Somalia, here we come!

The big buzz-word in American legislative circles these days is "deficit reduction." Let's reduce the size of government, reduce government interference in business, eliminate waste, and by doing all these things restore individual freedoms.
Like pretty much everyone, I favor eliminating government waste -- though we might have some difficulty in defining waste, once we get beyond a few glaring examples.
Let's look first at the society we might end up with if all the cost-cutters were to get their way. (I'll mention a number of proposals at both state and federal levels, because they will all -- from whichever level -- impact how we live, and because they are all expressions of the same mind-set.)
The two major categories of cuts may be in services and in regulation.
Services: States are vigorously cutting funds to education. In North Carolina, funding to universities, to community colleges, and to public schools is being cut. Admissions are being limited, tuitions are being raised (in spite of a North Carolina constitutional requirement that university tuition be essentially free), academic programs are being shrunk or eliminated, teachers are being laid off, class sizes are being increased. Cuts are being considered for many court programs that have been successful at keeping people out of prison (though experts point out that eliminating these programs will actually cost more). Various counseling programs and other programs to help young people stay in school or families stay together are being cut. Cuts are likely or are being considered in services to a wide variety of needy people -- the poor, the sick, the unemployed, the elderly. I could go on and on. Even if not all of these cuts become reality, we are looking at a future in which the well-to-do are surrounded with legions of needy, desperate people, people who cannot afford the medical treatment they need, cannot get trained for good jobs, cannot afford decent housing, and are left to their own devices in their ignorant interactions with the law. Sounds a bit like Somalia to me.
Regulations: Of course we oppose government regulation, particularly of struggling businesses. Or do we? I oppose petty bureaucratic regulation. But is that all there is? There have been innumerable newspaper accounts of tainted meat (because it was not properly produced or inspected), of farm workers harmed by pesticides (because no one was inspecting to be sure the employer did not have his workers use chemicals in a dangerous way), of imported sheet-rock that emitted formaldehyde or other noxious chemicals (again because no inspectors stopped the import or sale, of prescription drugs recalled when people began dying (because the government didn't have the manpower to check these drugs adequately before they were put on the market). The extreme example of lack of government regulation might, again, be Somalia.
So what is appropriate regulation? For me, it's this: I want to be sure that any product or food or medicine I buy is very unlikely to harm me if I use it according to directions. And I want to know that anything I buy is what it says it is -- that I can trust the label (and the advertising) to tell me the truth. And since the goal of any business is to make a profit, and since some businesses will do this by any means they can get away with, we need government regulation to ensure that all businesses play by the rules, selling safe and honest products.
Before we get too busy with our axes, let's give some thought to the kind of society we want to live in. I've given you an idea of the kind of society I want to live in. As I've said, I want a society with enough government regulation to ensure that products and foods and medicines are honest and safe.
And I want responsive government services sufficient to maintain a population that is healthy, well-educated, well-housed, employed. I want my neighbor's kids in good schools, I want any sick or injured person to get good medical care, I want both good roads and good public transit so I and my neighbors can travel where we need to go, safely, conveniently, and economically. I want services available so that abused or neglected kids get counseling or support or protection or whatever they need so that they have an opportunity to grow up to be happy, productive adults.
What kind of society do you want to live in? How much government will it take to provide that? If you want zero government, do you think you might be happier in Somalia?

Is Obama a Socialist?

Before we get mired down in arguments about what is or isn't "socialist," let's look at a basic difference in how people look at the relationship of individuals to society and vice-versa.
One basic principle, not a bad one in its intention, is that we should earn everything we get. If we find ourselves helpless, broke, sick, homeless, it's because we didn't plan well enough or work hard enough. The moral implication is that if society is properly structured, virtue -- hard work -- will be rewarded, and vice -- waste, laziness -- will be punished. Who can quarrel with that?
And in normal situations this is a good way to run things. If you work harder, you should earn more. And if you choose to be lazy or to squander your money on gambling or liquor or worse things, it's only fair that you should eventually be poor and miserable.
But what about disasters that we did not bring upon ourselves? What about droughts and famines and forest fires and floods? What about cancer and other devastating diseases not caused by our own stupidity? What about steady workers suddenly thrown out of work?
If you agree that such things happen, then you have to acknowledge that almost all of us could at some time find ourselves in a difficult situation which we did not cause and which we cannot fix by ourselves.
Here is where, for most of us, another principle applies: As a society, we all have a responsibility to care for others, and we all have a right to expect the help of others when disasters strike. Or, as the Bible says, "Do unto others," and "Inasmuch as you have done it unto the least of these, you have done it unto Me."
Unfortunately what I seem to be hearing from some politicians (and others) is a rejection of this second principle. "Cut welfare, cut Social Security, cut food stamps, eliminate Medicaid, reduce unemployment benefits," the litany goes on and on. The usual justification for this position is an unwillingness to support lazy bums who don't want to work.
But I think even most bleeding-heart liberals share that unwillingness. And we know that there are abuses of every system that doles out money -- there are always people (and not just poor people) who look for ways to con the system. So let's agree: Every money-spending system needs screening, controls, checks and balances, audits, investigations, and ultimately prosecutions of violators.
That being said, there are needy people, generally people who have worked hard and paid into the system all their lives (or people with legitimate disabilities that have prevented them from doing so). And we as a society, recognizing that "there but for the grace of God go I," have a responsibility (which in the long run may turn out to be enlightened self-interest) to help those in need.
So is this "socialism"? Perhaps. But Obama did not invent it. He has simply seen -- and seeks to enlarge -- this principle of helping the needy as a guiding principle of our caring society, manifested over the past seventy years as Social Security and the more recent Medicare and Medicaid

Credit-card sharks vs. regulation

A PBS Frontline program last night documented the thinking and the policies of credit-card companies as they seek maximum income. An interview with the man who, in a sense, started the whole process when he was CEO of Providian was refreshingly (and frighteningly) candid. He acknowledged that Providian had led the way (with many followers) in offering free credit cards (when most competitors were still charging annual fees) but making up the lost income by charging high interest rates combined with huge overdraft and late-payment fees. And of course other credit-card companies and banks saw the possibilities and quickly followed suit.

But this former CEO said something that I think gives a clue to the whole issue of government regulation of business. He acknowledged that his company – like almost every other – will be looking for loopholes in the newly passed credit card law. He said (paraphrased), “You [the government] can make any stupid laws you want, and we will play by those rules. But since our job is to make money, we will be looking for angles, loopholes, that will leave us a way to make a profit.”

I think this is a reasonable attitude, much though we would like every business to be charitable and altruistic – and much though it appears that Congress believes that to be the case when it passes laws that let business monitor itself and make its own rules.

No, let’s have a realistic separation of functions: let us recognize that the function of business is to make money, and one necessary function of government is to set up reasonable but realistic limits on how business can make money.

It appeared from the PBS program that the new law already has numerous loopholes, and credit-card companies will be able to exploit them to make even more money. Since it takes Congress an extremely long time to respond to abuses (and then the influence of lobbyists prevents Congress from really solving the problem), there seems to be an excellent case for a new regulatory agency that can create rules for credit-card companies (and other lending institutions) and modify them in a timely manner if they do not work as intended.

The Need for Regulation

Those who supported deregulation of the financial markets in the past (though perhaps not so enthusiastically now) seemed to have two assumptions underlying their position:

1) People (even financial types) are good, and will do the right thing even if there are no regulations requiring them to -- so we can trust them. (This assumption never seemed to get expressed in words, and when it is expressed it certainly becomes harder to maintain.)

Or

2) The market will make corrections. If there is fraud, it will be eventually found out, and those who cheat will be put out of business by the normal operation of market forces. If any stock or commodity becomes ridiculously overpriced, the market will figure this out and the market will adjust -- without any need for regulators to intervene. (This argument has been expressed, most notably by Alan Greenspan.)

I’d suggest a different way of looking at the market.

I believe that people are basically good -- but subject to temptation. Good people can do bad things. Good people, left unsupervised and unregulated, will all too often succumb to the temptation to make a huge profit at someone else’s expense. So a market without regulation is like a city without door-locks or policemen. Even if most participants (citizens, investors) want to be fair and decent, a few won’t, and they can corrupt the whole system. And before long we have a feeding frenzy.

Will the market make corrections, without any need for regulation? Very likely -- but only over a considerable period of time, by which time many innocent people will be hurt -- their jobs and their savings wiped out. Witness the most recent Wall Street disaster.

So let’s acknowledge these realities, and let’s state them this way:

The purpose of business (whether a restaurant, or a clothing store, or an auto manufacturer, or a bank) is to make money. For many participants, that will mean making money by any means possible. To expect otherwise is to expect sharks and wolves not to act like sharks and wolves.

The purpose, therefore, of government, is to restrain the natural shark-like tendencies of business -- to set up and maintain the rules under which business will be allowed to make money. It is the role of government to protect the customer, the consumer--

-- by requiring honesty -- truth in labelling, truth in lending, contracts that are understandable, products that are as advertised

and

-- by establishing and enforcing standards -- food must be free of harmful chemicals, products must be safe, interest rates must be reasonable.