My confidence in free markets is so high, and my faith (for faith is required) in government is so low, that my presumption is that nearly all government interventions into the economy are, on net, unjustified and harmful. This presumption fuels my instinct that these interventions should be eliminated pronto. But I’m also sufficiently influenced by the works of Adam Smith, Edmund Burke, Lord Acton, and F.A. Hayek to understand that large, sudden changes to an economy or society can be dangerously disruptive, even when such changes involve reversing policies that should never have existed in the first place.
So even if I had the power to eliminate all government interventions that I believe are harmful, I would not press a button to eliminate all of them. For example, I’m convinced that the welfare state corrodes welfare-recipients’ willingness to assume full responsibility for themselves and their children. One result is a draining away of recipients’ dignity, and the creation of a caste system of citizens who work and pay, alongside citizens who are largely idle and on the dole. The welfare state corrodes society.
Yet, even if there were no chance that sudden elimination of the welfare state would prompt recipients and their champions to cause havoc by rioting or by disrupting ‘ordinary’ politics until welfare payments are restored, I would not press a button to immediately eliminate the welfare state. The disruption for the recipients would be too great. Millions of people, sadly, rely on various forms of government-dispensed welfare payments. Suddenly severing this reliance would impose on welfare recipients too great and unjust a burden.
The appropriate move would be to gradually reduce the size and scope of the welfare state, with the ultimate goal of eventually making it disappear for good.
I also likely would not press a button to remove American troops and other military support from regions of the world where, were wiser courses followed years earlier, no such troops or support would be found today. I worry that the political and military vacuum created by an abrupt removal of American troops and support would be filled by especially nasty brutes, putting the lives of ordinary people in those regions in especially high danger. (I qualify my position here with the word “likely” because I’m no expert on US foreign or military policy. It’s possible that, were I to become more informed, I would indeed be willing to press a button that brings the immediate and complete removal of US troops and military support from those regions. But judging from what I now know, I’d not push this particular button.) I advocate gradual, yet sure, removal.
A third button that I’d refuse to push, were it available, is one that would immediately eliminate the Federal Reserve. I’m convinced that we Americans would be far better off had we never had a central bank. But history isn’t optional. The Fed has been around for 110 years; it and its practices have long been thoroughly woven into the fabric of the American (and global) economy. Abruptly abolishing the Fed would rip enormous gashes into the complex fabric of financial-market relationships and expectations upon which the entire economy depends.
I’m certain that the economy can – and should – be fully extricated from the Fed, but such extrication must be done gradually to ensure that the process does little damage to financial markets. For practical proposals along these lines, I’d rely on such scholars as my George Mason University economics colleague Larry White, my long-time friend and banking scholar George Selgin, and other serious students of money and banking (which I am not).
There are, undoubtedly, still other unwise government interventions that I would wish to eliminate, but that I would also not willingly push a button to eliminate immediately.
But there are buttons I would push.
I would immediately eliminate all minimum-wage legislation. This legislation does, of course, result in some workers being paid wages higher than they’d be paid absent a minimum wage, but it also results in some other workers being involuntarily unemployed or, if employed, working at jobs that are excessively demanding and unpleasant. Even if minimum-wage jobs were evenly ‘distributed’ across age groups, the drop in the wages of some workers as a consequence of immediate minimum-wage abolition would cause only slight hardship compared to the almost-immediate benefits that would arrive in the form of new job opportunities for low-skilled workers.
Yet, in fact, minimum-wage workers are disproportionately young; fully 44 percent are younger than 25, meaning that these workers are less likely than are older workers to be heads of households. Further, only 1.4 percent of all American workers who are paid by the hour earn wages no higher than the federally mandated hourly minimum of $7.25. Moreover, a mere four percent of all employed 16-19 year olds earn wages as low as the federal minimum. These realities seal the case in favor of immediate elimination of this vile policy that prices many low-skilled workers out of jobs.
The fact that several states and locales have minimum wages higher than the federal minimum wage does nothing, in my view, to change this calculus: all minimum wages should be eliminated, as the gains to workers who would finally be able to earn income and to get valuable job experience would almost certainly swamp the slight fall in the earnings of some other workers.
Another button that I would push is one that would greatly enhance school choice. Starting with the 2023-2024 school year, I would, if I could, use a combination of tax credits and vouchers, paid for out of current government-school revenues, to end everywhere in the US the monopoly grip that K-12 government schools and teachers’ unions have on low- and moderate-income families. This move would, in my ideal world, be a first step toward a complete separation of school and state. The squeals of the unionized teachers would be loud, as would the wailing of government-school administrators. But the pain suffered by these long-time coddled interest groups would be far surpassed by the immediately heightened incentives to improve their teaching and to tamp down their efforts at indoctrination.
Perhaps this sudden move toward meaningful school choice would elicit a few shrieks of anger also from upper middle-class homeowners, whose suburban property values currently reflect the superiority of the government schools in their neighborhoods relative to the abysmally poor schools in other neighborhoods. Too bad. These property-value premia are no more just than they would be if they were instead caused by upscale areas having, say, better government-run supermarkets compared to the government-run stores in poorer neighborhoods. If the fall in middle- and upper-income people’s property values caused by improving poor people’s access to food would be no reason to keep poor people stuck with incompetent supermarkets, the fall in middle- and upper-income people’s property values caused by improving poor people’s access to education is no reason to keep poor people stuck with incompetent schools.
There are many other such buttons that I’d eagerly press, including, were it to exist, the button to eliminate all non-national-defense-related trade restrictions and subsidies. But on this matter I’d find opposition even from Adam Smith. This reality suggests that I must devote an entire column to explain my justification for immediate and complete elimination of all economic protectionism. So stay tuned for my next column.