Simpler Is Better

On Saturday, The Wall Street Journal ran one of its trademark editorials making fun of government red tape—the massive regulations required to implement the Affordable Care Act; the 398 different rulemakings necessary to carry out the Dodd-Frank Act, and a great deal more. 

I seldom agree with the Journal’s editorial page, but it makes an unintentional point: Government regulations have become so complex that they can’t do their job. Or at best, the sheer complexity makes the government sitting ducks for the mischief of industry lobbyists looking to further complicate the rules with loopholes.

But where does the complexity come from? It comes from the metastasized abuses of the private sector and the success of the business elite in getting government to pass laws with plenty of room for industry to maneuver.

The Glass-Steagall Act of 1933, by contrast, was simplicity itself. It ran just a few pages and didn’t need 398 different rulemakings to carry it out. The act provided that you could either be a government-insured commercial banker or a risk-taking investment banker. Full stop. It drew a nice, simple bright line. The trouble crept in when industry lobbying succeeded in blurring the line.

And nations fortunate enough to have single-payer, universal health insurance don’t have libraries full of regulations to keep private insurers from fleecing doctors and patients alike—middlemen for the most part don’t exist. Simpler is better.

By the same token, the Home Owners Loan Corporation of the Roosevelt era, which refinanced one mortgage in five and saved a million homes from foreclosure, did not require the Byzantine rule book of the Obama mortgage-relief programs channeled through the private sector. The HOLC used the Treasury’s borrowing rate and made direct loans to homeowners. No securitization, no Wall Street middlemen, no scandals, no reams of regulations. End of story.

Pop quiz: Which part of America’s pension system is a complete mess, unraveling as large corporations like American Airlines abuse the bankruptcy system to walk away from pension obligations? Which part requires endless regulation that never seems to be sufficient to prevent the latest corporate scam? That would be the private part.

And which part is simple, elegant, scandal-free, and reliable? That would be Social Security.

Where are the gross abuses in student loans? In the private, government-guaranteed part of the system, of course. Where is the system simpler, fairer, and more cost-effective? In the direct-loan part.

Does there seem to be a theme here? It’s not just that simpler is better. It’s that public is better, and public is usually simpler and more efficient.

So the next time you read a Wall Street Journal editorial decrying all that government red tape, ask where the complex abuses came from that required all those rules. The answer is pretty simple.

Comments

The dream of progressives finally understanding that simple is better! Instead we get articles like this comparing government programs from a century ago to private programs now. And assuming anything complicated in a government program is due to private sector involvement. Open your eyes and look at the full picture. Simple solutions just don't appeal to progressives. TEA party conservatives wanted a simple solution to the financial excesses, like a reinstatement of Glass-Steagle, but progressives said they were ignorant of the complexities of the real world and started generating government structures in Dodd-Frank to solve every detailed possible problem. Now that progressives see the monstrosity of it, they are looking for a scapegoat and are pointing to "the private sector". The "private sector" doesn't want it - they want simple, clear laws properly enforced. The cronies at the big banks want millions of regulations because they have the staff to make loopholes out of the "exceptions", but the "private sector" does not. But the cronies have their suckers in the progressives to make sure that we get "nuanced", complicated solutions with lots of exceptions.

Yes the Roosevelt era mortgage program was much simpler, but that is because progressives felt we needed a more nuanced system of giving out mortgages, instead of requiring verification of income and a downpayment. The mortgage problem and its various complications comes from progressive desires for more "nuanced" approaches to granting mortgages for people who are alternatively credit worthy in their own cultural milieu. This is why the Roosevelt program was only involved in 1 mortgage in 5, where Fannie Mae and Freddie Mac are involved in 4 mortgages in 5.

If you could look at the past more clearly it would be profitable. But if you do, you will realize that many of our problems occured because progressives did not want simple solutions. The goal of the ACA was to increase access to medical care. Instead of looking for a simple solution to increase access, progressives decided we needed to remake the entire system from scratch. The private sector solution that was being gradually adopted was to remove the insurance companies from routine care, since they were just middlemen and did not add value. The current solution is much more complicated and much less effective.

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