Are Liberals Statists?

Conor Friedersdorf says no, but at Mother Jones Kevin Drum totes up the scorecard and says, pretty much, yes:

If you can find liberals who favor charter schools, less regulation of small businesses, and an end to Fannie Mae, that’s well and good. But that’s 10% or less of my worldview. I also favor high marginal tax rates on the rich, national healthcare, full funding for Social Security, more spending on early childhood education, stiff regulations on the financial industry, robust environmental rules, a strong labor movement, a cap-and-trade regime to reduce carbon emissions, a major assault on income inequality, more and better public transit, and plenty of other lefty ambitions… If we lived in Drum World I figure combined government expenditures would be 40-45% of GDP and the funding source for all that would be strongly progressive.

The only problem with this is that Drum underestimates the expense of what he wants to accomplish. According to usgovernmentspending.com, total government spending in the U.S. in 2009 was about 42% of GDP (up from 36% the year before), and we aren’t anywhere close to Drum World. He mentions Sweden favorably – well, Sweden has government spending around 60% of GDP.

Now, I think total government spending somewhat overestimates the true fiscal impact of government on the economy, because much of that spending consists of direct transfers to individuals, who then spend their money in the market, and some of it also consists of building things like roads. Government consumption is a very conservative estimate of the fiscal burden of government, consisting of government spending on its own operations (wages and goods). (Of course, it excludes regulatory burden.) According to the OECD, in 2008 government consumption was 16.7% of US GDP, compared with 26.0% in Sweden and 26.7% in Denmark. The lowest in the OECD? Mexico (10.6%) and Switzerland (10.8%). Switzerland – that land of impoverished people starving in the streets, that dystopia of megacorporations enslaving and brutalizing their employees – has a government more than 35% smaller than that of the U.S… in 2008.

10 thoughts on “Are Liberals Statists?

  1. Interesting since the word Liberal comes from the word Liberty which implies the opposite. Too bad the Liberals got caught up in the idea of positive liberties at the turn of the last century. They have become the monsters they feared.

  2. Aha. Marc likes comprehensive plans a’la Paul Ryan and Jason admires Switzerland. I had a short look in the OECD database not only whether Jason is cheating but also into what is going on? OECD: “Government expenditure by function” At the end of the day it should matter how government wastes Jason’s money.

    Good news! I’ve a comprehensive plan for the USA. First Obama must reschedule his State of the Union Address. He will announce: I’m fed up to police 99% of the world everyday and me and my US underlings will in the future only mind our own business. I declare the USA neutral and our defence limited to homeland self-defence. But be warned: any attack will be answered with nuclear extinction of the enemy. By doing so he can save a lot. CH spend 0.8% on defence the US almost 5%.

    Next Nancy Pelosi summons all her statist losers and reverses course on health-care. Obamacare wasn’t a real winner. Now the president wishes that his cadres revoke it and instead go for Emmentalercare. These Swiss aliens live far longer than Americans but spend only 1.7% of GDP on life instead of 7.5%. Voila … only two small adjustments and the US is Switzerland Deluxe.

    If Jason wants a medal of honour he can find his long lost and hidden compassion with his fellow citizens and start a Swiss federal initiative to double the social protection expenditure to match the actual Swiss expenditure. Of course he will cruise the country on public transport to watch Swiss-style voting in the various town halls meetings.

    PS: Does anybody pay attention to this silly labelling wars? Being a progressive I would never even dream to worry about being labelled “statist”. So what? The real question is: Is Drum’s world desirable or not?

  3. Those reforms, as a package, sound pretty good to me. 😉

    I do think there is reason to be concerned about the freedom-reducing effects of state intervention. Let’s suppose one doesn’t think that freedom is the highest end; instead, it is subordinate to equality of resources and such. Nevertheless, if there are two equally affordable means of reaching the same “progressive ends,” perhaps even many a progressive would say that the means that requires less state intervention is better.

  4. Hmmm … Today is the anniversary of MLK’s “I’ve a dream” speech. Right? My understanding of his thinking is, that freedom and civil rights per se are hollow concepts without some sort of social and economic justice. What’s the point of having the right to sit at a lunch counter without a dime in your pocket? So yes freedom per se isn’t the highest end.

    Martin Luther King III

    And again yes “progressive ends” should be reached based upon the subsidiarity principle. That said I disagree on your and Drum’s implicit constraint of “affordable” to reach those ends. Disclosure: my macro-thinking is along the line of Georg Knapp, JMK, Abba Lerner, Wynne Godley, … Modern Monetary Theory (MMT).

    In Stephan’s World taxes fund nothing. Instead taxes serve only two purposes: first they bring into existence a FIAT currency and second drain nominal demand from the private sector to counter inflation. Thus the consolidated government sector (treasury and central bank) can afford whatever means to reach a desired end. It has deep pockets. I would say infinity minus 1US$. But well that’s another story.

    By the way: I’ve some Austrian and German libertarian friends who are big fans of your New Hampshire project. So once your little libertarian utopia is in place be prepared for some immigration from Europe. They are fed up by the ongoing socialist oppression here.

  5. Stephan’s World just doesn’t make sense to me! Scarcity is an inherent feature of the human condition. No government can abolish or ignore it.

    The FSP’s had a number of Europeans join, and some of them have even moved. It’s difficult, though – the US government makes it very hard to immigrate & work here.

  6. Don’t worry! You are not alone in not understanding modern monetary arrangments. Keynes once remarked: “Lerner’s argument is impeccable but heaven help anyone who tries to put it across to the plain man at this stage of the evolution of our ideas.”

    And yes you’re right real resources are scarce! But money is a complex and very different subject compared to these real resources. Let me give you an example: Here’s the story how the FED purchased MBS on the secondary market. Richard Dzina, senior VP at the New York Fed was running the show.

    The task to accomplish was to buy 1.25 trillion of MBS assets. The Fed was able to spend so much money so quickly because it has a unique power: It can create money out of thin air, whenever it decides to do so. So, Dzina explains, the mortgage team would decide to buy a bond, they’d push a button on the computer — “and voila, money is created.”

    So money in this regard is only scarce if you assume the FED is running out of keystrokes. Not very likely 😉

    I would be delighted if we can have a discussion about money and modern monetary settings. To start with I would like to hear your opinion on L. Randall Wray’s “Towards a Libertarian/Austrian Modern Money Theory”

  7. I’m happy to have this discussion, but it may be worthwhile to clear a few preliminaries out of the way first!

    First, money isn’t wealth. If it were, Spain would have been the dominant European power of the 1600s, and Zimbabwe would be the world’s richest country today.

    Second, in the long run increases in the money supply only increase the price level; they don’t create new wealth. Even the most ardent Keynesians acknowledge this.

    I’ll check out that blog post & let you know what I think…

  8. (1) 100% d’accord. Eventually Spain and the Potosi silver mines are one of my favorite example to explain my Austrian goldbug friends why being on a metal-standard doesn’t mean inflation is never ever happening.

    (2) I would prefer a different formulation. If aggregate nominal demand from the private and government sector exceeds the economy’s capacity of real output it brings forth inflation.

    Your definition smells like “quantity theory of money” although with the qualifier “in the long run”. I don’t want to support an intellectual fraud 😉

    Enjoy your Sunday!

  9. Well, the Quantity Theory of Money is basically right in the long run. 🙂 I read the blog post you mentioned, but it never actually describes what “MMT” is. I do disagree with the government jobs program the author proposes. In the absence of externally imposed costs on the employment relationship, a competitive labor market tends to full employment. Siphoning otherwise productive people into government make-work jobs reduces an economy’s productivity, making everyone worse off. If you want to redistribute to the least well off in society, a much better alternative is the universal basic income, which allows recipients to supplement their government grant with private income, thus keeping work disincentives lower than existing welfare programs:
    http://en.wikipedia.org/wiki/Basic_income

  10. My mistake! Thought you were following the debate. I think Wray wrote this post in response to some libertarians and Austrians economists crying wolf about an article in the Huffington Post.

    Basically MMT is a synthesis of Lerner’s Functional Finance and Godley’s stock-flow consistent macro model (i.e. sector financial balances model). That’s how I would put it. Here’s Lerner’s original paper “Money as a Creature of the State” and here a more modern version Modern Money.

    I’m agnostic whether the government as employer of last resort (Lerner’s idea) or a Basic Income (What’s Wrong With a Free Lunch?, Philippe Van Parijs) is the way to go. For both there are good economic arguments. I think this is more or less a political question. If a society is stronger biased towards work ethics — like the US with a relative weak welfare system and automatic stabilizers — the former might be more acceptable for the public?

    Needless to say that I don’t underwrite your “a competitive labor market tends to full employment” assumption. But this and the Quantity Theory of Money are subjects for another day. For sure some Pileus wise man will come up with a scary inflation story in the next months, which is then the appropriate place to vent about the Quantity Theory of Money.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s