The Case for Limited Government is Now Stronger Than Ever

I have studied U.S. and California politics in particular since the mid-1990s, and believe the case for limited government is stronger now, than at any other time in history.

A series of emerging trends have coalesced to produce a political environment that makes it very unwise to try to enact sweeping policy change in today’s political environment (with the exception of an outright repeal of failed government programs).

A major treatise could be written on the subject, but here are some of the key considerations that led me to this conclusion.

First, there has been a noticeable decline in the quality of our elected leaders. To put it bluntly, many politicians are just in it for themselves and purport to pursue the public’s interest only as a means to their own ends.

The ramifications of this trend are huge and have served to give public interests more power over the political process and make it impossible in many cases to enact legislation that is within the public’s interest.

Second, the country’s political economy has gotten increasingly complex which makes it more difficult than ever to craft responsible public policy that is capable of addressing a policy problem not only today, but over a significant time period.

Third, the increasing polarization in the electorate, and reflected in U.S. governing bodies, make it extremely difficult, and more commonly impossible, to substantially revise a public policy once it has been approved.

Many examples could be provided to prove the validity of these assertions, but let’s look at a few case studies.

At the federal level, there is no better recent example than Obamacare. The policy was sold as being the best of all worlds expanding coverage, reducing costs, and improving the business climate in the process.

The only thing Obamacare has done well is expand coverage, but this has come at a great cost in the form of double digit annual cost increases on individuals, business, and government itself.

Without question, the program needs some major fixes to restore at least short-term viability and there are no signs that the political consensus needed to bring such change could be achieved. The result is a government program that is completely unsustainable, but has nonetheless provided health coverage to tens of millions more Americans which makes it impossible for anyone to advocate an outright repeal without a replacement.

Obamacare is looking like another example of a major government program that was enacted with very good intentions, but cannot be made sustainable over the long-run due to the huge complexity of the issue and the inability of the U.S. Congress to come anywhere close to the consensus needed to reform it. Two other examples: Social Security and Medicare, both unsustainable, yet almost politically untouchable.

At the state level, the pension crisis is an excellent example which holds ramifications for the long-term health of state government that equal or exceed Obamacare, Social Security, and Medicare combined.

The Public Employee Pension Crisis has the potential to entirely bankrupt the State of California and all of its public agencies. Stanford University had measured the unfunded pension liabilities at $950 billion in 2013, but more recent estimates peg the debt at around $1.5 trillion for 2016.

In California, the level of retirement benefits provided to public employees is unaffordable to most public agencies in California, and is not currently being covered through contributions raised from public employers, and to a far less extent public employees.

The result is a massive run up is debt for nearly all state and local public agencies in California. In 2013, the total debt for unfunded pension liabilities was estimated at $950 billion, according to Stanford University. But more recent calculations for 2016, peg the debt at $1.5 trillion 50% higher due to major investment losses and soaring benefit costs.

Public pension debt alone in California is currently estimated to equal $77,000 per household in 2013, according to Stanford University’s pension tracker.

Despite the magnitude of the current pension crisis, there are only a handful of California Legislators who will even publicly admit that the pension crisis is a major issue in California. This is due to the fact that the state’s public employee unions control the California Democratic Party, and the Democrats run the California State Legislature.

The state’s pension crisis has the potential to bankrupt the State of California and nearly all of its public agencies, but there is not the faintest sign of a political consensus that will even admit that there is a major problem here, let alone consider a solution.

Furthermore, absent changes to the state’s pension system it makes no sense to further increase state and local tax revenues (i.e. tax and fee increases) since these increased revenues will simply go to fund overly generous and unsustainable public employee benefit costs which are increasing at 10-25% per year on average.

Private conversations with Republican legislators, who are the minority, indicate that they understand the issue and the need for reform but there is nothing to be gained by them going out on the issue short of a critical mass for reform.

Democrat legislators, on the other hand, support the status quo because the public employee unions bankroll their campaigns and the Democratic Party, and most if not all have already signed pledges to the state’s public employee unions to only increase public employee compensation, regardless of the consequences for the state.

Although the necessity for Pension Reform in CA seems to be obvious, many legislators seem unwilling & therefore unable to address the issue, largely due to the strong influence Public Employee Unions possess when it comes to campaign financing of many within the state legislature.

The state’s unsustainable public pension system is another example of a large government program gone bad, but nothing can be done to fix it given the circumstances of the state’s current political environment.

One last case study regarding the need for limited government is the state’s regulatory climate, which has an obvious parallel at the federal level but I will confine my discussion to the State of California.

The State of California’s regulatory climate is credited with being a key factor, along with high taxes, for encouraging more than 10,000 businesses to relocate out of state in recent years.

In a recent Inside Source interview with Stanford University Economics Professor Roger G. Noll, Noll states that California’s regulatory policies and practices are deeply flawed, but not necessarily enough to “drag Silicon Valley to Texas.”

Noll said most California legislators lack the capacity and inclination to craft responsible regulatory policy and that most regulation considered by the California Legislature is deeply flawed.

“We have pretty much a bankrupt system, it is rare to have a bill that is well crafted,” Noll stated.

Yet this does not stop the Democrat Legislature from developing bill after bill that seeks to regulate the California economy in almost every way imaginable. The sad truth is that the vast majority of this legislation is deeply flawed and will do more harm to the state’s business climate while providing little if any public benefit other than a political sound byte.

Moreover, most Democrats develop and pass regulatory legislation as a means to advance their careers and the policy agendas of their supporters, as opposed to advancing the public interest.

Thus, we have a Democrat majority whose primarily occupation is advancing their own agenda, as opposed to the public’s interest, without regard for the long-term consequences for the state’s business climate and economy.

If the Legislature cannot craft legislation in such as way that is beneficial and cost-effective it should just leave the issue alone, which brings us full circle to the need for limited government.

The increased complexity of the economy has dramatically increased the number of issues that can be regulated as well as the potential for harmful effects from poorly crafted legislation, which has become the rule in California, not the exception.

In other words, the best thing the California Legislature can do on most regulatory issues is do nothing. But political motivations necessitate the opposite due to a decline in the quality of our public leaders, primarily if not exclusively California Democrat politicians.

Then California Treasurer Bill Lockyer (D) saw this trend in 2010, noting that most of the legislation considered and passed in the California State Assembly is “junk” but lawmakers “move it along” to keep the special interests happy.

Lockyer also chastised the Democrat Legislature for its inability to address the state’s pension crisis because of who elected them (i.e. public employee unions) stating that it will “bankrupt the state” if nothing is done.

In short, government has reached a point in California, as well as at the federal level, where politicians cannot address the most important issues (i.e. failing government programs) due to political realities, but commonly do the wrong things in the areas where they can act.

The only solution is limited government. First, we must prevent more government programs from going on the books that will inevitably become unsustainable or unworkable, but impossible to fix. And second, we must limit politicians from advancing their own private agendas through legislation that actually does more harm than good.

About the Author: David Kersten is an expert in public policy research and analysis, particularly budget, tax, labor, and fiscal issues. He currently serves as the president of the Kersten Institute for Governance and Public Policy – a moderate non-partisan policy think tank and public policy consulting organization. The institute specializes in providing knowledge, evidence, and training to public agencies, elected officials, policy advocates, organization, and citizens who desire to enact public policy change.