The unintended consequences of populism

Unfortunately, there is a difference between what’s needed to get elected to office and what’s needed to govern effectively.  Successful candidates can put forward populist positions that appeal to voters’ emotions but that ultimately result in economic policy problems.

In 1993, after a get-tough-on-crime campaign that included abolition of parole, George Allen was elected governor of Virginia.  According to Washington Post reports published 10 years later, the state then spent about a half-billion dollars to build, expand and operate new prisons.  Virginia’s inmate population rose 25 percent from 1994 to 2004, at a time when the state population increased just 15 percent.

The annual cost of incarceration was $22,000 per prisoner.  Fewer resources as a result were allocated to mental health and drug abuse programs aimed at preventing crime.  To be fair, crime rates and recidivism fell after parole was abolished.  Nonetheless, much of the decrease was attributed to an aging population.

Always a popular campaign promise, “Let’s get tough on crime,” was responsible for the election of dozens of politicians nationally during the 1990s.  A recent Wall Street Journal story reported that Georgia, Kentucky, Ohio, Texas, South Carolina and South Dakota, most of which are led by Republican governors, now are looking at sentencing reform to reduce the cost of handling swelling prison populations.

Another example of populism in Virginia was car tax relief, the central tenet of Jim Gilmore’s successful 1997 gubernatorial campaign.  Phased in over five years, the popular “No car tax” plan carried cost estimates as high as $2.8 billion.  Because of budget pressures, the General Assembly ultimately capped car tax relief at $950 million in 2002.

Though other factors, including a poor economy, came into play, every governor since Gilmore has struggled to close significant budget deficits.  Promising to eliminate the car tax may have won votes, but it hurt the state’s ability to cover the cost of transportation, public education and other basic services.

On a national level, immigration policy has recently taken center stage.  Populist demands to protect jobs through tougher border security come at a high cost.  Alternatively, adding undocumented workers to the tax rolls could significantly increase revenue.

According to the Congressional Budget Office, the immigration reform bill recently passed by the U.S. Senate would generate $300 billion in net revenue from income and payroll taxes during the next decade.  When it comes to the cost of border security, the Government Accountability Office estimates the cost of pedestrian fencing to be between $400,000 and $15 million per mile!

Another example: The current emphasis on STEM-H (Science, Technology, Engineering, Math and Health) education programs is often anecdotally justified by comments that many graduates in these programs at U.S. colleges are foreign-born.  This plays into multiple xenophobic sentiments reminiscent of the Cold War. 

Likewise, several reports on the proposed acquisition of Virginia-based Smithfield Foods by Shuanghui International Holdings Ltd. mention concerns over Chinese investment in the U.S.  Never mind that foreign direct investment in other countries by the U.S. totaled $351.4 billion in 2012, compared with only $62.4 billion by China, according to the international Organization for Economic Co-operation and Development (OECD).

The U.S. is by far the world leader in foreign direct investment.  If we believe in a level playing field, it is hypocritical to criticize China and other countries for similar actions. It is a simple truth that the world is a global marketplace.  Protectionism is widely regarded to be bad economic policy.

Let’s recap.  Populist sentiments have proven appeal on the campaign trail.  Yet the policy decisions that deliver on such rhetoric can have bad consequences.  As we look toward November’s elections, let’s be mindful that votes can have unintended results.  Let’s hope that our candidates also realize that governing is about more than popularity.