Making Good Decisions

Time magazine of 9/6/10 pp40-46, printed an article entitled “The Case Against Homeownership” by Barbara Kiviat. The article is very well written and raises a very important policy issue: How can a democratic government make good decisions and avoid poor decisions? I suggest that diverse groups of well-informed individuals tend to make better decisions. Wealthy political donors are not interested in objective decisions. Converting from war production to housing and auto production after WW2 was necessary, but went to extremes because political decisions were based on lobbying and donations. Likewise, current funding of wars, fossil fuels, extreme medicine, and manned space flight have become driven by lobbying and donations, not by rational review.

Some of the best governmental decisions have been made by The National Science Foundation, The National Academy of Sciences, The National Academy of Engineering, The National Institutes of Health, The Defense Advanced Research Projects Agency, and The National Academy of Arts. These groups all include well-informed individuals representing varied interests and organizations. I suggest that these, and similar, groups should make most decisions about which project proposals to fund with tax dollars. Different, but similar, groups could be very useful in designing trial programs to test options for helping Social Security, Medicare, and other federal programs become financially viable in the long term. All programs must change over time to meet changing social and financial needs. Congress should create and use such groups to avoid gridlock with competing social and financial lobbies.

The main role of Congress should be to allocate actual tax revenue to high priority recommendations of expert review groups. Congress is not objective enough, nor informed enough, to select which specific projects should be funded and at what level of funding. Congress must be held responsible for allocations of available revenue to major groups of programs, but should avoid endless fights over details which can only be resolved by trial and error over long periods of time, often by many states or countries. We know few answers, but can probably agree on some things to try. We have enough analytical means to determine which of several proposals are most likely to work. Proposals by lobbyist can also be reviewed and tested. However, all proposals should meet the same criteria to receive a technical review before testing. All bids, funding, and research proposals are expected to meet such review and testing criteria. Similar criteria should apply to Congressional proposals. Congress is clearly responsible for balancing federal income and expenses and for regulations to avoid major imbalances. It is time for Congress to do its job! Members of Congress, and citizens, have had it too easy since the end of WW2.

Note added on 2/19/12: Since politicians make more promises than we can pay for and businesses always lay off workers in serious recessions, governments must stimulate consumption during major recessions to avoid major public unrest. Politicians will have already created a public debt, so a recovery will always require more borrowing and printing of money to rebuild confidence and stimulate consumption. The ability of central banks to print money is critical to avoid a downward spiral. Of course, printing money will increase inflation, but slow inflation is usually necessary to repay too much debt, because neither voters, nor politicians, have enough, if any, savings to repay their debts. Lenders will simply raise their interest rates to cover the added inflation. The only alternative is to have significant savings and assume a reasonable, slow, growth rate on one’s investments. Noise (bubbles and crashes) happens! Deal with it! And stop blaming reserve banks for slow inflation which borrowers (including politicians) made necessary!