After Hurricane Katrina made landfall along the Gulf Coast on August 29, 2005, families, churches, private businesses, and nonprofit organizations from across the country and around the world immediately provided true compassion to the devastated communities on the Gulf Coast. These vital components of civil society worked tirelessly to minister not only to the physical needs of the people in these devastated communities but also to their unique emotional and spiritual needs, in a way that an impersonal, one-size-fits-all government could not.
There is no question that government has a legitimate role to play in addressing some problems. There are some things only government can do. For example, when the lives or property of citizens are in danger, or when individual rights are violated, government has the right and obligation to address the situation through a well-ordered legal system that treats all citizens with equal justice under the law. Reasonable steps toward public order (stop signs and traffic signals, for example) are appropriate, as are other functions, especially at the local level where the people have a more direct voice in governing. But the more it takes on, the less it is able to focus on its most important tasks. Even when there is a legitimate role for government, there is often a way to fulfill that role through contracts with private companies who compete with each other to offer the best service and value to the taxpayers.
Frequently when government is called upon to solve a problem, there is another entity that could address the problem more appropriately and effectively. “We need to do something!” Perhaps. But “we” doesn’t necessarily mean “the government.” Government programs crowd out innovative non-governmental solutions from the public imagination because people think, “it’s the government’s job,” or, “the government is taking care of that; I don’t have to.” Now, not only does the government voluntarily step up to try to solve all problems, the people expect and demand it, leaving the recipients under served and the potential givers unfulfilled.
In 1887, President Grover Cleveland vetoed a bill that would have provided financial aid to Texas farmers struggling through a drought, saying, “I can find no warrant for such an appropriation in the Constitution; and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering, . . . The friendliness and charity of our fellow countrymen can always be relied on to relieve their fellow citizens in misfortune.” Following that statement, people of all ages from every state sent their pennies, dimes, and quarters to Texas, providing ten times the amount that would have been provided in the bill he vetoed. Perhaps the greatest disservice of the welfare state is that it discourages the individual generosity seen in those days, or in the days after Hurricane Katrina—generosity that touches the heart as well as the pocketbook.
Our culture is moving rapidly toward the belief that the only source of help and hope in times of trouble is the government. Ryan Messmore, of the Heritage Foundation, contends that we are not asking the right question. He says, “Rather than asking who should take responsibility for an issue (whether family, neighborhood, government, religious congregation, etc.), the public debate too often blithely assumes that the answer is government and instead focuses on how it should address the problem.”
But government is not our savior.
The late Joe Overton put it this way: “When governing institutions establish programs that attempt to improve upon private intermediary institutions [churches, families, communities], three damaging things occur. First, there is a prevailing sense that the problem is being solved by government. Second, resources are taken from private individuals and organizations through taxes, which reduce their ability to provide assistance independent of the government. And third, government programs often generate numerous rules and regulations that prevent or hinder private organizations from dealing effectively with the problem.”
Sometimes, it is better for the government to do absolutely nothing. When government tries to solve problems, when the demand to "do something!" prevails, the "law of unintended consequences" becomes an unwritten amendment to every piece of legislation or bureaucratic plan. The result is often a permanent solution to a temporary problem, perhaps helping a little, but simultaneously creating new problems that will have to be dealt with by creating another new program or adding more regulations.
Private solutions, whether provided by for-profit or non-profit organizations, are more effective for a number of reasons. They can be implemented with lightening speed (within days of the hurricane, Southern Baptist relief teams were serving a half-million meals per day to victims and relief workers—at no cost to the recipients or the government), they are more likely to address the problem at its source, and they stay in place until the goal is accomplished. By the time the government gets around to doing something, it is massive, it misses the point, it discourages private innovation and initiative, and it stays past whatever usefulness it may have served. As Ronald Reagan said, “The closest thing to eternal life we’ll see on this earth is a government program.”
Johnny Ervin, who volunteered hundreds of hours coordinating relief efforts on the Gulf Coast through a Gulfport church, said, “When government is involved in solving a problem, it must use bureaucratic methods to deliver the solutions in order to meet all the demands that are placed on government functions. This always results in longer waiting times, more forms and red tape, less satisfied participants, and greater costs than other solutions provided by non-profits and free enterprise. Another way to say it is this: Government solutions to any problem should only be considered as a last resort, because by their nature they will always be the most bureaucratic, confusing, and expensive.”
This is an excerpt from Governing By Principle, MCPP’s ten principles to guide public policy.
The remaining Toys-R-Us stores closed last week ending an era of retail shopping in America. Many were saddened to see the large retailer collapse, but as long as we have had stores in this country, we have had stores that go out of business.
Before Toys-R-Us entered our malls and shopping centers, we had independent toy stores. They couldn’t compete with the large chain and today you see very few independent toy stores, outside of specialized stores in specific locations.
But the reaction to Toys-R-Us closing was a little different than we usually see for these types of announcements. Driven by nostalgia, we saw people shed tears- either real or virtual- about the news. We even saw someone set up a GoFundMe campaign to raise $1 billion.
GoFundMe and nostalgia simply weren’t enough to save the giraffe.
If people were that concerned about Toys-R-Us, there is one very important thing they should have been doing for a long time: shopping there. As happens in a free market economy, the markets change. Toys-R-Us did not adapt and they failed. No different than any other number of businesses.
But we always have to blame someone. That use to be Wal Mart. Today it is Amazon. They are the reason small towns are dying. Why shops downtown are boarded up. Why local governments aren’t receiving enough tax revenue to pave their roads or fund schools. The list could go on for days.
Blaming someone else is the easy thing to do. But the market always chooses the winners. American consumers are, and should be, free to shop for the best options available. In the end, Toys-R-Us missed on a number of key business trends in consumer shopping behavior.
They weren’t competitive with competitors, brick and mortar or online
A very basic rule to retail: you need to be competitive to survive. Toys-R-Us simply did not match their brick-and-mortar competitors like Wal Mart or Target on pricing. Add in the fact that you can also get groceries or household items at those stores and there was no real reason to visit multiple stores when you could complete your shopping in one location. Something that is especially appealing to mom’s with young children.
But Toys-R-Us, as well as Babies-R-Us, had a larger selection than their competitors in the store some might say. That was a bonus if you needed an item at that very moment. However, you can find those same items online either from Wal Mart and Target, or an online retailer like Amazon. And you can receive them in a day or two, with free shipping. Toys-R-Us didn’t seem to grasp the digital trend until it was too late. Again, they just weren’t competitive.
To truly understand how uncompetitive they were on pricing, you needed only to visit a Toys-R-Us or Babies-R-Us during their liquidation sales before closing. At 30 or 40 percent off, they were about on par with their competition.
They didn’t set themselves apart from their competition
The brick-and-mortar advantage is that people can touch and feel items before they buy. We certainly purchase tablets and computers online, but we also like to be able to go to a Best Buy and put our hands on a keyboard or our fingers on a screen- and maybe seek a sales adviser for some expert guidance.
Save for the joy of riding bikes down the aisles, there was nothing that set Toys-R-Us apart. The stores were often cluttered, the experience wasn’t enjoyable, and they certainly were not known for their customer service.
You need to be competitive in pricing, but you also need a niche. Simply selling toys is no longer a niche. Toys-R-Us didn’t do anything to set themselves apart. A joyful customer experience was not part a customer’s average visit to Toys-R-Us.
Kids are seeking digital options, rather than traditional toys
The other part of this story is that the market for toys has changed. As much as we may or may not like to hear it, kids today prefer digital options such as tablets or video games. If you are in the business of selling products for children, you need to adapt. Especially in an environment that is becoming more and more competitive each day.
Some might feel sad that Toys-R-Us closed. Some of us might think back to our childhood. But consumers voted with their feet. They chose convenience. They chose lower prices. They chose independent, niche toy stores. Unfortunately for Toys-R-Us, that means the market chose someone else.
When all is said and done, nostalgia or a catch phrase will only get you so far. The market always determines the winner…and the loser.
This year’s U.S. Supreme Court term is drawing to a close this week, and one thing is plain: this is the best Supreme Court—thanks to Justice Gorsuch and the general trend of the judiciary in the Trump Administration—that our country has had in my lifetime.
For proof, look no further than two cases handed down this week, NIFLA v. Becerra and Trump v. Hawaii.
The first case, NIFLA, was about whether California could require pro-life crisis pregnancy centers to post information about where patients could receive abortions. Forcing the centers to put up that information is forcing them to speak and therefore violating their First Amendment rights. California wanted to require people making pro-life statements to post abortion messages in up to 13 different languages. Even if you just wanted to put up a billboard saying “Choose Life,” you would also have to put up a poster with abortion-related messaging.
The Court found California had overstepped its authority.
Policies like California’s show how extreme the pro-choice movement has become. Thankfully, we have a Court that will protect our right to not be forced to say something we disagree with. You could see the same penchant for respecting speech in the Mansky case earlier this term, where the Court said Minnesota could not ban ideological statements, like “Don’t Tread on Me,” on clothes worn to the polling place.
In the second case, Trump v. Hawaii, the State of Hawaii challenged the Trump Administration's travel ban, which blocks some people from eight countries from coming into the U.S. The reason these eight countries were chosen is they refused to share information with our government to ensure that their travelers are not a threat. The countries are North Korea, Libya, Syria, Somalia, Chad, Iran, Yemen, and Venezuela.
Despite handwringing from the Left, the Court found that this policy was squarely within the powers of the President. The President has the power to ensure our country is safe, and even if some want to try to spin this policy as bigoted, the truth is that it mirrored policies from past administrations, like the Carter Administration, and was obviously constitutional.
The most encouraging takeaway from this term of the Court is that the Court clearly does not seem to mind making the hard decisions that would be unpopular in the media. Ruling for someone who opposes same-sex marriage, as the Court did in the Masterpiece Cakeshop ruling, is an example doing the right thing even though a swath of big corporations and media coverage will be against you. Defending the Trump Administration’s right to have a reasonable immigration policy is another example. This Court cares about following the law and staying within its designated powers, regardless of what names they get called (or what restaurants they get kicked out of). That’s good for our country and good for the judiciary.
Which brings us to the definition of a “good” Supreme Court. A good court is one that does not bend to what is politically popular or even what the justices think the best policy outcome should be. A good court understands its role, follows the plain text of the law, and doesn’t bend the words of the constitution to fit some desired result. Trump v. Hawaii provided an example of this approach. The Court knows that the law and constitution provide the President with broad authority in the areas of national security and immigration. It’s not for them to question decisions like the travel ban.
NIFLA and Trump v. Hawaii were close votes—both 5 to 4—so if we want more rulings like this, we need more backup for the five justices who stood for the rule of law. But while we wait for more appointment opportunities for this White House, let’s hope for more Supreme Court terms like this one in the meantime.
The latest development from Washington, D.C. includes a northern Virginia restaurant named the Red Hen and White House Press Secretary Sarah Sanders.
Shortly after Sanders arrived at the restaurant last week, co-owner Stephanie Wilkinson told her that they would not serve her and her party because they disagreed with her politics. Specifically, the owner was unhappy with the Trump administration’s refusal to have taxpayers pay for elective surgery and hormones for transgendered soldiers.
So Sanders and company left and only made note of it in a Tweet:
Last night I was told by the owner of Red Hen in Lexington, VA to leave because I work for @POTUS and I politely left. Her actions say far more about her than about me. I always do my best to treat people, including those I disagree with, respectfully and will continue to do so
— Sarah Sanders (@PressSec) June 23, 2018
The owner would then go on to defend her actions saying, “People have to make uncomfortable actions and decisions to uphold their morals.”
After the incident we then learned that the owner followed Sanders and her party to another restaurant to continue harassing her.
The difference between Red Hen and Masterpiece
The refusal by a business owner to serve a member of the Trump cabinet, and the celebration of this decision from the left, is oh-so ironic considering the reaction to a Supreme Court decision just a few weeks ago concerning a cake baker and who he would or wouldn’t make wedding cakes for.
The state of Colorado said Jack Phillips would have to make wedding cakes for anyone, regardless of his religious beliefs. Or face punishment for refusing. But in Masterpiece Cakeshop v. Colorado Civil Rights Commission, the U.S. Supreme Court ruled in favor of Phillips in determining that “religious and philosophical objections to gay marriage are protected views.”
But there are two main differences between Masterpiece Cakeshop and The Red Hen.
Masterpiece served customers who were gay. Phillips would make a cake for any reason other than for their wedding. The equivalent would be if Sanders asked the restaurant to cook for a Trump campaign event. The restaurant should have the right to refuse to do that, because they disagree with the President’s political message. But the restaurant won’t serve Sanders simply because of who she is and her job. That’s the exact opposite of what Masterpiece did. Red Hen said we won’t serve Sanders under any circumstance. Phillips just said he wouldn’t serve someone under a certain condition.
And the Masterpiece decision also centered around the deeply held religious views of Phillips. The Supreme Court has time and again protected the religious freedoms of Americans, which are guaranteed in the First Amendment of the United States Constitution. In the case of Red Hen, the refusal of service wasn’t related to anyone’s religious beliefs; rather purely to political differences.
The market always works
And Red Hen has plenty of encouragement, even from elected members of Congress. For example, Rep. Maxine Waters (D-CA) recently said this: “If you see anybody from that Cabinet in a restaurant, in a department store, at a gasoline station, you get out and you create a crowd and you push back on them, and you tell them they’re not welcome anymore, anywhere.”
But the truth is when it comes to Red Hen or Masterpiece, the market will sort itself out. Kicking someone out of a restaurant, particularly for no reason other than political differences, may be reprehensible. But for someone just outside of Washington D.C. surrounded by a sea of anti-Trump vitriol, it might not be a terrible business decision.
The same is true in the case of Jack Phillips. If his refusal to make a wedding cake for a gay wedding bothers you that much, and you don’t understand how someone could have religious beliefs that run counter to the endorsement of gay marriage, then don’t frequent his business. My guess is there are plenty of other options in Colorado.
Just like there are other options for restaurants in northern Virginia.
As Mississippi was passing legislation to protect individuals like Phillips from discrimination for their religious beliefs, restaurants and businesses in the Fondren and Belhaven areas of Jackson began putting up stickers on their front door or window that said something to the extent of “if you’re buying, we’re selling.”
Which, of course, any business is allowed to do, whether a state passes religious freedom laws or not. In fact, if a restaurant refused to serve someone simply because they were gay, odds are the media firestorm that that would create would cause real harm to the business.
Businesses should never be forced to promote a message that stands in opposition to their beliefs. Masterpiece shouldn’t be forced to make a cake for a gay wedding if they disagree with same-sex marriage, and Red Hen shouldn’t be forced to make a party tray for a pro-Trump rally if they disagree with Trump.
Mississippi has a recidivism problem that’s jeopardizing public safety and burdening taxpayers. As of 2013, the Magnolia State had the nation’s third-highest incarceration rate per capita. What’s more, research suggests that around 95 percent of Mississippi’s enormous prison population will eventually be freed. And, unfortunately, around three quarters of those released will likely reoffend within five years.
There are policies, however, that can be implemented to help reverse this trend. Researchers have demonstrated that the formerly incarcerated are more likely to return to crime if they cannot find stable employment upon release. But many employers will not hire or even interview someone with a criminal record regardless of their crime, which often leads to long-term unemployment for these individuals. In fact, surveys suggest that 60-75 percent of the formerly incarcerated are jobless up to a year after their release.
Consequently, several states have enacted “second chance” legislation to better these individuals’ odds of landing decent jobs. “Second chance” measures aim to address the unemployment issue by enabling the formerly incarcerated to expunge their records of petty, first-time offenses. Mississippi should similarly strive to remove barriers to employment for these individuals.
Mississippi already has a program that allows certain first-time offenders to petition the court to seal their criminal records. However, these individuals aren’t permitted to have their records expunged under this program if they have been convicted of a misdemeanor traffic offense, such as a DUI. Considering that at least 1 percent of drivers are arrested for DUIs each year, an inordinate number of people are struggling to find gainful employment due to a one-time DUI offense.
DUIs and similar low-level traffic offenses ought to be treated the same as other misdemeanors for the purposes of the first-offender program. Mississippi could follow Texas’ lead in this regard by allowing first-time DUI offenders who registered a 0.14 blood alcohol content or lower to petition for expungement.
Individuals are also ineligible for first-time offender-status — and therefore cannot have their criminal records sealed — if they have been convicted of specific, nonviolent felonies, including many drug crimes. Nationally, 16 percent of inmates are imprisoned due to drug-related crimes. While it isn’t entirely clear how many of these are first-time-offenders, this statistic shows that a large number of individuals could benefit from a fresh start. Mississippi should therefore append more non-violent drug crimes to the list of expungement-eligible offenses.
Also, in many cases, Mississippians who were over 21 years old at the time of their offense are precluded from having their records sealed. Like juveniles, adults over the age of 21 make mistakes and deserve a second chance after their first violation. As a result, Mississippi ought to include more of those who were over 21 years old at the time of their crime into its first-time-offender program.
Even when offenders actually qualify to have their records sealed, they can’t request an expungement until five years after they have completed their sentence. By that point, many of the formerly incarcerated have already been dealing with criminal background-related joblessness. Like Texas, Mississippi ought to avail the first-time-offender program to individuals immediately upon their completion of court requirements to enable them to quickly obtain work.
Mississippi’s occupational licensing system also impacts formerly-incarcerated individuals’ ability to find employment. Like most states, Mississippi requires state licenses for myriad jobs. While most licenses don’t have strict criminal background requirements, many boards can reject applications based on prior convictions, thereby preventing people from working. Rather than allowing this, the state ought to permit boards to only consider convictions directly related to their industry and allow prospective employers to decide whether they wish to hire someone with a record.
Finally, each of these reforms should be applied retroactively in order to provide past offenders the same second chance as present ones.
Mississippi’s current law is clearly fraught with limitations and desperately needs updating. These proposed measures should not be misinterpreted as being soft on crime. Rather, they are about giving first-time offenders an opportunity to become productive citizens after they’ve been prosecuted and punished for their crimes. These reforms are simply smart public policies. They can decrease the number of formerly-incarcerated people whom Mississippians financially support through various entitlement programs. Further, these reforms would reduce recidivism rates, benefiting the general public with a safer society and reduced tax burden.
Work gives people purpose and contributes to a stronger economy and civil society.
A prospering Mississippi requires putting as many individuals to work as possible. Let’s give the formerly incarcerated the chance to become employed, productive members of society.
This column appeared in the Clarion Ledger on June 24, 2018.
Much has been written lately about how sports gambling is going to lead to the downfall of man, the decay of society, and the loss of the integrity of sports. As the late Lewis Grizzard would say, “That’s a bunch of hogwash.”
What the Supreme Court did in voting 6-3 to overturn the federal ban on sports gambling was to give back to the states their constitutional powers.
In affirming federalism, they also gave people back their rights to choose how they want to live and whether they want to spend their own after-tax money on a sports bet, a municipal bond, or a ham sandwich. No matter how you personally feel about gambling on sports, it’s a mistake to take away a person’s individual liberty just because some people will be irresponsible.
Now that power to regulate gambling has been returned to all the states, there are more than a few organizations making spurious arguments about the need for all sorts of remedies to potential harms. The sports leagues have started to campaign for a “content fee” from each state. The argument is that their team and league intellectual property will be used by various sports gambling sites, apps, media, and other related entities. Ironically, such increased use of the “content” of the leagues’ and teams’ logos and trademarks is actually going to make the the leagues and teams more valuable, along with the rights to distribute their live programming. The states shouldn’t agree to pay a penny to a sports league.
The other specious claim is that sports gambling will seriously threaten the integrity of the games. You’ll hear this especially from the NFL and the NCAA. But rather than seeing legal sports betting as the enemy of sports competition, we should see it as an ally to protect sports. Using powerful algorithms, sports leagues (the NCAA included) can use sports wagering technology as an “early warning system” to uncover potential signs of corruption. Major data companies, including Google and Microsoft, have been developing technologies to aid in the operation of legal sports betting for years. Thanks to the free market, sophisticated software and innovative competitors will harness technology to improve the integrity of all the games.
The repeal of the federal prohibition on sports wagering is bringing a massive industry out of the shadows and into the sunlight. Despite the ban, which began with the passing Professional and Amateur Sports Protection Act in 1992, annual sports betting activity in the U.S. is estimated to be as high as $400 billion. Since the enactment of PASPA, which was largely driven by the NCAA as a way to prevent gambling on sports, the industry has grown by a factor of 10. Like most federal intrusions into state matters or consumer protection, the results of PAPSA were far different from the original intent.
Most of that betting was happening offshore or through the dark net — without transparency or consumer protection. According to the estimates from the American Gaming Association, 80 percent of the $10 billion bet on the NCAA tournament this past March and April was done illegally, essentially making anyone who participated in the bracket office pool a criminal.
For 26 years, we’ve been living under a dubious set of claims about sports wagering while Nevada and a few other states enjoyed a federal monopoly. In Mississippi, where I now live and work, the Mississippi Band of Choctaw Indians is planning to have the first casino in the Magnolia State to offer sports betting. What’s more, they expect to be the first Native American tribe in the U.S. to offer sports wagering. Because the Choctaw tribe is not subject to state regulation, they are free to offer sports betting to customers immediately.
In Mississippi, and in other states in need of new revenue streams, the regulated casinos will not be far behind. That’s because Mississippi lawmakers had the foresight to approve new rules from the state’s Gaming Commission in anticipation of a repeal of PAPSA.
Why should Nevada and a few other states have all the fun (and all the tax revenue) associated with letting people legally pursue their interests and hobbies? The games will be fine, and individuals will have the personal liberty (and responsibility) that comes along with it.
This column appeared in the Washington Examiner on June 22, 2018.
One reason we have Medicaid is because most Americans believe insurance coverage is necessary to obtain health care. The ACA reinforces this bias by penalizing employers who do not offer insurance and fining individuals who do not obtain insurance. While there is a place for third-party insurance in health care, employer-based insurance, in particular, has almost completely undermined the U.S. health care market by training Americans not to approach health care with a consumer mentality that balances price against quality.
Hospital pricing is nontransparent. Health care pricing, in general, is nontransparent because insurance companies (along with Medicaid and Medicare) are the largest purchasers of health care. Most individual consumers simply do not care how much their health care costs because their insurance provider is paying the bill. Those few who do pay out-of-pocket are often charged exorbitant prices, with one recent study finding charges more than 10 times the amount allowed by Medicare, with “a markup of more than 1,000 percent for the same medical services.” “Because it is difficult for patients to compare prices, market forces fail to constrain hospital charges,” conclude the authors.
Fixing health care will require creating a market that incentivizes quality care at a lower price. Lawmakers should promote policies that encourage consumers to pay cash for health care, or to at least begin to ask about price. Three policy reforms, in particular, can unleash the power of pricing in health care: Large Health Care Savings Accounts (HSAs); direct primary and surgical care; and comparative shopping incentives.
An HSA is a tax-advantaged medical savings account that, under federal law, must be paired with a high-deductible health insurance policy. Because HSA holders have high deductibles, they tend to pay cash for minor services. If HSA contribution limits were higher, more consumers could use their HSA to pay for major medical procedures. While Mississippi can’t increase the federal limit, it can increase its own. Much like Singapore, federal policymakers could also create subsidized HSAs as an alternative to Medicaid.
State lawmakers should also incentivize direct surgical care. In 2015, Mississippi became one of the first states to protect the contractual right of physicians to provide direct primary care, also known as “concierge care.” Concierge care patients pay a monthly fee to a physician in exchange for a predefined set of benefits, such as unlimited doctor visits. The next step is to expand the direct payment model to surgical care, as is being done at the Surgery Center of Oklahoma. At least one public health plan (Oklahoma County) and numerous private employers are bypassing the traditional insurance model and partnering with the center, which bills itself as a “free-market loving, price displaying, state-of-the-art facility.” The center lists on its website all-inclusive prices for hundreds of procedures, attracting customers from around the world. It does not accept insurance. The center’s prices are about 1/6 that charged for comparable procedures at local nonprofit hospitals and lower than what Medicare or Medicaid would pay.
Finally, even people with traditional insurance can be encouraged to comparison shop. Some states have experimented with mandatory pricing transparency without much success. The missing element is to provide an incentive for consumers to actually shop around. New Hampshire is seeing success by using an app that enables state employees to compare health care pricing. If an employee elects to use a less expensive provider, he gets to keep some of the savings. The rest accrues to the state. In three years, the New Hampshire State Employee Health Plan has saved $12 million, with $1 million going back to shoppers. In 2017, Maine also instituted incentivized shopping for small-group health plans.
The reforms described above would benefit all consumers by using the power of pricing to deliver affordable, quality care.
This is an excerpt from Medicaid: A Government Monopoly That Hurts the Poor by Jameson Taylor. It was published in Promoting Prosperity in Mississippi.
Human nature is prone to look at the short-term, rather than plan for the long-term. We try to stop immediate pain without considering the pain we — or worse, our children — will face later.
This is perhaps the most challenging task for government officials who want to do what is right and best for their constituents, their state, and their country. It goes to the core of what it means to be a statesman—a steward of the foundation of freedom. So many ideas that sound good and will help people in the short run actually do harm in the long run.
One of the most devastating examples of unintended consequences is our welfare system. By “welfare” we mean any program in which the government takes money from one person (the taxpayer) and gives it to another person who has not earned it. This could be given to the recipient directly, by check or debit card, or indirectly, by having the government pay for products or services on their behalf.
There is no doubt that many people have had their immediate needs met by government welfare programs. The impetus for those programs was a genuine concern for those whose need for food and medical care were not being met. Families, neighbors, churches, and communities worked hard to help each other meet those needs, but still there were some people and some needs that fell through the cracks. As a result, there developed a prevailing notion that the government needed to step in to fill those cracks, or at least create a “safety net” underneath them. It all sounded so good, and there were real needs that were met.
However, the long-term negative impact of those programs is immense. By targeting financial assistance to low-income women with children, the programs contributed to the perception that husbands and fathers were no longer needed, at least financially. By devaluing marriage as the starting point for raising children, they helped launch an alarming escalation in the number of children born to unmarried mothers, resulting in single-parent families and, ultimately, entire neighborhoods where children would never see an intact marriage.
Because children in single-parent homes are highly likely to live in poverty, it’s clear that the very system designed to help the poverty-stricken has in many ways led to more poverty, not only financially but relationally. That system also helped create an atmosphere of “entitlement,” the idea that “merely by being alive one is owed costly things at other people’s expense,” as one writer put it.
The welfare mentality extends to people who would give to meet the needs of the poor, if they didn’t think the government was taking care of them. In other words, the more government steps in, the more private individuals and organizations step out. This results in new pressure for government to fill that new void, creating a perpetual cycle of more government provision and fewer relationships that would provide accountability, emotional support, and spiritual support. Before government programs were so widely available, that type of additional support accompanied personal assistance - because it was personal assistance from one person to another, not help from a bureaucracy. The problem with government programs (and now some non-government programs) is that they help people while they are in their poverty, when the real need is to lead them out of poverty.
This is an excerpt from Governing By Principle, MCPP’s ten principles to guide public policy.
While we tend to think of our wealth in dollars, true wealth has nothing to do with paper money itself. Total wealth in a society is not a fixed pie waiting to be divided among us. Wealth, instead, is constantly being created by each of us; the ‘economic pie’ grows each day. Wealth is created through both production and exchange. An example will help to illustrate.
Suppose that two neighbors trade a bushel of hay for a load of wood. Both are now better off; after all, they were only willing to trade with each other because each wanted what the other person had more than what they traded away. Both have become wealthier in every sense of the word even though no new money has been printed, nor existing money passed around.
On an everyday basis, money only represents wealth to people because it measures the quantity of these trades—or purchases—we can undertake when we exchange money that we earn from producing at our jobs for the goods and services produced by others. A man on a deserted island with $1 million is very poor indeed without anything to purchase with the money. On the other hand, a man deserted on an island with no money, but a group of other people, will be much wealthier because of his ability to produce and exchange with others—even in the absence of paper money on the island.
Taking the example further, suppose a group of island castaways decided that half of them should dig holes and the other half should fill them in. After a full-day’s work, they would have nothing to show for this effort; nothing was produced. Holes were dug and filled again. No wealth was created, even though people worked very hard.
Wealth would be created if instead half the tribe collected coconuts and the other half fished. Now they would have dinner. Suppose one castaway invents a new tool that increases the number of fish she can catch. This invention would further increase wealth; there is more food at the dinner table. In fact, the new tool might increase productivity so much that only half as many castaways are needed fishing, and the extra castaways are free to labor at a new task such as building a shelter, further increasing wealth. As these examples illustrate, there is a close link between prosperity, or ‘wealth,’ and the quantity, quality, and value (or usefulness) of the output produced. Prosperous places—those with high levels of income and wealth—become that way by producing large quantities of valuable goods and services.
One difference between this castaway analogy and our daily economic lives, however, is that we might anticipate the castaways sharing the fruits of their labor, for example, splitting the fish caught that day. In a large and advanced economy it no longer works this way. Instead, each of us gets paid in dollars, or money income, for what we produce at our jobs. We then go to stores and exchange that money for the goods and services produced by others at their jobs.
The amount of income we earn is determined by both the prices people are willing to pay us for what we are producing and how many units of it we can produce. For individuals, states, and nations, income is determined by the value of output. A worker with a backhoe will be more productive than a worker with a shovel and will earn more as a result. An entrepreneur producing apple pies will be more prosperous than one producing mud pies because people place a higher value on apple pies (and thus are willing to pay more for them).
This logic leads to one obvious, and simple, litmus test that can be used to decide if a suggested new policy or law is good, or bad, for the Mississippi economy—does it increase, or decrease, the net amount or value of output (of goods and services) produced in the state. Regulations, such as those adopted in some European nations for example, which restrict the workweek to 35 hours clearly result in reduced output, and reduced standards of living as a result. For a tax-funded government program, this principle must be applied by looking at the net change in output—that is, one must properly account for the reduced output caused by the taxes or other resources necessary to fund the policy.
One of Adam Smith’s insights in his previously mentioned 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, is that labor productivity, the main determinant of wage rates, is increased through specialization and the division of labor. When labor is divided into specific tasks, like workers in an assembly-line, they can produce more as a group than could have been produced individually. The same holds true when individuals specialize across different occupations and industries.
However, according to Smith, our ability to specialize, thereby increasing our productivity and enhancing our wages, depends on the size or ‘extent’ of the market to which we sell. When consumer markets are larger in size, smaller specialized stores can survive that could not have survived in a smaller marketplace. Oxford’s population, for example, is able to support two general purpose pet stores, each carrying a broad line of products. In a place like Jackson, however, a dozen or more such stores can flourish, with a greater extent of specialization, some focusing on saltwater fish, while others may focus on birds and other reptiles. Increasing the size of the markets to which Mississippi’s goods and services sell could increase wealth by allowing Mississippians to specialize more specifically in areas where they do best.
Population growth in metropolitan areas would be one way of increasing market size. But another way to increase market size is to enact policy reform that better enables the businesses in Mississippi to sell and compete in larger national and global marketplaces and expand their customer base. To compete in these markets Mississippi businesses need to be on a level playing field with their competitors. Mississippi’s taxes and regulations are a competitive disadvantage to firms located in the state. The higher prices Mississippi businesses must charge for their products greatly limits the markets in which they can compete. If these tax and regulatory costs could be reduced through policy reform, firms could offer more competitive pricing, increasing their market shares and the extent of their markets. This would allow both the businesses themselves, and their workers, to become more specialized and earn higher incomes as a result.
In addition to specialization and the division of labor, capital investment also increases labor productivity. Higher levels of education (more ‘human capital’) and better machinery, buildings, and tools to work with (more ‘physical capital’) can help our citizens produce more output and generate more income. Recent capital investments in the auto industry provide a good example of this. Modern robotics and automation allow workers to position, spin, and move the parts they are assembling much more easily and quickly. With this new capital equipment workers are more productive and earn higher wages as a result.
But new factories, better machinery, and equipment are expensive. They require large investments in assets and property. In Mississippi, taxes (such as property taxes on capital equipment), regulations, and lawsuits decrease the return from capital investment and thereby lower the inflow of capital into the state. And Mississippi has among the highest property taxes in the nation on a representative manufacturing facility’s equipment and machinery. This results in Mississippi’s workers being less productive—and earning less as a result.
The income a state produces from its output depends not only on how much is produced (which can be expanded through specialization, division of labor, and capital investment), but also on the price per unit, or value, of the goods and services produced. A company trying to sell mud pies will generate less income than one producing apple pies. Income can be increased not only by increasing labor productivity, but also by raising the value per unit—or ‘value added’—of Mississippi labor.
However, the answer to the question of which specific uses of Mississippi’s resources create the most value, and thus income, is not obvious. In fact, the answer is so complex that it is not something any one person or group of people knows, not even a group of expert economic planners. It is an answer that must be discovered by individuals in the private sector through the decentralized process of entrepreneurship, a process of private trial and error. This is the topic of our next section.
Before moving on, however, let us complete our discussion of the process of wealth creation started above. As we pointed out, in a real-world economy things work a bit differently than in the castaway example because we must first earn income by producing goods and services. Only then do we use that income to acquire the goods and services produced by others. The ability to turn our income into prosperity and wealth through exchange is the second important part of this process.
As consumers, we turn income into wealth through the acquisition of goods and services like food, clothing, shelter, and recreation. In our shopping, we search out and negotiate with potential sellers from around the globe. We spend time and effort on this search because maximizing the value we get from our limited budgets makes us wealthier. Finding a product we want to buy at a lower price increases our wealth because we now have more money to spend on other things.
This is the reason why restrictions on the ability of citizens to freely engage in trade with people from other geographic areas through tariffs, quotas, taxes, and other restrictions, destroy wealth. Individuals cannot generate as much value and happiness from their limited incomes. Not only are there fewer options to select among, but also the taxes and regulations make things more costly for us to purchase, reducing our ability to stretch our budgets and turn our income into wealth. This is one reason to avoid adopting policies that interfere with, tax, or restrict Internet purchases.
Our well-being is the result of both production and exchange. Becoming more prosperous can be accomplished by increasing the amount of wealth created in the state through: (1) increasing in the quantity, quality, and value of goods and services the state’s citizens produce, and (2) increasing the number and value of the voluntary exchanges the state’s citizens make, both with other Mississippians and with people from around the world.
Policy reform that lowers taxes and regulations can help achieve these goals because it results in: (1) increased specialization of labor and increased capital investment—increasing labor productivity and wages; (2) increased ability of residents and businesses to buy and sell with individuals from across the state, nation, and globe; and (3) more private sector entrepreneurship that allows the decentralized decisions of workers and business owners—rather than government planning—to help search out and identify the ever-changing bundle of goods and services that creates the most value and income for Mississippi.
This is an excerpt from Why Capitalism Works by Russell S. Sobel and J. Brandon Bolen. It was published in Promoting Prosperity in Mississippi.