Why Do Libertarians Like Federalism? Why Does Anyone?

By Robert H.

I know why libertarians like government of limited powers: libertarians think government is an armed thug that forces people to do things at gunpoint, so they want to use it to force everyone to live in a minarchy at gunpoint.  The idea that the rest of us might have a right to have some sort of democratic say in how big government should be, or that democracy might by a better tool for ordering society than their personal whims and beliefs, can be dismissed.  After all, people keep voting for things libertarians dislike, so democracy must be wrong and need limits.*

But I don't get for one moment why libertarians are so into American federalism.  I honestly don't.

Here was the idea behind the constitution: government of near unlimited power with that power divided horizontally (executive, legislature, judiciary) and vertically (federal vs states).  The second division is federalism.  Theoretically it could work to avert tyranny (state and federal power will check each other) and promote limited government (if government gets too onerous in a state you can move, federal power can't get too onerous because it is limited).  

In reality state power was used to enslave people, institutionalize racism, and perpetuate corruption on a scale not even the federal government could match (Tammany Hall was not a national machine).  And states weren't even any more friendly to small government: during the lochner era we had the states desperately trying to create a nanny state and the federal judiciary just as frantically dismantling it.  It was the mirror image of what a pro-federalism libertarian might expect.

And yet libertarians act like federalism was a great idea.  I honesty don't get it.  "Unlimited power distributed vertically" is such a far cry from "limited power" that I don't see the theoretical appeal.  And the states have been so abusive of liberty historically that I don't get the appeal in practice.  Honestly I just do not get this.  Every scrap of American history seems to show that going back to a more federalist structure would just lead to fifty, worse run, more abusive little welfare states, not libertarian utopia.  We would be the EU, where citizens get to vote with their feet for exactly which kind of socialist (little s) state they prefer.  And if we were really lucky, some of those states would enslave millions of people again,

Man, f--- federalism.  Someone explain to me how anyone still embraces this terrible idea.

*Not to over-praise democracy.  It's dependent on good social norms, rights sometimes function in a counter-majoritarian way, and the iron triangle sucks and distorts democratic outcomes.  Libertarians can and do overemphasize these problems.

How I know Work Requirements are Mean

By Robert H.

People who want to couple wealth redistribution with work requirements (making people look for a job to get UI, redistributing wealth with wage subsidies rather than hand outs, whatever) often say they are trying to fix incentives.  Just giving a low income person money removes a lot of his incentive to work.  So it makes sense to require the people we are giving money to to work.  From an "economic efficiency" standpoint, anyway.

But this is pretty much the only place I hear that argument?  For example, the money we are giving the poor person was taxed (or borrowed, in which case it will be payed for with a tax later).  If it was taken as an income tax, it lowered the incentive for rich and middle class people to work, since their post-tax salary is going to be less for the marginal hour worked.  So why not just require them to work more hours!  Make people in the top tax bracket work 80 hour work weeks, the bracket below that 60 hours, etc., with a big tax penalty for people who don't work  the "right" amount.  Problem solved!  Instituting a sales or VAT tax?  Command people to consume more!  Problem solved!  Spending money on a sugar subsidy?  Just order people to eat more sugar substitutes!  Problem solved!   It's a bright new day for economics, and we can finally tax and subsidize people with no dead weight loss!

This is crazy, and would not work.  Everyone knows it wouldn't work.  Bureaucratic orders simply aren't a substitute for actual market incentives, and if you are going to tax or subsidize someone you should just accept that that is going to screw up incentives and move on.  But, for some reason, when we turn to subsidizing poor people, free-market types see it as a self-evidently correct to try to stamp out the disincentive to work.  Why does so much effort go into coming up with ways to give a poor person money while requiring them to work more hours, and so little effort go into figuring out ways to tax a rich person's income in a way that requires he work more hours?  I can't really explain that, other than as moralizing (people don't deserve hand outs unless they are willing to work) attitudinal bias (of course ordering those poor people to work makes sense.   Of course it doesn't make sense with us middle class and rich people) or a sort of fuzzy argument form history (panem et circenses!).

I honestly feel like I am missing something, though.

Basic Guaranteed Job

by Robert H.

Morgan Warstler has a plan to replace a bunch of our current welfare programs with a new, more economically efficient scheme.  He thinks it will be able to woo liberals with it.  Well, I'm a liberal already wooed by Milton Freedman, so let's see how he does.  I'll put the basics of his plan here, but it is worth reading the whole thing.  Anyways, the basics (long):

The Basic Plan
Using the Paypal and Ebay platforms, the US govt. should establish a Guaranteed Income of $240 per week. Anyone who wants to work registers, receives a Paypal Debit Card, and each Friday at 5PM has their GI deposited.
All GI recipients have their labor weeks auctioned online. 
Job offers begin at $40 per week ($1 per hour).  Offers increase by .50 cents per hour ($20 increments).
At $40 per week, there’s no able bodied / able minded person that some rational returns bidder won’t find use for.  The 70 yr old woman in a wheelchair who wants to work to keep busy?  Plenty of teleservice operators have work for her to do from home for $1 per hour.
Note: I solve for the criminally lazy.  Identifying and fixing them is one of my plan’s advantages. I’ll get to it a bit later in the What Abouts plan.
So minimum take home cash under GI is $7 per hour or $280.  $240 is the social commitment paid out of taxes and $40 is the winning job offer.
To perfectly align incentives, for each $20 per week offer increase over $40, the govt. gets back $10 of our $240 social commitment, and the auctioned employed keeps $10.
So, on a offer of $100, the govt. is paying $210 and the auctioned receives $310.  A offer of $200, hits the govt. for $160 and auctioned receives $360.
The system ends at $10 per hour.  The maximum offer allowed in the GI Auction is $280 and the govt. is still kicking $120 netting the auctioned $400 per week.

So, I have some questions.  Keep in mind that my current preferred policy is a basic guaranteed income coupled with a negative income tax.  I think this should replace most forms of subsidies for low income folks (college subsidies, food stamps, TANF, unemployment, etc) with healthcare and educating children left as big expenses (and boy howdy, how we educate children also needs to be reformed too).

So, with that as my alternative, I have some questions.:

1. Surely there are, sometimes, more socially useful things someone can do with their time than work?  What if someone wants to go to school?  What if they want to stay home and take care of their kids?   Take an unpaid  internship?  Under my plan people can spend their lump to support themselves while they do these things and to cover their expenses (IE, tuition).  Under Warstler's plans either no one can devote themselves to those things or else we will need some separate  convoluted government programs to subsidize higher education, work training, etc.

2. What about part time workers?  Surely for some people working an amount lower than 40 hours a week is efficient?

3. Are we not trying to maximize utility?  It seems to me letting an old blind granny have 280 a week to live off of and + all of her free time is much more utility maximizing than giving her 280 a week and making her work for very marginal social gain 8 hours a weekday.

4.  What does Warstler think is a better way to have 1000 dollars allocated efficiently:  give it to someone who hasn't earned it, or give it to someone who hasn't earned it along with some preconditions on how they can spend it, what they can do with their time, etc?

5. If Warstler is worried about poor people getting money who haven't worked for it, what does that imply about the optimal inheritance tax?

6. What about parasites?  In eastern Europe under communism, another system in which everyone was required to work, there was a class of people called parasites (that link talks about anti-parasite laws as a pretext for oppressing social dissidents, which happened, but they were also used to go after actual parasites.  A few seconds googling can't find a better source).  They didn't work hard so no one wanted to hire them, and when firms were forced to hire them their bosses hated them.  At their jobs everyone had to cover for them in order to make the communal work norms, so their co-workers hated them.  They were fired at the first opportunity, at which point they were technically breaking the law.  Generally a judge or social worker would at first try to encourage them to get work, but at some point it would become clear that the person simply wasn't interested and they would be sentenced to jail.   The end result was that they tended to bounce from job to unemployment to prison in a sort of depressed, alcoholic haze.  Eventually they would die young.  This was a relatively large class of young men, and was often the fate of the non-functioning alcoholic in the GDR.

Under my system, people like that stay at home and try to scrape a little bit of happiness out of life.  Maybe they drink themselves to death, maybe they reform.  Under Warstler's system, they apparently don't exit?  This is how he describes lazy people:

That guy right now hides amongst 30M good people who want to work.  The first step is to expose him.  The second step is ostracizing and singling him out.  The third step is firm but forgiving punishments until his behavior is altered.

On day one, he signs up with everybody else, and never shows up at job.  His feedback is bad, he gives an excuse, or he ignores it.  The bidder doesn’t lose anything.  He’s just disappointed. 

After 4 weeks of taking the $240 GI, never being rehired, and given negative feedback, the criminal lazy is suspended, cut off for 6 weeks on first infraction.  Where does he go?  How does he eat?  Who’s couch does he sleep on?

Now all around him are 30M people waking up and going to work, getting their GI + Bid. They are happily employed, they are choosing between multiple jobs.  They are productive members of society.

He lives amongst them and they hate him.  They are getting louder and angrier with him.  He’s no longer able to hide amongst them complaining about the bad economy.  His support system crumbles.

Finally he breaks, after 6 weeks, maybe then 12, maybe then 26, he is put back to auction, and if he is rehired, he’s back in the game!  Take pictures of the work he did, prove he arrived early, stayed late by his own choice!  The system quickly exposes any positive effort and rewards it.

26 weeks to go from alcoholic bum to the new soviet man!

***

So yeah, I could keep going, but those are my big questions.  In general Warstler confirms a pet theory of mine: we can blame both liberals and conservatives for not having a more rational welfare system.  Liberals are too paternalistic and aren't willing to just give low income people money and trust they will know what to do with it.  But free market types are often too righteous, and aren't willing to give people money who haven't worked for it.  Obviously there are exceptions to the rule.

HT: Scott Sumner

Why I Think About Libertarianism So Much

By Robert H.

I am not a Libertarian, but I devote a lot of time to thinking about libertarianism and reading libertarians.  Why?  Well, the answer to that question depends a lot on the libertarians I am thinking or reading about.  I divide libertarians into three sorts:

1. Marginal Libertarians: For most policies, these people think the next policy step should be in a libertarian direction, but they don't necessarily want a libertarian state.  So of all the realistic policies we might adopt towards health care, the marginal libertarian wants the one that has less government intervention in the  marketplace, less government subsidies, etc.  Maybe he likes Paul Ryan's plan.  But, unlike a traditional libertarian, he doesn't necessarily want government OUT of healthcare.  At the margin he prefers libertarian policies, but going all the way to a minimalist state scares him.

Obviously more people are *mostly* marginal libertarians, than are *completely* marginal libertarians, since it is more a coincidental or attitudinal thing ("hey, look at that!  Most of the policies I like involve less government!") than a real ideology.  Greg Mankiw is an example of a marginal libertarian.  Or Tyler Cowen.

2. Consequentialist Libertarians: Consequentialist libertarians think the marginal policy move should be in a more libertarian direction, but they also think that those policy moves should go all the way, and we should have a night-watchman state, or anarcho-syndicalism, or whatever.  They want this because they think those kind of states are simply the best way to arrange public affairs, IE that adopting a minarchy has better consequences than adopting other forms of government.  They aren't much interested in libertarianism as a philosphy, they see it as a practical and superior form of government.

I tend to think of Scott Sumner as a consequentialist Libertarian, though he may be more of a marginal libertarian. In general I think very few people fall into this category, and I don't spend much time thinking about it.

3. Philosophical Libertarians: Philosophical libertarians think a libertarian state would have good consequences, but they also think it is philosophically mandatory.  They think government simply has no right to engage in redistribution, for example, and that this is as much a moral evil as theft.  Or maybe they don't go that far, but on some level they think there is a *moral*, as well as a practical case to be made for minimal government.

I am just going to pick the obvious example and say Robert Nozick was this kind of libertarian.  Or at least, was when he wrote Anarchy, State, and Utopia.  But this category obviously includes people with muddier thinking. Ron Paul, say.

***

So why do I care about libertarianism?  Because I am close to 1 and detest 3.  In terms of category 1, I've been convinced on the merits that a lot of policy should move in a more libertarian direction.  I am for free trade, open borders, less local regulation of property (IE, "zoning," height restrictions, etc), less incarceration  etc.  I still have big soft fuzzy liberal notions that keep me from identifying as a libertarian (hooray obamacare!), but I can read Tyler Cowen's blog and "right on" more than I "tsk tsk."  So I tend to enjoy reading and thinking about consequentialist libertarians, even when they disagree with me.

In terms of category 3, I pay attention because a lot of philosophical libertarians are, to me, terrifyingly counter-majoritarian , rejecting the basic

Democratic Focused, Rights Focused, Rule of Law Focused Cultural Norms + Democracy + Rights as Side Constraints = Sound Government 

formula that worked increasingly well over the 20th century.  So, for example, here's a law profesor, Glenn Reynolds, who came on Russ Robert's show to talk about all the ways he would like to change the constitution in order to ensure that his policies always win.  His proposals run the gamut of ways you can fail to respect modern democracy,  from changing long established process rules to make the outcomes you want more likely (IE, fiddling with term limits, which he wants to do), to constitutionally forbidding democratic outcomes simply because you don't like them on policy grounds (IE, instituting a balanced budget amendment, which he does not oppose and only does not support because he thinks it won't be stringent enough), to undermining human rights when you find them inconvenient (IE, he wants a constitutionally mandatory poll tax, currently forbidden by the 24th amendment and probably by Article 25 of the ICCPR, an international human rights treaty we have ratified).

That's modern philosophical libertarianism: "We are clearly right as a philosophical and policy matter, but modern democratic government keeps not doing what we want.  Therefor, democracy is flawed and the government is only failing to recognize our obvious rightness because it is in thrall to special interests.  Therefor, we should limit democracy not just when it steps on human rights, but more generally whenever it fails to enact the policies we want.  Convincing people to vote libertarian is all well and good, but most important is to take away or limit their ability to vote for non-libertarian outcomes."  The US constitution's model, limited powers for federal government to guard against tyranny, but broad powers for state government to empower the people, has been turned into a radical new model: limited power for all government, not for the purpose of preserving democracy, but in order to make sure all our preferred policies win.  It's a sickening rejection of majoritarian rule.

Add the distrust of democracy in with the utopianism, the blind conviction in an over-simplified philosophical position, the bad economics, the confident predictions of imminent doom for western democracies (doom that will conveniently reveal the status quo to have been flawed and libertarians right all along), the revolutionary rhetoric, and the on-campus appeal and you get a movement that reminds me uncomfortably of American communism in the 20th century.  I'm not sure if movement libertarianism has the potential to actually be as dangerous or global as communism was, but I don't think it's worth finding out.  Philosophical libertarians, from Ron Paul to law professors on Econtalk, have terrible ideas.  Those ideas have to be engaged.  Doubly so since so many of their policy positions coincide with my own, and since it worries me when my beliefs about, say, ending the drug war get lumped in with the beliefs of someone who wants a constitutionally mandated gold standard, or something.

So, that's why I spend a lot of time thinking about philosophical libertarianism.

Obviously, not all philosophical libertarians fit the description I just painted (most don't, probably.  The most wrong voices are probably the ones I am most likely to remember), and I try to be charitable to the best arguments philosophical libertarianism can present (which are pretty good!).  Just as obviously, plenty of people who hold a few views I find objectionable are probably smart people with lots of other good views (I am sure Reynolds, the law professor I talked about above, is smarter than me and has better ideas than me about most things, he just has really bad ideas about whether the constitution should be amended).  I am trying to demonize ideas, not people.

The Worst Pun

Arnold Kling (man, how many posts have I written commenting on something he's said?  I have no defense other than that he is thought-provoking and smart, while having views that differ from mine just enough to fuel posting) has a post on the riddle of social security.  Why do we subsidize retirements?

If it's a riddle, it's a very old one.  Bismark invented the welfare state in the 1880's, and the third major law he passed, in 1889, was The Old Age and Disability Bill.  Enter social security insurance on the world stage.  The fact that old age is linked with disability in that legislation tells the whole tale: in this crazy modern world in which we live in, for some people retirement is what happens when you decide to stop working and play golf.    But for most people in history (and now?) old age isn't dominated by leisure so much as it is dominated by having a crappy body.  In 1880's Germany, being an old person is basically the same thing as being a disabled person -- you physically can't work for a decent wage.  So Otto says,

„[...] the actual complaint of the worker is the insecurity of his existence; he is unsure if he will always have work, he is unsure if he will always be healthy and he can predict that he will reach old age and be unable to work. If he falls into poverty, and be that only through prolonged illness, he will find himself totally helpless being on his own, and society currently does not accept any responsibility towards him beyond the usual provisions for the poor, even if he has been working all the time ever so diligently and faithfully. The ordinary provisions for the poor, however, leaves a lot to be desired [...].“

Auto Van Biz-Mart

For a lot of Americans, there is still some truth in the idea that old age leaves people less able to support themselves and is a form of disability (IE, if they had a very physically active line of work or if they are low skill and mostly sell their manual labor).  But in a white collar world with age discrimination laws that is increasingly not true (or at least, the wage hit old people take is more marginal), and I think you are increasingly seeing a new justification for SSI.  There is an element of hope to it.  Lots of people have to work shit jobs they hate their entire life.  Subsidizing retirement is a way to give those people meaningful hope -- there's gold at the end of the crap rainbow! -- which both makes the working people happy in its own right (lives with hope are better!) and probably gets people to buy into society more (remember, Bismark didn't implement the welfare state because he believed in it, he implemented the welfare state to keep social order in a world increasingly dominated by class struggle).  I think this is what people talk about when they talk about lives deserving "dignified retirements" -- everyone deserves a little hope at the end.

But those two things have different policy implications.  If we feel bad for old people because "old" is a form of disability and the elderly can't work, we feel bad for all old people.  But if we want to give working people an element of happiness and dignity to look forward to at the end of their lives, we can means test SSI.  Rich people can buy their own dignified retirement just fine, thank you. I suspect that, as the justification for the program increasingly moves from the first to the second thing, the system will start to look (and be) more explicitly redistributive.