A rchive Date
[ 17-02-2006 ]
Category
[ International Relations ]
sub-Categoy
[ U.S ]
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[http://www.tcsdaily.com/article.aspx?id=021606B
The Politics of Economic Nationalism
By Arnold Kling 16 Feb 2006
"To remain competitive in the global economy, the United States needs to improve the education and skills of its residents and prepare them for jobs that will be available in the future."
-- Economic Report of the President 2006, Chapter Two
The rhetoric of economic nationalism is scattered throughout this year's Economic Report of the President, and it pervades policy discussions among politicians and in the press. It comes so naturally that we hardly even notice it -- I'm sure I've slipped into it myself. So it's important to point out how unnatural it really is.
As I write this, the Winter Olympic Games are taking place. If you think about it, the nationalistic element of the Olympics is unnecessary. Why make a big deal about how many medals are won by "the United States" as a collective entity? Why not just focus on the achievements of the individual entrants?
Nationalistic rhetoric about economics is even worse than nationalistic rhetoric about the Olympics. Nationalism about the Olympics is a marketing tool for commercial exploitation, and the harm done is relatively minor. Nationalism about the economy is a marketing tool for politicians, and it leads to loss of freedom and responsibility, with enormous quantities of resources channeled through government.
Not "Our" Trade Deficit...
Recently on TCS, Don Boudreaux challenged the economic nationalism of those who worry that "our" trade deficit is causing "us" to become too burdened with foreign debt.
As Boudreaux points out, debts accumulated by our government are indeed collective debts. But if someone from the private sector borrows from overseas, that is his debt, not your debt or our debt. In and of itself, a trade deficit -- or a Capital Account Surplus, as the Economic Report refers to it -- would have no collective implications. With private transactions, those who borrow are in debt, and those who don't -- aren't.
Immoral Government Debt
What is immoral about government debt is the disconnect between the people receiving the benefits and the people who will bear the responsibility of repayment. When my credit card statement shows up, I know what I could have done differently to owe less money. My children won't have that same direct personal responsibility when they wind up having to pay taxes down the road to pay for government spending today.
In fact, it is not just the intergenerational-shifting component of government spending that creates a moral disconnect. Even with a balanced Budget, the people paying the taxes are not directly in control of how the money gets spent.
All that said, the nationality of the holders of our government debt is irrelevant. We are eventually going to be forced to pay taxes to cover the interest and the principal, whether the bondholders live in Tokyo or Peoria. If you want a useful measure of collective liabilities, look at the total future commitments of the government (including payments promised under Social Security and Medicare as well as outstanding debt). Those figures are much more important indicators of future problems than the statistics on the balance of trade or the amount of government debt held by foreigners.
Not Our Oil Dependence
The United States gets much of its oil from Canada and Mexico. Still, we are "dependent" on Middle Eastern oil, because oil is traded in a world market. Any time there is a shock to demand or supply, the price is affected.
"We" are not doing anything wrong by using oil instead of a more-expensive fuel. "We" are not funding terrorism. If you think that Saudi Arabia and Iran are doing bad things with the money they earn, then the place to go to get that fixed is the State Department or the Pentagon, not the Department of Energy. The Energy Department only affects our collective interests by increasing government indebtedness (see "Immoral Government Debt," above).
Not Our Lack of Skills
Individuals need education and skills. Employers need workers with education and skills. But there is no separate "national need" for education and skills.
We do not need a government-schooled population to have an educated population. Instead of No Child Left Behind, the slogan could be Every Family Left Alone. Instead of school districts where the most affluent families are also the ones with the most money to spend on public education, we could have a voucher system where the voucher starts at $15,000 a year per child for the poorest families and gradually declines to zero for families earning the median income.
It can be argued that there are spillover effects from education. I benefit from the fact that you are educated. There is some truth to this, but relative to the benefit that you get from being educated, my benefit from your education is small.
It used to be that our education system helped to promote understanding of our history and culture, and that is a legitimate benefit. Today, however, university education departments seem to turn out teachers who are folk Marxists, not folk Locke-ists.
Not Our Health Care Spending
If libertarians face an uphill battle in selling the notion that education is an individual responsibility, that is nothing compared to the battle we face in health care. Nearly all discussions of health care policy are framed in the rhetoric of economic nationalism. We spend too much on health care. Our system emphasizes acute care rather than preventive care. We have too many uninsured.
When we hear this litany, we should ask skeptical questions. Who spends too much on health care? If I choose to spend a lot on my health care, how does that hurt anyone else? How is the "system" stopping me from getting preventive care? Isn't prevention my personal responsibility? Why don't the uninsured buy catastrophic health insurance? Is it because health insurers won't take them, or is it because the individuals don't really want health insurance unless someone else gives it to them?
I have to concede that there may be a deep cultural impulse to collectivize health care. As the Left is fond of pointing out, every other advanced country has government pay for at least three-fourths of total health care spending. Even in the United States, 45 percent of health care spending is paid for by government, and another 40 percent is paid for by the prepaid health plans that we call health insurance. Less than 15 percent of health care spending is paid for out of pocket.
Still, it might be a useful exercise to take a moment to think about health care without any economic nationalist preconceptions. Suppose that we start with a presumption that consumers can make their own health care decisions, with advice from doctors and information available from third parties. Would it be unreasonable to have an individual factor in cost when making these decisions, rather than take it for granted that an insurance company will pick up the tab? If individuals were choosing health insurance to purchase themselves, rather than using employers as middle men, what sorts of policies would they want? If someone does not choose any health insurance policy, what consequences should they face? Should we continue to force working people to subsidize the elderly, or should people be expected to save enough to pay for the almost-inevitable expenses of health care in their retirement years, and to obtain insurance to cover any unusually expensive late-stage illness?
What I suggest is that instead of starting with the rhetoric of economic nationalism and working down, we start with a presumption of individual responsibility and work up. Maybe the solution for "our" health care system does not come from "us." Perhaps my health care needs and my family insurance needs are something that I appreciate better than anyone else, and perhaps I can choose solutions that are best for my situation.
I am happy to have my tax dollars go to assisting people who are in poverty or who have chronic illnesses. It is the leap from that to a system where everyone uses taxpayer-financed health care that has me confused.
Arnold Kling is author of Learning Economics.
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