Physicians tend to the welfare of their patients. Their prime directive during treatment of those in their care is to first do no wrong. Government should follow the same admonition when it comes to the economy. In both instances, it is harder than it looks.
Doctors know that their intervention may result in great harm to a patient, so they proceed carefully. When government takes an action, it can have an effect that can cause a problem for an entire city, nation, or the world. Therefore, it isn’t a bad thing when government acts cautiously. A careless word by a president can have a devastating impact especially when it is about economics.
Economic markets should have government involved in their operation as little as possible. There is a need for regulation so that markets remain open to all competitors. It is also the government’s responsibility to make sure that the markets are not being manipulated for the benefit of one person or company over another.
Doing nothing requires a sophistication that elected officials and bureaucrats are not very good at achieving. Too often they chose political expediency and believe that whatever policy they enact from regulation to tax cuts will be seen as a positive. This is patently false. It is more ego than reality.
A government that truly enforces anti-trust rules and does not succumb to carving out tax policies for favored individuals, companies, and industries is playing its part. With that help alone, markets should be able to weed out inefficiencies. Government action may have a transitory impact on the economy through spending policies, but continuous interference will result in reduced economic growth not more.
The government leaving the markets unfettered does not mean that there isn’t a need for government action in other areas. Market capitalism is different from social Darwinism. I would submit that the United States has confused the two contributing to both economic and social impacts negatively.
Businesses are not and should not be engines for social policies. Once corporate decisions are made that revolve around matters other than making a profit ethically and legally, then markets become inefficient. Society and its controlling authority, government, cannot have economic equality when it relies on only a tiny segment to provide social benefits through policy mandates.
This is where tax policy and a social safety net need to work together. The goal should be to make sure that a certain economic equality is afforded every citizen regardless of their income or their employer. We have done an excellent job in making sure everyone has a retirement income and, for older Americans, medical care.
As an example of a necessary governmental safety net, I believe that adequate medical care should be provided to all citizens regardless of income. Our current system relies on an employer to provide medical coverage. That works very well if your employer is Google but, if like most Americans, you work for “Mom & Pop” retail store or are self-employed, you have inadequate benefits even with the ACA.
At the same time, even Google must divert economic and business resources to something other than their reason for being. However, large companies because of our tax codes can absorb more of the non-essential costs of government imposed medical benefits. Medical benefits are nontaxable to employees while deductible to the company. It becomes one of the perks of employment. This results in many smaller businesses being unable to compete for the best employees.
Taxes would need to be increased to afford this safety net, but two advantages would be immediate to the economic markets. One, employers could stop spending resources on non-productive activity. And second, a level of equality would be achieved. How the government provides medical and other benefits could be everything from a single payer system like Great Britain to a more market-based outcome like Medicare which would be my preferred option.
There is a certain inefficiency and added cost with American health care today. By removing the burden of being the provider from the private sector, markets should respond positively. It will also reduce inequality in healthcare.
As to the role of presidents, they usually negatively affect markets by their actions. Markets left alone will rise and fall based on being able to operate efficiently. What could be a positive for one market segment can be a negative for another. The markets like consistency. The government’s abrupt or frequent policy changes result in uncertainty. This is something markets do not want.
The U.S. government claims we have a capitalist system. That has not been true for a long time. Our economic system has become one of favoritism and cronyism. Government intervention has resulted in a quasi-market-based system…one that each year creates more unfairness to more citizens.
I urge us to return to free markets and a just society. True capitalism can and would do just that. But capitalism does not mean the government should forget the welfare of its citizens. A social safety net and unencumbered markets are anything but incompatible.