Friday, June 4, 2010

Government-Bashing: 7 Myths

by Gail Cohen

CLAIM: Government exerts too much control over our lives. Every time private citizens allow "government" to enact a new law, or new regulation, we cede a little bit more power to it. We give up a little bit more of our privacy, a bit more control over our future, and enable this huge impersonal force called government to make more decisions for us. 
ANSWER: Ask yourself the following questions:  What goes into our ears? Sounds provided by Clearchannel and an ever-shrinking number of privately-owned radio conglomerates answerable to no one.  What goes into our eyes? TV shows and movies and news broadcasts provided by a small group of ever more powerful private entities whose goal is to increase their bottom line. Who tells us what foods to eat and medicines to take? Privately owned companies like McDonalds and Coke and Pfizer and Johnson &Johnson. Who tells our children what constitutes "cool behavior" gives our kids daily examples of what is fair and moral? Does Obama get on TV and say that pre-marital sex and swearing are great ways to make friends? No, but private industries do, in that case, the entertainment industry, which makes money selling kids extremely non-family values.  Who tells us what cars we need to drive in order to feel manly, what gadgets we need to buy for our children, and where to shop? Private industry does. Who tells our children that it's much better to spend money on trinkets and fancy cars to impress girls, than it is to save for college? Who tells our kids to drink Budweiser and smoke cigarettes? Private industries do, industries that make billions of dollars from your children's' future addictions.  Who collects data on the websites we visit, what we buy online and who we chat with? Well, my friend, that would be Google, Microsoft and Facebook, not "government." Who reports the identities of political dissidents to repressive governments like China, sells our personal data to the highest bidder, and spies on our internet activity? You're thinking,  that's gotta be Obama and those wicked Democrats? No. Once again, that would be Yahoo, Facebook and Google, respectively. Does government make the school books our children learn from? No. Private industries do, companies like Pearson, McGraw-Hill, Reed Elsevier, and Houghton Mifflin. Check your child's text book. Did "government" make it? Nope. Mostly likely, it came from one of the companies I just named.  Does government make the voting machines we vote on? No. Private industries do, companies like Diebold, Sequoia, and the Nebraska-based Election Systems, who are answerable to no one but their shareholders. And who has the largest financial stake in you ignoring the above paragraph, and wants you to please, please get back to business of complaining about government? Private industry does.

CLAIM:  When government steps in to fix a problem, they never get it right. They should just leave business to fix itself.
ANSWER:  It's quite true that government's fixes never seem to work, but that's by design. We don't want a government with absolute power to dictate policies, even if those policies seem good for the short term. We're too smart for that. We know very well that giving government lots of power to fix today's crises would create rules that, later on, would be burdensome. This is true by and large, but there are times we should rethink that notion.  Take the example of the BP oil mess. For decades, America has let Big Oil pretty much have its own way, let them sign off on their own safety reports, accept their verbal assurances that they will play nice and not hurt the pretty fishes when they drill. Now, BP has created a crisis they can't control, so we want Obama to step up and take over. But since America has always let oil companies manage their own problems, we lack the expertise to come in behind BP and play cleanup. Obama will now try his best to jump in and fix things, and the results will appear clumsy and poorly-thought-out, simply because a spill of this magnitude is quite new to all of us, and we'll have to learn as we go. One might say that the government should have been keeping closer watch of Big Oil all along, so as not to be caught in this sort of mess. But then, Republicans would have seized that opportunity to whine even more about "government" interference. Another example of government's partial solutions to big problems is Obama's foreclosure prevention plan. It's a flop. Why? Because the plan is voluntary. Obama's plan would work just fine, if Congress forced the banks to play, but who has the political stomach for that? Force the banks to take pennies on the dollar? There'd be cries of "socialism." Very few people want to grant the government the broad powers and regulatory teeth required to craft a workable solution to the foreclosure problem. Such a plan would be very good for the economy, but enacting it is a matter of political will. Who wants to tell the banks that they need to take a haircut for the good of the nation? Obama could, if he had enough political support to weather the Glen Beck character assassination that is sure to follow. But since Americans want Obama to be both "in charge," but also let the private sector run its own ship, then he's bound to fail in many people's eyes. Americans seem destined to accept ineffective half-solutions to the problems we want the government to address, rather than give the President the mandate to enact something far-reaching and comprehensive. So pick your poison: Give government the wide-ranging power to fix a problem, or live with that problem and feel "free" from government oppression. But don't just complain that "government can't fix things." 

CLAIM: Government can't do anything right.
ANSWER: Everything you do is protected by government. We drive on paved highways, eat food, drink water, breath air and take medicines that are relatively safe, and contain ingredients that bear some similarity to what's on the label, all because of government. The dealer who sold you a car can't sell you a lemon, because of government. The restaurant you eat at, can't serve you spoiled food, because of government. We live in homes that are built according to legal codes, codes that punish builders who use shoddy workmanship and toxic materials. These benefits also come from government. We are paid regular wages by employers who are obligated to do so by law. Because of government oversight, the policeman who pulls you over can't punch you in the stomach just because he's in a bad mood. When we go to the hospital, we are treated according to standards that carry the force of regulations that come from government. When we hire a lawyer, he or she must do the same, or risk disbarment. The elderly among us are not obliged to beg, or die in the streets when they get sick, because a government program takes care of them. When we turn on the radio or TV, the airwaves broadcast as expected. Programs not suitable for families are labeled accordingly, and aired only when the kids are (supposed to be) in bed.  Despite all our complaints, our lives are improved greatly by that evil boogeyman, "government," the institution we love to hate, those mousy regulators that are the butt of everyone's jokes.  These faceless, plodding, uninspiring bureaucrats that we endlessly make fun of, actually make it so that our lives run relatively smoothly.  

CLAIM: Before Reagan came along and reduced government and lowered taxes, America was worse off. Although it's true that in the 1950s-70's, America enjoyed a heyday, with a healthy middle class, lots of well-paying union jobs, few economic worries, where the average worker could raise a family in a nice neighborhood, buy a home and afford to send his kids to college. However, these salad days were built on comfortable union deals and high taxes that were only sustainable because America was the sole economic engine of the West. Enter the mid-1970's, with its crippling inflation, expensive foreign aid commitments, and the resulting Carter-era "stagflation," and it became clear that America's experiment with high taxes and liberal big government was coming to an end. The allies America helped rebuild were challenging our economic dominance, and no Democrat had the guts to propose scaling back government and union power. When President Reagan was elected, he bucked all trends and lowered taxes, especially on the wealthy, and on corporations. Reagan ordered The Fed to tighten money, which unfortunately ushered in 3 years of painful unemployment, but the final result was an unprecedented economic boom that made money for everyone and generated wealth in all quarters. There can be no doubt that Reagan's brave medicine of tax cuts in the face of almost universal Democratic opposition turned the nation around, so that the America that Reagan left us, awash in national pride and wealth, bore no resemblance to the sorry state given him by the outgoing President Carter in 1980. 

ANSWER: There's certainly some truth to the above. It's true that by 1980, America's allies were becoming industrial powerhouses, and wiser heads predicted a day when the world would no longer buy our all cars, absorb our exports, and thus finance Big Labor's expectation of cradle-to-grave comfort for America's workers. Reagan's answer was to radically cut taxes. In doing so, he created massive deficits. America quickly learned that deficits would balloon and become unmanageable, so in 1983, Reagan backed off his tax cuts, and raised the amount that each worker had to contribute to Social Security. He also raised the Social Security deduction ceiling to $90,000 (before this, you didn't have to pay Social Security tax on yearly income over $30,000). However Reagan continued to cut corporate taxes and taxes for the very wealthy, so the deficit grew. To curb it, he borrowed hundreds of billions from the Social Security trust fund, the first President to do so in significant amounts. Americans still pay 100 billion dollars a year in interest on the money that Reagan took from Social Security. This deficit-fear and all the creative bookkeeping required to paper over the deficit has clouded every Presidency since. There was, however, lots of money floating around in the '80's. The shifting of the tax burden to regular workers and away from corporations and their owners, resulted in a rush of new cash that required investment, capital that had to be stashed in some way. What's more, other nations were coming into their own, flush with cash, and were eager to loan it to us so America could skip down its merry high-borrowing ways. Thus began the now-familiar scenario of foreign investors owning an ever-increasing portion of the American pie. And around this time, since banks and corporations and the wealthy were flush with cash, common-sense investment regulations were tossed aside. Capitalization/reserve requirements of banks were reduced. Banks began bundling debts from various sources and swapping them for other commodities (sound familiar?), making billions of dollars in the process. Wealthy players were encouraged to bet on energy futures, and one result was the collapse of Enron, half a generation later, which cost taxpayers billions. Thus, Reagan's newly minted billionaires played Wall Street like a casino, and Wall Street's character changed from the stolid, relatively boring institution it had become in the postwar world.  We see the results of such gambling today, when Goldman Sachs testified before Congress that they thrived during the 2008 meltdown by betting that their own investors would fail. And under Reagan, for the first time, pension funds and Bond markets were encouraged to begin playing these risky financial games. These staid pillars of prudence were no longer content with slow growth, while the rest of the big players were making billions. So they tossed money into the pot as well, and one result was the financial near-collapse of Orange County, California in 1994. All of this was presaged by the Reagan-era Savings & Loan scandal, which was but the first of the now-familiar bankers' games that cost the taxpayer hundreds of billions of dollars. The 2008 and 2009 "bailouts" were not the first time the taxpayers footed the bill for Wall Street's betting frenzy. They were only the first giveaways to be called what they really were. But it was under Reagan that taxpayers began shoring up bankers after they failed at dice. Before his Presidency, such a practice was unheard of. 

What else did the Reagan-rich do with their newly-minted billions? Buy other companies. The phenomena of eliminating companies and product lines because they weren't profitable enough, of forcing every company to do what it must to maximize profits or risk being taken over, all that started under Reagan. The Reagan billionaires didn't buy other companies for the good of the nation, so that America could run fit and trim on the open seas of tough competition, but instead, they treated newly acquired firms as if they were ATMs, firing employees, gutting communities, stripping legacy businesses of their assets, and draining money to the new corporate headquarters. The resulting dearth of small businesses, the lack of local flavor, the corporate bigness that reduces every town to a series of strip malls each with a Starbucks and a Subway and a Blockbuster Video, that all started under Reagan. The mega-rich reasoned that the purpose for all the easy money Reagan gave them, was to make more. We Americans didn't notice the trends right away, the corporate acquisitions that gradually touched every corner of America over three decades. Therefore, it's hard for us to imagine an America that doesn't resemble an ever-shrinking portfolio of corporate logos dotting the highway. There was a time when a community's livelihood had a lot more to do with what actually happened in that community (no matter how small), not a corporate boardroom in a different state, or different country. Can you imagine a world in which CEOs could grow their company at a manageable pace over a number of years, focusing on sustainability rather than obsessing over quarterly profits? Before Reagan, such goals were the norm.  Of course in 2010, in the wake of the Enron scandal and the 2008 Meltdown, we are careful to lament the obsession for fast profits at the expense of common sense, but such wariness is only hindsight.  Beginning under Reagan and through today, profit-mania is viewed as a patriotic duty. Many have also lamented the loss of small, local industries, local food and power production, but these had been deemed "inefficient," by the still-popular Reagan business model, and so, we find that they've gone the way of the typewriter and the dial-up modem. But this notion that maximum profitability must be the Golden Mean for all commerce was not popular until the Reagan Presidency sanctioned pure profitability for its own sake. A local industry that employs perhaps a few hundred people can seldom compete with the profitability of its global brethren. But so what? Should that assessment be regarded as the final word on its value? Reagan convinced America that it was.

In the short run though, Reagan's America was indeed awash in cash. We were wealthy on paper, but those billions created relatively few jobs, and the ones created were usually not robust. The 1980's saw the decline of well-paying manufacturing jobs and the rise of the "service sector." American workers emerged from early-1980's recession to find themselves wearing aprons, colorful hats and serving hamburgers. But rather than invest in industries that would create good jobs, rather than building industries that required highly-educated workers in a multi-step production chain that would put lots of people to work, the Reagan-rich invested in financial schemes that created a quick buck. Why didn't the rich invest in stable, multifaceted industries that created a vast array of products that regular people could actually buy? Because during the Reagan years, regular people couldn't afford to buy much of anything. During Reagan's first term, 10% of all working Americans had no job, and the jobs they found later didn't pay very well. Thus Industry had little incentive to re-invent the Boom Years of 1955-75, during which products and all their parts were made at home. During that era, regular Americans could afford to buy the things they manufactured, a dual role which encouraged industry to manufacture more, creating a healthy cycle. But under Reagan, the middle class lost buying power, making up for this loss only by going into debt. The result was that the Reagan-rich saw little incentive to finance what might have been a rejuvenated industrial base, a new economy that created long-term, non-exportable jobs, rather than electronic trinkets that could just as well be manufactured overseas.

It's quite true that in 1980, taxes needed to be cut, but America had other options besides setting the rich loose on some sort of extended Las Vegas vacation at our expense. What if Reagan had cut taxes but created strong incentives to reinvest in America?  By now, we'd be energy-independent, be a nation of producers as well as consumers, and this notion of America going bankrupt because the Chinese market blinks, would be the subject of a novel, not our reality. How? By doing what America does best: invent what is next. Ever hear of Bell & Howell? A joint business-government think tank based in >>> that developed technologies that shaped the world. We got there first. America did it by combining brains and skill with manufacturing know-how. We could do that again by developing renewable energy sources, for example biomass fuels, which only need a bit of tweaking to be profitable. America under Reagan, flush with cash from tax cuts, could have began such a partnership, getting a jump on fuel-efficient cars (by now, we'd all have one, and oil-producing nations would have no power over us at all). Under Reagan, we could have used all that cash to develop small industries with minimal environmental impact that could be controlled locally, which matches the goal of both the Right and Left – to keep our affairs small and controllable. If Reagan hadn't simply handed over tax cuts to the rich, giving them play-money to manipulate stocks and housing, but had instead, put America first, today, we'd have broadband in every corner of America, we'd have small rural industries efficient run off biomass fuels and computer technology, and students that could look forward to jobs in these new burgeoning sectors, instead of working at Starbucks and flipping houses.   Under Reagan, America's prisons grew by 90 percent.  Imagine if the percentage of Reagan Youth that spent its years behind bars, could have, instead, been given a low-cost education, then put to work developing tomorrow's technologies. Expensive? Not as expensive as incarceration. Incarceration is much, much more expensive than education. The rush to lock up citizens is a problem of mindset, a problem that results when you listen to an actor, and not a thinker. We can do better.   

CLAIM: Small government is good government
ANSWER:   Because of the atmosphere described in the above paragraphs, the need to squeeze every dollar spent for maximum profit, businesses can't function with a lot of common sense. In such a go-getter environment, a company is tempted to make-believe that their employees can actually live on 8 dollars per hour, or that, by cutting health insurance, their employees will magically stay healthy and productive. A company is tempted to pretend that water runoff from animal waste will magically avoid the lettuce crops nearby, or that customers who purchase your pharmaceuticals will magically not notice the nasty side-effects that you've been hiding for years. The breakneck rush for profits, the need to avoid being taken over by a larger company who's willing to be nastier than you are, well, those realities make it too tempting to for a large business to engage in predatory and unsafe practices. Business critics on the Left often characterize corporate leaders as evil human beings. That's not fair. They're just people who want their companies to survive, who believe that by firing 300 employees today, they're doing right by the 800 employees who remain. Todays corporate heads did not make these rules. Reagan and his cronies did, and today's businesses must survive by them. I once worked at a fiber-optic cable company, and one day, a particular salesman was lauded for making our product the dominant player in Australia and Oceana. "Good show," everyone said. "Now, go out and do it again. And we'll fire all your colleagues that can't keep up with you." For a moment, you could see the weariness in his eyes, the realization that his own demise is only a matter of time, the realization that this is not a way to do business.

But, regardless of whose fault it is, it's fair to say that, given the atmosphere described above, big companies cannot function with our best interests at hearts, "our," meaning the regular people who drive their cars and buy their products and work at their factories and offices. Therefore, some entity needs to watch for stuff, watch for the salmonella in the lettuce, the shoddy workmanship in the cars, the pollutants in the air, the side effects in the medications, and so forth. Of course, a person might live each day eating food that's relatively free of poisons, living in a home constructed with safe materials, and believe that the world of commerce proceeds smoothly as if by magic. That's not true. It's because of "government." This fact won't be obvious until you become one of those sad statistics whose plane trip ended in tragedy, whose liver was ruined from unlabeled medication, whose shoreline is covered with oil, whose daughter died from E. Coli in the cheese.  You see them on TV, and it's easy to assume they're just trying to squeeze money from a company that made an honest mistake. But when you find yourself in a similar situation, you realize how easy it is for big companies to get away with . . . well, murder.  You realize is perfectly fair to expect government to protect us from these economic entities that have such control over our daily lives. Such "government" oversight is indeed necessary.  

Of course, if you read the news, you'd think all big companies practice careless disregard for our lives. That's silly. People are people. But regardless of the exaggerations, it should be obvious America needs corporate watchdogs, unless you believe that CEOs are saints who would never cut corners on safety reports or produce shoddy ingredients. That, too, is silly. Society just runs much better if somebody's keeping the big guys honest. And not just anybody.  The task requires powerful entity outside a company's corporate structure, an entity accountable only to "the people," (at least on paper), and not corporate boardrooms. We would call that "government."  Now, does all this mean government should be "big?" Not necessarily. But regulatory agencies should be well-funded and staffed, empowered with the right technology and skills to do their job, and enough regulatory teeth to make their findings legally binding and enforceable. If regulation agencies are not "big," then they are no match for the corporations they much watch over, who are getting bigger and more concentrated by the minute. Still, in America, we don't like to interfere with a man and his right to make a dollar. We're inclined to side with the bloke who made the machine, rather than the guy who wants to burden him down with "safety" this and "safety" that.  What this means, then, is that the public supports regulations, but unfortunately, only toothless ones, regulations with huge loopholes. If politicians try to design regulations that honestly do the job, for example, force oil companies to install safety mechanisms so that oil spills can be contained, the companies complain of overregulation and start ragging on "government," and usually get the support of the public. From there, it gets worse: these toothless, ineffective regulations give the public more reason to complain "government can't do anything right."  Sometimes, it all seems like a game of cat and mouse, and it's only after you've been screwed out of your life savings, lost your house, a limb, or a family member, or had your coastline polluted by oil, do you realize that it's not a game at all.  

CLAIM:  Government is more secretive and less answerable to the people than business.
ANSWER: In reality, businesses routinely hide data that would be of great interest to the general public. Goldman Sachs claims that they had no obligation to reveal that they were betting against their own investors. During the recent financial meltdown, firms routinely cooked the books to hide their losses, claiming such deceptions were legal. Food companies claim they have the right to call their products "organic," when they are anything but, and bottled water companies can legally lie about the source of their natural spring (city tap) water. Car companies will hide data about their unsafe vehicles until the resulting injuries and deaths can no longer be plausibly denied. Companies routinely hide the anticompetitive results of their mergers and acquisitions, and mask the deceitful means they use to drive competitors out of business. Businesses claim these rights because they don't want to reveal trade secrets, or reveal their true financial health to competitors. In any event, right or wrong, big corporations believe they don't have to reveal facts that might be harmful to their bottom line, regardless of the central roles their products play in our lives. Government, however, does have an obligation to be transparent, and when it refuses, we can fire officeholders who refuse to be accountable. Whistleblowers at government agencies are protected by law, and have at least some recourse when they are harassed for speaking up. Although government regulators lie as much as anyone, there are pathways for concerned citizens to get to the bottom of these deceptions. Raise similar charges against a large private company, and they can stonewall until the money runs out (forever).

CLAIM: Anything government can do, business can do better.
ANSWER:  In America, we don't look to government to take on money-making, potentially profitable ventures. We leave that for the private sector, with its healthy, profit-seeking motivation. We look to government to do things that all citizens require, even those citizens that can't pay. The postal service delivers mail to everyone, because not everyone can afford UPS and Fed Ex. Public schools have to let in all the kids, even those who might never read or write or do math very well. Not everyone can afford a car, so you have to have busses. Not all goods can be delivered on airplanes, so you have to have trains, even though they're not profitable. Since we haven't found a way to keep germs on the poor side of town, we have to have hospitals where poor people can get treated. Notice every institution I just mentioned is the frequent butt of anti-government jokes. It's true that none of these ventures make money, because they're not allowed to choose whom they treat, educate, deliver mail to, or drive around town. Now, businesses often say that they can run these ventures "at a profit," and do them "better than government." What they mean is that they can cut people off who can't pay. But profitability is not the point of these services. They are necessities and are provided by government, for everybody, without regard to profit. Therefore, they will forever be considered "moneylosers" and "inefficient."

Feel free to print, post, or publish any portion of the above.


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1 comment:

Hojae Song said...

The ultimate status of small government will be anarchism.
Or Business dominant status; The Ultimate Capitalism.