Complex Problems, Simple Solutions

Posted on | August 19, 2010 | 40 Comments

Imagine the horror of finding myself favorably cited by David Frum, who notes my concern with lack of attention to elections by the conservative blogosphere, and says that conservatives aren’t neglecting politics so much as they’re neglecting policy:

What is neglected is governance. How much do we discuss what went wrong with the US economy in the Bush years? If tax cuts are essential to pulling the economy out of recession, why didn’t Bush-enacted tax cuts prevent the US economy from tumbling into recession in the first place? Why did incomes stagnate between 2000 and 2007? Why did health cost inflation suddenly accelerate after 2001? What went wrong in the energy markets? How can we do better next time?

Where to begin addressing Frum’s questions? I would start by quoting an observation Ronald Reagan made about liberals in 1964:

They say the world has become too complex for simple answers. They are wrong. There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.

In terms of economic policy, the Bush administration was necessarily guilty of doing that which was politically feasible, rather than doing what was right. Bush also became a prisoner of his own rhetoric — a “compassionate conservative” who was a “uniter not a divider” and who aimed to establish “a new tone in Washington.” This stance limited Bush’s ability to do what was really needed: Reduce the economic footprint of the Welfare State and, especially, curtail the entitlement programs that threaten to bankrupt our nation.

Consider the most glaring failure of the Bush era, the housing bubble. Over the past several decades, the federal government has become so deeply involved in housing — Fannie and Freddie, HUD, the Community Reinvestment Act, the mortgage-interest income tax deduction, etc. — that genuine free-market price signals have become hopelessly obscured by the effects of government intervention. And I am reminded of something that P.J. O’Rourke said two decades ago about public housing policy and rent control:

The law of supply and demand tells us that when the price of something is artificially set below market level there will soon be none of that thing left — as you may have noticed the last time you tried to buy something for nothing.

The flip side of this aphorism (which we may call O’Rourke’s Law) is that when the federal government subsidizes something — as it has subsidized home ownership — the price will be artificially set above market level so that people will be paying more than they can afford for something that is worth a lot less than they paid.

What is true of housing subsidies is also true of health-care subsidies. When the federal government made employer-provided health insurance exempt from income taxes, and subsidized health care in other ways large and small, the inflation of health-care costs was an inevitable result. In an attempt to get a handle on this problem, companies responded by turning to the much-hated HMOs, as well as enacting policies (including out-sourcing and hiring lots of part-time workers) that limited their health-insurance obligations. In many states, policy-makers responded by seeking to impose various mandates on employers and/or insurance companies, having the effect of forcing the private sector to provide health care, regardless of the costs and . . .

Well, these various problems were recently “solved” by the enactment ObamaCare, a solid-gold policy nightmare. It is predictable, as night follows day, that this new policy will not only fail to remedy most of the problems it aimed to address, but also — because of the Law of Unintended Consequences — that it will cause new problems its proponents failed to anticipate. It is just as predictable that any conservative proposal to amend ObamaCare (never mind repealing it, as we ought to do on Day One of any future GOP Restoration) will be denounced as heartless cruelty to the program’s tens of millions of beneficiaries.

You see here, then, that the failure of Bushism was in its unwillingness to speak with Reaganesque clarity about the simple answers — not easy, but simple — to complex problems: Get the federal government out of the housing business and out of the health-care business and (while we’re at it) out of the education business.

Professor Glenn Reynolds has recently discussed the “higher education bubble” as a looming disaster and, as with so much else in contemporary America, this is a problem largely caused by federal meddling. Who is it, after all, that encouraged the Courtney Munna to borrow nearly $100,000 to get a degree in Religious and Women’s Studies? If Fannie Mae and Freddie Mac were implicated in the housing bubble, who will exempt Sallie Mae from blame for the higher education bubble?

We cannot solve problems that we are unwilling to identify as problems, and the intrusion of the federal government into nearly every aspect of our lives — which is to say, the modern liberal Welfare State — cannot be remedied by pretending that all it needs is a few policy tweaks.

Excuse me if I suspect David Frum of believing that a better set of policies, enacted by a better set of policy-makers, can make the Welfare State monstrosity workable. The answer to the Welfare State is not to put Republicans in charge of running it, but rather to push relentlessly for its reduction, to point out at every opportunity how this overgrown bureaucratic catastrophe is destroying our freedoms, picking our pockets, corrupting our politics, and — the most cruel irony — endangering the American dream for those “little people” whom these misguided policies were allegedly intended to help.

That may not be an easy answer, but it is indeed simple.

Good policy is good politics, and vice-versa. To speak the truth, and act upon it, will require moral courage, as Reagan said. The failure of the Welfare State is a truth so obvious that only a fool could fail to recognize it, and only a coward would refuse to join the fight to remedy that failure, thereby restoring both our freedom and our prosperity.

Who will have the vision to lead this fight?

Category: Economics

Comments

40 Responses to “Complex Problems, Simple Solutions”

John S
August 19th, 2010 @ 4:55 pm

Let’s pray that this sentiment resonates with voters:

“The answer to the Welfare State is not to put Republicans in charge of running it, but rather to push relentlessly for its reduction.”

Put perfectly.
John S
August 19th, 2010 @ 12:55 pm

Let’s pray that this sentiment resonates with voters:

“The answer to the Welfare State is not to put Republicans in charge of running it, but rather to push relentlessly for its reduction.”

Put perfectly.
Dave C
August 19th, 2010 @ 4:57 pm

The same with the digital TV tuners… They really were not worth the 70 or 80 bucks that they sold for.. but people had the $40 coupons from the government in order to offset the costs and that easily drove up the price.
Dave C
August 19th, 2010 @ 12:57 pm

The same with the digital TV tuners… They really were not worth the 70 or 80 bucks that they sold for.. but people had the $40 coupons from the government in order to offset the costs and that easily drove up the price.
paul mitchell
August 19th, 2010 @ 5:36 pm

These things are so very simple that it boggles the mind that actions are not taken. You miss the very first step, though.

ABOLISH MINIMUM WAGE.
paul mitchell
August 19th, 2010 @ 1:36 pm

These things are so very simple that it boggles the mind that actions are not taken. You miss the very first step, though.

ABOLISH MINIMUM WAGE.
Robert Stacy McCain
August 19th, 2010 @ 6:06 pm

ABOLISH MINIMUM WAGE.

Also: Abolish the federal 40-hour week, raise the Social Security age for healthy individuals to 70, limit SSI to serious disabilities, and devolve both public K-12 education and regulation of child labor to the state level.

That last point involves a pet peeve: There are a great many 16-year-olds who aren’t really getting anything out of high school (an institution Newt Gingrich once characterized as “subsidized dating”) and who, if the law permitted, could be productive full-time workers. However, between federal restrictions on “child labor” and compulsory-school laws in most states, these 16-year-olds find their work opportunities severely limited and the constant hysteria over “high school dropouts” tends to stigmatize them as a sort of social problem.

What happens — another one of those unintended consquences — is that many otherwise good kids who lack scholastic aptitude are forced to attend school until age 18. So we are compelling kids who aren’t good at school to waste their time (and taxpayer money) by attending an institution that doesn’t serve their needs, when instead they could be working (and paying taxes) while gaining valuable experience doing something useful.

This is just one example of how the one-size-fits-all approach to education disempowers most young people. Yet if you challenge the status quo in such a direct and fundamental way, you will be accused of advocating a sort of Dickensian world where 10-year-olds toil in coal mines, etc. Rather than to risk such accusations, many people who see the systemic problems of our education establishment are afraid to speak blunt truth about the problems, so that real debate about real reform becomes an impossibility.
Robert Stacy McCain
August 19th, 2010 @ 2:06 pm

ABOLISH MINIMUM WAGE.

Also: Abolish the federal 40-hour week, raise the Social Security age for healthy individuals to 70, limit SSI to serious disabilities, and devolve both public K-12 education and regulation of child labor to the state level.

That last point involves a pet peeve: There are a great many 16-year-olds who aren’t really getting anything out of high school (an institution Newt Gingrich once characterized as “subsidized dating”) and who, if the law permitted, could be productive full-time workers. However, between federal restrictions on “child labor” and compulsory-school laws in most states, these 16-year-olds find their work opportunities severely limited and the constant hysteria over “high school dropouts” tends to stigmatize them as a sort of social problem.

What happens — another one of those unintended consquences — is that many otherwise good kids who lack scholastic aptitude are forced to attend school until age 18. So we are compelling kids who aren’t good at school to waste their time (and taxpayer money) by attending an institution that doesn’t serve their needs, when instead they could be working (and paying taxes) while gaining valuable experience doing something useful.

This is just one example of how the one-size-fits-all approach to education disempowers most young people. Yet if you challenge the status quo in such a direct and fundamental way, you will be accused of advocating a sort of Dickensian world where 10-year-olds toil in coal mines, etc. Rather than to risk such accusations, many people who see the systemic problems of our education establishment are afraid to speak blunt truth about the problems, so that real debate about real reform becomes an impossibility.
Robert Stacy McCain
August 19th, 2010 @ 6:17 pm

ABOLISH MINIMUM WAGE.

Another point, directly related: Stop limiting your policy proposals to those things which are considered “plausible” or “pragmatic” according to current conventional wisdom. One can think of many things — e.g., airline deregulation — that were denounced as impractical at the time they were proposed, simply because they contradicted conventional wisdom, which has the effect of imposing artificial limits on policy debate.
Robert Stacy McCain
August 19th, 2010 @ 2:17 pm

ABOLISH MINIMUM WAGE.

Another point, directly related: Stop limiting your policy proposals to those things which are considered “plausible” or “pragmatic” according to current conventional wisdom. One can think of many things — e.g., airline deregulation — that were denounced as impractical at the time they were proposed, simply because they contradicted conventional wisdom, which has the effect of imposing artificial limits on policy debate.
Jeff Weimer
August 19th, 2010 @ 6:49 pm

I wouldn’t say abolish the minimum wage. At the federal level, yes, but let the states suffer their mistakes. That said, it certainly needs to be lowered to the point it no longer is a barrier to entry in the job market.
Jeff Weimer
August 19th, 2010 @ 2:49 pm

I wouldn’t say abolish the minimum wage. At the federal level, yes, but let the states suffer their mistakes. That said, it certainly needs to be lowered to the point it no longer is a barrier to entry in the job market.
Jeff Weimer
August 19th, 2010 @ 6:51 pm

As for limiting your policy proposals to that which is plausible and pragmatic, that’s not such a bad thing. An elephant is eaten one bite at a time, after all. And politics is the art of the possible.

Now, agitating to make the impossible plausible, that is another thing entirely…..
Jeff Weimer
August 19th, 2010 @ 2:51 pm

As for limiting your policy proposals to that which is plausible and pragmatic, that’s not such a bad thing. An elephant is eaten one bite at a time, after all. And politics is the art of the possible.

Now, agitating to make the impossible plausible, that is another thing entirely…..
Kojocaro
August 19th, 2010 @ 8:31 pm

my father died and that is how i get SSI
Kojocaro
August 19th, 2010 @ 4:31 pm

my father died and that is how i get SSI
Kojocaro
August 19th, 2010 @ 8:32 pm

oh wait nvm sorry btw
Kojocaro
August 19th, 2010 @ 4:32 pm

oh wait nvm sorry btw
Kojocaro
August 19th, 2010 @ 4:33 pm

GOProud forcing their lifestyle on to ous is not conservative but i will not let that get in the way of madisonconservatives screed
Kojocaro
August 19th, 2010 @ 8:33 pm

GOProud forcing their lifestyle on to ous is not conservative but i will not let that get in the way of madisonconservatives screed
Kojocaro
August 19th, 2010 @ 8:34 pm

us*
Kojocaro
August 19th, 2010 @ 4:34 pm

us*
dad29
August 19th, 2010 @ 9:13 pm

…as it has subsidized home ownership

Or college educations (through its loan programs).
dad29
August 19th, 2010 @ 5:13 pm

…as it has subsidized home ownership

Or college educations (through its loan programs).
Live Free Or Die
August 19th, 2010 @ 9:38 pm

If Public High schools is ‘subsidized dating’, then college is surely ‘subsidized binge drinking and hooking up’.

The higher education bubble bursts on an individual basis, when the new possessor of a college BS attempts to find employment for a wage that High School and College Counselors led them to believe would be theirs upon graduation.They end up tending bar, working the stripper pole, assistant managing at McDonald’s,etc.., and living with their parents
in order to pay off their college loans.Or they blow off the college loan repayment, which will lead to Sallie Mae failure
Live Free Or Die
August 19th, 2010 @ 5:38 pm

If Public High schools is ‘subsidized dating’, then college is surely ‘subsidized binge drinking and hooking up’.

The higher education bubble bursts on an individual basis, when the new possessor of a college BS attempts to find employment for a wage that High School and College Counselors led them to believe would be theirs upon graduation.They end up tending bar, working the stripper pole, assistant managing at McDonald’s,etc.., and living with their parents
in order to pay off their college loans.Or they blow off the college loan repayment, which will lead to Sallie Mae failure
Adobe Walls
August 19th, 2010 @ 10:07 pm

RSM, advocating policies that are considered on the far edges of the reasonable should encouraged, while we work on the more “attainable” goals. Ron Paul has been taking the proverbial blunt instrument to the Federal Reserve for years seemingly to little effect. But perhaps he is more effective than is apparent, who can say? The reason I prefer we start with abolishing the Dept. of Ed.,is that it’s the plainest, easiest case to make. To some extent it’s about selling ideas to the public. I doubt that one percent of Americans have any idea what the Fed does let alone what it’s doing wrong. Make the simple stuff work, that builds trust.
Adobe Walls
August 19th, 2010 @ 6:07 pm

RSM, advocating policies that are considered on the far edges of the reasonable should encouraged, while we work on the more “attainable” goals. Ron Paul has been taking the proverbial blunt instrument to the Federal Reserve for years seemingly to little effect. But perhaps he is more effective than is apparent, who can say? The reason I prefer we start with abolishing the Dept. of Ed.,is that it’s the plainest, easiest case to make. To some extent it’s about selling ideas to the public. I doubt that one percent of Americans have any idea what the Fed does let alone what it’s doing wrong. Make the simple stuff work, that builds trust.
Curious Phrasing, Mr. Appel : The Other McCain
August 19th, 2010 @ 7:53 pm

[…] as factually superior, but rather because they’ve got the votes.And this returns us to the earlier colloquy with David Frum, who asserts the supremacy of policy (“governance”) over politics. You […]
A Welcome Distraction « Obi's Sister
August 19th, 2010 @ 8:55 pm

[…] vacations, politics or whether we are still at war with Eurasia. Or shrinking in horror over being “favorably cited by David Frum.” […]
Dandapani
August 20th, 2010 @ 12:57 am

“For every complex problem there is a solution that is concise, clear, simple, and wrong.” – H.L. Mencken (1880 – 1956), American Journalist, Essayist, and Editor
Dandapani
August 19th, 2010 @ 8:57 pm

“For every complex problem there is a solution that is concise, clear, simple, and wrong.” – H.L. Mencken (1880 – 1956), American Journalist, Essayist, and Editor
Randy Rager
August 20th, 2010 @ 1:47 am

Mencken was a fine individual, but that’s not one of his better quotes. It encourages the individual to stop striving for the elegantly simple solution, and worse, it encourages the individual to allow unnecessary complexity where there need be none.
Randy Rager
August 19th, 2010 @ 9:47 pm

Mencken was a fine individual, but that’s not one of his better quotes. It encourages the individual to stop striving for the elegantly simple solution, and worse, it encourages the individual to allow unnecessary complexity where there need be none.
SDN
August 20th, 2010 @ 2:36 pm

Stacy, child labor laws and minimum wage have one overriding purpose: to keep youngsters who have the capacity to work long hours out of the labor force, thus expanding the market for older workers.

The problem is that we don’t have enough work for the 50% of the population that is below average, but we do have a warm-body democracy (NOT what the Founders intended) where increasingly a vote is the most valuable thing someone has to offer. The consequences are entirely predictable.
SDN
August 20th, 2010 @ 10:36 am

Stacy, child labor laws and minimum wage have one overriding purpose: to keep youngsters who have the capacity to work long hours out of the labor force, thus expanding the market for older workers.

The problem is that we don’t have enough work for the 50% of the population that is below average, but we do have a warm-body democracy (NOT what the Founders intended) where increasingly a vote is the most valuable thing someone has to offer. The consequences are entirely predictable.
Jeff
August 20th, 2010 @ 7:09 pm

first why don’t we actually identify the problems we are trying to solve …

Not the symptoms of the problems but the root problems …
Jeff
August 20th, 2010 @ 3:09 pm

first why don’t we actually identify the problems we are trying to solve …

Not the symptoms of the problems but the root problems …
Stogie
August 20th, 2010 @ 7:13 pm

Your article implies that Bush was responsible for the housing bubble and melt down. He wasn’t.

It was the Clinton Administration who began suing banks and mortgage companies to force them to lend on an “affirmative action” basis, specifically, Andrew Cuomo, Bill Clinton’s Hud Secretary, who sued AccuBanc mortgage for exactly that purpose: to force AccuBanc to make risky loans to minorities.

And it was during the Clinton Administration that Fannie Mae, Freddie Mac and HUD all loosened lending standards for home mortgages to allow poorer people to own homes, regardless of whether they could actually pay for them.

Republican hearings in 2004 sought to enact tighter credit rules over GSE’s, for fear of just such a meltdown, and were roundly rebuffed by the Democrats, who denied there was a problem at all.
Stogie
August 20th, 2010 @ 3:13 pm

Your article implies that Bush was responsible for the housing bubble and melt down. He wasn’t.

It was the Clinton Administration who began suing banks and mortgage companies to force them to lend on an “affirmative action” basis, specifically, Andrew Cuomo, Bill Clinton’s Hud Secretary, who sued AccuBanc mortgage for exactly that purpose: to force AccuBanc to make risky loans to minorities.

And it was during the Clinton Administration that Fannie Mae, Freddie Mac and HUD all loosened lending standards for home mortgages to allow poorer people to own homes, regardless of whether they could actually pay for them.

Republican hearings in 2004 sought to enact tighter credit rules over GSE’s, for fear of just such a meltdown, and were roundly rebuffed by the Democrats, who denied there was a problem at all.