by Sandy Ikeda
I would like to share some thoughts on how the size of government can influence the effectiveness of the principle of the rule of law.
The rule of law does not mean, as it is often interpreted to mean, that ordinary people should obey the decrees that government issues. Rather, it means that laws should serve to promote the general welfare and so should not aim to harm or benefit particular persons or groups. Think of a speed limit on a highway that applies to and is equally enforced upon all motor vehicles.
I will follow Hayek in The Road to Serfdom (the 70th anniversary of which we celebrate this year) on the simple meaning of the rule of law:
Stripped of all its technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand — rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.
Think of a speed limit on a highway that applies to and is equally enforced upon all motor vehicles.
The rule of law is a constraint on government
In essence, the rule of law is a constraint on public authorities. It says that people in government should refrain from singling out particular, identifiable persons or groups for either harm or benefit. The rule of law then opposes legislative discrimination or privilege, persecution or intentional favoritism. And the generality of aims, universality of application, and stability of the rule of law are intended not only to enable people to accurately predict the consequences of their actions (if you exceed the speed limit, you will get a speeding ticket) but also to promote principled governance. The rule of law is ideally an obstacle to political expediency.
Like almost any legal principle, the rule of law has complications and subtleties, and I don’t wish to spend time here disentangling all of them. There is, however, one aspect that I would like to focus on, and that is the way in which growth in the scope of government activities gradually undermines the rule of law and eventually makes it impossible to apply. I think the idea is pretty simple, but it may clear up some misunderstandings about its role in governance.
Government growth weakens that constraint
There are, of course, libertarians who see little merit in the rule of law because, well, they believe there should be no government at all and therefore no governmental laws — that an agency with a monopoly on the use of aggression is inherently immoral. But if you do believe there is some role for government in promoting the general welfare, then something like the rule of law would seem like a good thing. That’s true even if it’s just a norm of behavior that depends for its effective enforcement on the willingness of political agents to tie their own hands, despite imposing a significant cost on them without immediate and obvious benefits. Although I myself question the morality of government, I still believe there are people in the public sector who do at least sometimes behave that way.
But here’s the thing: as the government’s role in our daily lives grows larger, the less likely it will be that government agents — not to mention those they are meant to serve — will adhere to the rule of law. If it is to work at all, the rule of law works best when the government is doing things that the large majority of citizens agree the government should do — where there is something close to consensus. Examples might include national defense and provision of domestic police. That’s because of two things. First, because it’s unlikely that there are more than a few categories of intervention that a large and diverse citizenry could approach a consensus on, the scope of serious disagreement and political conflict will be minimized. Second, because government functions are few, the cost of financing its operations through taxes (although there may be other, nonaggressive ways of paying for government if it’s so small) is also minimized.
An example from the flat-tax debate
Let’s suppose that a minimal government, one that performs functions that nearly everyone agrees should be performed, taxes income at a flat 5 percent. Because the scope of government is so small and the tax burden is so low, taxpayers’ demand for exceptions to the tax will probably be low. Moreover, government authorities will have fewer opportunities to hand down privileges, exceptions, and penalties both because the rule of law constrains them and because there would be few significant privileges for them to hand down even if they wanted to do so.
Now, a minimal government might also use a progressive tax. But I follow economist Roger Garrison in thinking that, when it comes to simplifying the tax code, whether a tax on income is flat or progressive is not all that important. Garrison argues that getting rid of progressivity per se won’t simplify tax preparation or lower its cost. That’s because under current tax law, with its high overall tax burden, many taxpayers have an incentive to (wastefully) spend vast resources trying to find deductions from taxable income, whereas under a high, flat tax without deductions, it’s likely that taxpayers would still (wastefully) spend vast resources, this time in trying to disguise or eliminate taxable income in the first place.
Garrison explained it this way in a Freeman article a few years ago:
But a small tax can be simple — and for a simple reason: If taxpayers find it easier and less costly to pay the tax than to redesign their economic lives so as to avoid paying it, the incentives for creating and exploiting complexities are effectively blunted. The resulting simplicity, of course, is not a goal unto itself but rather a healthy indicator that we have achieved the prerequisite goal of low taxes.
When taxes are high, whether progressive or flat, some taxpayers will try to find exceptions (either deductions or ways to exclude income) for themselves, and accountants, politicians, and attorneys will either try to help them find those exceptions or try to close those loopholes. In other words, the scramble will be to secure privileges or penalties on particular persons and groups — the opposite of the rule of law.
In this example of the tax code, government officials and citizens alike have a strong incentive to violate the rule of law because the government sets high progressive taxes or high flat taxes in order to raise a lot of revenue. And government needs a lot of revenue because it’s big. When the scope of government activity is large, some people will try to evade or counter interventions, and still others will try to use interventions for various selfish interests. When government is big, public authorities have a lot of bargaining power — handing out privileges, imposing penalties, and issuing exceptions. The rule of law works, if it works at all, when government is small.
This example is generalizable. The same tendencies operate when government expands to other forms of costly and disruptive regulations and interventions. Big government spells the end of the rule of law.