Posted by: bmeverett | September 14, 2011

Friedman Watch 9-14-11


Tom Friedman is America’s leading purveyor of economic, political and social myths. His columns are a useful addition to the public debate because he makes explicit beliefs and assumptions that are implicit in most of our discourse. Mr. Friedman’s New York Times column of September 10 (“Getting Back to a Grand Bargain”) presents the greatest myth of our day, to wit, the federal government can solve all our problems if we just give it the power and resources to do so. Mr. Friedman was impressed by President Obama’s speech on Wednesday evening and buys lock, stock and barrel into the President’s assertions that (a) massive federal spending will improve the economy and (b) only the most selfish and hateful people (i.e., Republicans) would oppose such spending. In Mr. Friedman’s mind, “President Obama has now offered a legitimate, constructive proposal to reignite efforts to forge a Grand Bargain with Republicans.” Really?

Human beings have a unique ability to think rationally about danger. Our brains have been hard-wired for millennia to avoid snakes, snarling dogs, fire and the other dangers we faced living on the open savannah. We have to figure out for ourselves, however, the dangers of a complex modern society. Let’s take the simple example of buying a car. When we teach our children how to shop for a car, lesson #1 is to be wary of the salesman. It’s most unlikely that a car salesman will hurt you in any physical way. He’s probably a good family man who obeys the law and pays his taxes. On the other hand, he does not have your best interest at heart. He wants to sell you a car – any car – at the highest price he can get you to pay for it. Selling cars is difficult, and success depends on getting a lot of sales, each carrying a relatively small commission. Car salesmen who advise their customers honestly about fair pricing and drawbacks of the models he sells will not last long.

The car salesman presents no real danger to us, provided we know who he is and act accordingly. We need to find out for ourselves what makes and models are safest and most reliable, and, above all, we need to research market prices for ourselves. Nobody in his right mind would walk into a car dealership and delegate to the salesman the task of selecting a car and determining a fair price.

When we deal with politicians, particularly at the federal level, we need to be just as informed and just as skeptical. Elementary school civics books may refer to elected officials as “public servants”, but adults know better. There’s nothing wrong with seeking elected office, but, like our car salesmen, you have to be good at it to succeed. That means putting together a coalition of votes sufficient to beat your opponents in elections and then working 24/7 to maintain or expand that coalition. How do you get people to vote for you? By giving them things that they want.

If you ask most elected officials about their motivations for what they do, they will undoubtedly offer public service as their noble goal. They (at least the honest ones) will also tell you that they cannot serve the public unless they can get elected, so politics must come first. Unfortunately, most never quite get around to the public service part. Mr. Friedman’s support for the President’s new jobs bill seems to ignore the obvious lesson of the $800 billion Stimulus Bill passed in 2009. That money, plus a substantial share of the Toxic Asset Relief Program (TARP) was allocated by politicians on political grounds. A couple of examples.

The White House loves to talk about helping states promote education and avoid teacher layoffs. There were plenty of teachers around when President Obama made his most recent speech about his jobs plan. The public (rightly) holds teachers in high esteem and doesn’t want anything bad to happen to them. However, in the real world, teachers get laid off only when (a) the state/local government has contracted to pay them way above their market value through union contracts and/or (b) the state/local government won’t make difficult budget choices and instead cuts all programs by roughly comparable amounts. In other words, the school system and the state arts festival each get cut 10%. Federal “stimulus” money discourages states from facing their real budgetary problems and penalizes the states that have managed their finances well by forcing them to pay for their less disciplined neighbors. Does stimulus money improve education? It doesn’t really matter to elected officials, who are only interested in whether they can garner union money or additional votes. According to the Wall Street Journal, in 2009 the city of Milwaukee had 15 vacant school buildings, declining enrollment and skyrocketing per pupil costs. Milwaukee public school officials described the school system’s physical plant as being “in good to better-than-good condition”. President Obama’s 2009 stimulus plan allocated $88.6 million to Milwaukee for school construction. Naturally, none of the money could be used for charter schools or school voucher programs which were actually helping low-income children.

Let’s take another favorite of Mr. Friedman’s – government research and development programs. As I have discussed in this space many times before, technology is a powerful force in social and economic development. We have also learned over the years, however, that, while government can occasionally solve difficult technical problems at great expense (i.e., the Manhattan and Apollo Projects), the feds have never been able to create commercially viable technologies. Mr. Friedman seems to believe that Congressional research appropriations go to some group of experts who decide how to spend the money to achieve the optimal economic results for the country. Nonsense. As we just saw in the Solyndra case, our elected officials and their appointed colleagues allocate the money for their benefit, not yours. Members of Congress are not interested in whether research produces results. They simply want as much money allocated to their districts as possible. It’s no accident that the federal government has spent roughly $125 billion (in $2011) on energy research over the last 40 years without producing a single commercially viable result.

To be fair, Republicans and Democrats behave pretty much the same way. Republicans funnel money to different constituents, for example farmers instead of unions, but they still funnel as fast as they can. That’s why you are forced to subsidize ethanol: an expensive, low-grade fuel with distinctly negative environmental impacts. Fortunately, voters are getting fed up with this process. Most Americans are too busy earning a living and taking care of their families to bother much with politics. Washington has taken roughly 20% of the GDP to play with for the last several decades. As long as the federal government defends the country and pays out Social Security and Medicare, the public is pretty tolerant. The Obama administration is clearly attempting to engineer a permanent increase in the federal share of GDP to 25%+, and the result has been economic stagnation. If the government demands 30% of GDP, the economy will go into long-term decline.

If you believe that anybody in Washington is serious about controlling spending, check out Senate Majority Leader Harry Reid’s speech of March 8 of this year in which he opposed cuts for the Northern Nevada Cowboy Poetry Festival. Check it out yourself at http://www.youtube.com/watch?v=hsDwEUJPlSU.

Mr. Friedman wants a “grand bargain” of spending and tax increases, as though it’s perfectly obvious to everyone that such a program would actually work. In Mr. Friedman’s mind, the only possible reason for Republican opposition to the President’s program is their hope that the economy will “tank” and cost President Obama the 2012 election. It doesn’t seem to occur to him that another $500 billion in stimulus funds would simply be wasted, just like the last $1 trillion. History demonstrates powerfully that only free markets generate sustained high living standards and economic growth along with personal freedom. Putting the management of the economy in the hands of the federal government is like trusting a car salesman to choose your car.

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