According to Paul Krugman, the government shutdown amounts to a potentially big libertarian experiment.
With nine departments and multiple agencies closed, maybe for months, the New York Times columnist and Nobel laureate envisages a coming test of whether the country can live without the Food and Drug Administration, the Small Business Administration and farm subsidies.
So are those of us at Cato who believe in the abolition of these programs celebrating? Not quite.
As the vast majority of the U.S. population go about their daily lives, barely noticing that 25 percent of federal discretionary spending has been paused, it’s certainly possible many will wonder why debt is being racked up for programs that have no noticeable effect on their well-being. Who knows, many employees, businesses and farms may also reconsider the wisdom of placing their livelihoods at the whims of the political process.
Better still, the shutdown may bring attention to these otherwise rarely-scrutinized programs. If major columnists continue identifying Cato as proponents of scrapping things such as farm subsidies and small business cronyism, linking to our research on the damaging economic, political, and social consequences of existing provisions, the shutdown could serve a useful public education role too!
But, the truth is, most libertarians aren’t cheering current events because shutdowns appear not to change much in regards the size and scope of government in the long term, yet bring chaos, ill-feeling and uncertainty in the short.
Markets are powerful precisely because they allow people to interact in voluntary ways to fulfil wants and needs. Necessity, as they say, is the mother of invention.
Libertarians are indeed confident that, as in countries such as New Zealand, scrapping agricultural subsidies would deliver a more efficient industry, taxpayer savings, and a bigger economy.
But it’s obvious, as Krugman acknowledges, that temporary suspension of promised support is not an environment conducive to farmers making long-term crop or farm ownership decisions, private companies banding to form market-based food safety certification agencies, or small businesses sourcing new finance.
Yes, economic actors will take steps to mitigate the effects of disruption. But knowing government will eventually reopen, there is little to no incentive for the new institutions to develop or businesses and farms to undertake the structural change we would see if government absented from these roles. Instead, businesses and individuals are temporarily crippled in their forward planning and paralyzed by the uncertainty promises made to them being broken.
The natural priority for those farms, businesses and federal employees right now is to lobby successfully for the government to reopen and their payments to start flowing again. Hence the newspaper stories we see already about their difficulties, indicating precisely the diffuse costs yet concentrated benefits associated with much government spending.
That doesn’t mean libertarians are any less supportive of removing government from these activities. In fact, as Chris Edwards shows, a host of other areas likely to be noticeably affected by a sustained shutdown – security screening at airports, air traffic control, and the management of national parks – are better managed in other countries with more private sector involvement. If the shutdown brings attention to this, then great.
Overall though, libertarians are fully aware that for the real policy experiments we desire, the public and/or politicians must be convinced of the necessity or desirability for permanent policy change in a market-based direction. The best chance for success with that is in an environment where those affected can adjust in an orderly manner, and replacement private-sector institutions have time to develop.
Krugman knows it is disingenuous to suggest that the current chaos is some libertarian policy experiment. But as some Republicans do make the case that the programs above are vital for the health of the economy, and libertarians continue to make the case for their abolition, perhaps he will finally cease lumping Republicans and libertarians together in his columns.
