It is likely that tonight we will go to bed having witnessed the second massive political shift in the last two years. Does it mean that voters are schizophrenic? Not schizophrenic, but misunderstood, says Matt Michell over at the Washington Times:
Time and again, they turn against incumbents who assume too much control. As a result, new politicians have entered office believing voters have handed them a powerful mandate to take control. Democrats made this mistake after the 2008 election, but Republicans made the same mistake in 2000 and 2004.
He concludes:
Whichever party emerges victorious Tuesday, let’s hope it does not interpret its victories as a mandate to take control, but as one to relinquish it. When it does, it will find that newly empowered consumers and entrepreneurs are well-equipped to solve many of our most pressing problems. They have the local knowledge, the on-the-ground expertise and — importantly — the ability to experiment.
Here is a chart that illustrates the control that government has taken over our lives:
The red line tracks the evolution of federal spending per household in the United States since 1985, with all amounts presented in real 2010 dollars. Since 2007, government spending per household has risen by $4,578. This year, the federal government has spent $30,174 per American household. That’s down from the 2009 level of $32,934 because some spending measures from the 2008 financial rescue have ended.
This doesn’t include state spending and the debt.
Also, it doesn’t take into consideration the fact that many Americans don’t pay any taxes. I should add, however, that even the people who don’t pay taxes pay a real price for the increased control that government has on the economy. Going back to Mitchell’s piece, he reminds us how government spending crowds out private spending and government employment crowds out private employment.
When government policies push, prod and nudge people in different directions, it takes power away from private individuals. One might say the consumer and the entrepreneur are “crowded out” — a term economists use when government activity displaces private activity.
Crowding out was first observed and applied to government deficit spending. In the long run and sometimes even in the short run, crowding out can undo the effects of a fiscal stimulus. For example, when government borrowing drives up interest rates, that makes it harder for businesses to finance their own spending, or when forward-looking consumers anticipate an increase in taxes, they increase their savings and spend less in the economy today.
Harvard economists Joshua Coval, Lauren Cohen and Christopher Malloy recently examined the extent of crowding out associated with earmark spending. They found that after a district’s representative or senator ascended to a powerful committee and began to steer more pork home, the firms in his district saw a loss in sales, cut back on their spending and reduced their work force.
That affects even those who pay no taxes.