Posted by: bmeverett | January 24, 2013

Friedman Watch 1-21-2013


It’s been a while since I’ve offered a post on Tom Friedman, but I would like to direct your attention to his January 12 New York Times column entitled “Collaborate versus Collaborate” – one of his very worst pieces. Mr. Friedman offers a solution to Washington gridlock – the two parties should collaborate as they do in Silicon Valley. Mr. Friedman argues that collaboration produces great outcomes, or, as Jeff Weiner, the C.E.O. of LinkedIn, puts it: one plus one can often turn out to be four. This topic is a bit off energy, but it’s very fundamental to what’s going on in the country today.

Mr. Friedman’s problem here is that he does not understand the difference between zero sum games and positive sum games. In a zero sum game, one person’s gains can come only at someone else’s expense. In positive sum games, the total benefit available for distribution can grow with everyone sharing some part of the gain. The real beauty of the free market is that it’s a positive sum game – hence the extensive opportunities for collaboration in Silicon Valley. Mr. Friedman needs to re-read (or perhaps read) Adam Smith. Silicon Valley entrepreneurs are not collaborating to help their customers or to improve the society; they’re collaborating to make money. The benefits to their customers and to the society as a whole are substantial but incidental and are not increased by replacing capable, self-interested business people with altruists. It’s this point that the American political Left doesn’t seem to grasp.

Politics is different. Elections are by definition zero-sum games. One candidate wins, the other loses. They can’t collaborate to improve the outcome. Mitt Romney and Barack Obama were not seeking common solutions. Only one of them could be President; the other got nothing.

For many years, the Congress gave the appearance of a positive sum game. Between 1954 and 1994, the Democrats controlled the House of Representatives. They also controlled the Senate for 34 of those 40 years. That made politics easy and civil. The Democrats expected to win and thus enjoy all the power and perks of office. They named the committee chairs and controlled the pork. The Republicans expected to lose and collaborated with the Democrats on many issues in return for whatever share of the pork they could get. Both parties agreed, however, that the federal Treasury should be a constantly expanding piggy bank they could use to dispense funds to the constituents they needed to keep getting elected.

Since control of Congress was never really contested during this period, there were opportunities for collaboration, particularly on defense. Senior congressmen of both parties never had to choose between a strong defense and getting reelected, since they could have both. Democrats knew they would have the positions of Congressional power, and Republicans accepted that fact.

The whole world changed in 1994 when the Republicans took control of both the House and the Senate. All the powers and perks which were assumed to go to senior Democrats were suddenly up for grabs in each election. It’s interesting to note that, when the Republicans took the Senate, a couple of powerful lifetime Democrats, Richard Shelby of Alabama and Ben Nighthorse Campbell of Colorado, immediately switched parties to remain on the winning side. When the Democrats regained the Senate, Jim Jeffords of Vermont and Arlen Specter of Pennsylvania decided that they were really Democrats. According to Washington values, collaboration on problem solving is fine, but always takes a back seat to getting reelected. As my father (a very wise man) said recently, “Politicians do care about the country, just not very much.” For the last twenty years, we have been in a constant knock-down-drag-out fight for political control in Washington. Nothing of substance takes precedence over the need to gain and hold power.

Mr. Friedman maintains the naïve view that elected officials in Washington are there to serve the country and solve its problems. They are there first and foremost to keep getting reelected and second to enhance their status and power as much as they can. If you don’t understand that simple fact, nothing in Washington will ever make sense.

The country could easily tolerate this ongoing battle provided as long as there were no great national issues to be solved. Today, however, we face one of the most critical issues in the country’s history: the unsustainable growth of government. In 1950, government at all levels consumed about 25% of our GDP. As our elected officials sought more and more funds to distribute to favored constituents, that share gradually increased to about 38% by 1992. Government declined to about 36% under Bill Clinton’s presidency, largely because of cuts in defense, but then began to grow again under President Bush, reaching almost 40% under President Obama. Much of the historical increase was at the state and local level, but, unfortunately, large federal funds transfer to state and local governments in the last few years have enabled the profligate states and municipalities to maintain their growing budgets at the expense of those areas of the country that are well managed.

This situation has become unsustainable. The public is aware of our annual deficits of more than a trillion dollar plus deficits, but the real problem is the unfunded liabilities of Social Security, Medicare, Medicaid and the pensions of overpaid state and municipal workers. These liabilities total tens of trillions of dollars and cannot possibly be paid for by any of the “soak the rich” schemes currently under discussion. Arithmetic dictates that one of three things will happen: (a) the country will reverse course and reduce government’s hold on the GDP, (b) the government will impose heavy taxes on the middle class (where the real money is) or (c) governments at all levels will exhaust their credit limit and default on their obligations and debts with disastrous consequences.

Both parties agree that (c) would be a bad outcome, but they are completely at odds as to what to do. The Democrats are insisting that government spending must continue to grow. Although they have yet to say so, option (b) is their only hope of success. Republicans, on the other hand, are demanding that we do (a). These positions are simply incompatible. How in the world can the two sides collaborate on solutions?

Mr. Friedman naturally blames the Republicans for the impasse. Mr. Friedman’s real point seems to be that the Democrats are right, and the Republicans should abandon their position and get on board with the unsustainable growth of government, which Mr. Friedman generally refers to as “investment”.

The outcome that Mr. Friedman seeks is as plausible as expecting the Ravens and the 49ers to “collaborate” at the Superbowl, agreeing in advance to end the game in a tie and give the championship bonuses to charity. This expectation is not only unlikely, it’s impossible. One way or another, one of these positions must prevail over the other.

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