The Big Con: The True Story of
How Washington Got Hoodwinked and Hijacked by Crackpot Economics
Houghton Mifflin Company, 2007,
294 pages, $25.00.
Science-fiction author Peter David tells an I-swear-it's-true tale about the folks who were licensing to a publishing house the rights to use the Star Trek characters. The question arose: Which stories would be deemed "canonical" -- those from TV and the movies or those in the books? A resolution was proposed: What was on screen would be "what really happened," while what was in print would be "just make-believe." And a response was drawn: "Wow, and you guys say we need to get a life?!"
Even more in need of a life -- and direct contact with the planet Earth -- is New Republic senior editor Jonathan Chait. As self-contradictory as it is empirically farcical, his thesis can't work either side of the old analytic-synthetic dichotomy. "Thesis"? Chait's work is a character assassination: He aims his faulty phaser at anyone and anything ever taxonomized "conservative" -- and is felled by the backfire.
Chait's "true story" has only one point of confluence with our world: Supply-side economics -- if by that we mean tax cuts without spending cuts (aka the tax-cuts-will-pay-for-themselves doctrine) -- is indeed "crackpot economics." A theory that assumes what it has to prove, it has been rejected by virtually all economics departments -- as Chait correctly notes (p. 21). He even writes: "To be sure, economics departments are filled with conservatives who very much favor smaller government. But none of them share the basic supply-side view...." And yet the rest of his book -- its "thesis" -- soars past the stratosphere to cast supply-side sophistry as the unifying orthodoxy of "conservatism" and its ultimate implementation: the Republican administration of George W. Bush.
Recalling Daniel Bell's 1963 talk of the "ideology" of the "right-wing Republicans," Chait laments that now "those right-wing Republicans have taken control of the party..." (p. 235). Say what?! The Goldwaterites were big-spending supply-siders? This, when Chait himself affirms that the theory "emerged from the writings and discussions of [Arthur] Laffer, [Jude] Wanniski, and the late Wall Street Journal editorial page editor Robert Bartley" (p. 22)? Nor is the GOP today in the hands of the "New Right" activists of the Reagan era: Howard Phillips and Richard Viguerie praise Ron Paul, not “presumptive nominee” John McCain (or "Dubya" himself, for that manner). Indeed, the president's embrace of supply-side isn't even his father's famous dismissal of it as "voodoo economics."
A thinking man would now begin to acknowledge the multiplicity of factors uniformly labeled "conservatism." But Chait thinks not. Conservatism is a "totalistic ideology" that "resembles that of communism much more than liberalism" (p. 236). Why, just consider:
It's no surprise that a disproportionate number of conservative intellectuals were once communists -- first, the National Review crowd in the 1950s (Whittaker Chambers, James Burnham, Frank Meyer, Wildmoore [sic] Kendall), then the neoconservatives of the 1970s (former Trotskyists Irving Kristol and Norman Podhoretz). They simply exchanged the primacy of the state for the primacy of the market.
Possibly this is an attempt to conscript red-baiting into the service of contemporary liberalism, but certainly it is fiction. Neither Chambers nor Burnham was in any significant way a free-market enthusiast, and Kendall, who favored Rousseau over Adam Smith, believed in the primacy of the majority. But this slant on the neocons! Kristol has written explicitly ("The Neoconservative Persuasion") that he and his fellow neocons do not dread the "growth of the state" and regard it as "natural, indeed inevitable." He disavowed such limited-government icons as Goldwater and even Hayek. In short, the "neoconservatives" believe in the same fundamentalism as the "liberal" Chait: the primacy of the mixed economy.
So, what's all this about the primacy of the "market"? Elsewhere in the book (p. 48), Chait informs us that the economic policy of current conservatism is "nothing that a Friedrich Hayek or a Milton Friedman would recognize as his own." And in a discussion of this conservatism's "material self-interest" (pp. 76-79) -- which is actually a listing of a few examples of corporate welfare under Bush 43 -- he asks, "How, one might wonder, could anybody regard this great mass of government subsidies as a triumph of the free market?" Rhetorician, answer thyself.
The best we get is this: "The rise of the business lobby has distorted -- and, finally, corrupted -- the Republican Party...," which is true -- if we were talking about the Progressive Era. But regarding that period, Chait rehearses a superstition that puts the flat-Earth faithful to shame: "[M]any of the reforms the Progressives set in place were met by fierce opposition from corporations. Yet eventually much of the business community accepted them ... [including] reasonable regulation." "This history," he explains, "runs against the mythology ... in which American business is seen as a constant, thoroughly evil, and near omnipotent force" (pp. 48-50).
Chait's "history" has been exposed as mythology itself by the scholarly research of historian Gabriel Kolko, who documented how the Progressive regulatory agencies were "invariably controlled by leaders of the regulated industry, and directed toward ends they deemed acceptable or desirable ... [mostly] because the regulatory movements were usually initiated by the dominant businesses to be regulated," e.g., the Interstate Commerce Commission and the railroad industry. Kolko's work was embraced by free-market economists from the conventional Friedman to the radical Murray Rothbard, who all stressed the same point: Big Business loves "business regulation" (especially the funded-by-taxpayers and crippling-to-smaller-competitors parts). Chait concedes that by the Johnson administration corporate support for regulation became obvious to all, but he characterizes the regulation as something corporations accepted altruistically because they sincerely believed it benefited the "country as a whole." Yup, that's what he writes. Only under George W. Bush has corporatism warped into the special-interest pursuit of privileges for connected businesses.
Chait often frames Bush policies as outrages for which there's been no Democratic counterpart. "In 2003, Bush and the Republican Congress enacted a bill extending Medicare coverage to prescription drugs, representing the largest expansion of entitlements in nearly forty years" -- so much for the "primacy of the market," to say nothing of popular charges of rolling back the welfare state. Yet Chait is indignant that the legislation also contained "hundreds of billions of dollars of subsidies to health insurance companies, the prescription drug industry, and other supplicants" (p. 65). Does he really imagine that the current administration invented corporate welfare? That Democrats never threw a bone to Big Business while throwing one to the little guy? That people are delusional when they note the corporate ties of both parties? (Not for more than a polemical moment, after which he's left with only the argument that "Republican style" contemporary pork is porkier than Democratic "[c]lassic pork.") Since Chait never brings up Kelo, he at least doesn't blame Bush for the Court liberals' gifting corporations with "property rights" to other people's property.
The upshot of all this is to project onto "conservatism" the policies of what has been called "corporate liberalism" by virtually everyone but the corporate liberals themselves (though there is something to be said for Ralph Nader's preferred term: "corporate socialism"). This becomes glaring when Chait finally acknowledges the many conservatives who see President Bush as an enemy. But look at how he spins it. Once, conservatives revered George W., as exemplified by how "National Review's David Frum called Bush 'a resolute and even heroic president'" (p. 239). But then something happened:
After his reelection in 2004, Bush's popularity sank and his legislative agenda ground to a halt. In the conservative mind there was only one possible explanation: Bush had abandoned the faith. As the liberal writer Rick Perlstein has observed: "Conservatism never fails. It is only failed." ... The conservative press reverberated with denunciations of him as an ideological turncoat.... A previously unknown and unimaginable genre appeared: the conservative anti-Bush book, with titles like Imposter [by Bruce Bartlett] or Conservatives Betrayed [by Richard Viguerie].
Let's get this absolutely straight: The Big Government "neoconservatives" who supported Bush then, support him now (in some cases with an obligatory qualification or two), and the libertarians and "paleoconservatives" who oppose him now, opposed him then. The point is not which side is right about the good or ill of the Bush presidency, but that both sides are right in recognizing whose ideas he embraces ... and whose he rejects.
But again, Chait refuses to make any such distinctions. He wants us to accept that "conservatism" has failed, that Bush never "abandoned" it, but in fact sustained it. Meaning ... what? That the president repealed all government involvement in the economy back to pre-Progressive levels -- and now we're all suffering the catastrophic results? Here's where Chait's notion of supply-side economics as the defining tenet of "conservatism" reaches its climax. He insists that the theory constitutes the "starve-the-beast strategy, which is the essential premise of conservative domestic policy. But the conservatives could not admit that their own theory had fallen short, that the strategy and the assumptions behind it had failed." Now to get this straight: The "essential premise" of supply-side -- viz., that at a certain point, a rise in taxes lowers revenue -- was a "strategy" to increase the efficiency of, not abolish or even just reduce, the great beast Leviathan. Chait himself acknowledges (p. 109) that "when [supply-siders] have the opportunity to preach their case to liberals, they are happy to argue that tax cuts would produce a gusher of revenue that could fund more generous programs" -- a Medicare bill expanding both entitlements and subsidies, let's imagine. In stark contrast, the "essential premise" of "conservative domestic policy" (i.e., free-market reforms, rejected by corporate liberals and "neoconservatives" alike) has for decades been the very slaying of Leviathan. The biggest con is the conflation of these opposites as "conservatism," whether the perp's an Irving Kristol -- or our author. We won't find any support for a supply-side-as-starvation theory from Bartlett (who, contrary to Chait's blatant misrepresentation, in fact writes that "tax cuts actually seem to cause spending increases," which Chait should know: Imposter bears a cover blurb from him) or Viguerie or Victor Gold (Invasion of the Party Snatchers, which calls for a GOP committed "to the economic realism of Milton Friedman and Herb Stein, not the irresponsible debt-and-deficit economics of Arthur Laffer and Robert Mundell").
Chait simply cannot face the truth: George W. Bush the "conservative" is a conservator of corporate liberalism/socialism. Not raising taxes is his only break with tradition. Were Wilson, Roosevelt, Truman, Kennedy, Johnson, or even Bill Clinton the current president -- heck, we might as well go and throw in the Republicans (e.g., Nixon, to belabor the obvious) -- the nation would be exactly where it is today ... except with higher taxes.
It's not a matter of only economic policy. George Bush II is no Robert Taft II. He has become -- yes, in abandonment of his pre-election statements (e.g., America cannot "go around the world saying, we do it this way, so should you") -- the stalwart of an aggressive foreign policy, i.e., the policy of the iconic liberals above (as acknowledged by even Spite Right firebrand Ann Coulter). It was his Rockefeller Republican father who sent troops into Iraq -- and Democrat Clinton who kept them actively bombing there (to say nothing of the U.S. intervention in the Balkans). We forget that his sending of additional troops was originally presented as the escalation of a military action that had been in progress since Saddam had invaded Kuwait. We forget -- or at least they now hope we forget -- that mainstream liberals Biden, Rodham Clinton, Dodd, and Edwards voted for "his war in Iraq" (as Michael Kinsley dubs it in the cover blurb). And we should remember that it was the libertarians (e.g., Ron Paul, Milton Friedman) and "paleoconservatives" (e.g., Pat Buchanan, Samuel Francis) -- i.e., "right-wing Republicans" -- who opposed it. Again, the point is not which side made the wiser decision, but which side took which position.
And yet nothing dissuades Chait from his core premise: the polarity of all "conservatism" and all "liberalism" -- not even his inability to provide coherent definitions. The former is drawn so broadly as to include not only the conflicting thinkers we've seen thus far, but also Religious Right and other "right-wing" elements. However, despite all these different ideologies, he characterizes conservatism as an "ideological sect," with debate limited to only a few specific issues (p. 237). Liberalism, on the other hand, is drawn to exclude Marxists (p. 129) and "[l]eft-wing social activists and campus radicals" (p. 134), yet he calls it an "ideological coalition." What, then, is the ideology holding this "coalition" together? Answer: "[T]here is no agreed-on definition of what liberalism means." Oh. So liberals "freely accuse each other of all sorts of ideological sins" -- even though they literally don't know what they're talking about. Well, you can't say that Chait's book isn't proof of its own contention. (For a discussion of the inability of modern liberalism to maintain any philosophic integrity, see my "Liberalism: History and Future.")
Forget coherence -- you can't credit Chait even with any originality. Hasn't a certain Berra-esque déjà vu crept in by now? You can discover its source by going to David Horowitz's 1998 essay on Up From Conservatism by Michael Lind. It's all there in the book: monolithic-extremist conservatives vs. centrist liberals ("consensus liberals," in Chaitspeak [p. 231]). It didn't take much sweat on Horowitz's part to wield example after example of "conservative" disagreements to hack away at the monolith Lind imagined. For what it's worth, Chait can find roughly the same point -- viz., that the only things "conservatives" have ever shared are a common tag and (from the end of World War II to the fall of the Berlin Wall) a common enemy -- in the August 31, 1992, John Judis article in a journal called The New Republic.
Chait insists that conservatism and liberalism differ in "not just goals but epistemologies" (p. 235). And what could that possibly mean at this point? "Conservatives," he elucidates, "believe government simply has no right to insert itself into economic life the way it has since the New Deal" -- evidently even when the party they "have taken control of" enacted "the largest expansion of entitlements in nearly forty years." He quotes as a representative of this belief Milton Friedman -- that's right, the same man earlier portrayed as a thinker discarded by today's conservatives. (Taking in the book's proliferating contradictions, you have to wonder if editors these days worry about anything other than dangling participles.) So, what does he have Friedman say? This: "Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself." Chait tells us that this (sans-context) statement shows that conservative beliefs about the harmfulness of government intervention in the economy, "while deeply held, are not necessarily determinative." And as for what that means, he pulls his trump, a quotation from Andrew Sullivan: "If faster growth were caused by a bigger government, a conservative would still back smaller government and individual freedom. Similarly, my hostility to a progressive income tax is because I believe it's hubristic over-reach. Why should a government have the power to penalize some individuals for their relative success while rewarding others for relative failure?" Now Chait reaches for the jackpot:
So while conservatives believe, say, that progressive taxes inhibit incentives to work, they would not change this view even if it were proven wrong, because buttressing their position is a deeper belief about the immorality of big government.
Liberal support for bigger government, on the other hand, is entirely rooted in what liberals believe to be its practical effects. They support regulations on pollution because they believe it will improve air quality. They support tax credits for the working poor because they believe they will raise income for such workers. If liberals were to be convinced those programs failed to achieve their intended goals, they would withdraw support for them. Increasing the size of government does not, in and of itself, serve any greater purpose. Conservatives regularly cite the size of government as a measuring stick -- bigger government means they are failing, smaller government means they are succeeding. Liberals don't think this way. For them, bigger government is a means, not an end.
This is what we've been waiting for, isn't it? "Liberals" are open-minded and humanitarian; "conservatives," fanatically committed to their one nostrum and thus ultimately indifferent to its possible harmful effects on human well-being. For Chait, the conflict of the present age isn't between ideas true and false, but between people good and evil.
It is perverse that an author who so focuses on economics should essentially dismiss, rather than refute, the economic (i.e., "practical effects") argument of his opponents -- even when they are economists (e.g., Friedman, who in fact has always been a strong proponent of empirical falsification). The caricature that Chait draws from Sullivan's idiosyncratic statement -- an entity who would champion the market economy even if it were shown to starve the masses -- reflects no capitalist economist, from Adam Smith to Mark Skousen. Even the "moralist" defenders of the free market, those who do indeed maintain a "belief about the immorality of big government," do not ignore "practical effects." After all, what was Atlas Shrugged but a demonstration of the consequences -- for everyone, not just the John Galts -- of a collectivized economy?
On the flip side: Do liberals resemble Chait's portrait of them? Consider the nature of economic debate to date. Free-market economists still explain why, for example, the minimum wage won't help the poor, and "practical effects" liberals still respond that we need the minimum wage because the poor need help. So, does the hope that it helps the poor prove that it helps the poor? Does it prove at least that liberals are good people? (It is beyond the pale to speculate whether liberals are limiting their benevolence to the special interests of Big Labor.) Can liberals "be convinced [such] programs [have] failed to achieve their intended goals"? In his Everything for Sale (which contains just such an it-helps-the-poor-because-the-poor-need-help advocacy of the minimum wage, including a total failure to address any of the arguments against it), Robert Kuttner seems to regard the law of unintended consequences not as a sober reality, but as a self-evident absurdity, which he mocks as the "Perversity Thesis": Claim a law will do something and "conservative" contrarians reflexively assert it will do the opposite. (Kuttner and kind might care to ponder the late-2007 AP reports that the "shortage of National Health Service dentists" in the U.K., which began when "[m]any dentists abandoned Britain's publicly funded health care system after reforms backfired in April 2006," has left a "growing number of Britons without access to affordable care." The reforms, e.g., a guaranteed income for dentists, were an "effort to increase patients' access." Even more thought-provoking is "Health Status, Health Care and Inequality: Canada vs. the U.S." from the National Bureau of Economic Research.)
So now the question about "bigger government" liberals becomes: Is there no "deeper belief" -- the immorality of a "common good" that's only the "sum of selfish individual goods" (Kuttnerese for any values pursued by free individuals) and the superior ethic of a "collective good" (ditto for anything imposed by majoritarian state coercion); uniformity of wealth/poverty; punishment for the sins of "materialism" and "greed"; or simply special interests -- buttressing their position? As for Friedman, he was by no means declaring (at the very beginning of Capitalism and Freedom) that "economic freedom" is the supreme value irrespective of its "practical effects" on people's lives; rather, it is not only "an end in itself," but "also an indispensable means toward the achievement of political freedom" (emphasis added). He rejected further the false dichotomy between freedom and "material welfare," and libertarians today reject in turn that between morality and practicality -- fundamentally, I would contend, between ethics and economics. That's because the two sciences are studying merely different aspects of the same reality, the same nature -- human nature. They can no more conflict than physics and chemistry. It is a "deeper belief" (explicit or implicit) in some standard of morality that determines both "intended goals" and the means to achieve them. As one liberal conscious of the need to account for the morality-practicality nexus, Kuttner subtitled another book False Choices Between Prosperity and Social Justice. Now, as to which ethic -- individual freedom or "social justice" -- truly coexists with economic abundance, one answer has long been clear: the contrast between the pro-prosperity Old Left and the pro-austerity New Left and its fellow travelers (e.g., affluence foe John Kenneth Galbraith, the Salieri of economics, now so irrelevant as to not even merit a mention from Chait). Here the supporters of "bigger government" continued to "back" it despite the demonstration of its actual relation to "growth."
Had Chait tried to understand his free-market subjects, he would have seen that for them limited government is not a fetish, but the yin to the yang of a thriving civil society -- in whole, a "free and prosperous commonwealth" (Ludwig von Mises). But he preferred to scribble his caricatures. Ultimately, Chait is not an FDR, JFK, LBJ, or even Clinton liberal -- he's a Norman Lear liberal. His conception of "conservatives" and "liberals" is no less one-dimensional than the characterization of Archie Bunker and son-in-law Mike. As stereotypes, they work not to educate or challenge others, but only to confirm one's own prejudices.
All this is not to say that Chait hasn't taught us anything inadvertently. Recall how he spoke of an ideology that "resembles that of communism." Indeed: a crafted mythology as official history; government growth as a declared inevitability; administration of the masses economically (professedly to benefit the lower classes, really to establish a political elite); the use of the term socialization to denote usurpation by the State of the institutions of society; the invocation of "wrecker" saboteurs ("reactionaries" and "conservatives") to prove that statism never fails, but is only failed; militarism in the service of "pacification."