How Government Works : A Primer
We all think we know how government works, then we undermine it every day.
Government has only three responsibilities: support the poor, regulate the rich, maintain the commons. Failure to do even one of these means collapse of the state.
In order to achieve this, government must collect taxes and manage that income. The correct way to do this is to save money when the economy is good and distribute money when the economy is bad. Governments have a hard time with this because it is the exact opposite of what the economy does.
In bad times, the government tax role decreases, making it hard to argue for more spending. In good times, the government collects more taxes, making bureaucrats giddy to fund pet programs. Even harder, the populace constantly demand funding from the government, even as they bemoan taxes.
Governments think that their newfound wealth during boom economies can fix or at least catch up on previous failures. It cannot, because that is not what government is for. Contrary to popular belief, a government best serves when it acts as insurance — funding when the chips are down, pushing against the free market, and building what others can’t or won’t.
There are three forces acting on government. The poor are always poor. The rich act in their own interest. Entropy stalks the common. All three threaten the system.
The Rich
The rich have the surplus power and resources to increase their share of power and resources. Any efforts to curtail this is considered a hindrance to economic growth. Yet the rich will prey on the poor and dump on the common if it serves their interest. Hence the need for government.
The Poor
The poor have no power and no resources and call themselves victims of the system. To cease helping them results in their death, so their cry will always rise. If they remain ignored long enough they will eat the rich and burn the common. Neither of these help anyone, hence the need for government.
The Middle
Then there is the Middle, the vast majority of citizens. They are neither rich nor poor but claim to be one while aspiring to the other. They pay the bulk of taxes, do most of the work, and can’t figure out why so much of their money goes to other people. They resent the poor, envy the rich. Though they daily use the roads and schools and trade agreements that make their lives possible, they take the common for granted. So they fight welfare programs, thinking that money saved means less in tax. They ask to tax the rich because that is not their money. The commons, they think, magically fixes itself. In an ideal world, they think, the rich would pay for the poor, or the poor would become rich. Either one is conveniently not their problem.
But that’s not how it works.
It is that simple
Support the poor, regulate the rich, maintain the commons. It sounds simple because it is. The problem is that so few people understand this simple concept. Democratic governments work perfectly when 51% of the citizens agree. That means 49% of the citizens remain unhappy with no change necessary. If you’re unhappy with the government, enjoy the company.
Whatever group you’re in — the poor, the middle, the rich — you’re ensconced in your worldview. Each have their own interests. The poor are too busy trying to survive to worry about the middle and the rich. The rich are too busy with their empires to worry about the poor and the middle. And the middle are too busy working and paying taxes to worry about the poor and the rich.
But whereas the rich and poor have predictable agendas, it is the vast Middle that remain wild. The middle can adopt the extreme ideas of the poor or rich even when they have no real stake in it. For example, if you feel the poor are lazy, you probably resist government regulations on the rich. If you feel the rich are overpaid, you probably support taxing them. Neither of these concern you, but you will fight as if they do.
Misconceptions about the government’s role lead to roaring distractions. For example, many think the role of government is to “help the economy”. That’s why “the economy” almost always comes out on top in electoral opinion polls. Because the tax base is tied to the earnings of its people, we assume it is in the best interest of the government to improve the economy.
In fact, there is very little the government can do to help the economy short of the crude lever of interest rates and tax spending. And how does that work? By easing when the market is down and rising when the market is up. To function properly, the government must act contrary to the economy, and contrary to its own tax collection model. Hence the confusion.
How to predict the future
This is also, you may recognize, the exact opposite of what governments have been doing in the last 15 years. We can predict the result.
Live long enough, and you see the fallout when governments get this wrong. Governments who didn’t support the poor are not safe to travel in. Shoddy infrastructure, crime. Governments who failed to regulate the rich are also not safe. Lead in the drinking water, polluted air. In both cases, the commons suffer as well. Potholes remain unfixed, pipes burst, services stop. In fact, when the government fails one, it usually fails all three. The government cannot catch up, eventually leading to collapse. Wihout the tax base to help the poor, enforce regulations, and repair the broken commons, the government loses the resources to govern.
Finding the balance is not simple. Fail to regulate the Rich and the Poor suffer. Over-regulate the Rich and a competitive disadvantage reduces the tax base so the Middle suffer. Over-spend on the Poor and the commons and regulation suffer. Under-spend on the poor and see crime and homelessness lead to more spending in the poor through an overburdened justice system, less spending on the commons, and higher operating costs for the rich. (You can never underspend on the poor. A dollar saved will be forced in the end.)
Government cannot spend on one in isolation of the others, and yet that’s exactly what voters and special interests ask their politicians for every day.
And then there’s the Middle. Again.
The government’s largest support for the Middle is a well-run commons but, this taken for granted, they feel they are not represented at all. Ignore the grumblings of the middle long enough and you drive them to the poles. They adopt positions of the rich or the poor, though they are neither, to feel they are being heard. Their activism irrelevant, this alienates them further, leading to intractable divides.
Identity politics happen when the middle adopt politics that are not their own, such as the poor coal miner arguing for de-regulation or the upper middle class soccer mom shouting about racism. If it feels weird, that’s because it is. It is the picture of a government that failed. The less centrist the Middle, the closer to collapse.
Government must be allowed to do all three — support the poor, regulate the rich, maintain the commons — and it must do this while acting contrary to the economy and saving up for collapse. People who advocate otherwise unwittingly advocate collapse.
And, usually, that’s all of us.