Many people emote rather than think (the technical term for them is “liberals”), and this is nowhere more obvious than this argument: “Something is wrong with the free market, therefore the government should fix it”   (well, electing the Hopeychanger-in-chief is more obvious, I suppose).  But actual thinking should reveal the unstated—and false—premise: that the government will be an improvement on the market.  In reality, time and time again, government interference has replaced a relatively small market failure with a huge government failure.

Those on the left fondly imagine that the market rewards selfishness and greed.  But as I pointed out in the Patriot column The Greed Myth, even greedy and selfish people can prosper in the free market system only if they please their fellow man.  People don’t cease to be greedy and selfish when they are in political or bureaucratic office.  But here, they don’t have to please people to succeed—because they have the mighty arm of the state, thus force, behind them.  I’ll give one well known example, which Obama has been following lately.

“Washington Monument” strategy

Think of what happens when a private business is feeling the financial heat.  What it is most likely to cut?  Obviously the least popular brands (as well as lay off the least productive staff).  If it cut the most popular brands (or fired the most productive staff), it would be economic suicide.

As a government bureaucrat is likely to be no more selfish—or less selfish—than a private businessman, he is just as likely to respond to incentives.  But what are the incentives driving a bureaucrat?  Why, his whole prestige and salary increase as his bureaucracy bloats!  Cutting goes right against this.

So when faced with a funding “cut” (bureauspeak for “not as much of an increase as I would like”), they often do the opposite of a private business.  They instead threaten the most popular programs! This has long been called the “Washington Monument Strategy”: whenever the National Park “Service” was  faced with “cuts”, they threatened to close that hugely popular attraction.  Ostensibly it was due to the lack of funds, although this one was actually cheap to maintain. No, their strategy was to hold lots of naive people hostage—those addicted to government treats.  Thus they would bleat and harass their Congresspeople for the funds to be “restored” (i.e. the bureaucrats’ demands are met).

Similar, a move to cut funds to public broadcasting was always countered with a threat to axe the most popular programs.  With zoos, it would be closing the most popular animal exhibits.  The aim in all cases is to hold the public hostage, so they would threaten the political careers of politicians, who would be forced to give in to the bureaucrats.  In subtropical Florida, the cooling systems of school drinking fountains were turned off ostensibly to save money.

As Milton Friedman pointed out, it would do no good to fire the bureaucrats.  The incentives would still remain, so the replacements would do just the same thing.  Rather, the only solution is to change the incentives so that the right behavior is rewarded.

 

This whole “change the guard” thus misses the point.  The only way for change (for the better) is to change the incentives.  That means privatizing as much as possible, so that they must respond to the “market”, i.e. people making free choices and backing them up with their own money.

Obama learned from the bureaucrats

In a column last month, Debt ceiling: Obama’s demagoguery vs economic reality, I pointed out some of Obama’s dirty tricks.  These included  scaring seniors by threatening to withhold Social Security, and holding military pay hostage.  We can see now that this is the Washington Monument Strategy operating.  There is no fiscal reason to prefer these cuts rather than obvious ones like Planned Parenthood, high speed rail, wind energy boondoggles, the ethanol scam, the anti-American kakistocracy (government by the worst people) known as the United Nations, foreign aid to countries that hate us, and of course Obamacare.  The economic historian Burt Folsom pointed out:

“What about the Republicans? Are they proposing cuts that are specific and helpful? The answer is yes. Here are some of the specific cuts that have emerged from the Republicans in the House. First, cut Amtrak’s $156.5 billion annual subsidy. Amtrak is expensive and inefficient, which is no surprise. The first transcontinental railroads—the Union Pacific and the Central Pacific Railroads—were built in the 1860s and they ran about $60 million (in 1869 dollars) in the hole in building costs, and both went bankrupt (the Union Pacific several times) before the end of the 1800s. The Great Northern Railroad, which went from St. Paul to Seattle (with no federal subsidies) never went bankrupt. In fact, it may have been the best built railroad in the U. S. in the late 1800s, thanks to its builder, James J. Hill. If the federal subsidies to transcontinental railroads failed when first tried in the 1800s, why should we be surprised that they are failing now?

“The Republicans also recommend eliminating the National Endowment for the Arts and the National Endowment for the Humanities to save $333 million annually. We didn’t have these subsidies until the 1960s, and we had excellent literature (Hemingway and Faulkner) and art (from Whistler to Thomas Hart Benton). In fact, Mozart, DaVinci, and Shakespeare all produced excellent works without government subsidies. They sometimes had patrons—private support—but not government help, which is good because with government aid would have come potential government control over story plots and musical design. In my profession of history we had liberals and conservatives alike producing quality books with no government help before the 1960s, and we would save $333 million by cutting subsidies today.

“The Republicans have also proposed cutting the Davis–Bacon Act, which raises the costs of construction all over the country in order to support union labor. In our current housing crisis, building cheaper homes and offices is essential, and cutting Davis–Bacon would save our nation $1 billion per year. Other suggested cuts by the Republicans include eliminating the Department of Energy grants to states for weatherization ($550 million), eliminating the mohair subsidy ($1 million), and eliminating the Ready to Learn TV program ($27 million).”

But all of these have powerful bureaucratic vested interests.  Obama is happy to keep their support and the votes they can deliver.  So instead he threatens to cut the most popular programs, knowing very well that the Gutless Old Party is too fearful of being “blamed”.  So they keep caving in, as with the Debt Ceiling, despite the disastrous consequences for the country.

Conclusion

Know thine enemy!  When we are aware of enemy tactics, we will be ready to counter  them.  When Obama tries the Washington Monument strategy, explain it for what it is: holding people hostage to bully opponents into giving in.  Also, realize that the only real cure is taking as much out of the hands of politicians and bureaucrats as possible.  And resist siren songs of still more bureaucracies to solve problems!