is contained in Richard Epstein’s explanation of his deep personal aversion to publicly endorsing political candidates for office:

The reason has nothing to do with any sense of personal shyness about taking strong stands on substantive issues.  Indeed, the concern is precisely the opposite.

Candidates represent what might be called tied purchases of a market basket of goods.  The only choices that are given to hapless voters is to pick one such basket over another.  Anyone who offers the menu at a Chinese restaurant gets to choose one from column A and one from column B.  Yet that form of flexibility is denied in choosing people for political office.  It is not because of any inherent defect in the political system.  It is simply because the person is the smallest unit for which it is possible to cast a vote for holding public office.  The only comfort that one takes is that no voter is required to vote for the entire slate of candidates from either party, but can pick and choose among them.

No such comfort in New Zealand.  Under New Zealand’s MMP system, one of the two votes you cast does force you to vote for an entire slate of candidates. More’s the pity.

Another ‘takeaway’ is that voting (politics) is a very crude way for people to pursue their preferences. Markets and voluntary cooperation are often infinitely superior. We should reserve for voting only those things that need to be decided through the political system.

I recommend reading Richard Epstein’s full article. 

As a postscript, I was interested to note that the Tea (Taxed Enough Already) Party – surely one of the most spectacularly successful grass roots movements of our times – is not the ‘extreme conservative movement’ it’s sometimes been painted as. The movement has in fact brought together huge numbers of Americans of a variety of political hues, united in a belief in fiscal austerity as a solution to the country’s economic problems. Interestingly one recent survey showed that 28% of Tea Partiers are independents, and 17% Democrats. 

Much of the movement’s success in uniting such a large and diverse constituency (Moe Tucker of the band Velvet Underground has been a vocal supporter) can be attributed to a desire to maintain a steadfast focus on the economy, and in particular government spending. Another lesson for New Zealand?

For an interesting pre-election view on the biggest myths of the mid-term elections which covers Tea Party misconceptions, read Kimberly Strassel’s article.