The Cato interns had an op-ed writing competition this week. I wrote about Puerto Rican independence and its positive implications for regulatory competition. Congratulations to contest winners Peter Antosh, Hans Lango, and Josh Tomalin. My op-ed submission follows:
Destroy the Fed
By Wallace Forman
“Government,” says Bastiat, “is that fiction in which everybody strives to live at the expense of everybody else.” The United States Congress is no different. Each state sends a few representatives to Washington to brawl for taxes – collected nationally – to disburse in their home districts. The system is roughly described in game theory as the Prisoner’s Dilemma. Puerto Ricans are now being asked whether they want to play. Hopefully, they will vote no – twice.
H.R. 2499, the Puerto Rico Democracy Act, authorizes two non-binding plebiscites. A first referendum polls whether the island’s inhabitants wish to remain an unincorporated territory of the United States. If a majority votes no, a second referendum is held asking whether the island should become a state, autonomous, or fully independent.
Conservatives argue convincingly that the later vote is rigged to produce false majority support for statehood. The options for autonomy and independence may split the separatist camp. And because the second referendum includes no option for continuing the status quo, Puerto Ricans who prefer a close relationship with the US must vote for statehood. The Heritage Foundation’s Hans von Spakovsky says that the bill is “designed to create millions of new votes at a time when certain political actors [i.e. Democrats] fear their election prospects are diminishing.” [UPDATE: Reviewing the legislation, I find this not to be true. The status quo remains an option in the second plebiscite. This does not affect my larger argument.] Put this way, who cares? Whether Democrats or Republicans rule Washington, Congress will continue to pass bad laws.
In the Prisoner’s Dilemma, cops convince two criminals to rat on each other by offering a lighter sentence to the one who testifies first. Although the criminals would be better off as a pair if they kept quiet, each one knows that he personally benefits from squealing. Both talk, and both go to jail.
In Washington, legislators and lobbyists stand in for the law-breakers. Each single congressman is powerless to stop the others from spending the tax-dollars of his constituents – all he can do is appropriate as much money to his own district as possible. Thousands of interest groups add to the chaos by lobbying for special regulations and subsidies. Each interest gains from its own special rent, but not as much as it loses from the rest of the lobbying. The more that is taken from the common pot, the smaller it shrinks.
It doesn’t have to be this way. There is a simple way out of the Prisoner’s Dilemma – not playing in the first place. If Puerto Ricans vote for full independence, they can help start an entirely different game.
When all people live together under one government, they may vote to live at the each others expense. But as the number of countries increases, the power of each shrinks. A state cannot tax foreigners, and if it regulates its own citizens too harshly, they will emigrate. As productive citizens leave, the state loses their tax revenues and has less to offer those who remain. Voters must balance the impulse to rob each other with the need to attract wealthy citizens from other nations. States will compete to offer only laws with real value – even the social safety net must look like one that voters really want beneath them.
The problem with the United States is not too much government, but too few. North America contains only three countries, all massive. Emigrants from the US have to travel huge distances if they wish to leave. Between the dearth of alternatives nearby and language barriers outside of the country, Congress knows its subjects will stay put. Why should we let the federal government keep a monopoly on regulatory authority, when the 48 continental states can offer it at competitive prices?
An independent Puerto Rico will not deliver regulatory competition to North America by itself. But it has the power to remind Americans that no government is a holy and unbreakable union. Separatist movements continue to bring greater freedom worldwide – recently in the Baltic, former Yugoslavia, East Timor, and elsewhere. Other movements remain important in major countries like Canada, China, and Spain. Alaska elected a Governor from the secessionist Alaskan Independence Party Governor as recently as 1990. Legislators from Hawaii continue to push for native autonomy in that state.
There is a chance, however slim, that independence in Puerto Rico could help revive independence movements in the United States themselves. If it comes to a referendum, the island should vote for full separation. An independent Puerto Rico is a small step toward a better world with more choices and no federal government. It is a vote for freedom – theirs and ours.