Economy and Jobs

Experience has shown repeatedly that market economies outperform government-planned economies in providing material well-being: However, the recent recession and continuing unemployment have propelled the government into the American economy to an unprecedented extent. In some respects, such as the takeover of automakers, the government intervention is expected to be temporary. In others, such as the thousands of pages of new laws regulating the financial industry, the intervention is meant to be permanent.
What is the government’s proper role in the economy and jobs? In considering this question it is important first to distinguish emergency measures from actions that are intended to make long-term changes in the structure or operation of the economy. When a patient is in critical condition, his liberty may have to take a back seat to survival.

In late 2008 it looked like extraordinary conditions made it unlikely that the economy would be able to avoid depression using the freedom of choice it usually relies on. In such a situation, the government may have had a compelling interest in providing emergency intervention. Moreover, the initial measures that were taken (the so-called TARP) seem to have been fairly narrowly tailored to serve that compelling interest. The subsequent “stimulus” package is, however, another question.

A larger and more enduring concern is that our nation may be slipping into “socialism” (literally, government ownership and control of the means of production). These fears of socialism may, for the moment, be overblown, but there are degrees of “socialism,” and citizens may have legitimate concerns about the direction in which our economy is being taken. Even if the only near-term changes are increases in the degree of government control over the nation’s economic life, genuine concerns for liberty may exist.

The greatest concern from a liberty standpoint is that increasing the government's control over industry will give the government greater power over people's everyday lives. It is enough that the government can restrain and suppress individual liberty through its monopoly on the force of law (ultimately meaning a man at the door with a gun on his hip). As the government takes on more and more economic power, it can leverage that power to dominate in non-econmic ways as well. What if, for example, most of us depended on the government for our jobs: Would it still be possible for speech and expression to be truly free?

There is no reason to assume that government economic power would be always used benignly. This is especially so given the example of how government has so expansively and somewhat capriciously exercised its longstanding legal power. (Note 1)

Thus, in the interest of preserving our freedom, TAKING LIBERTY SERIOUSLY means vigorously resisting structural changes that would increase the degree of socialism (government-control) in our economy. This “liberty” rationale for resisting socialism is, of course, in addition to the pragmatic concern that a market economy driven by private initiative yields generally better levels of material well-being.

What about the pressing short-term concerns, such as our currently sluggish economy and shortage of jobs? What should the government’s role be in dealing with these kind of problems? To say that the government should have no role at all is unrealistic. For one thing, the government’s tax policies inevitably deflect the economy for good or ill. Also, again probably inevitably, government controls the money supply.

Ultimately, from a liberty standpoint, the question of the proper government role in short-term crises is not so much one of principle but of pragmatism. The “liberty” principle itself—application of the rule of strict scrutiny to impingements on liberty—does not give specific economic answers (since these vary with context), but it does tell us this: There must be a compelling interest to justify any impingements on liberty that government adopts, and even if a new restriction is deemed “compelling,” it must be narrowly tailored and without less restrictive alternatives.

In the economic recession that emerged in late 2008, government was the only entity capable of mollifying and possibly reversing the situation, and that unique capability could have given it the requisite compelling interest. It is, however, more open to question whether the measures that Congress selected were all narrowly tailored. Indeed, the question of narrow tailoring did not seem even to be consciously considered. The stimulus package is notorious for the many spending choices that were in it for purely political reasons. That fact is enough in itself to justify doubt that the stimulus was appropriately calibrated to carry out its ostensible objectives with a minimum of impact on liberty.

More generally, when economic crises occur, the government should not use its compelling interest as a pretext to step in and unnecessarily take over private decisions about how to deploy the nation’s resources. Rather, the basic strategy should be to intervene in ways that encourage private decisions in wealth deployment.

For example, lowering taxes is normally a better form of stimulus than targeted government spending. Not only are lower taxes more friendly to liberty but lowering taxes usually gives more bang for the buck.

The reason lower taxes give more bang for the buck is exactly the same as the reason that market economies outperform planned economies in providing material well-being: A dispersed group of private decision makers is almost always more likely to put money where it will “do the most good,” i.e., provide the best “return” or value on amounts expended. This is an empirical rule of economic science that is as firm as any yet discovered, and there is no reason to think it does not apply just because the economy is in a downturn.

Note 1. See, e.g., Paul Rosenzwieg and Brian W. Walsh, "One Nation Under Arrest: How Crazy Laws, Rogue Prosecutors, and Activist Judges Threaten Your Liberty" (2010) and Harvey A. Silverglate, "Three Felonies a Day: How the Feds Target the Innocent" (2009). Return