Archive for the ‘2a. Small, Not Big Government’ Category.

John Stossel – No They Cant

John Stossel – No, They Cant!

John Stossel explains in this short video that politicians routinely make grandiose promises, but never deliver the results.

Here are the main points of the video:

Stossel contends that government doesn’t really create jobs. All government does is take money from somebody else to create a job. To support his point, he interviews the following people:

  • Keith Ellison, Minnesota Congressman says that the public sector and private sector must work together.
  • However, billionaire Mark Cuban says nonsense. The government is inefficient and the private sector must create jobs. He says that he would have a tough time recreating his success today because of the increased burden of regulation. He wonders why government makes it so hard for people to start a business, when businesses provide the real employment for an economy.
  • Ed Land, owner of Chattooga Belle Farm in South Carolina, agrees. He decided to go into agro-tourism, hosting weddings at his acquired farm. Now, he’s so sick of government regulations, hoisting a high stack of regulations that require his time and money to comply with. Regulations stopped him from canning and selling his crops. Regulations required him to make multiple little changes to his building. For example, he was required to place a secondary sink next to an existing sink. He observes that bureaucrats keep their jobs by finding problems. Without government intrusion, he says, he could have hired 10 more people.
  • Often well-intentioned laws have the opposite effect of what was intended. A case in point is the Americans with Disabilities Act. Before the Act, 51% of disabled people had jobs. Now, only 33% have jobs. Why? Employers see the disabled as a legal threat. They are afraid if they hire the disabled, they face potential lawsuits if they ever had to fired them.

Our country is drowning in regulations, and entrepreneurs are being discouraged from starting and growing businesses and providing the jobs our country desperately needs.

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John Stossel – Regulation Nation

John Stossel – Regulation Nation

John Stossel explains in this short video that government regulators run roughshod over common sense.

Here are the main points of the video:

The government has produced 160,000 pages of rules. Some contradict each other, yet bureaucrats keep adding more. They add thousands of new pages of regulations every month.

Cliff Asness, of AQR Capital Management, a fund he grew from $1 million to $50 billion dollars, says that some regulations are needed but most are not necessary and counter-productive. He observes that politicians don’t get famous for doing nothing. They get well-known for passing passing laws.

For example, after Enron, the government passed Sarbanes Oxley. They told us that the regulations would protect us. However, it didn’t stop Bernie Madoff or the housing collapse.

Asness says you can never prevent intentional financial fraud if it occurs through collusion and participation from the top. He says that Bernie Madoff was registered with the SEC, yet it didn’t prevent that fraud. Dodd/Frank now requires more money managers to be registered with the SEC. All that accomplishes is to place a greater burden on smaller companies. Asness concludes that markets are not perfect and make errors, but they are far more efficient than bureaucrats.

John Stossel recounts his book tour for No They Can’t. He was impressed by the number entrepreneurs that attended. Why did so many come? Most were infuriated because of their experience with regulators.

Mike Whalen is CEO of Heart of America Group CEO, a hotel and restaurant operator. Thirteen years ago his company installed pool lifts for the disabled in its hotel swimming pools. However, the Department of Justice has since mandated that self-operated lifts be installed at every body of water on the property, including pools, spas, etc. Plus, they gave Heart of America Group 40 days to comply.

Here’s the problem. There are 105,000 – 120,000 pools and spas in hotels alone in this country. In addition, there are another 150,000 public pools. The manufacturers only make about 50,000 lifts per year. It would take years for everybody to comply with the Department of Justice regulation, not 40 days. There simply isn’t enough manufacturing capacity.

Furthermore, in thirteen years the Heart of America Group has never seen any disabled person ever use any of the lifts they installed. Another hotel operator reports that after 15 years nobody has used their lifts either. Since lifts cost $10,000-$15,000, this regulation will cost a billion dollars to comply with and few people are going to benefit from it.

Bigger government creates more and more useless regulations. It’s time to shrink our government.

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Want Less Corruption Shrink the Size of Government

Want Less Corruption? Shrink the Size of Government

In this short video, Dr. Daniel Mitchell of the Cato Institute explains that the bigger the government the bigger the opportunities for corruption.

Here are the main points of the video:

Dr. Mitchell explains that when there are ethics breaches, governments respond with more laws. This merely provides politicians with more power to redistribute wealth. Then, special interest groups seek welfare, foreign aid, bailout money, artist handouts, healthcare subsidies, etc. Our government spends $3.5 trillion, more than $45,000 for every family of four in America. This massive size of government creates opportunities for corruption.

Federal government spending increases each year, as you can see below

Federal Government Spending

Programs that provide subsidies to other parties grow as well, as you can see below

Number of Federal Subsidy programs

More programs that provide subsidies to other parties lead to more lobbyists trying to get their hands on that subsidy money, as you can see below

An Expanding Government Leads to More Lobbyists

It all adds up to more opportunities for corruption, as you can see below

Opportunities for Corruption

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What Is the Evidence Against Big Government

What Is the Evidence Against Big Government?

Watch this short video to see real-world research proving that countries with small governments are more prosperous than countries with big governments.

Here are the main points that Dr. Daniel Mitchell, Senior Fellow-Cato Institute, makes:

Countries with small governments are more prosperous than countries with big governments. For an apples-to-apples comparison, Mitchell only chose similar Western democracies to study, including Denmark, Sweden, Germany, and France. Notice below that the countries have comparable Economic Freedom of the World rankings with two better than the US and two worse.

Economic Freedom of World

Economic Freedom of the World

Notice below that the four governments of the European countries all spend more per GDP than the U.S. For example, France spends about 53% of GDP compared to about 40% for the U.S. Therefore, the governments of the four European countries are larger than the U.S.

General Government Total Outlays

General Government Total Outlays

Now, notice which of the countries is more prosperous as measured by per capita GDP. You’ll notice that the U.S. with the smallest government is more prosperous with a per capita GDP of about $27,000 compared to Sweden with a a per capita GDP of only $38,000.

Per Capita GDP

Per Capita GDP

What is the lesson for us? The more a government spends, the lower the country’s standard of living. The less a government spends, the higher the standard of living. The costs of government will inevitably exceed the benefits it provides because the government: 1)sucks resources from the private sector; 2) misallocates resources; 3) encourages undesirable behaviors; 4) is inefficient; and 5) inhibits innovation.

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Eight Reasons Why Big Government Hurts Economic Growth

Eight Reasons Why Big Government Hurts Economic Growth

Yesterday, we showed that countries with small governments are more prosperous than countries with big governments. Today, we explain why big governments harm the economic prosperity of a country. Watch this video by Dr. Daniel Mitchell of the Cato Institute.

Here are the points that Mitchell makes: Eight Reasons Why Big Government Hurts Economic Growth

  1. Extraction cost. The federal government cannot spend money without taking it from someone else. The taxes government collects discourage work, saving and investment and reduces our nation’s competitiveness.
  2. Displacement cost. When government diverts money from the private sector, there is one less dollar spent on productive private investment and one less dollar spent creating jobs.
  3. Negative multiplier cost. To see that new regulations are followed, government creates agencies to monitor compliance and hires workers that further suck money from the economy. Plus, the regulations themselves cost money to comply with. The IRS is a good example.
  4. Behavioral subsidy cost. Many government programs encourage undesirable behavior.  An example is welfare, which encourages recipients to stay unemployed.
  5. Behavioral penalty cost. Many government programs discourage saving because the government subsidizes retirement, housing, and education.
  6. Market distortion cost. Government programs interfere with competitive markets. In healthcare and education, costs rise dramatically because of the “third party payer” issue, in which somebody else, not the recipient of the service, pays for the service. Therefore, the recipient doesn’t care what the service costs: someone else is paying for it.
  7. Inefficiency cost. Government run programs like K-12 education, air traffic control, and the postal service are less efficient than comparable private sector companies.
  8. Stagnation cost. The private sector must constantly innovate to stay competitive. Government programs have no such incentive.

We need reduce the size of our government and hand the U.S. back to the people and the private sector.

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Countries with small governments are more prosperous

Countries with small governments are more prosperous.

This week’s lesson will provide a short video each day presenting the case for small government. The government of the United States is now too large and threatening our competitiveness in the world. There is an optimum size for government, which we have exceeded today.  Watch this short video by Dr. Daniel Mitchell of the Cato Institute that provides visual proof that countries with small governments are more prosperous than countries with big governments.

Here are the main points that Dan Mitchell makes:

Government is needed to protect personal property and enforce rule of law. However at some point government spending sucks money from the economy and reduces the economic prosperity of a country. This is revealed by the Rahn Curve, shown below.

The left axis is economic performance, which you want to be high. The horizontal axis is size of government, which is government spending measured as a percentage of GDP. Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period.

You certainly need some government versus no government. After all, no government can result in lawlessness. So an increase in essential government (going right on the horizontal axis) will cause economic prosperity (going up on the vertical axis) to increase. However, at some point when you go right on the horizontal axis too far and increase government spending too much, economic prosperity begins to fall and the curve  begins to slope down.

What is that optimum point where more government spending actually diminishes economic prosperity? Studies say around 25% or lower of GDP. Where are we today (as measured in 2010. It’s worse now!)? As you can see below, US government spending as of 2010 consumes 40% of GDP. This is way past the 25% the point where we should be.

Other nations are worse off than the US as you can see below.

The lesson for us is that we must reduce the size of government to get our economy growing again and to reduce our huge deficit.

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