The advantage of centralized government

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

I saw this interesting bit on Hacker News: by bhups:

The United States is a federation of self-governing states within which there are open borders and free trade…just like the European Union. The United States has a population of 320 million people, while the EU has a population of a similar order of magnitude: around 500 million. To many voters, the idea of enacting broad social welfare programs in the United States sounds just as infeasible as enacting similar programs in the whole European Union. California is different from Ohio, both of which are different from Georgia.

If we want to use Denmark and the Nordic countries as examples for our policies, we should move towards the republican (small r) idea of decentralization so that the states can enact such systems. Today, I pay roughly 30% of my income in taxes to the federal government, and 10% of my income in taxes to the state government. This should be the other way around – 10% to the Federal government and maybe 30% to my state. Maybe Wisconsin can have a single payer healthcare system, California can have a universal multi-payer system (like Germany), and Texas can have a universal multi-payer system like that in Switzerland.

I responded:

bhups, I don’t think you’ve thought about the implications of this:

“The United States is a federation of self-governing states within which there are open borders and free trade”

The point is, it is rather easy for a wealthy person to move to a low tax state. I’ve known several retired people who picked a particular state as their new home, once they had retired. And corporations do this all the time — they move from one state to another so they can be in the state where they can pay the least in taxes. This limits our ability in the USA to impose the taxes necessary for a healthy set of social safety programs. Let’s think about this as engineers — if we see a system of pipes, and there is a leak in one of the pipes, what would we do? In the short term, we would plug that leak. In the long-term, we would ask “Can this system be streamlined so there are less pipes, and therefore less things that can leak?” That line of reasoning has lead me to conclude that we should amend the Constitution in the USA, abolishing all local and state governments, and concentrating all power in the national government. That would allow the government to impose the taxes necessary to give the country the kind of broad social programs that European countries already enjoy.

bhups replied:

It’s rather easy for a wealthy person in the EU to move to a low tax country as well! Switzerland has one of the lowest income taxes in the developed world, yet most of the wealthy people in Europe don’t live there. Wealthy people will choose to go wherever it’s most beneficial for the industries that they participate in. London still has a booming economy despite its relatively high tax rate. In fact, post-Brexit, there’s speculation that industries will choose to leave London in favor of cities like Paris, Amsterdam, or Berlin to be able to participate in the European common market.

Retirees can definitely choose to move to whatever state they want, but they’ve never been the contributors to social security programs, they’ve always been the beneficiaries.

The system that I’ve proposed seems to be working quite well in the EU. Perhaps provide a counter-example to support your assertion that the opposite is true?

EDIT: and I agree with you – let’s think about this as engineers. As an engineer, I would approach this problem using divide-and-conquer: by breaking down the problem into multiple sub-problems (i.e. at the state level) of the same or related type, until they become simple enough to be solved directly. We have come to learn that monoliths do not scale, and we have to scale horizontally.

I responded:

“It’s rather easy for a wealthy person in the EU to move to a low tax country as well! “

This is exactly why many people in the EU argued for a closer union, to harmonize taxes and thus avoid the kind of tax evasion that you mention.

I don’t know what to do with this:

“The system that I’ve proposed seems to be working quite well in the EU.”

By what possible stretch of the imagination is the system working well in the EU? The EU has been on the brink of breaking apart since 2008, and Britain just voted to leave the EU this summer. The EU is even more federated than the USA, and they have suffered even more problems with federation. Both the USA and the EU must eventually move toward consolidated governments.

bhups replied:

“By what possible stretch of the imagination is the system working well in the EU? The EU has been on the brink of breaking apart since 2008, and Britain just voted to leave the EU this summer. The EU is even more federated than the USA, and they have suffered even more problems with federation. Both the USA and the EU must eventually move toward consolidated governments.”

I would argue exactly the opposite. The primary criticism that member nations have of the EU is that there are too many regulations imposed at the EU-level. This was the non-xenophobic argument in favor of Brexit.

By enacting what you would propose: total control at the federal level, we would move closer to such an unpopular reality.

I replied:

“total control at the federal level, we would move closer to such an unpopular reality.”

Surely that isn’t true? If we abolish all local and regional regulations, then there is an absolute reduction of regulations. Many of the criticisms that I’ve read have been about the conflict between regional and EU directives. For instance, regulations regarding milk and cheese, in Wales, regulations that had been in place for centuries, and which came into conflict with the EU directives. Those kinds of problems go away if you simply abolish all the local and regional directives and consolidate things at the top level.

To put this in engineering terms, I’ve often been part of the debate regarding where Exceptions should be handled in software. Some programmers feel that Exceptions should be handled as close to the source of the problem as possible. Others argue that it’s idiocy to allow Exceptions handling code to be scattered throughout the code base, and therefore its best to consolidate error handling at a single top level. Depending on the project, I’ve been on both sides of that debate, but I’ve never argued that the decentralized approach lead to less code. The consolidated approach certainly involves less code.

Also, I’ll point out the “we keep local control” is the most illusionary of the claims made by those opposed to the EU. Consider the case in England. As long as England has trade with the continent, then England will face long-term pressure to harmonize it’s economy with its major trading partners. Look at what’s happened over the last 200 years. All of Britain eventually accepted the metric system, even though it was developed in Revolutionary France, who Britain fought against. Leaving the EU doesn’t save England from the pressure to harmonize its economy with the EU, it only undermines England’s negotiating position.

bhups replied:

“If we abolish all local and regional regulations, then there is an absolute reduction of regulations. ”

You seem to make the implicit assumption that federal regulations are somehow better than the same amount of state-level regulations. This simply isn’t the case. Today, New York has to participate in the same polity as Florida, and it is for that reason that it does not have a single payer system, despite its citizens being in favor of it. This is unsurprising because you can’t create one-size-fits-all solutions for all of our states given how different they and their economies are.

Instead, if we allow them to chart their own path, we can allow them to fail (or succeed) fast. The alternative is the limbo state we are in where nobody is moving forward (or backward) and nobody is happy.

To continue the engineering analogy, this is a divide-and-conquer problem. Denmark and the Nordic countries were able to successfully implement their social systems because they are small, well contained countries. By allowing US states to implement their own systems, we set them up for the same kind of success.

I’ll post my response here on my blog.

About this:

Denmark and the Nordic countries were able to successfully implement their social systems because they are small, well contained countries.

There is no relationship between the size of a country and its social welfare systems. Liberia is much smaller than Germany, but it does not have the social welfare programs of Germany. Poland is much more homogenous than Germany, but has less in the way of welfare programs. I could go on giving examples, but you get the idea. A nation has a rich set of social welfare programs when it has the will to have a rich set of social welfare programs. Nothing else matters.

By allowing US states to implement their own systems, we set them up for the same kind of success.

I’m afraid that at this point we are simply repeating points that we’ve already made. I’ve already explained that independent states can not set up rich social welfare programs on their own, because there is a limit on how much they are able to raise taxes. Rich people and corporations can move to lower tax states. We can avoid this problem by abolishing the states and concentrating all power at the national level. I said this up above.

I think bhups goes a little too far here:

This is unsurprising because you can’t create one-size-fits-all solutions for all of our states given how different they and their economies are.

This confuses the issue of what is possible and what is good. I’d rather treat those as 2 subjects. On the matter of what’s possible, clearly a government can create one-size-fits-all solutions — there have been many empires that have enforced their laws on diverse populations. And policy can obviously create a greater homogeneity between the states — this has already happened. Starting in the 1930s the national government in the USA began offering large subsidies to bring the southern states up to the same economic level as the northern states. The gap between the states is much narrower now than it was then.

You seem to make the implicit assumption that federal regulations are somehow better than the same amount of state-level regulations.

I don’t think that was implicit, I think that was explicit for certain kinds of “better”. For instance, I gave the example of Exception handling in software code. Where “better” equals “less code” or “better” equals “streamlined” then I was explicit in suggesting the consolidated approach is better.

Did you hear about the corporation that went 229 years without re-organizing any of its departments? No? That’s because it is a silly suggestion. But many of the divisions in the USA are based on state boundaries that have not changed since the country started.

Consider transport in New York City. There are too many systems. There is the Long Island Expressway. The Port Authority. New Jersey buses. New Jersey trains. Amtrak. The Empire Service. The Adirondack Service. If the states were abolished, then the national government could consolidate some of these, just like the British government has done for London. I could maybe see separate departments for bus, train and ferry, but beyond that, I don’t see a need for so many divisions. But perhaps bus, train and ferry might be easier to coordinate if they are all handled by one organization? That’s an interesting topic of conversation, but it is not a practical conversation to have in the USA right now, since there is no easy way to consolidate New Jersey, New York and Connecticut into one polity.

Today, New York has to participate in the same polity as Florida, and it is for that reason that it does not have a single payer system, despite its citizens being in favor of it.

This mis-states the case. Right now New York doesn’t have a single payer health system because the people have not yet been able to push this idea through the national government. But at some point, this will be enacted at the national level, and then both New York and Florida will have a single payer health system. Morally, there is a strong case for a single payer health system. And the inverse is true: it is immoral to let individual states ignore their moral obligations to their citizens. Therefore it is wrong to enact these policies on a state by state basis. This law must be passed at the national level. And there are practical reasons for this too: the issue of taxation is easier at the national level.

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