Monday, August 22, 2011

When 'inconsequential' means 'better'

by Jeff Jacoby

TO MANY LIBERALS, Rick Perry's audacious pledge to make Washington, DC, as "inconsequential in your life as I can" is tantamount to a pledge to bring back the Dark Ages.

Commenting on Twitter as the Texas governor announced his presidential candidacy last weekend, longtime Washington journalist Howard Kurtz wondered: "Perry wants to make DC 'inconsequential in your life.' Does that include Medicare, Soc Sec, vets' programs, air safety, FDA?" Former Bobby Kennedy aide Jeff Greenfield, calling Perry's words "nothing short of astonishing," ran through a litany of Washington's contributions to American life -- from railroads, interstate highways, and the Hoover dam to land-grant colleges, civil rights, and subsidized mortgages -- and marveled at the depth of the right's "disdain for all things Washington."

Libertarians and conservatives believe what the Founders believed: that that government is best which governs least. "Society in every state is a blessing," wrote Thomas Paine, "but government even in its best state is but a necessary evil."

But it isn't highways or veterans' programs or minority voting rights that conservatives find so objectionable about Washington. When Perry speaks of making the nation's capital "inconsequential," he isn't proposing to dismantle the Hoover Dam. Hard as it may be for liberals to accept, the Republican base isn't motivated by blind loathing of the federal government, or by a nihilistic urge to wipe out the good that Washington has accomplished.

What conservatives believe, rather, is what America's Founders believed: that that government is best which governs least, and that human freedom and dignity are likeliest to thrive not when power is centralized and remote, but when it is diffuse, local, and modest.

"It is not by the consolidation or concentration of powers, but by their distribution, that good government is effected," wrote Thomas Jefferson in 1821. In part that is because central planners and regulators rarely know enough to be sure of the impact their decisions will have on the innumerable individuals, communities, and enterprises affected by them "Were we directed from Washington when to sow and when to reap," Jefferson dryly remarked, "we should soon want bread." The Beltway blunders of our own era -- from the subprime mortgage meltdown to Cash-for-Clunkers to minimum-wage laws that drive up unemployment -- would not have surprised him.

But that isn't the only reason that shrinking Washington and decentralizing power promotes better government. While curbing the federal behemoth is important in its own right, it is indispensable to the moral health of a nation rooted in the conviction that men and women can govern themselves. Our social arrangements tend to work best when they are organized at the lowest possible level, closest to concrete, day-to-day experience. Only as a last resort should we seek to transfer power upward, from individuals and families to city hall, or from city hall to the statehouse, or from the statehouse to Washington, DC. This is the principle of subsidiarity that historically underpinned American federalism.

Once it was commonly understood by Americans that the best way to get things done was usually to do them privately. In his classic study of democracy in the young United States, Alexis de Tocqueville marveled at the American propensity to form voluntary organizations for nearly every purpose.

"Americans of all ages, all conditions, and all dispositions, constantly form associations," an impressed Alexis do Tocqueville wrote in 1835. "They have not only commercial and manufacturing companies . . . but associations of a thousand other kinds -- religious, moral, serious, futile, extensive or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found establishments for education, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; and in this manner they found hospitals, prisons, and schools. . . . Wherever, at the head of some new undertaking, you see the government in France, or a man of rank in England, in the United States you will be sure to find an association."

But as government grows larger and more powerful, it crowds out private action. It replaces local, familiar, and organic institutions with remote bureaucratic ones. As state and federal governments swell, taking over functions that used to be left to individuals and voluntary organizations, communities are weakened. Increasingly citizens are taught to rely on government, rather than on themselves or their neighbors. They develop a sense of entitlement, and entitlement in turn fuels selfishness. Other people's needs come to be seen as the government's responsibility. Government gets bigger and bigger -- and citizens get smaller and smaller.

Of course some functions can only be performed at the national level. But Washington does far more than it should, in so many ways treating Americans like children who cannot be trusted to run their own lives. The effect of that infantilization has been an erosion in the virtues without which no free society can thrive: Work, honesty, discipline, gratitude, moderation, thrift, initiative.

The way to undo that erosion? We can start by making Washington more inconsequential.



Progressive Intolerance

Talking to themselves

Television pundits increasingly express an attitude that is at once arrogant and ignorant: The people who oppose Keynesian economics – specifically a massive increase in government deficit spending to create jobs and jumpstart the economy – are the same kind of people who also believe that the earth is only several thousand years old (rather than 4.5 billion), that evolution is bunk, and that science is something to be feared on principle. MSNBC’s Chris Matthews takes the strongest version of this position. To him even skepticism about catastrophic climate change is a sign of hostility to science, although a good number of scientists are skeptical.

It may not seem worth the time to expose the fallacies of cable television’s talking heads, but since they are the source of what so many people “know” about public policy, the time is well spent.

TV hosts like Matthews of course are not authorities on economics (though he did some graduate work in the subject), so when they judge Keynesianism as the only truly scientific economics, they mean two things: That is what a Keynesian taught them in school and that is what all their Keynesian friend-guests assure them is the case. Since they never invite a non-Keynesian economist on their shows (Republican consultants don’t count), they insulate themselves against all informed dissent from their faith. Considering this policy against head-to-head discussion, who’s got the antiscientific attitude?

Simply Ignored

If someone doesn’t fit their mold, he or she is ignored or vilified. I know many people who (like me) reject Keynesian economics (and are skeptical about catastrophic climate change) while embracing science. (Yet we realize that scientists have the same the foibles and temptations we all are prone to, such as confirmation bias and career ambitions.) But Matthews & Co. say there are no such people. The pundits can’t even acknowledge good faith in their opponents.

This explains the intolerance shown those who refuse to agree that in a recession government spending is indispensable to raising aggregate demand and restoring economic growth. (Conservatives are not necessarily better. See my article on conservative Keynesians.)

If you point out that every dollar government spends, whether obtained through taxation or borrowing, is dollar removed from the private sector, the Keynesian pundit might agree but point out that business is not investing and consumers are not spending – so what’s lost? The other night Matthews suggested that business may be sitting on its $2 trillion in cash in order to damage Obama’s presidency. So to Keynes’s animal spirits Matthews adds animosity to Obama in explaining why the economy is at a virtual standstill.

The pundits’ blinders keep them from a broader perspective. Since all they know is the most vulgar rendition of Keynesian economics (Keynes wasn’t quite as bad as the Keynesians, writes Mario Rizzo), they have no idea that two distinct factors now prevent economic growth. First, the boom (without which there’s no bust) was created by monetary, housing, and financial policies that to a great extent still exist. Government officials are trying to resurrect the housing industry, indicating that the ruling elite still does not realize that the industry’s pre-bust condition was the artificial result of misguided interventions. Fed-depressed interest rates and easy-housing programs induced widespread malinvestment – investments unjustified by real underlying conditions – which have to be liquidated before economic growth can resume. Liquidation requires the costly but necessary adaption and transfer of resources and labor to purposes for which there is genuine demand. This correction cannot take place if political responses to the recession get in the way.

“Regime Uncertainty”

Second (as if that weren’t enough), the government has created significant new uncertainties that chill the investment climate. (This is what Robert Higgs calls “regime uncertainty.”) Obamacare and the Dodd-Frank law mandate the writing of hundreds of new rules governing employer-based health insurance and financial transactions. Why would anyone risk money in a new venture with so many yet-to-be-filled gaps in the regulatory environment? A government regulatory regime is bad enough; one that can change at any moment is far worse.

Finally, the pundits are blind to the fact that government can’t create real jobs. Let’s be clear what this means. It’s not that government can’t pay people to do things. It does that all the time! But in economic terms, a job is not merely exertion in return for a pay check. It’s much more: activity that transforms resources from a less-valued form to a more-valued form in the eyes of consumers. For the sake of irony, I’ll quote Karl Marx: “A thing cannot have value, if it is not a useful article. If it is not useful, then the labor it contains is also useless, does not count as labor and hence does not create value” (Capital, volume 1, emphasis added).

Keynesian pundits insist that a stimulus program to pay workers billions of dollars to repair schools, roads, and bridges would qualify as productive because people value those things. What’s missed is that we live in a world of scarcity and tradeoffs, and that we always make choices at the margin. Repairing a school may sound good in a vacuum (Which school? How elaborate a repair?), but not so good when something more valuable must be given up in exchange.

Market Prices

We all make similar tradeoffs in the marketplace all the time, and we can do so intelligently because goods and services have prices. Prices enable each of us to engage in economic calculation, that is, to make rational tradeoffs aimed at obtaining higher values (subjectively appraised) in exchange for lower values.

But government-produced goods and services are not priced and sold in the market. Instead, government collects its revenues by threat of force, and politicians and bureaucrats dispose of them ostensibly in the interest of the people but more likely in the career interest of those same politicians and bureaucrats. (The New Deal is a perfect example.) Without prices and free exchange — without entrepreneurship – we cannot know if what government produces is worth the alternative goods and services never produced. (We can say that the freedom lost is not worth the cost.) Putting the infrastructure into a marketplace void of privilege and subsidy would thus make economic sense. Politicians only notice the deterioration during recessions anyway.

The Keynesian pundits, then, are wrong on all counts. The government need not be the spender of last resort because 1) producers and consumers would spend just fine if it would get out of their way, and 2) the government can’t be relied on to create, rather than destroy, value in its use of scarce resources.




Wall Street aristocracy got $1.2 trillion in bailout loans: "Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress."

Coast Guard waste: "Nearly a decade into a 25-year, $24.2 billion overhaul intended to add or upgrade more than 250 vessels to its aging fleet, the Coast Guard has two new ships to show after spending $7 billion-plus. Now it's facing an uphill battle persuading a budget-conscious Congress to keep pouring money into a project plagued by management problems and cost overruns"

SSI disability insurance on brink of insolvency: "Laid-off workers and aging baby boomers are flooding Social Security's disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency. Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can't find new ones in an economy that has shed nearly 7 million jobs."

Forget corporate jets. Government limousines show they’re stealing you blind: "President Obama has made a big deal out of corporate jets. Apparently they are a symbol not of success but of greed. Yet even as the private jet marked has lagged with the ongoing recession, President Obama’s own employees in his administration have significantly increased the number of limousines available for their travel."

There is a new lot of postings by Chris Brand just up -- on his usual vastly "incorrect" themes of race, genes, IQ etc.


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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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