Unlike Jack Nicholson's mother, who never saw the irony in calling Jack a “son of a bitch,” I'm hoping you'll appreciate another delicious irony. In a keynote speech at an international economic forum, a major political leader blamed the state's heavy role in the economy for stagnation. Government, he said, should “protect the choice and property of those who willingly risk their money and reputation.”
If you're guessing the critiqued policies are in Greece, Ireland or the United States, Think Again. In fact the speaker was President Medvedev of Russia, the country whose government excesses inflicted misery and deprivation on its people.
It is poetic irony, then, to hear Medvedev wax Jeffersonian while throwing overboard the Russian autocrats who've concentrated power in the Kremlin. Medvedev knows that “the proposition that the government is always right is manifested either in corruption or benefits to ‘preferred' companies.” Medvedev says, “The Russian economy ought to be dominated by private businesses and private investors.”
That is the definition of “seeing the light!”
As astonishing is the rejection of America's founding principles of limited government and free-enterprise by politicians who've glommed onto a micro-managed government-approved “capitalism.” I'm not claiming the U.S. has morphed into Russia, only a shared lesson. Government officials are too easily captured by special interests, often ones they should be regulating and on which they lavish taxpayer-financed favors. Therefore, trusting government officials to influence the economy is mistaken and dangerous.
The ironic truth is that governmental policies to promote home ownership precipitated the financial crisis by pushing suicidal loans onto low-income people and stimulating taxpayer-backed demand for the bad loans. As a result, the government perverted the free-enterprise system and subverted everyone's economic interest, sticking taxpayers with massive losses, saddling homeowners with unfair mortgages and damaging credit markets. More ironically, we've allowed government officials to deny responsibility, blame others and even benefit personally — sounds like Russia!
Economists say there's no such thing as a free lunch, but seeming to give free lunches elects politicians who claim they can do miraculous things like create economic growth and jobs. The reality is, despite economic models showing government could create wealth by spending (“investing”, in politician-speak), the models don't reflect the complexity of a dynamic market economy where millions of decisions are made simultaneously. While government can invest at the margins in research and activities that spin off useful technologies, spending incurs an opportunity cost as taxation, borrowing and mandates undermine businesses' desire to hire and invest.
Haven't we learned the Great Depression lessons when New Deal policies initially committed these mistakes, thus prolonging economic despair? In 1939, FDR's Treasury Secretary Henry Morgenthau said, “We have tried spending money. We are spending more than we have ever spent before and it does not work … After eight years of this administration we have just as much unemployment as when we started … and an enormous debt to boot!”
Since 2008, we've spent almost $2 trillion on stimulus and recovery programs. We've enacted a too-big-to-fail policy, bailing out bankrupt banks and car companies, making taxpayers liable for reckless decision-making while penalizing disadvantaged smaller competitors who don't enjoy government backing. Cash for clunkers and the first-time homebuyers tax credit generated no incremental demand. Hundreds of new complex regulations and hidden taxes lurk in financial reform and health-care legislation with critical details left to regulators. Employers worry that hiring implies accepting costs they can't control or predict. Not surprisingly, American businesses are reluctant to invest their $2 trillion cash horde.
As Karl Marx said, “the road to hell is paved with good intentions.” After all this government “goodwill,” unemployment exceeds 9 percent (despite promises the rate wouldn't top 8 percent by now), economic growth is anemic, and the misery index (unemployment plus inflation rates) is at a 28-year high. Federal spending is at an unsustainable 25 percent of GDP, up from a 60-year 18 percent average, as we borrow 42 cents out of every dollar spent. With $14.3 trillion in federal debt, Americans brace for higher interest rates as creditors doubt America's ability to repay.
The role of government is not to create jobs but to facilitate an environment hospitable to the private investment that drives innovation and, ultimately, job growth. America must revert to the values that made us the most prosperous country in history — smaller government, sensible though limited regulations, a globally competitive tax burden, entrepreneurialism, equality of opportunity, an exceptional educational system, respect for private property, and individual responsibility.
Pollster Scott Rasmussen wrote, “the gap between Americans who want to govern themselves and politicians who want to rule over them may be as big today as the gap between the colonies and England during the eighteenth century.” Americans don't want to be governed from the left, the right or the center; they want to govern themselves.
There's nothing ironic about that.