Government and Economy

Economy, labeled “Issue #1” by CNN on the election, is literally a ramification of issues. For different people it could mean different things like higher gas price and food price, stagnate wage increase, unacceptably ever-increasing health care cost, and for the least unfortunate—the loss of job or house (these cases are evidently piling up). For the better-offs, it means a shrinking investment portfolio and less higher net worth. Some others developed an anxiety on the weakening dollar, solely and over-obsessively on the ground of pride.

Before casting your vote on the “Issue #1”, however, you have to develop some crystal thoughts of your take on the government’s role in the economy, as well as how much it can do about it.

Role of Government. if you are an Adam Smith’s fan, believing in firmly the power of the “Invisible Hand” (or matter-of-factly an unfettered dollar-term show-hands of everyone), chances are that you are better off than the average and believe in a small or limited government – “the government should simple get out of our way,” as you would say. Or you may use the catchier phrase – “laissez-faire”, a French phrase literally meaning Let do.
But “laissez faire” never existed and perhaps will never exist in full scale. Being an ideal and perfect state notwithstanding, the idea that market works perfectly all the time have been proved faulty. The market has foibles and occasionally it goes haywire in forms of market failures. What is more, market is not apt to solve all the problems by itself. For example, the quest for “energy independence” requires a much more organized force than ones available. Another case is the remedy of “global warming.” Also, I can’t image any business corporation would have pulled the big step of “moon landing.”

Federal Government as an Economic Power. The federal government, if seen as a single force in the economy equivalent to businesses, is a pivotal power. In 2007, it collected $2.6 trillion and ladled out almost $2.9 trillion. That is a goodly 21% of GDP – the total value of domestic production. Adding up local government, the stats becomes $4.1 tril and $4.7 tril. If not losing a bit money, it makes Exxon look like a midget. The government, though through collecting and spending your money for you, has indeed a big time say-so in your economic life.

On top of the fiscals, the economic preponderance of the government lies in the regulations, which serves as dams and valves in the economic landscape, guiding the distribution of tremendous flow of wealth. The epochal examples are the tax system and Social Security (a.k.a. the social network).

Given the complexity of the issue-basket, I will help disentangle the snarl into sub-issues - namely, tax, federal budget, job, trade, and tap into the housing crisis and the strong dollar anxiety. If it interests you, I have a note on recession.