Sunday, November 22nd, 2009

The Role of Government

With the advent of the recent recession and the tremendous response by the federal government in intervening in the economy, the question arises as to what is the appropriate role of government in society.  The two testaments of the Bible look at government from two vantage points.  The Hebrew Scriptures focus on the development of a righteous nation under the rulership of God.  Various types of governments were formed in the early Biblical period, culminating in a monarchy.  Most significantly, the Book of Deuteronomy mandates that the king be subject to the rule of law, as given by God at Mt. Sinai.  Utilizing this principle, the prophets often challenged unethical or immoral government actions.  In addition, the law required provision for the poor, the widow and the alien.  Again, the prophets raised these issues when society failed to uphold them. 

The context within the New Testament period was quite different.  Jews were no longer in control of their society or government.  Rather, they were subject to a foreign power, i.e., the Roman Empire.  Hence, the focus was on the people’s relationship with the government, with the emphasis on respect of authority.  However, there was an implicit recognition of the government’s role in ensuring justice.  Nevertheless, both Testaments suggest a role for godly people to challenge society and governmental injustices. 

Throughout most of world history, the primary form of government was a type of monarchy.  More progressive monarchies attempted to raise the standard of living for the masses and granted limited freedoms.  For the most part, however, there were two classes in society, the rich and poor.  The concomitant rise of both capitalism and democracy in the 18th century dramatically changed society.  Our founding fathers constructed a governmental model in the midst of the rise of these two huge societal changes.  Unquestionably, the fathers proposed a government with limited powers that provided for maximum individual freedom.  It really was a grand experiment.  That experiment proved wildly successful as the United States has been the most prosperous and free nation in world history, and its influence upon other nations has brought freedom and prosperity to much of the rest of the world. 

Until the twentieth century, the federal government was quite small, and its reach into private economic affairs was limited.  With the ascension of Teddy Roosevelt to the presidency, the federal government’s role in society grew.  He successfully pushed through legislation limiting economic trusts and monopolies, increasing the government’s intrusion into private business.  He established new agencies regulating various products such as foods and drugs.  He began calling for limiting the use of natural resources to preserve the environment.  But it was his remote cousin, Franklin Roosevelt, who in response to the Great Depression, oversaw a vastly increased federal government.  Massive government work projects were instituted to lift the collapsing American economy, and possibly, most importantly, programs were launched to protect the economic security of the population, the best known being the Social Security program. 

Since the Depression, scholars have debated the successes of the Roosevelt plan.  Regardless, he created a new foundation in America of an activist government.  Following World War II, the United States became the world’s foremost powerhouse, economically, politically and militarily.  It seemed as if the mixture of opportunity and government imposed security nets provided a secure foundation upon which America’s freedoms and prosperity could grow.  The next major change occurred during the Johnson/Nixon administrations.  Huge entitlement programs were enacted such as Medicare, Medicaid, Food Stamps and benefits for the poor and the disabled, followed by the passage of environmental legislation attempting to clean up America’s air and water and protect endangered animal species.  The government, foreseen by the founding fathers as limited, had grown to affect almost every part of American life. With the exception of some minor blips, however, it seemed the American model continued to work, successfully adapting to each new economic and political development.  The United States seemed to achieve an almost Biblical envisaged society of justice, prosperity and protection for the down trodden. 

However, there remain huge challenges to this reworked formula for government involvement.  Government programs are financed either through taxes or borrowing; the larger the government, the higher the taxes or the greater the borrowing.  Tax rates have remained relatively low for awhile, thereby enhancing investment and consumer spending.  Hence, government programs have been subsidized by ever increasing borrowing.  That cannot continue.  In addition, huge entitlement programs such as Social Security and Medicare are badly underfunded and will need massive infusions of income in the near future.  The most recent recession reveals the vulnerability of enhanced government involvement.  The recession was caused by numerous factors, but most experts point to the collapse of the housing market as the prime mover.  Government mandates to lower housing financing standards to enable more people to qualify for home ownership undermined the integrity of normal business decisions.  Previously unqualified applicants were granted home mortgages.  The increased number of applicants drove up home prices.  When these individuals no longer could afford their homes, the housing market began to collapse, threatening the viability of financial institutions around the world.  As a result, the Bush and Obama administrations intervened into the economy at rates previously unseen, leading to unprecedented and massive deficits for the foreseeable future.  Despite assurances to the contrary, the government’s increased involvement in American society is likely to remain, best exemplified by the health reform legislation being considered by the Congress today. 

In reality, there are only three responses to the enhanced government involvement in American life.  1) The United States can continue to borrow funds for its programs, a situation that could lead to wildly escalating interest rates and the collapse of business.  2) Taxes can be significantly increased to pay for the new programs, the current deficit and for the unfunded entitlement programs.  This, in itself, could lead to another recession.  3) Government spending can be sharply reduced, including drying up the funding of foreign wars and cutting the benefits promised through various entitlement programs. Only the third option would scale back the government’s role in society.  It’s ironic that only 25 years ago serious consideration was being given to pass a constitutional amendment requiring the federal government to maintain a balanced budget. 

There are no free lunches.  Someone has to pay.  When the government provides benefits to one group, another group must pay.  This impinges upon freedom.  Historically, the United States has successfully balanced freedom and opportunity with limited safety nets.  It appears, however, the balance is changing.  Americans increasingly demand that government provide for their needs, and most politicians refuse to confront the necessary trade-offs to meet those needs.  Expect an ever increasing role of government and a diminishing of freedom, opportunity and prosperity.