Larry Reed’s Seven Principles

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Contributed by “The Ed”

Larry Reed, President of the Foundation for Economic Education, gave a speech called “The Seven Principles of Sound Public Policy”.  The YouTube video appears at the bottom of this article.  I’ve taken the principles from that speech verbatim.  The comments are mine, though I may be echoing some of what Larry Reed has said:

1.  “Free people are not equal and equal people are not free.”

It should be noted that this is an economic principle and is not meant to apply to equal justice under the law.  You would think this should be obvious.  People don’t save the same way.  They don’t spend the same way.  They don’t have the same skills.  They don’t work toward the same goals.  They don’t work equally hard.  People’s work, their accomplishments, their efficiency, their accuracy and most importantly, their values are not equal.  So why would they be economically equal?

Who do you hire first?  Who do you pay more?  Do you have a right to choose the better candidates?  If you have that right, then you are free to choose.  If you have that right then the candidates will not appear equal.  In a free society, you can choose a plumber whose work will leave your walls dry.  In an equal society, you get what they give you.

2.  “What’s yours you tend to take care of.  What belongs to everybody or nobody tends to fall into disrepair.”

It sounds so good to move people who cannot afford it into a place where the rents are low enough for them to afford, in a city where they can find work, near a grocery.  It is called public housing.  But it results in urban decay.  If there is one thing wrong with public housing, this is it.  The people in public housing do not have a stake in the property they live in. Without a stake, it doesn’t matter what happens to the place.  If the occupants don’t own the problem, how can they be part of the solution?  But they are not the only ones who don’t own the projects.  The people running the projects don’t own them either.  Nobody owns the projects.  It is only natural that they fall into decay.

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3.  “Sound policy thinks of the long run and all people, not the short run and few people.”

This is the problem of transfer payments.  Transfer payments can only be given from the many to the few.  As the few grow the transfer payments become unsustainable.  Transfer payments are not even good for the short run.  How often do transfer payment programs go away?   Rarely.  Transfer payments are not sound public policy.

4.  “If you encourage something you get more of it.  If you discourage something you get less of it.”

What else can be said about what happens when you pay people for being out of work?  Take a look at statistics out of Denmark.  They illustrate when unemployed workers found a job under two periods of government policy:  Red line = unemployment benefits available for 5 years;  Green line = unemployment benefits available for 4 years.

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As you can see, the biggest transition from unemployed to employed occurs when the benefits (financial subsidies for the unemployed) run out.

5.  “Nobody spends someone else’s money the way he spends his own.”

Federal revenue is   $3 trillion

Federal debt is          $17.6 trillion

Congressman’s income is $174 thousand

By proportionality, if the house or senate members spent their own money like they spend the federal government’s money they would have a debt of  $1.06 million dollars each. They would be spending $203 thousand annually.  They would have nothing to show for it and they would have no way of paying it back.

6.  “Government has nothing to give except what it takes from someone else.  If a government is big enough to give you everything you want, it is big enough to take away everything you’ve got.”

This is the answer to “The government ought to…” crowd.  We don’t want government to give us everything.  Collectively, government can only give back to us part of what it takes from us.  Nearly 1/3 of what we earn goes to taxes.  April 21, 2014 is tax freedom day.  Much like the slave owners of antebellum days, the government lays first claim to the fruits of our labor.  With the debt that our government has accumulated, again like the slave owners of the antebellum days, they have laid first claim to the fruits of the labor of our children and our children’s children.  And they STILL won’t stop borrowing and spending.

7.  “Liberty makes all the difference in the world.”

Take a look at what it takes to start an enduring company today.  Although starting a company is relatively simple in the U.S., staying within the regulation requirements is not.  We have labor regulations, environmental regulations, online business regulations, OSHA regulations, tax regulations.  In addition, we have specific regulations that apply to finance, banking, chemicals, power, food, mining, oil and gas, pharmaceuticals, telecommunications, media, manufacturing, construction, real estate and other industries.  These regulations are making the cost of doing business too high to sustain a company.

As government grows, liberty shrinks.  So goes our economy.

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