Tuesday, August 30, 2011

Rick Perry's Anti-Federalism

Governor Rick Perry of Texas is too stupid to be a good President. But even the stupidest person can sometimes get something right - if only by accident.

One of the issues brought up in connection with Perry’s campaign is the idea of allowing each state to determine its own rules regarding education, health care, and other forms of regulation.

This issue also relates to what is said to be the relevant difference between Romney’s health care law in Massachusetts compared to Obama’s federal health care law. The two plans are fundamentally the same, except Romney’s law is at the state level (and is consistent with allowing each state to determine its own rules), while Obama’s is federal and imposed on all states.

The main argument in favor of federalization is efficiency.

It costs companies a fair amount of money to deal with different state regulations. It takes effort just to know what those regulations are, let alone design and build corporate products (insurance, automobiles, breakfast cereals, text books) to meet those standards. With one standardized set of federal regulations, these costs are reduced. Companies become more competitive, and savings can be passed on to the consumers.

I will not dispute any of this.

However, I will give two reasons to oppose federalization, and briefly mention a couple more.

Reason 1: Social experimentation.

How do we know what set of rules to adopt at the federal level?

I am a scientifically minded person. I like to base conclusions on data. One possible way to get data is to allow different states to adopt those rules that make sense to them and to observe the results. We can come up with theories to explain those results, and then use those theories to improve the regulations in each state.

In most policy debate, we are bombarded with propaganda telling us the catastrophic costs of adopting this change and the utopian benefits of that change - political propaganda tends to be somewhat exaggerated. Special interest groups love to scare us with stories of jobs that would be lost, threats to our health and safety, and other dire consequences that would follow upon failure to give them what they want. Or they paint a utopian picture of life after adopting a policy that favors their group, here want and suffering has been eliminated.

It would be handy, to say the least, to look at a state that has adopted that change and see if it has suffered catastrophic ruin or obtained a utopian ideal.

There is nothing in this that prohibits the possibility of certain standards being adopted on a national level. However, with state regulations, there is at least a chance that the reason a standard is universally adopted is because, with all of the comparing and contrasting of different state systems, a particular regulation actually has and was able to demonstrate its merit in those states that first adopted it.

Furthermore, the very costs mentioned in the pro-federalization argument will be drivers for states to adopt the standards of their neighbors - unless they think they have good reason not to. Regardless of whether they do or do not decide to go the same route as their neighbors, at least they will have more data on which to base that decision.

Reason 2: Harder to abuse.

In my last post, I argued that bureaucracies easily become agencies for transferring wealth in small amounts from a large number of households and concentrating it in large amounts in the hands of those who have the resources to game the system.

I used an illustrative example of a regulation that adds $1.00 per year to the cost of some product for 100 million households, but generates $50 million in profit for the company that makes that product. The company has a huge financial incentive to make sure that this interpretation gets adopted. The average person has almost no incentive to oppose it or even know of its existence.

Yet, thousands of these types of changes in a large bureaucratic system means that the average household loses a considerable amount of money, all of which gets concentrated and put in the hands of those with the resources to harvest it - to harvest us.

These types of manipulations are significantly more profitable on the federal level than the state level. If I wanted to exploit this type of manipulation, I would much rather manipulate a federal regulation that will take $1.00 from 100 million households and put it in my pocket, then a state regulation that affects only 2 million people.

While the efficiency argument for federalization is valid, in some cases - such as regulatory manipulations that divert wealth from many and concentrates it in the hands of a few - we do not want the system to be more efficient. Sometimes, efficiency is not a good thing.


I have a couple more reasons I could throw out there. One looks to evolution and argues for the benefits of having a diverse population. Another respects individual differences in likes and dislikes and questions the idea of a one-size-fits-all government.

And there are obvious exceptions. National defense and international treaties are obviously powers that need to be federalized, and state regulations should not be the type that puts them in a state of war with other states.

However, it is not the case that just because an idiot such as Rick Perry says something that the idea itself is one that should be dismissed on those grounds alone.


dbonfitto said...

If health care isn't going to be mandated at a federal level, it at least has to be measured there.

If nobody is collecting the data and analyzing it, it's not science. It's 50 unmeasured anecdotal accounts.

Jim Baerg said...

3rd advantage to putting government functions on the more local level:

Individual freedom.
If you don't like the way the government is doing things, it is easier to move to the next county than the next country.

Alonzo Fyfe said...

I do not have any serious objection to any of these two comments.

dbonfitto said...

That individual freedom to move to the next county is only valuable if it's based on actual collected data about each of those counties.

psychadelicfuse81 said...

There is one serious problem with devolution: capital flight becomes much easier.

It is a relative hassle for US-based multinationals to ship all their operations overseas to avoid regulations and unwanted taxation. However, if the majority of regulations and tax laws are decided by individual states--the threat of capital flight becomes much more concrete. That is very bad for democracy.

Kristopher said...

the innefecency aside, there are somethings that are so important that they can not be left to each state to handle differently. slavery being one example. And while I dont know the specifics of how each state was handling these issues before (i am young) i think that medical care might be one of those important issues where it is not okay to alow some states to handle it poorly.

on a lighter note i just discovered this blog in july and i am thrilled that you have continued posting!

Being discontented with other ethical philosophies during college i created my own which i lived by for 4 years until i came across your desire utilitarianism. the name immediately through me off as something i had discounted in the past but i continued reading it on a whim and quite frankly i think it is better than mine. I think you have done a very good job, your posts are very well thought out and informative.

thank you.