Thursday, September 23, 2010

An interesting read

In an op-ed in the Wall Street Journal, AEI President Arthur Brooks and Representative Paul Ryan (R-Wisconsin) discuss why America continues to have big government even though Americans consistently tell pollsters that they’d prefer smaller government...
I can sum up the problem this way: First, it's inherent to human nature to seek greater benefit than effort expended ('something for nothing'). Second, any effort to provide service or benefit via government will almost always entail more overhead and inefficiency than allowing free association to create ways to meet legitimate needs.

What caught my attention about this piece was their (I believe) key identification of why we're unable to take action:
But here the effects of pay-as-you-go financing are most insidious. As I noted in a recent National Review column on why Social Security reform has proved so difficult, shifting from a pay-as-you-go program to a funded system entails significant “transition costs,” which are borne by the very citizens who would decide to make the change. Since today’s Social Security, Medicare, and Medicaid benefits are paid from today’s taxes, if we decide to pre-fund these programs then the current generation must pay twice: first for current beneficiaries, and second for their own benefits. Put simply, to shift from an unfunded program to a funded program, someone must contribute extra funds. When the defining characteristic of domestic policy has been for voters to shift their own cost burdens to future generations, it is highly optimistic to expect current voters to accept a double burden.
This applies across the board. If Americans are truly serious about reducing the size of government; about reducing their dependence on public programming and subsidizing of massive debt, they will incur a transition cost. As economists are quick to quip: "there's no free lunch." We've operated for half a century as though we figured out a way around that principle, when in fact all we did was run up the tab. Sooner or later, one way or another, it will be paid. The warnings have sounded for years, that we needed to face the problem now and stop making it worse by merely kicking it down the road. We failed to heed those warning, and the easier 'off ramps' are now behind us.

In the end, then, the question is this: will America discover its "greatest generation" yet -- the one willing to shoulder the burden not only for their own provision but to clean up the mess of their forebears? If today's citizens instead attempt to pull one more rabbit out of the hat to avoid the problem, they may find themselves still stuck with the tab, but paying it in ways not of their own choosing.

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