Between the new administration’s seemingly pro-cryptocurrency stance and its creation of the Department of Government Efficiency, many Americans are optimistic president Trump will shrink the role of the federal government. It would be a great victory if the administration pulls it off, but it won’t be easy.Spending problems aside, the federal bureaucracy has steadily grown more entrenched in Americans’ daily lives. It’s regularly made it more difficult for people to improve their living standards. Government debt has reached historic highs and is set to explode to unprecedented levels over the next three decades.
That’s the trajectory of the administrative state’s legacy.
As this Cato report shows, the government tries to do too much. It overspends and overregulates the private sector. The administrative state has grown so unwieldy that there are now hundreds (thousands?) of ways to shrink the government’s role.
While some policymakers are sympathetic to shrinking the government’s role, most are hesitant about getting the government out of financial markets. They tend to view financial markets as a special case, an area of the economy that requires extra intervention to keep people safe.
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Sound Financial Policy Guide Makes the Case
Contrary to conventional wisdom, there is no such requirement for financial markets. My Cato colleagues and I make that case every day. My new book (with Jennifer Schulp) does it, and our new Sound Financial Policy guide for the 119th Congress does it, too.
The policy guide explains that financial regulation can, in fact, be relatively light touch. Contrary to popular opinion, financial regulation can be based on rules that mainly protect people from fraudulent behavior. Financial regulation simply does not have to be based on restricting what people can do with their money because regulators deem certain products or behaviors as “too risky.” Financial losses don’t have to be backed up by the government, and that process comes with its own set of risks.
Yes, this new approach would mean that more people must exercise caution and good judgment, knowing they will make mistakes. But that’s what people should always be doing. In a more rational system, it would be called reality.
The tragedy is that the current approach—a group of officials trying to dictate that financial outcomes will be great if only everyone else follows their rules—does not work.
Regulators make mistakes because they’re people, too, and nobody has perfect foresight. It should surprise no one that financial losses and crises haven’t disappeared from American financial markets. The current approach merely