Systems, Incentives and U.S. Government

A couple weeks ago, I was having a lively discussion with my hard core Libertarian and Rush Limbaugh fan husband about government.   It’s so easy to take pot shots at the Dems for their spread the wealth and take care of the downtrodden policies driving to a socialist/communist society, but I say that misses the point.  Take a step back, I say, and consider the systems and incentives that drive ALL politicians in their policy-making.

Now, I’m no expert on politics nor financial policy by a very long shot which makes me reticent to opine on these topics on a blog generally reserved for things I know more about.  Yet, in a moment of intuitive clarity, I scratched a note on a scrap of paper that says “Government Systems Blog,”  failed to follow through on it, then was reminded of my intent while catching up on Gordo’s posts this past weekend.  So.   Here we are.

It’s just as well that I waited to write this because Gordo, being very smart about this kind of stuff, said it better and more concisely than I am likely to pull off:

…the cost to run our society is going up, not down. There has been no meaningful restructuring of our approach to government, or foreign wars. This isn’t a case of right/left – government believes in government (and re-election). Congress reflects a lack of will (in the electorate) for a radical restructuring. Frankly, it makes sense, it is a rare group that initiates change absent a crisis.

Well said, but here’s how I articulated my position to Gary.  Our system of government has an imbalance in its’ incentives for growth versus contraction regardless of political party.  Even with all the delays of partisan politics, once you create policy that benefits a particular group, that group is disincented to give up that value (or entitlement).  This is true whether it comes in the form of “free” money, services, stuff, jobs or relative reduction in taxation (although this Fair Tax business is pretty interesting). 

There are perils of governance by the majority because the majority of the individuals in our society are not looking at the long term good for themselves, their progeny and society as a whole.  The more common question among the electorate is what have you done for me lately?  Or how can you help me get mine now, or in the very longest, within a year or two? 

This is not a criticism on the masses of shorter term thinkers.  It’s not reasonable to expect everyone to be comfortable with a 20+ year time delay for resolution of their goals and desires, myself very much included.  If everyone was busy pontificating the long view, who would do all the important work that is best suited for those with typical time horizons?

Yet, as problematic as it is in our governmental system, it’s not just “the masses” who are failing to think long term.  Consider the corporate executives who are supposed to act on long term visions that are subverted by quarterly and annual financial incentives in both publicly traded and privately held institutions.  This contraction of time horizon over which we seek value is a broad problem that will eventually correct itself through a tidal change in public opinion due to either (1) reaching the tipping point of people’s willingness to be taxed or (2) tremendous crisis which leaves us no alternative.  

I wish I had the solution to solve all of our social ills, but I don’t.  I do, however, see the writing on the wall.  Not to be alarmist, but what goes up must eventually come down, and we’ve been going up in size and complexity of our governmental and other institutions for a very long time.   As a society, we may continue on this path for a decades before a correction is imminent.  Or not.  I don’t know.

Still, I can’t help but ask myself some important questions.  What systems and incentives can help us correct the imbalance?  How can I protect myself and my family?  Is there a way I can leverage a future change that others don’t see coming for our relative benefit and protection?  I don’t know, but I’ll be calling on my limited intelligence and unlimited intuition with these questions in mind.

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