Arnold Kling  

Government Overgrowth

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One fascinating phenomenon is that when government grows so large and its interest groups so powerful, it threatens to crowd out the private sector. This is a concern in Israel, where a new economic plan that tries to limit government spending is meeting stiff opposition from the trade union movement, the Histadrut.

Another place where government overgrowth is a concern is New York City, where a group of distinguished citizens writes,


Over the last four decades, New York City has become the most heavily taxed city in America. And as a result, Gotham has not added a single net new private-sector job over that period of time, while local government jobs have grown by more than 20% -- 90,000 positions.

In her comments on this article, 'Jane Galt' writes that it illustrates that the Laffer Curve is more likely to be relevant to cities than to the Federal government.
For Discussion. Is there a "tipping point" at which government becomes too big to restrain?


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COMMENTS (9 to date)
Micha Ghertner writes:

Anarcho-capitalists would argue that this tipping point is reached at *any* level of government. As Jefferson remarked, "The natural progress of things is for liberty to yield and government to gain ground."

The most compelling argument for this position is the one made by public choice theory. Economists frequently justify government by claiming that it is the only tool we have to solve certain public goods problems. But government *itself* is a public goods problem. In addition to voters' rational ignorance, attributed to the lack of incentive to invest time and energy in decisions over which the voter - as an individual - has no influence, there is also little incentive for individuals to lobby for legislation that would benefit society as a whole. On the other hand, there is a large incentive for special interest groups to lobby for legislation that would benefit themselves at the expense of everyone else.

Once the steelworkers are getting theirs, the auto workers are getting theirs, the teacher's unions are getting theirs, the sugar-farmers are getting theirs, the elderly folk are getting theirs, and so on, there is a considerably large portion of the population with a personal interest in maintaining or increasing the status quo size of government - but never decreasing it.

Who cares that we are just pickpocketing each other? As long as I can pickpocket everyone else at a greater rate than they can pickpocket me, I'm doing good, right? Rinse, repeat, and the Leviathan is born.

Eric writes:

I am an economic refugee from New York. I grew up on Long Island, went to a state school, lived near Buffalo for a few years, and then was taxed out of the state.

I moved to Illinois and I cut my state and local taxes in half. My house in Illinois cost almost twice as much as in New York, and my property taxes here are a little more than half as much. Illinois isn't even a low tax state. We have income, sales, and property taxes.

It's not just New York City that has a problem, it is the entire state. Taxes are just at a European level, which has a tendancy to gut an economy!

In the 1940s, upstate New York had the highest standard of living in the entire country, based on a heavy manufacturing economy. Now, thanks to state taxation and over-regulation, those jobs are gone, and income levels in upstate New York are at Appalachian levels.

You have a situation where the only people living in the region are retirees and people on welfare, and of course those in government "serving" these two groups. None of these groups is interested in seeing taxes lowered, which pretty much explains why they're so high, and getting higher.

I'm just glad I had the opportunity to move, and that there are states like Illinois that have more rational taxation policies.

David Thomson writes:

I am utterly convinced that Israel's greatest threat may not be terrorism, but its seductive social welfare policies. Israel’s ultra Left wingers must be marginalized. These socialists advocate policies which will ultimately destroy the country’s economy. Also, they are often the same folks who appease the terrorists. Have we already forgotten the foolish Olso accords which are responsible for so much horror and bloodshed?

The la-la land of New York City is probably doomed---and its citizens mostly have only themselves to blame. Nobody forced these folks to vote for idiot Liberal politicians who promised them something for nothing. We should cut New Yorker’s slack for 9/11, but not for their own self inflicted economic miseries.

The Olso accords and wasteful governmental spending reflect the silliness of utopians Liberals who prefer fantasy over reality. They are childishly immature people who refuse to grow up. We must direct them to their toys and lollypops while the adults try to clean up their messes.

Micha Ghertner writes:

The socialism in Israel cannot be blamed on the left-wing alone. The religious right-wing demands social welfare payments for a large portion of the population that does not work, does not serve in the military, and has huge families. Two out of my three aunts living in Israel have over 10 children each, and the third aunt is rapidly catching up.

Keith writes:

The most recent elections in NYC tilted the political balance even more leftward.

It brought in "the most progressive City Council" in the words of one who was elected, which turns out to be the most far-left and anti-progress.

It also brought a limousine liberal into the mayoraly. Michael Bloomberg, a lifelong Democrat, switched parties to avoid a crowded primary. He bought off the city and state GOP by promising new computers for their offices and protected patronage jobs like former state senator Roy Goodman as President of the UN Development Corporation, even though Bloomberg's predecessor, Rudy Giuliani, wanted to privatize the UNDC.

Metaphorically, a pleasant piece of art sculpted by Giuliaini and the former City Council speaker, Peter Vallone, has been horribly disfigured by their successors.

Bernard Yomtov writes:

Religious right-wingers also damage the Israeli economy by restricting economic activity. El Al, I believe, does not fly on the Sabbath. Try running a capital-intensive business when your utilization is limited like that. And there are numerous other "blue laws".

And of course many of the settlements are a drain due to the costs of protecting them.

David Thomson writes:

I’m afraid that it’s necessary to mention an awkward and uneasy truth concerning the World Trade Center: it was rapidly becoming irrelevant at the very moment the terrorists struck! Why have so many people located in such an expensive area of the country when such work can be performed in a small New Jersey town, or even a village in someplace like New Mexico? The World Trade Center actually represented the era of yesterday. This is why New York City will likely never again return to its former days of glory. This metropolitan area is too mired in the past.

David Thomson writes:

There is also a hopeful sign that the citizens of New York City may now start to face economic reality. The most recent Jayson Blair scandal is a serious wake up call. Far too many New Yorkers have been deluded by the immoral and corrupt New York Times which has for years lied and slanted the news coverage provided to its readership. New Yorkers were indeed encouraged to live in the land of make believe by its so-called prestigious “newspaper of record.”

It’s very fair to claim that the New York Times is greatly responsible for encouraging the reckless spending by the political establishment of that large metropolitan area. The New York Times has for far too long stood in the way of those wishing to reverse New York City’s growing financial mess. Let's pray, for the good of the whole country, that this lying rag loses a lot of subscribers.

David Thomson writes:

I have just read a fascinating article, “Empire State? Try Banana Republic!” in the May 13, 2003 issue of the Wall Street Journal, by John Steele Gordon. This highly respected historian cites the 1825 completion of the Erie Canal---a most successful “gigantic gamble” government project! It was almost certainly something the private sector could not have accomplished during that time period. Sadly, it appears that New York is yet another example of a political entity that failed to realize when it needed to pull the plug on its politicians micromanaging the economy.

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