When proponents of government intervention make their case, it is nearly always in terms of intent. “X is bad, Y would be better, and we need government intervention to get Y.” The fact that government intervention often yields Z, and Z is worse than X, is forever being overlooked.

That banks get ever bigger, that they routinely hand out multi-million dollar bonuses, and that they frequently get bailed out, is not a result of the greed of the bankers – a stupid explanation anyway, only satisfactory to the intellectually challenged and perennially envious – but is integral to the fiat money system.

Ever since the U.S. economy began to tremble, Republicans and Democrats have been been trying to goose the consumer with temporary tax cuts, alongside an assortment of deficit-spending schemes. Even if temporary tax cuts do work and are regarded by consumers as found money to be spent quickly, the deficit spending tells the citizen that taxes will go up in the future, so that it’s advisable to save any found money. The tax cut also makes Social Security less self-supporting and more of a welfare program supported by general revenue. The $112 billion not raised by the Social Security tax is to be “offset” by injecting Treasury bonds into the Social Security Trust Fund, which promises higher taxes in the future. If consumers are capable of telling the difference between found money and fool’s gold, Congress should try a different kind of stimulus.

It is possible today to become President without having any idea how to set up effective processes for making and implementing decisions. That does not mean that a President will necessarily lack those skills. It seems to me that President Clinton maintained effective processes. He used his economic team well enough. But I expected the current President to be roughly similar, and I was wrong.

Suppose a 50-year-old couple with two teenage kids and with household income of $60,000 experiences a year of out-of-pocket medical expenses substantially higher than normal. Fortunately, everything is cured. And fortunately they have savings to draw on, they forego their vacation that year and temporarily suspend their HBO subscription to pay their medical bills. If the expenses are large enough, this family is now considered living in poverty.

According to the poll, ”the 64% of Americans who say big government will be the biggest threat to the country is just one percentage point shy of the record high, while the 26% who say big business is down from the 32% recorded during the recession.

…politicians can’t just do the “obvious best” thing. There is no such thing as a perfect rational maximizer in policymaking. Politicians are always limited by what their voters think is fair. The voters may be right, they may be wrong, but in the end (hopefully), they’re still the boss.

If social phenomena are too complex for any of us to understand, and if individuals consistently overestimate their knowledge of these phenomena, then prudence would dictate trying to find institutional arrangements that minimize the potential risks and costs that any individual can impose on society through his own ignorance. To me, this is an argument for limited government.

If the regulators do not want to shrink the financial sector, then they have to try to prop it up, in part by labeling securities as low risk when they are not. Which is how the financial sector got to be to big in the first place. The regulators labeled mortgage securities as low risk when they were not. Then they labeled sovereign debt low risk when it was not.