Why progressive institutions are unsustainable

Consistent bad results can only be explained by consistent bad policies and not by some mysterious run of bad luck.

The classical liberal evokes references to 19th century theories of market liberalization, which were intended to reduce the dead hand of government over the operation of the economy.

Modern progressive recalls the progressive movement of the first third of the 20th century, which championed the rise of the large administrative state to overcome the perceived weaknesses of the classical liberal synthesis.

Governments are to supply public goods and maintain social stability, leaving innovation to the private sector.


Key components of the classical liberal theories:
(1) The call for limited government funded by tax revenues preferably generated under a flat tax. It is proper to use borrowed funds to create long-term capital improvement but not to fund short-term government activities.

The purpose of taxation is to fund the creation of (nonexcludable) public goods that could not be created or maintained without some system of coerced public support.


(2) Traditional libertarian theory insofar as it relies on a system of strong property rights that allow individuals choice on how to use and dispose of their property so long as they do not encroach on the land of their neighbor or create nuisance to their neighbors.

Differentiate between technological and pecuniary externalities. Classical liberalism steers between the risks of anarchy and authoritarianism. 


The theory is that the rules that preserve the like liberties of property owners should maximize their joint welfare by imposing parallel limitation against disrupting the quiet enjoyment that neighbors have of their own property.


(3) a strong commitment to the principle of freedom of contract

The progressive agenda shrinks the size of the stock of financial wealth by a sustained program of ill-advised regulation of primary conduct. It imposes extensive and counterproductive programs of redistribution that cannot be supported by a stagnant economy and a shrinking productive wealth base.

Lump sum tax limits the political competition for favorable tax rates.
The restriction of the use of taxation (only to public goods) reduces the likelihood that a skewed set of government payments will undermine the strict parity on the taxation side.

The reason why the gulf between public revenues and public expenditures has risen to 10 percent of GDP, or 40 percent of the federal budget, which now can only be made up by deficit financing:
(1) decrease in tax revenue
(2) increase in government expenditure
(3) increase in regulatory burden
what triggered the downturn in income tax revenue is the radical decrease in the income of upper-income individuals, not any favorable rate break.