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Friday, February 12, 2010

Too Big to Fail

I'm an advocate of providing incentives to entities that are "Too Big to Fail" to split up into smaller, independent components that won't endanger the economy or even civilization itself if they happen to fail. The devil's in the details regarding how to do that, but I think it's probably plausible and desirable for private companies.

However, the Federal Government is the 800 pound gorilla (or rather the $3,800,000,000,000 gorilla) in the room when it comes to entities that are "Too Big to Fail". Failure doesn't necessarily mean a short-term catastrophic failure. An entity that becomes increasingly sclerotic and non-functional to point where it parasitically sucks in an enormous vortex of resources from its increasingly beleaguered hosts also becomes a failure at some point.

Since the Government is "Too Big to Fail" (and therefore "Too Big to Exist"), it should be broken up. Since it is so large it should be broken up into numerous entities. Picking a number out-of-the-air, I'd say that breaking it up into 50 entities (or 57 if you're Obama), would be about perfect. Conveniently, we happen to have 50 mostly functioning government entities to which we can transfer responsibilities and authority. Also conveniently, with the possible exception of a few of those States, none of them are "Too Big to Fail". Problem solved.

Wasn't that what our Founders had in mind? Smart dudes.


erp said...

We already are 50 entities. Unfortunately, we've been seduced into giving over much of our individual sovereignty to the feds so that state governments can get a pass on things citizens don't like.

Now the feds have taken to setting up ad hoc committees, commissions, tribunals, etc. to deal with things congress doesn't want to take the blame for -- like military base closings, tax rates, etc.

Going back to basics and forcing every area of government to accomplish its assigned tasks is a great idea. Actually breaking up the union is a very bad one.

Balkanization isn't a pretty sight.

Susan's Husband said...

The problem with your suggestion is that it increases accountability of the political class. When areas of responsibility are smaller and better defined (e.g., this is federal, that's state, the other thing is local) then it's easier to figure out who's not up to the task. Our current centralized muddle, on the other hand, is perfect for disguising where the problems come from. Therefore our political class will never support such a thing.

Hey Skipper said...

Bret for President.

Harry Eagar said...

Parkinson's Law enforced.

On the other hand, during the 1840s, one-third to one-half of all national government expenditure was for scientific research.

Which means not much for defense, public works (pretty much limited to lighthouses in those days) etc.

Paradise for small government folks, I guess, but it turned out later that the national government was too small.

I highly recommend a short book by Margaret Humphreys, 'Yellow Fever and the South,' in which she relates how local and state efforts to enforce quarantines or otherwise protect the population from yellow fever failed for decade after decade.

At long last, and despite the Southern antipathy to interference from Washington, in desperation the state health departments put themselves under federal control.

Within 3 years, yellow fever was gone, never to reappear since.

erp said...

What did the feds do that the state didn't?

Bret said...

I'd ask a very slightly different question.

What did the feds do that the states couldn't?

Obviously they could've create a multiple State commission that they ceded authority for that one topic.

erp said...

... send in the Marines?

Harry Eagar said...

Enforced uniform quarantine.

The patchwork of quarantines (and informal, shotgun quarantines) set up a competitive frenzy -- markets, you know -- which meant that none worked.