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Another Impractical Guide To Small Government

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Part 2 -- Critically Evaluate Public Policy

A Critical Exam
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A Critical Exam by Email address removed" target="_blank">Larry Butler

   The first installment of An Impractical Guide established that critical thinking, as a national value and widespread among an enlightened populace, is necessary to bring about positive change in America.   But once we have embraced the value of critical thinking, we must apply it to an evaluation of the public policies that provide the legal and cultural framework within which our lives are lived, and then we must create new solutions that replace today's inefficient and inequitable public policies.


   People who fail to evaluate their values, attitudes, and actions are unable to learn from experience.   Reflection can be painful, but is a necessary component of personal growth and maturity.   Institutions are no different.

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   Errors in the framework of government will tend to be self-perpetuating and self-protecting.   Such errors are typically introduced by interests seeking some special advantage.   For example, Article IV, section 2 of the Constitution provides that any person "held to service" in one state cannot escape into another state without the destination state being held responsible for returning that person.   This was later clarified, perhaps redundantly, by the Fugitive Slave Act of 1793 and the Fugitive Slave Act of 1850.   All of these laws served the powerful special interests of slave holders, and it took a bloody civil war to correct the error.

   We do not need another civil war, so I suggest that all public policies be systematically and critically examined at their most fundamental level for value, effectiveness, and efficiency.   A systematic evaluation of our laws and regulations will require a structure within which the evaluation can be conducted, and the process will certainly take a very long time.   The where and the when of this process are beyond the scope of this article, but American law schools might be a logical place to start.   As to when, there's no reason not to begin immediately, even though the process may take generations.


   To understand the magnitude of the revolution I am suggesting, consider the Constitution of the United States.   We agree that there are things about it that are in conflict with modern values -- things like slavery.   We agree that it has proven to be a pretty durable model for government, over a very long time.   And we agree that the flexibility of amendment has proven valuable in keeping the document relevant and effective.   Military officers and public servants are sworn to uphold this document, in its present form.   So shouldn't the Constitution be excluded from our critical thinking revolution?   Absolutely not!   Evaluating public policy must include -- must start with -- the basics, even the things that are widely regarded as sacred and infallible.

   A real, comprehensive evaluation of public policy cannot simply be a critique of that which we have already done.   Although it can be helpful to know the forces that worked to construct our imperfect system of laws and regulations, such an approach can lead us to comfortably sit back and criticize, sapped of our motivation for taking any further action.   Worse, this approach may lead us to ignore the fundamentals in favor of patching up previous mistakes.   We need to understand what problem a law or system of laws was originally intended to address.   We also need to understand just how the underlying problem came about in the first place, recognizing that the root causes of the problem may demand an entirely different solution than the problem itself.   Stripping away the distortion of viewing a problem through the lens of failed solutions can help us get down to basics.


   As an example of the process, consider a single federal government function -- taxation.   We'll apply critical thinking to the fundamentals of the issue, we'll apply modern economic theory, and we'll raise questions about the very role of government institutions.

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   The federal government is funded primarily by taxes.   About 48% comes from taxes on personal income, about 14% comes from taxes on corporate income, and about 37% comes from taxes against payrolls.   Tax law is insanely complicated.   All of these things are true, and all of these things are so familiar that we are largely resigned to living with them even though nobody likes them.   The last major change to the revenue code was nearly thirty years ago, and it was little more than lipstick on a pig.

   In order to formulate a solution, it helps to understand what we have, how we got it, and how very different it would be if we had what we want.   Begin with fundamental economics.

   The relationship between supply, demand, and prices is something we generally agree upon.   Changes in supply or demand reflect themselves in changes in prices, and changes in prices reflect themselves in changes of supply or demand.   We all know that reducing the price of a commodity increases demand, and increasing its price decreases demand.   Public policy has not directly controlled most commodity prices in the economy since Richard Nixon's presidency, but indirect controls abound in the form of selective taxes.

   But the law of supply and demand only applies to commodities.   A commodity, as seen by economists, is an economic good that is marketable and is interchangeable with other commodities of the same type.   Metals, crops, and many manufactured products are traded freely and are generally subject to the competitive forces of free markets.   Labor is likewise a commodity, to the extent that it is subject to competition and substitution.   Yes, labor is a commodity -- a fact worth remembering when we consider the relationships between supply, demand, and pricing.

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Years ago I made a decision to commit to a life of business management. After thirty five years as a small business consultant, CFO, and university educator specializing in quantitative business and economic modeling, everything changed. A (more...)

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