Big Government Revisited

A while ago I announced on this blog that I Hate "Big Government." Specifically, in that post I argued against the usage of the phrase "big government" to refer to a government specifically defined as having a large budget, compared to its country's economy, e.g. when Medicare, a large federal spending program financed by ordinary taxes, is attacked as being a form of "big government." To me, the phrase is meant to conjure up visions of George Orwell's 1984 and a big surveillance state that has infringed the liberties of its subjects, but general taxes, I argued, don't really infringe on people's liberty very much (setting aside the question of whether they're economically desirable) and once the government has its hands on the money, well, it can spend it however it wants without violating anyone's liberties. And I still think that's basically correct, but I recently gained a deeper appreciation of what the "big government (a.k.a. big budget)" complaint is. The thing is, it's not about the tax side of the equation, it's about the spending side.



Y = C + I + G + (X - M)

That's the formula for gross domestic product (or one of them, at least; there are several others that are the same by definition). Y is the economists' variable for GDP itself, for some reason; C is (private) consumption, I is investment, G is government spending, X is exports, and M is imports. For the sake of this particular discussion, forget about the parenthetical (i.e. net exports) and also about investment; let's imagine a world that's just C and G. And let's say that C = G, so that our economy is 50% private consumption, 50% government consumption. The basic question of economic social organization is how to decide which goods and services will be produced and consumed, and also who will do the producing and consuming. Not just, mind you, the merits of those questions, but also what my criminal law professor Dan Kahan would call the "institutional dimension": who should decide. So let's consider who decides these questions, in each half of the economy.

In the C half, the private consumption half, well, as an initial matter it's private parties making these decisions, through the standard mechanisms of supply and demand, etc. Maybe that produces a well-functioning market that optimizes total production and maybe it doesn't; that's not the point. The point is that private individuals make the decisions that end up allocating resources, except insofar as the government comes along and regulates those decisions. And those regulations are the kind of thing that libertarian types love to object to, because they violate freedom blah blah blah. And, y'know, I disagree for various reasons, but obviously I can see what they're getting at: the government is telling people what they can and cannot do. In some very broad sense, it is restricting their "liberty"--perhaps in a justifiable and good way, but it is restricting something that can plausibly be described as liberty.*

In the G half, there are no government regulations at issue, at least, not ones that regulate things that aren't the government itself. So as a legal matter, or a constitutional matter, there are just plain no individual rights being violated here (except maybe something like the Establishment Clause right against having your tax dollars finance a religion you don't like). What happens in this half of the economy is actually a lot like what happens in the other half, on one level: producers and consumers bargain and purchases are made and goods are consumed, and that process is what ends up determining how this half of society's resources are distributed. Except that there is only one consumer, and it's the government. Which means that the government gets to just decide what stuff it wants to buy. And that's the stuff that's gonna get produced! I mean, the government can't exempt itself from the laws of economics; if it wants to buy a lot of a very scarce thing, it's gonna need to pay for that thing through the nose, etc. But nothing in this half of the economy happens without the government's wanting it to happen. And because it's such a big friggin' consumer, it's likely to have really quite massive market power, the kind that shapes people's decisions about what kinds of production games to enter.

Like, y'know, Medicare. It doesn't violate anyone's negative rights, not even remotely, but simply by spending so goddamn much money the government does have enormous power to shape what the health care "sector" looks like. And if we adopted single-payer a.k.a. Medicare-for-all, well, that power would become a lot stronger. Perhaps not absolute: when a national insurance system decides it won't pay for a certain procedure/whatever, that doesn't forbid people from obtaining that procedure at their own expense, so some fringe "markets" providing those non-covered procedures to the wealthy would likely survive. But basically it would be up to the government to decide how society's health care resources would be allocated. Likewise when the government decides to spend substantial money on other things (although honestly, aside from health care I dunno where the current government does that on any large scale other than by diverting some resources to the production of public goods e.g. national defense, courts of justice, perhaps some scientific research, etc.).

One way or another, the point is that the government's own spending decisions, tho' they violate no negative liberties, function almost exactly like regulations of private consumption decisions. They're the government deciding how to allocate society's resources, and, therefore, mostly, the labor and efforts of its constituent people. But the G side of the economy is regulated far more pervasively than the C side could ever be! On the G side, there's nothing but regulations! It's regulation all the way down, and there's no way to challenge it because hey, the government is just spending money, it's not hurting anyone and hence no one has standing to sue. (Again except in the Establishment Clause context.) But it's still the government telling us what to do, by telling us what to do if we want its dollars. And, of course, the more dollars, the more telling.

So, I get it. I get why people measure the "size" of government by the size of its budget. Which isn't to say I think that's a bad thing: after all, I generally think there should be a lot of regulation-as-such on the C side of the economy, too, so I don't really mind the fact that the entire G side is nothing but regulations. And, I mean, another way to put all of this is that the G share of the economy is the share of our collective productive capacities that we decide how to use together, collectively, rather than just letting our individual decisions aggregate through economic laws. And... when you do put it that way, maybe it doesn't sound so bad? Philosophically, at least? (Setting aside, that is, the question of whether such collective decisions can ever be as clever/efficient as the decisions the market makes.) Like, if there's any sense of a nation as a shared enterprise, maybe some of that enterprise should have democratic politics' hand on the till?

Of course, plenty of people disagree with that philosophy. And this is sort of where the flip side of the point I've just been making, the reflection back to the tax side, comes into play, because one way to think about G is that it's the share of GDP a.k.a. of everyone's income where the decision how to direct that income isn't left with the person whose income it is, but rather appropriated to the government. I don't have any philosophical problem with that; in fact, I think it's kind of neat. Philosophically I actually feel like having G be 50% of GDP is nice, because then the distribution between individual and society is 1:1. But plenty of people do have very deep-seated philosophical problems with the idea that someone else is gonna come along and decide how to spend "their" income that "they" earned. Whatever. But I at least get the sense that something important, and almost sort of liberty-ish, is being taken by the taxman: not just the dollars, but the power to decide how to spend those dollars. And if we conceive of each dollar as just a little bundle of decisional authority, then yeah, the greater the taxman's bite, the bigger the government, in a sense.^ I get it.






*There's an old idea in political theory that "liberty" is distinct from "license," where the latter describes the state of being able to do whatever the hell you feel like and the latter is basically being able to do anything you feel like that doesn't violate someone else's rights. E.g., in a state of perfect license, people are allowed to commit murder; in a state of perfect liberty, they are not. So sayeth, for example, John Locke. So if we buy that idea, there might be room for debate about whether these sorts of economic regulations restrict people's liberty or merely their license; indeed, Randy Barnett would basically have the constitutionality of these regulations turn on that question. But, while it might be an entertaining philosophical thing to discuss, and maybe there should be some distinction where we think a little longer/harder about imposing restrictions on liberty rather than on mere license or whatever (though, obviously, not going to Barnett's crazy-land), the big problem is of course how to tell what the bloody hell the rights that you aren't allowed to violate in a state of liberty are! If I conceive of a right against the exploitation of a person's labor, e.g. by paying that person less than a living wage for said labor, then paying someone less than a living wage does obviously violate their rights, and so a minimum wage law restricts the exercise of mere license, not of true liberty. The Barnett types want to insist that the "rights" woven into the definition of liberty are only a fairly narrow set of traditional common-law "negative" rights, things for the violation of which one would've had a tort suit basically. This is of course crazy, and really the best approach is just to ignore the whole discussion and hope it goes away. So, the point of this footnote is: I really don't give a damn whether these economic regulations restrict liberty or license. Let's define a local term of art, "liberty," that means the combination of the things that Locke and Barnett would call liberty and the things they'd call license; that's the word to which this footnote is attached.

^Of course, I still don't think it's the most powerful sense. I'll admit that there's something being lost to the taxman, something more than just money, something perhaps susceptible to characterization as an individual right. But the individual rights to, say, read whatever books you want, or sleep with whomever you want, or whatever, or basically to do whatever you want in the privacy of your own home, feel a lot more important, viewed as rights rather than as the building-blocks of economic policy. Perhaps my overall intuition about which senses of "big government" carry the most normative weight is broadly in tune with John Hart Ely's grand theory of constitutionalism, which says that judges should basically let the people, through their representatives in legislatures, do whatever they want, unless what they want would interfere with the function or integrity of the political process or would harm a vulnerable minority group whose interests the majority does not share. That "big government" is worst which most creates a sense of separation between the government and the people, I think. So on the one hand we have this purely economic sense of big government, where not only do you get compensated for the loss of your actual tax dollars with the benefit of public services but you also get compensated for the loss of your right to be one tiny droplet in the vast rivers of supply and demand and thus to help shape the economy with the right to be one tiny droplet in the vast rivers of public opinion from which the government springs and thus to help shape the economy. At the far other extreme you have censorship regimes, which are so odious precisely because free speech is not merely a negative individual liberty but is also a cornerstone political liberty, the restriction of which severely restricts the people's ability to control their government rather than the reverse. See, e.g., the People's Republic of China. Somewhere in between, but toward the worse end of the spectrum I think, are things like the government telling people how to conduct their personal/romantic lives, where the (justified) fear is that this will just be the majority imposing its values on deviants with the force of law in a way that the political process is just never going to correct, and/or that these rules will be manipulated by the government to wield power over political dissidents.