The Deficit and our Obligation to Future Generations

The Deficit and our Obligation to Future Generations

James M. Buchanan

 Can we, in good conscience, force our children to pay for our current spending policies? Does this make good fiscal, let alone moral, sense? For James M. Buchanan, head of George Mason University's Center for Study of Public Choice whose work recently earned him the Nobel Prize in economics, the answer is a resounding "no."

Yet our government continues to engage in the disastrous practice of deficit spending. The national debt exceeded the trillion dollar mark a long time ago; and still, the trend is to spend more and more with faint sense of obligation to succeeding generations which will be forced to pay for our profligacy. Borrowing is simply a much easier expedient than cutting spending or raising taxes. How can we stop this dangerous cycle? "The basic moral dimension of fiscal policy must be elevated to center stage" says Professor Buchanan. "In no other way can we begin to determine what constitutes responsible collective behavior." The implication is, of course, that we must reject one of the principal elements of Keynesian economics which regards deficit spending as a morally acceptable proposition.    

Introduction

Philosophers and social scientists alike have seemed surprisingly reluctant to discuss the modern practice of continuous deficit financing in intergenerational terms. In part, this reluctance stems from the long-continuing confusion in economists' understanding of the elementary principles of government borrowing. Until and unless economists get their theory of public debt in order, we can scarcely criticize the philosophers for failing to examine the moral content of the behavior that debt represents. So long as economists suggest that the relevant variables are levels or rates of change in the national product, national income, consumption, saving, investment, and capital formation, they will necessarily concentrate attention on secondary rather than primary consequences of deficit financing.
Whether the borrower is an individual, a corporation, or a government, borrowing, as an institution, allows the borrower to shift patterns of outlay over time; borrowing makes spending possible now, but eventually the time comes when the incurred debt must be paid off or rolled over and upon which interest must be paid. This elementary logic holds regardless of the usage to which borrowed funds are put.
With an individual or a firm there is, however, a direct linkage between the act of borrowing and the accompanying assignment of liabilities, a linkage that operates to insure that the institution is not abused. The profligate individual who incurs debt to expand current consumption suffers the consequences; he alone is liable for interest-amortization charges later. This responsibility to pay the price for borrowing is recognized by both the individual and his potential creditors. And the corporation knows it must put borrowed funds to productive use in order to survive in a competitive economy.
But there is no such burden of responsibility when it comes to the national debt. A government may expand current rates of spending by borrowing the funds, but those persons who, as agents for the state, make fiscal decisions do not face obligations to repay its creditors. If the borrowed funds are used to finance current rates of public consumption (including transfers), the decision makers, personally and/or through their constituents, secure benefits without directly suffering losses.
There are two closely related reasons to suggest why the government's, i.e. our, sense of obligation is so faint. First of all, we as individuals do not live forever, and our interests in our progeny may be somewhat less than our interest in ourselves, especially when we may not have any children at all. Secondly, some of us may desire to leave negatively-valued "bequests, " even for our own progeny, a desire that the institution of public debt can satisfy. My point here can be put simply in a comparative illustration. If I borrow $1000 personally, I create a future obligation against myself or my estate in the present value of $1000. Regardless of my usage of the funds, I cannot, by the act of borrowing, impose an external cost on others. Unless I leave positively-valued assets against which my debts can be satisfied, my creditors cannot oblige my heirs to pay off their claims. By contrast, suppose I "vote for" an issue of public debt in the amount of $1000 per person. I may recognize that this debt embodies a future tax liability on some persons, but I need not reckon on the full $1000 liability being assigned to me. If I leave no positively-valued assets, the government's creditors can still enforce claims on my progeny as members of the future-period taxpaying group. Further, the membership in the taxpaying group itself shifts over time. New entrants, and not only those who descend directly from those of us who make a borrowing-spending decision, are obligated to meet debt interest and amortization charges.
In sum, the institution of public debt introduces a unique problem that is usually absent with private debt; persons who are decision makers in one period are allowed to impose possible financial losses on persons in future generations. It follows that the institution is liable to abuse this and overextend its borrowing practices. There are moral and ethical problems with government deficit financing that simply are not present with the private counterpart.

Classical Precepts and the Keynesian Revolution

The simple logic of public debt, sketched out above, was fully recognized in classical public finance theory, and its implications were embodied in classical norms for the debt issue. These norms justified financing government outlay by borrowing only in two circumstances, (1) when the funds were devoted to capital investment projects, and (2) when there were extraordinary demands on revenues, such as war emergencies. In either of these settings, resort to public debt allows for a closer matching of the time patterns of costs and benefits than seem to be available through tax financing. In all other settings, whether through formal constitutional restriction or through voluntary adherence to rules for fiscal prudence, governments were not authorized to borrow to cover revenue needs.
The Keynesian revolution in the theory of macroeconomic policy essentially repealed these classical norms. This paper is not the place for me to detail the many intersecting confusions that this theory of macroeconomic policy reflected. Suffice it to say that, as interpreted by practicing politicians in democracy, the effects have been indeed dramatic. Since roughly the early 1960s, political decision makers have felt free to finance outlays by debt, quite independently of the classical restraints. As a result, in the 1980s much of our current public consumption is financed by debt. We are, as members of the body politic in 1986, currently enjoying the benefits of public outlays that must be paid for by those who come after us. We are imposing external costs on future generations.

The Benefit Principle of Taxation

Here, I want to look critically and carefully at the moral dimension of the debt issue, and, specifically, at the moral and ethical foundations of the classical norms of government spending. Why should public debt be limited to the financing of either capital projects or extraordinary revenue needs? Why should not we, as citizens in the 1980s, finance current benefits by imposing taxes on those who will pay taxes in the 2000s? What theory of rights allows us to say that the classical principles are justified? Or, to repeat the title for this paper, what are our obligations to future generations in these respects?
The classical norms are based on the same ethical foundations as the benefit principle to taxation, which states that those who enjoy the benefits of public spending programs should be those who are required to pay the taxes necessary to finance them. This precept reflects a straightforward extension of the commutative justice of market exchange to the public sector, and it finds its most sophisticated exposition in the Wicksell-Lindahl model of fiscal process.
There is moral and ethical content in the quid pro quo of market dealings, and this content applies to strictly voluntary exchange of the marketplace to the implied voluntary exchange that takes place in the public sector. This conceptualization, in its turn, embodies a theory of the state itself. The state is conceived as the means or instrument through which persons cooperate to secure benefits that cannot be secured efficiently in the market sector. Conceptually at least, the individual's claims are both prior to and separate from the collectivity in which he has membership.
If this essentially Lockean theory of the state is accepted, the exchange or benefit principle for taxation seems a natural consequence, and the classical norms for public debt fall clearly into place. Indeed, these norms are simply the temporal extension of the benefit principle. Those who exist when the benefits from public spending are enjoyed should be required to pay the taxes necessary to finance such benefits. To depart from this putative exchange nexus of costs and benefits, save in the two circumstances noted, violates the founding principles and values of a society of free persons.
Or so it should seem. The analogy with the benefit principle of taxation should, however, give us pause. We must acknowledge that, in the mainstream of normal public finance over the last century, the benefit principle has not been universally applied, and perhaps has not even occupied a dominating place among alternatives for tax share allocation. The most familiar alternative has been "ability to pay." Progressive or proportional rates of taxation to finance genuinely redistributive transfers could never be derived from any simple application of the benefit principle. There is no quid pro quo. Taxes take from the rich; transfers give to the poor. Any ethical justification for this sort of fiscal action must be informed by a different argument than the benefit principle.
Can we possibly justify current debt financing of public spending on some grounds analogous to those advanced in support of the modern redistributive fiscal regime? Transfers occupy ever-increasing shares in the budgets of modern governments, and, as noted, taxes to finance such transfers could never be justified on any simple application of the benefit principle. The first point to be made here is that the debt financing of current-period consumption is a temporal tax-transfer system in many respects akin to the within-period tax-transfer system of the modern welfare state. Persons who enjoy the benefits of the spending now do so at the expense of persons who will, in subsequent time periods, be required to pay the taxes required to meet the interest and amortization charges.

Justification of In-Period Redistributive Transfers

If, as both normative and methodological individualists, we refuse to acknowledge the existence of some organic collectivity that has purpose apart from those of its members, we must try to locate any justification of an in-period tax-transfer system in some conceptualized contractual agreement among all members of the polity. A multi-period perspective must be taken, and it is necessary to distinguish carefully between the choice of rules or institutions that remain in force over many periods and the choices made under the operation of a specific set of such rules within a single period.
That is to say, we must adopt what is essentially a "constitutional" perspective.
If we do this, it does become possible to derive an ethical argument in support of fiscal redistribution, and, indirectly, of those institutions of taxes and transfers that facilitate such redistribution. The individual who chooses among basic social institutions that are expected to remain in existence for some time is necessarily operating behind a veil of uncertainty; he cannot fully identify his own position in any one future period during which the chosen institution will be operative. In this setting, which was introduced by myself along with Gordon Tullock in The Calculus of Consent (1962), the individual may prefer some institutional-constitutional arrangement that will involve some elements of an in-period tax-transfer system. The analogous setting for constitutional choice, in which the veil of ignorance becomes more central, was used by John Rawls in A Theory of Justice (1971), to derive the ethical argument for some fiscal redistribution.
The economy grows through time, and because persons in future periods will be wealthier than persons who live now, the postponement of the tax payments for currently enjoyed spending will embody a rich-to-poor redistribution that may be dictated by the same precepts applied to the in-period model.
The logic seems straightforward. Consider a highly simplified two-period model in which there is only one person alive at any period, and where persons live for only one period. Suppose that the income in Period 1 is 100 units, and that in Period 2 is 200 units. These income flows are known, but the selector among institutions remains totally ignorant as to whether he will be alive in Period 1 or Period 2. In this setting, it seems plausible to predict that some adjustment of concern for environmental pollution we observe an historically unique record of fiscal profligacy. Our record suggests an absence of concern for the well-being of future generations. Debt financing of currently enjoyed public program benefits imposes charges on all future taxpayers, just as surely as pollution exacts a toll on their welfare. Why do we observe such an apparent disparity in both public attitudes and in political response? Why is there so much political support for toxic waste cleanup and so little for reforms like budget amendment?
There are at least three separate arguments that may explain the differences here. First of all, the modern concern over environmental quality is motivated, at least in part, by an anti-capitalist, or anti-market, mind set. The "evildoers" are business firms seeking profits, not the benevolent government. With deficit financing, by contrast, no fingers can be pointed directly at profit-seeking business firms, or even at persons in their private capacities. The costs that deficits impose on future generations are imposed by government, by the working of democratic political process, by duly elected political representatives of the people who are electorally responsible to us all. We should not, therefore, be much surprised that the Ralph Naders of the age should remain relatively silent.
A second, and possibly much more important reason for the relative disparity in concern lies in the wide-income between periods would be preferred if institutional arrangements could be made to facilitate such adjustment. If spending in Period 1, over and beyond 100 units, could be financed by some borrowing against the income of Period 2, the individual chooser, when adopting the constitution, might well authorize such an institution.
But should this argument be taken seriously? Before we do so, it is necessary to consider the sources of economic growth and the attitudes of the individual toward such growth. Suppose we remain with the one-person-per-period, two-period model, but that we postulate that economic growth is dependent upon the resourcefulness and behavior of the person alive during Period 1. Suppose, further, that this person saves one-half of his income of 100 units, invests this in productive capital, which yields a rate of return of 100 percent. The potential consumption of the person alive in Period 2 is then 200 units, as in the first model examined. But would an individual, behind the intertemporal veil, prefer an adjustment in the income levels between the two periods? Would the individual authorize an institution that facilitated borrowing against Period 2 income to finance a potential rate of consumption greater than 100 units in Period 1? If it turns out that he is alive in Period 2, then clearly the debt financing of Period 1 consumption would have undesirable consequences.
Since economic growth is dependent upon the behavior of persons in the economy, there seems to be no contractarian argument that will justify the constitutional authorization of the debt financing of current period consumption. Separated in time or by generation, individuals cannot be considered as players in the "same game." So any other arguments in favor of equal opportunity, redistribution and "fairness" lose much of their meaning as well.

Pollution and the Fiscal Environment

I have suggested that there is no plausibly supportable ethical justification for imposing net fiscal charges on persons who pay taxes in future periods. I have not directly addressed the more difficult question concerning our positive obligations to future generations. We live in an era characterized by mounting concern over environmental quality that is presumably motivated in part by a sense that our generation should not so despoil the atmosphere as to make living less pleasant for those persons who will follow us. Note that this expression of concern implies that we have an obligation toward future generations in our capacities as citizens, as members of the body politic, and that where required, we should, and do, act collectively through our government to implement such an obligation, even if constraints are placed on our individual liberties to act.
It is surely singular, if not bizarre, that alongside our spread confusion among economists, noted at the outset of this paper, that has resulted in a neglect of the intergenerational effects of debt financing. A third reason prompts both the economists' confusion and the public's failure to express indignation at the gross violation of norms for intergenerational equity that the deficit regime embodies. There is no counterpart to the observable physical deterioration of the atmosphere that persons may see and that the scientists can measure. The piling up of claims against future-period incomes of taxpayers does not physically enter the consciousness of present-period persons; these claims do not float about for all to see. This difference suggests that the pollution of our fiscal environment is all the more pernicious. No present person's laundry gets dirtier, yet many persons clearly secure net benefits.

Debt, Default, and Future Generations

Does the last reason noted give pause when we compare fiscal with atmospheric pollution? Precisely because the claims against the incomes of future taxpayers are just that—claims—has there been any actual destruction of value involved in the whole debt-deficit operation? Must the financial levels attainable for persons of future generations be lower as a result of the deficit regime than they might have been under a balanced budget? To raise this question prompts attention to possible default. What would occur if future taxpayers, or rather, if the government acting on their behalf, simply refused to pay the claims? What if the government, say in the year 2000, repudiated all of the debt claims held against it, and indirectly, against those who would be subjected to the taxes required to meet these claims?
In such a scenario, future generations of persons, as taxpayers, would, indeed, escape damage. But persons play several roles simultaneously, and those members of future generations who are bequeathed government securities (bonds, notes, bills) held against the government would find them subject to capital-value confiscation. These persons, rather than the more inclusive group of taxpayers, would be the losers in the process. These future creditors of government would be the persons on whom the final incidence of payment for the benefits of currently enjoyed spending rests. In effect, these future creditors, future taxpayers themselves, would pay in two ways for our fiscal profligacy. Default doesn't exempt them from bearing our costs.

Mortgages and the Destruction of Capital

In another version of this paper, the title includes the word "mortgage. " But this analogy is misleading, since by standard dictionary definition the word "mortgage" means the conveyance of a property that secures the debt, a property that presumably yields a stream of value to the user. The use of the mortgage analogy to apply to government debt would indeed be appropriate if the debt was created in the process of financing a genuine capital investment project, but no pretense is made that the outlays financed are anything other than ordinary expenses of government, expenses required to provide the goods and services and transfers for the various interest groups who are successful in getting their demands met by politicians. There is no capital value against which the debt claims are or could be offset. Nothing of lasting value emerges from the fiscal operation that will make the servicing of the debt claims easier or less onerous for those members of future generations who will be faced with the tax charges. Not only do current debt-financing schemes fail to yield capital; they destroy opportunities to create it.

Our Obligation

I have tried, throughout this paper, to avoid the sometimes murky discourse on the general question concerning our obligations to future generations. I have restricted my remarks to the currently observed regime of debt-financed current public consumption and to the implications of this single institution to the larger and more inclusive question. I have tried to demonstrate that there is little or no ethical justification for such an institution, and that the classical principles for public debt issue carefully specify the circumstances in which governments may justifiably raise revenues by borrowing.
The basic moral dimension of fiscal policy must be elevated to center stage in public and political discussion. In no other way can we begin to determine what constitutes responsible collective behavior. The hour is late and we have already inflicted major damage on those who will come after us, damage that must be permanent. Let us not add to the damage by tolerating continued debt financing of current program benefits.

---

The New York Times profiled Nobel Laureate James M. Buchanan, Harris University Professor of Economics and general director of the Center for Study of Public Choice at George Mason University as one of the leaders of a "quiet revolution in politico-economic thinking:" a revolution which, the Times noted, "focuses on the political process particularly," and in Buchanan's words, "on structure, on how the rules work and how they can be changed:' Professor Buchanan has written a number of books, including Liberty, Market and State (1985), and he has co-authored a number as well, most notably: Calculus of Consent (1962), Democracy in Deficit (1977) and The Political Economy of Budget Deficits (1986).   

---

Copyright © 2011 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325.

What Is Public Choice Theory?

What Is Public Choice Theory?

James M. Buchanan

  Public choice should be understood as a research program rather than a discipline or even a subdiscipline of economics. Its origins date to the mid-20th century, and viewed retrospectively, the theoretical “gap” in political economy that it emerged to fill seems so large that its development seems to have been inevitable. Nations emerging from World War II, including the Western democracies, were allocating between one-third and one-half of their total product through political institutions rather than through markets. Economists, however, were devoting their efforts almost exclusively to understanding and explaining the market sector. My own piddling first entry into the subject matter, in 1949, was little more than a call for those economists who examined taxes and spending to pay some attention to empirical reality, and thus to politics.
Initially, the work of economists in this area raised serious doubts about the political process. Working simultaneously, but independently, Kenneth Arrow and Duncan Black proved that democracy, interpreted as majority rule, could not work to promote any general or public interest. The now-famous “impossibility theorem,” as published in Arrow’s book Social Choice and Individual Values (1951), stimulated an extended discussion. What Arrow and Black had in fact done was to discover or rediscover the phenomenon of “majority cycles,” whereby election results rotate in continuous cycles, with no equilibrium or stopping point. The suggestion of this analysis was that majoritarian democracy is inherently unstable.
I entered this discussion with a generalized critique of the analysis generated by the Arrow-Black approach. Aren’t “majority cycles” the most desirable outcome of a democratic process? After all, any attainment of political equilibrium via majority rule would amount to the permanent imposition of the majority’s will on the outvoted minority. Would not a guaranteed rotation of outcomes be preferable, enabling the members of the minority in one round of voting to come back in subsequent rounds and ascend to majority membership? My concern, then and later, was the prevention of discrimination against minorities rather than stability of political outcomes. The question, from an economist’s perspective, was how to obtain a combination of efficiency and justice under majority rule.

Wicksell’s Insight

The great Swedish economist Knut Wicksell was the most important of all precursory figures in public choice. In his dissertation, published in 1896, he was concerned about both the injustice and the inefficiency resulting from unfettered majority rule in parliamentary assemblies. Majority rule seemed quite likely to impose net costs or damages on large segments of the citizen or taxpayer group. Why should members of such minorities, facing discrimination, lend their support to democratic political structures? Unless all groups can benefit from the ultimate exchange with government, how can overall stability be maintained?
These considerations led Wicksell to question the efficacy of majority rule itself. His solution to the problem was to propose that majority rule be modified in the direction of unanimity. If the agreement of all persons in the voting group is required to implement collective action, it would guarantee that all persons secure net gains and, further, that the approved actions would yield benefits in excess of costs. Of course, Wicksell recognized that, if applied in a literal voting setting, a requirement of unanimity would produce stalemate. To recognize this, however, does not diminish the value of the unanimity rule as a benchmark for comparative evaluation. In suggestions for practical constitutional reforms, Wicksell supported changes in voting rules from simple to qualified or super majorities, for example, a requirement of five-sixths approval for collective proposals.
In their analyses, Black and Arrow had assumed, more or less implicitly, that the choices to be voted on exist prior to, and outside of, the decision-making process itself. Wicksell understood the error in this assumption, although he did not recognize the importance of this insight. Neither did Gordon Tullock, who wrote a seminal paper in 1959 using the example of farmer voters, each of whom wants to have his local road repaired with costs borne by the whole community. Tullock showed that majority rule allows for coalitions of such farmers to generate election results that impose unjust costs on the whole community, while producing inefficiently large outlays on local roads.
If majority rule produces unjust and inefficient outcomes, and if political stability is secured only by discrimination against minorities, how can democracy, as the organizing principle for political structure, possibly claim normative legitimacy? Wicksell’s criterion for achieving justice and efficiency in collective action—the shift from majority rule toward unanimity—seems institutionally impractical. But without some such reform, how could taxpayers be assured that their participation in the democracy would yield net benefits?

Constitutional Economics

In implicit response to these questions, Tullock and I commenced to work on what was to become The Calculus of Consent, published in 1962. The central contribution of this book was to identify a two-level structure of collective decision-making. We distinguished between “ordinary politics,” consisting of decisions made in legislative assemblies, and “constitutional politics,” consisting of decisions made about the rules for ordinary politics. We were not, of course, inventing this distinction. Both in legal theory and in practice, constitutional law had long been distinguished from statute law. What we did was to bring this distinction into economic analysis. Doing so allowed us to answer the questions posed previously: From the perspective of both justice and efficiency, majority rule may safely be allowed to operate in the realm of ordinary politics, provided that there is generalized consensus on the constitution, or on the rules that define and limit what can be done through ordinary politics. It is in arriving at this constitutional framework where Wicksell’s idea of requiring unanimity—or at least super majorities—may be practically incorporated.
In a sense, the analysis in our book could have been interpreted as a formalization of the structure that James Madison and his colleagues had in mind when they constructed the American Constitution. At the least, it offered a substantive criticism of the then-dominant elevation of unfettered majority rule to sacrosanct status in political science.
Our book was widely well received, which prompted Tullock and me, who were then at the University of Virginia, to initiate and organize a small research conference in April 1963. We brought together economists, political scientists, sociologists and scholars from other disciplines, all of whom were engaged in research outside the boundaries of their disciplines. The discussion was sufficiently stimulating to motivate the formation of an organization which we first called the Committee on Non-Market Decision-Making, and to initiate plans for a journal to be called Papers on Non-Market Decision-Making. We were unhappy with these awkward labels, and after several meetings there emerged the new name “public choice,” both for the organization and the journal. In this way the Public Choice Society and the journal Public Choice came into being. Both have proved to be quite successful as institutional embodiments of the research program, and sister organizations and journals have since been set up in Europe and Asia.
Many subprograms have emerged from the umbrella of public choice. One in particular deserves mention—“rent seeking,” a subprogram initiated in a paper by Tullock in 1967, and christened with this title by Anne Krueger in 1974. Its central idea emerges from the natural mindset of the economist, whose understanding and explanation of human interaction depends critically on predictable responses to measurable incentives. In essence, it extends the idea of the profit motive from the economic sphere to the sphere of collective action. It presupposes that if there is value to be gained through politics, persons will invest resources in efforts to capture this value. It also demonstrates how this investment is wasteful in an aggregate-value sense.
Tullock’s early treatment of rent seeking was concentrated on monopoly, tariffs, and theft, but the list could be almost indefinitely expanded. If the government is empowered to grant monopoly rights or tariff protection to one group, at the expense of the general public or of designated losers, it follows that potential beneficiaries will compete for the prize. And since only one group can be rewarded, the resources invested by other groups—which could have been used to produce valued goods and services—are wasted. Given this basic insight, much of modern politics can be understood as rent-seeking activity. Pork-barrel politics is only the most obvious example. Much of the growth of the bureaucratic or regulatory sector of government can best be explained in terms of the competition between political agents for constituency support, through the use of promises of discriminatory transfers of wealth.
As noted earlier, the primary contribution of The Calculus of Consent was to distinguish two levels of collective action, ordinary or day-do-day politics and constitutional politics. Indeed the subtitle of that book was Logical Foundations of Constitutional Democracy. Clearly, political action takes place at two distinct levels, one within the existing set of rules or constitution, the other establishing the rules or constitution that impose limits on subsequent actions.
Only recently have economists broken away from the presumption that constraints on choices are always imposed from the outside. Recent research has involved the choice of constraints, even on the behavior of persons in noncollective settings, for instance, with regard to drug or gambling addiction. But even beyond that, what I have called the “constitutional way of thinking” shifts attention to the framework rules of political order—the rules that secure consensus among members of the body politic. It is at this level that individuals calculate their terms of exchange with the state or with political authority. They may well calculate that they are better off for their membership in the constitutional order, even while assessing the impact of ordinary political actions to be contrary to their interests. A somewhat loose way of putting this is to say that in a constitutional democracy, persons owe loyalty to the constitution rather than to the government. I have long argued that on precisely this point, American public attitudes are quite different from those in Europe.

Objections to Public Choice

There is a familiar criticism of public choice theory to the effect that it is ideologically biased. In comparing and analyzing alternative sets of constitutional rules, both those in existence and those that might be introduced prospectively, how does public choice theory, as such, remain neutral in the scientific sense?
Here it is necessary to appreciate the prevailing mind-set of social scientists and philosophers at the midpoint of the 20th century, when public choice arose. The socialist ideology was pervasive, and was supported by the allegedly neutral research program called “theoretical welfare economics,” which concentrated on identifying the failures of observed markets to meet idealized standards. In sum, this branch of inquiry offered theories of market failure. But failure in comparison with what? The implicit presumption was always that politicized corrections for market failures would work perfectly. In other words, market failures were set against an idealized politics.
Public choice then came along and provided analyses of the behavior of persons acting politically, whether voters, politicians or bureaucrats. These analyses exposed the essentially false comparisons that were then informing so much of both scientific and public opinion. In a very real sense, public choice became a set of theories of governmental failures, as an offset to the theories of market failures that had previously emerged from theoretical welfare economics. Or, as I put it in the title of a lecture in Vienna in 1978, public choice may be summarized by the three-word description, “politics without romance.”
The public choice research program is better seen as a correction of the scientific record than as the introduction of an anti-governmental ideology. Regardless of any ideological bias, exposure to public choice analysis necessarily brings a more critical attitude toward politicized nostrums to alleged socioeconomic problems. Public choice almost literally forces the critic to be pragmatic in comparing alternative constitutional arrangements, disallowing any presumption that bureaucratic corrections for market failures will accomplish the desired objectives.
A more provocative criticism of public choice centers on the claim that it is immoral. The source of this charge lies in the application to politics of the assumption that individuals in the marketplace behave in a self-interested way. More specifically, economic models of behavior include net wealth, an externally measurable variable, as an important “good” that individuals seek to maximize. The moral condemnation of public choice is centered on the presumed transference of this element of economic theory to political analysis. Critics argue that people acting politically—for example, as voters or as legislators—do not behave as they do in markets. Individuals are differently motivated when they are choosing “for the public” rather than for themselves in private choice capacities. Or so the criticism runs.
At base, this criticism stems from a misunderstanding that may have been fostered by the failure of economists to acknowledge the limits of their efforts. The economic model of behavior, even if restricted to market activity, should never be taken to provide the be-all and end-all of scientific explanation. Persons act from many motives, and the economic model concentrates attention only on one of the many possible forces behind actions. Economists do, of course, presume that the “goods” they employ in their models for predicting behavior are relatively important. And in fact, the hypothesis that promised shifts in net wealth modify political behavior in predictable ways has not been readily falsifiable empirically.
Public choice, as an inclusive research program, incorporates the presumption that persons do not readily become economic eunuchs as they shift from market to political participation. Those who respond predictably to ordinary incentives in the marketplace do not fail to respond at all when they act as citizens. The public choice theorist should, of course, acknowledge that the strength and predictive power of the strict economic model of behavior is somewhat mitigated as the shift is made from private market to collective choice. Persons in political roles may, indeed, act to a degree in terms of what they consider to be the general interest. Such acknowledgment does not, however, in any way imply that the basic explanatory model loses all of its predictive potential, or that ordinary incentives no longer matter.

Impact of Public Choice

As noted, public choice theory has developed and matured over the course of a full half-century. It is useful to assess the impact and effects of this program, both on thinking in the scientific community and in the formation of public attitudes. By simple comparison with the climate of opinion in 1950, both the punditry and the public are more critical of politics and politicians, more cynical about the motivations of political action, and less naive in thinking that political nostrums offer easy solutions to social problems. And this shift in attitudes extends well beyond the loss of belief in the efficacy of socialism, a loss of belief grounded both in historical regime failures and in the collapse of intellectually idealized structures.
As I noted earlier, when we look back at the scientific and public climates of discussion fifty years ago, the prevailing mindset was socialist in its underlying presupposition that government offered the solution to social problems. But there was a confusing amalgam of Marxism and ideal political theory involved: Governments, as observed, were modeled and condemned by Marxists as furthering class interests, but governments which might be installed “after the revolution,” so to speak, would become both omniscient and benevolent.
In some of their implicit modeling of political behavior aimed at furthering special group or class interests, the Marxists seemed to be closet associates of public choice, even as they rejected methodological individualism. But how was the basic Marxist critique of politics, as observed, to be transformed into the idealized politics of the benevolent and omniscient superstate? This question was simply left glaringly unanswered. And the debates of the 1930s were considered by confused economists of the time to have been won by the socialists rather than by their opponents, Ludwig von Mises and Friedrich Hayek. Both sides, to an extent, neglected the relevance of incentives in motivating human action, including political action.
The structure of ideas that was adduced in support of the emerging Leviathan welfare state was logically flawed and could have been maintained only through long-continued illusion. But, interestingly, the failure, in whole or in part, of the socialist structure of ideas did not come from within the academy. Mises and Hayek were not successful in their early efforts, and classical liberalism seemed to be at its nadir at mid-century. Failure came, not from a collapse of an intellectually defunct structure of ideas, but from the cumulative record of nonperformance in the implementation of extended collectivist schemes—nonperformance measured against promised claims, something that could be observed directly. In other words, governments everywhere overreached. They tried to do more than the institutional framework would support. This record of failure, both in the socialist and welfare states, came to be recognized widely, commencing in the 1960s and accelerating in the 1970s.
Where is the influence of public choice in this history? I do not claim that it dislodged the prevailing socialist mindset in the academies, and that this intellectual shift then exerted feedback on political reality. What I do claim is that public choice exerted major influence in providing a coherent understanding and interpretation of what could be everywhere observed. The public directly sensed that collectivistic schemes were failing, that politicization did not offer the promised correctives for any and all social ills, that governmental intrusions often made things worse rather than better. How could these direct observations be fitted into a satisfactory understanding?
Public choice came along and offered a foundation for such an understanding. Armed with nothing more than the rudimentary insights from public choice, persons could understand why, once established, bureaucracies tend to grow apparently without limit and without connection to initially promised functions. They could understand why pork-barrel politics dominated the attention of legislators; why there seems to be a direct relationship between the overall size of government and the investment in efforts to secure special concessions from government (rent seeking); why the tax system is described by the increasing number of special credits, exemptions, and loopholes; why balanced budgets are so hard to secure; and why strategically placed industries secure tariff protection.

***

A version of the old fable about the king’s nakedness may be helpful here. Public choice is like the small boy who said that the king really has no clothes. Once he said this, everyone recognized that the king’s nakedness had been recognized, but that no one had really called attention to this fact.
Let us be careful not to claim too much, however. Public choice did not emerge from some profoundly new insight, some new discovery, some social science miracle. Public choice, in its basic insights into the workings of politics, incorporates an understanding of human nature that differs little, if at all, from that of James Madison and his colleagues at the time of the American Founding. The essential wisdom of the 18th century, of Adam Smith and classical political economy and of the American Founders, was lost through two centuries of intellectual folly. Public choice does little more than incorporate a rediscovery of this wisdom and its implications into economic analyses of modern politics.

---

James M. Buchanan, winner of the 1986 Alfred Nobel Memorial Prize in Economic Sciences, is Distinguished Professor Emeritus of Economics at George Mason University and Distinguished Professor Emeritus of Economics and Philosophy at Virginia Polytechnic Institute and State University. He is best known for developing the “public choice theory” of economics, which changed the way economists analyze economic and political decision-making. Professor Buchanan received a B.A. from Middle Tennessee State College in 1940, an M.S. from the University of Tennessee in 1941 and a Ph.D. from the University of Chicago in 1948. He has taught at the University of Virginia and UCLA. Among his many books are The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962) with Gordon Tullock; Cost and Choice (1969); The Limits of Liberty (1975); Liberty, Market, and State (1985); Better than Plowing and Other Personal Essays (1992); and the 21-volume set, The Collected Works of James M. Buchanan (1999-2002).
The following is adapted from a lecture delivered at Hillsdale College on February 3, 2003, at a seminar co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.

---

Copyright © 2011 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325.

Coping With Ignorance

Coping With Ignorance

F. A. Hayek

 It is to me not only a great honor but also the discharge of an intellectual duty and a real pleasure to be allowed to deliver a Ludwig von Mises memorial lecture. There is no single man to whom I owe more intellectually, even though he was never my teacher in the institutional sense of the word.
I came originally from the other of the two original branches of the Austrian school. While Mises had been an inspired pupil of Eugen Boehm von Bawerk, who died comparatively early and whom I knew only as a friend of my grandfather before I knew what the word "economics" meant, I was personally a pupil of his contemporary, friend and brother-in-law, Friedrich von Wieser. I was attracted by him, I admit, because unlike most of the other members of the Austrian school, he had a good deal of sympathy with a mild Fabian socialism to which I was inclined as a young man. He in fact prided himself that his theory of marginal utility had provided the basis of progressive taxation, which then seemed to me one of the ideals of social justice.
It was he who, just retiring as I graduated, sent me with a letter of introduction to Ludwig von Mises, who as one of the directors of a new temporary government office concerned with settling certain problems arising out of the treaty of St. Germain, was looking for young lawyers with some understanding of economics and knowledge of foreign languages. I remember vividly how, almost exactly fifty-six years ago, after presenting to Mises my letter of introduction by Wieser, in which I was described as a promising young economist, Mises said, "Well, I've never seen you at my lectures."
That was almost completely true. I had looked in at one of his lectures and found that a man so conspicuously antipathetic to the kind of Fabian views which I then held was not the sort of person to whom I wanted to go. But of course things changed.
The meeting was the beginning. After a short conversation, Mises asked, "When can you start work?" This led to a long, close collaboration. First, for five years, he was my official chief in that government office and then vice president of an institute of business cycle research which we had created together. During these ten years he certainly had more influence on my outlook of economics than any other man.
It was essentially his second great work, Die Gemein Wirtscaft of 1922, which appeared in English translation only fifteen years later as Socialism, that completely won me over to his views. And then in his Privatseminar, as we called the little discussion group which met at his office, I became gradually intimately familiar with his thinking.
I do not wish however to claim to be an authoritative interpreter of Mises' views. Although I do owe him a decisive stimulus at a crucial point of my intellectual development, and continuous inspiration through a decade, I have perhaps most profited from his teaching because I was not initially his student at the university, an innocent young man who took his word for gospel, but came to him as a trained economist, trained in a parallel branch of Austrian economics from which he gradually, but never completely, won me over. Though I learned that he usually was right in his conclusions, I wasn't always satisfied by his arguments, and retained to the end a certain critical attitude which sometimes forced me to build different constructions, which however, to my great pleasure, usually led to the same conclusions. I am to the present moment pursuing the questions which he made me see, and that, I believe is the greatest benefit one scientist can confer on one of the next generation.
I do not know whether my making our incurable ignorance of most of the particular circumstances which determine the course of this great society the central point of the scientific approach would have Mises' approval. It is probably a development that goes somewhat beyond his views, because Mises himself was still much more a child of the rationalist age of enlightenment and of continental rather than of English liberalism, in the European sense of the word, than I am myself.
But I do flatter myself that he sympathized with my departure in this direction, which I like to describe briefly as a movement back from Voltaire to Montesquieu. It is the outcome of this development about which I am now going to speak.
I've come to believe that both the aim of the market order, and therefore the object of explanation of the theory of it, is to cope with the inevitable ignorance of everybody of most of the particular facts which determine this order. By a process which men did not understand, their activities have produced an order much more extensive and comprehensive than anything they could have comprehended, but on the functioning of which we have become utterly dependent.
Even two hundred years after Adam Smith's Wealth of Nations, it is not yet fully understood that it is the great achievement of the market to have made a far-ranging division of labor possible, that it brings about a continuous adaptation of economic effect to millions of particular facts or events which in their totality are not known and cannot be known to anybody. A real understanding of the process which brings this about was long blocked by post-Smithian classical economics which adopted a labor or cost theory of value.
The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around. It was the costs which they had expended which determined the prices of things produced.
It was this crucial insight which finally broke through and established itself about a hundred years ago through the so-called marginal revolution in economics.
The chief insight gained by modern economists is that the market is essentially an ordering mechanism, growing up without anybody wholly understanding it, that enables us to utilize widely dispersed information about the significance of circumstances of which we are mostly ignorant. However, the various planners (and not only the planners in the socialist camp) and dirigists have still not yet grasped this.
I do not believe that it is merely present ignorance, which we expect future advance of knowledge will remove, which makes a rational effort at central planning wholly impossible. I believe such a central utilization of necessarily widely dispersed knowledge of particular and temporary circumstances must forever remain impossible. We can have a far-ranging division of labor only by relying on the impersonal signals of prices.
That here and now we economists do not know enough to be justified to undertake such a task as the planning of the whole economic system seems to me so obvious that I find it increasingly difficult to treat the contrary belief with any respect.
It is a basic fact that we as scientists have to explain the results of the actions of men, which produces a sort of order by following signals inducing them to adapt to facts which they do not know. It creates a comparable or similar problem of coping with ignorance such as the people in economics world encounter even more than the people who undertake to explain this process.
It is a difficulty which all attempts at a theoretical explanation of the market process face, though it appears that not many economists have been clearly aware of the source of the difficulties which they encounter.
If the chief problem of economic decisions is one of coping with the inevitable ignorance, the task of a science of economics trying to explain the joint effects of hundreds of thousands of such decisions on men in many different positions has to deal with an ignorance as it were, of a second order of magnitude because the explaining economist does not even know what all the acting people know; he has to provide an explanation without knowing the determining facts, not even knowing what the individual members in the economic system know about these facts.
We are in this respect not in the happy position in which the theorists of a relatively simple phenomena find themselves. When they have formed a hypothesis about how two or three variables are interrelated, they can test such a hypothesis by inserting into their abstract formula, observing values replacing the blanks, and then see whether the conclusions are correct.
Our problem is that even if we have thought out a beautiful and possibly correct theory of the complex phenomena with which we have to deal, we can never ascertain all the concrete specific data of a particular position, simply because we do not know all that which the acting people know. But it is the joint results of those actions which we want to predict.
If the market really achieves a utilization of more information than any participant in this market process possesses, the outcome must depend on more particular facts than the scientific observer can insert into his tentative hypothesis which is intended to explain the whole process.
There are two possible ways in which economists have endeavored at least partly to overcome this difficulty.
The first, represented by what today we call micro-economics, resignedly accepts the fact that because of this difficulty we can never achieve a full explanation, or an exact prediction of the particular outcome of a given situation, but must instead be content with what I have occasionally called a "pattern prediction" or, earlier a "prediction of the principle." All we can achieve is to say what kinds of things will not happen and what sort of pattern the resulting situation will show, without being able to predict a particular outcome.
This kind of microeconomics attempts, by the construction of simplified models in which all the kinds of attitudes and circumstances we meet in the real life are represented, to simulate the kind of movements and changes which we observe in the real world.
Such a theory can tell us what sort of changes we can expect in the real world, the general character of which our model indicates, which reduces (not so much in scale as in the number of distinct elements), the facts with which we have to deal, to make its workings still comprehensible or surveyable.
I still believe that this is the only approach which is entitled to regard itself as scientific. Being scientific involves in this connection a frank admission of how limited our powers of prediction really are. It still does lead to some falsifiable predictions, namely what sorts of events are possible in a given situation and which are not.
It is, in this sense, an empirical theory even though it consists largely, but not entirely, of propositions which are self-evident once they are stated. Indeed, I doubt whether microeconomic theory has ever discovered any new facts. Decreasing returns, decreasing marginal productivity or marginal utility, decreasing marginal rates of substitution were of course all phenomena familiar to ordinary people even if these did not call them by that name. In fact, it is only because ordinary people knew these facts, long before economists discovered their importance, that they have always been among the determinants of how the market actually functions. What the economic theorists found out was merely the relevance of these particular facts for the decision of individuals in their interactions with other persons.
It is the obscuring of the empirical fact of people learning what others do by a process of communication of knowledge which has always made me reluctant to accept von Mises' claim of an a priori character of the whole of economic theory, although I agree with him that much of it consists merely in working out the logical implications of certain initial facts.
I recognize with him microeconomic theory as the only legitimate economic theory because, and in so far as, it recognizes the inevitable limitation of our possible knowledge of the objective facts which determine any given situation; and we need claim no more that we are entitled to claim.
I will not deny that we find also in the microeconomic literature a good deal of indefensible pretense of a great deal more.
There is, of course, in the first instance, the frequent abuse of the convenient conception of "equilibrium" toward which the market process is said to tend. I will not say that there are not forces at work which can usefully be described as equilibrating tendencies.
But equilibrating forces are of course at work in any stream of a liquid and must be taken into account in any attempt to analyze the flow of such a stream. Such a stream in the physical sense of the word of course will never reach a state of equilibrium. And the same is true of the economic efforts of the production and use of goods and services where every part may all the time tend toward a partial or local equilibrium, but long before that is reached the circumstances to which the local efforts adapt themselves will have changed themselves as a result of similar processes. All we can claim for the achievement of microeconomic theory is that the signals which the prices constitute will always make the individuals change their plans in the direction made necessary by factual charges of which they have no direct knowledge—not that this process will ever lead to what some economists call an equilibrium.
Not content with this limited insight, which economics can in fact supply, economists ambitious to make it more precise have often spoiled microeconomics by a tendency, which we shall encounter in a more systematic form when I pass on to the second type of approach, macro-economics. They tried to deal with our inescapable ignorance of the data required for a full explanation, the macroeconomic one, by trying measurements I shall discuss later.
I will at this stage make only two further comments on this. The first is that it is an erroneous belief, characteristic of bad mathematicians, that mathematics is essentially quantitative and that, therefore, to build on the great achievements of the founders of mathematical economics, men like Jevons, Walras and Pareto, one has to introduce quantitative data obtained by measurements. That was certainly not the intention of the founders of mathematical economics. They understood much better than their successors that algebraic mathematical formulae are the pre-eminent method for describing abstract patterns without assuming or possessing particular information about the specific magnitudes involved. One great mathematician has indeed described a mathematician as a maker of patterns. In this sense mathematics can be very helpful to us.
The second point which I want to make is that a particular reason which in the physical sciences make measurements of concrete magnitudes the hallmark of scientific procedure for a very definite reason do not apply to the explanation of human action. The true reason why the physical sciences must rely on measurements is that it has been recognized that things which appear alike to our senses frequently do not behave in the same manner, and that sometimes things which appear alike to us behave very differently if examined.
The physicist, to arrive at valid theories, was often compelled to substitute for the classification of different objects which our senses provide to us a different classification which was based solely on the relations of objective things toward each other.
Now this is really what measurement amounts to: a classification of objects according to the manner in which they act on other objects. But to explain human action all that is relevant is how the things appear to human beings, to acting men. This depends on whether men regard two things as the same or different kinds of things, not what they really are, unknown to them. For our purposes the results of measurements (at least so far as these are not performed by the people whose actions we want to explain) are wholly uninteresting.
The belief derived from physics that measurement is an essential foundation of all sciences is very old. There was more than 300 years ago a German philosopher named Erhard Weigel who strove to construct a universal science which he proposed to call Pantometria, based as the name says on measuring everything. Much of economics, and if I may add in parenthesis much of contemporary psychology, has indeed become Pantometria in a sense in the principle that if you don't know what measurements mean, measure anyhow because that is what science does. The social sciences building at the University of Chicago indeed still bears since it was built 40 years ago on its outside an inscription taken from the famous physicist Lord Kelvin: "When you cannot measure, your knowledge is meager and unsatisfactory." I will admit that that may be true, but it is certainly not scientific to insist on measurement where you don't know what your measurements mean. There are cases where measurements are not relevant. What has done much damage to microeconomics is striving for a pseudo-exactness by imitating methods of the physical sciences which have to deal with what are fundamentally much more simple phenomena. And the assumption that it is possible to ascertain all the relevant particular facts still completely dominates the alternative methods of dealing with our constitutional ignorance, which economists have tried to overcome. This of course, is what has come to be called macro-economics as distinct from microeconomics.
The. basic idea on which this approach proceeds is fairly simple and obvious. If we cannot know all the individual facts which determine individual action and thereby the economic process, we must start from the most comprehensive information which we can obtain about them, and that is the statistical figures about aggregates and averages.
Again, the model which is followed is provided by the physical sciences which, where they have to deal with true mass phenomena such as the movement of millions of molecules with which thermodynamics has to deal, where we admittedly know nothing about the movement of any individual molecule, the law of large numbers enables us to discover statistical regularities or probabilities which indeed, in this way, provide an adequate foundation for reliable predictions.
The trouble is, unfortunately, that in the disciplines which endeavor to explain the structure of society, we do not have to deal with true mass phenomena.
The events which we must take into account in any attempt to predict the outcome of particular social processes are never so numerous as to enable us to substitute ascertained probabilities for information about the individual events. As a distinguished thinker, the late Warren Weaver of the Rockefeller Foundation has pointed out, both in the biological and in the social sciences frequently we cannot rely on probabilities, or the law of large numbers, because unlike the positions which exist in the physical sciences, where statistical evidence of probabilities can be substituted for information on particular facts, we have to deal with what he calls organized complexity, where we cannot expect to find permanent constant relations between aggregates or averages.
Indeed, this intermediate field between the simple phenomena of the physical sciences, where everything can be explained by theoretical formulae which contain no more than two or three unknowns, and the instances where a large enough number of events to be able to deal with true mass phenomena to rely on probability is our subject. In the social sciences we have to deal with something which Warren Weaver called organized complexity, phenomena which are not made up of sufficiently large numbers of similar events to enable us to ascertain the probabilities for their occurrence.
In order to provide a full explanation we would have to have information about every single event which you can never possibly obtain. But while micro-theorists have resigned themselves to the consequent limitations of our powers and admit that we must be content with what I've called mere pattern predictions, many of the more ambitious and impatient students of these problems refuse to recognize these limitations to out possible knowledge, and possible power of prediction, and therefore also of our possible power of control.
What drives people to the pursuit of statistical research is usually the hope of discovering in this way new facts of general and not merely historical importance. But this hope is inevitably disappointed. I certainly do not wish to underrate the importance of historical information about the particular situation. I doubt, however, whether the observation and measurement of true mass phenomena has significantly improved our understanding of the market process. What we can find by this procedure, as by all observation of particular circumstances, may possibly be special relations, determined by the particular circumstances of the moment and the place, which indeed, perhaps for some time may enable us to make correct predictions. But with general laws which help to explain how at different places the course of economic affairs is determined, these quantitative relations between measurable magnitudes have precious little to do. Indeed, even the very moderate hopes which I myself had at one time concerning the usefulness of such economic forecasts based on observed statistical regularities has mostly been disappointed. The concrete course of the process of adaptation to unknown circumstances cannot be predicted. All we can predict is certain abstract features of the process, not its concrete manifestations.
It is now frequently assumed that at least the theory of money, in the nature of that subject, must be macro-theory. I can see no reason whatever for this. The cause for this belief is apparently the fact that the value of money is usually conceived as corresponding to an average of prices. But that is no more true than it is of the value of any other commodity. I do not see for instance, that our habitual use of index numbers of prices, although undoubtedly very convenient for many purposes, has in any way assisted our understanding of the effect of monetary changes, or to draw relevant conclusions, except, perhaps about the behavior of index numbers.
The interesting problems are those of the effect of monetary changes on particular prices, and about these index numbers or changes of general price levels, tell us nothing.
It seems to me more and more that the immense efforts which during the great popularity of macroeconomics over the last thirty or forty years have been devoted to it, were largely misspent, and that if we want to be useful in the future we shall have to be content to improve and spread the admittedly limited insights which micro-economics conveys.
I believe it is only microeconomics which enables us to understand the crucial functions of the market process: that it enables us to make effective use of information about thousands of facts of which nobody can have full knowledge.

---

F. A. Hayek, a native of Vienna, was awarded the Nobel Prize in Economic Science in 1974.
An author of eighteen books, Dr. Hayek is currently completing Volume Ill of Law, Legislation, and Liberty: The Political Order of a Free Society. He has taught at numerous universities, including the University of Vienna, The University of Chicago, and the London School of Economics.
Dr. Hayek is a founder and Honorary President of The Mont Pelerin Society and a Distinguished Member of The Philadelphia Society.
This address was delivered at Hillsdale College as a part of the Ludwig von Mises Lecture Series. 

---

Copyright © 2011 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325.

Whatever Happened to the Contract with America?

Whatever Happened to the Contract with America?

Dick Armey


BOTH THE CREATION of the Contract with America in 1994 and its subsequent abandonment can be explained in terms of the conflict in government between what I call legislative entrepreneurs and legislative bureaucrats. In 1994, when we wrote the Contract, entrepreneurs were strong. Today, as most of the time, bureaucrats are running things.
By legislative entrepreneur, I mean a person who has a set of principles and is willing to take risks on its behalf. A legislative bureaucrat, by contrast, seeks only to perpetuate the current situation with the motive of remaining safely in office. The fact that legislative bureaucrats are usually in command reminds me of Armey’s Axiom Number One: “The market is rational. The government is dumb.” I know the former to be true as someone who has studied economics. I know the latter to be true as someone who spent a long time in Congress.
One of the greatest entrepreneurial moments in the history of human government was the writing of our Constitution. America’s Founders understood clearly what it means to accomplish a goal on behalf of ideas and principles that rise above self-interest. George Washington might have become our king, but chose not to. His governing idea was that government is our servant because we are inherently free. It is an idea too many in government today forget.
In politics, every great enterprise eventually falls into the hands of what I call legislative bureaucrats. This explains the ongoing debate in Congress today over whether we even need to pay attention to the Constitution, and over whether the government’s power should indeed be limited, as our Founders believed, to upholding liberty. It has fallen now to future legislative entrepreneurs on the conservative side of the aisle to revive that central concept of America.
There have been only three great moments of pro-Constitution entrepreneurship in my adult lifetime. The first of these was the presidential campaign of 1964, when Barry Goldwater tried courageously to remind the nation why our Founders thought it vital to limit government. Needless to say, Goldwater suffered a landslide electoral defeat. But he galvanized the modern conservative movement, which rose from the ashes of his failed campaign.
The second great moment was Ronald Reagan’s presidential campaign in 1980—this one wildly successful—which was run, like Goldwater’s, on a consistently principled platform of limited government. Reagan’s election inspired me and many other conservatives to run for office. And the eight years following can largely be characterized as a struggle between constitutionalists who wished to restore limits on government and the always more numerous bureaucrats, both in the executive departments and in Congress. Fortunately, for most of his presidency, Reagan and his allies prevailed. But when George H.W. Bush took office in 1989, riding Reagan’s coattails, the bureaucrats began taking over again, and the Reagan Revolution had almost completely dissipated by the time Bill Clinton was elected in 1992.
The third great political moment in my lifetime was the Contract with America in 1994. In the run-up to the congressional elections that year, Hillary Clinton had been touting her government-run, command-and-control health care plan and scaring the devil out of the American people. The Republican leadership decided to capitalize on this terrible plan, seeking to seize power for the sake of implementing pro-Constitution policies. And the idea worked: Republicans took control of Congress that year in dramatic fashion, largely due to the Contract with America.
Those of us who signed on to the Contract were devoted to rolling back government as much as we could. The biggest success of those years—and a superb example of legislative entrepreneurship—was welfare reform. President Clinton vetoed it twice, but we saw it through, and it has worked marvelously well. It became such a great success, in fact, that Clinton eventually claimed it as the best idea he ever had! The lesson here for limited government conservatives is that they must not be afraid to dare.
Ever since the successes of the Contract with America, the balance in our government has moved slowly but surely from entrepreneurship back to bureaucracy. One day I found myself in a House leadership meeting, and I realized that we were coming to town each week and doing things we weren’t supposed to be doing. We justified this by telling ourselves that we needed to hold on to the majority in order to do the things we should be doing.
In the end, the Republican Congress—in the two or three years leading up to the Democratic victories in 2006—had utterly forsaken its commitment to liberty and limited government, with the often active acquiescence of the White House. This brings me to another one of Armey’s Axioms: “If it’s only about power, you lose.”
The Republican majority, having forgotten the lessons of 1994 and having committed themselves only to the next election, not only failed their country but lost their power.

---

 Dick Armey is the chairman of FreedomWorks. He received his Ph.D. in economics from the University of Oklahoma and taught at the University of Montana, West Texas State University, Austin College, and the University of North Texas. Elected to Congress in 1984, he was the principal author of the Contract with America in 1994 and served as U.S. House Majority Leader from 1995-2003. Dr. Armey is the author of four books, including, most recently, Armey’s Axioms: 40 Hard-Earned Truths from Politics, Faith, and Life.
The following is adapted from a speech delivered at Hillsdale College on January 27, 2008.

---

Copyright © 2011 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325.


                  

The Real Cost of Regulation

The Real Cost of Regulation

John Stossel,

 When I started 30 years ago as a consumer reporter, I took the approach that most young reporters take today. My attitude was that capitalism is essentially cruel and unfair, and that the job of government, with the help of lawyers and the press, is to protect people from it. For years I did stories along those lines—stories about Coffee Association ads claiming that coffee "picks you up while it calms you down," or Libby-Owens-Ford Glass Company ads touting the clarity of its product by showing cars with their windows rolled down. I and other consumer activists said, "We've got to have regulation. We've got to police these ads. We've got to have a Federal Trade Commission." And I'm embarrassed at how long it took me to realize that these regulations make things worse, not better, for ordinary people.
The damage done by regulation is so vast, it's often hard to see. The money wasted consists not only of the taxes taken directly from us to pay for bureaucrats, but also of the indirect cost of all the lost energy that goes into filling out the forms. Then there's the distraction of creative power. Listen to Jack Faris, president of the National Federation of Independent Business: "If you're a small businessman, you have to get involved in government or government will wreck your business." And that's what happens. You have all this energy going into lobbying the politicians, forming the trade associations and PACs, and trying to manipulate the leviathan that's grown up in Washington, D.C. and the state cap-itals. You have many of the smartest people in the country today going into law, rather than into engineering or science. This doesn't create a richer, freer society. Nor do regulations only depress the economy. They depress the spirit. Visitors to Moscow before the fall of communism noticed a dead-eyed look in the people. What was that about? I don't think it was about fear of the KGB. Most Muscovites didn't have intervention by the secret police in their daily lives. I think it was the look that people get when they live in an all-bureaucratic state. If you go to Washington, to the Environmental Protection Agency, I think you'll see the same thing.
One thing I noticed that started me toward seeing the folly of regulation was that it didn't even punish the obvious crooks. The people selling the breast-enlargers and the burn-fat-while-you-sleep pills got away with it. The Attorney General would come at them after five years, they would hire lawyers to gain another five, and then they would change the name of their product or move to a different state. But regulation did punish legitimate businesses.
When I started reporting, all the aspirin companies were saying they were the best, when in fact aspirin is simply aspirin. So the FTC sued and demanded corrective advertising. Corrective ads would have been something like, "Contrary to our prior ads, Excedrin does not relieve twice as much pain." Of course these ads never ran. Instead, nine years of costly litigation finally led to a consent order. The aspirin companies said, "We don't admit doing anything wrong, but we won't do it again." So who won?
Unquestionably the lawyers did. But did the public? Aspirin ads are more honest now. They say things like, "Nothing works better than Bayer"—which, if you think about it, simply means, "We're all the same." But I came to see that the same thing would have happened without nearly a decade of litigation, because markets police themselves. I can't say for certain how it would have happened. I think it's a fatal conceit to predict how markets will work. Maybe Better Business Bureaus would have gotten involved. Maybe the aspirin companies would have sued each other. Maybe the press would have embarrassed them. But the truth would have gotten out. The more I watched the market, the more impressed I was by how flexible and reasonable it is compared to government-imposed solutions.
Market forces protect us even where we tend most to think we need government. Consider the greedy, profit-driven companies that have employed me. CBS, NBC, and ABC make their money from advertisers, and they've paid me for 20 years to bite the hand that feeds them. Bristol-Myers sued CBS and me for $23 million when I did the story on aspirin. You'd think CBS would have said, "Stossel ain't worth that." But they didn't. Sometimes advertisers would pull their accounts, but still I wasn't fired. Ralph Nader once said that this would never happen except on public television. In fact the opposite is true: Unlike PBS, almost every local TV station has a consumer reporter. The reason is capitalism: More people watch stations that give honest information about their sponsors' products. So although a station might lose some advertisers, it can charge the others more. Markets protect us in unexpected ways.

Alternatives to the Nanny State

People often say to me, "That's okay for advertising. But when it comes to health and safety, we've got to have OSHA, the FDA, the CPSC" and the whole alphabet soup of regulatory agencies that have been created over the past several decades. At first glance this might seem to make sense. But by interfering with free markets, regulations almost invariably have nasty side effects. Take the FDA, which saved us from thalidomide—the drug to prevent morning sickness in pregnant women that was discovered to cause birth defects. To be accurate, it wasn't so much that the FDA saved us, as that it was so slow in studying thalidomide that by the end of the approval process, the drug's awful effects were being seen in Europe. I'm glad for this. But since the thalidomide scare, the FDA has grown ten-fold in size, and I believe it now does more harm than good. If you want to get a new drug approved today, it costs about $500 million and takes about ten years. This means that there are drugs currently in existence that would improve or even save lives, but that are being withheld from us because of a tiny chance they contain carcinogens. Some years ago, the FDA held a press conference to announce its long-awaited approval of a new beta-blocker, and predicted it would save 14,000 American lives per year. Why didn't anybody stand up at the time and say, "Excuse me, doesn't that mean you killed 14,000 people last year by not approving it?" The answer is, reporters don't think that way.
Why, in a free society, do we allow government to perform this kind of nanny-state function? A reasonable alternative would be for government to serve as an information agency. Drug companies wanting to submit their products to a ten-year process could do so. Those of us who choose to be cautious could take only FDA-approved drugs. But others, including people with terminal illnesses, could try non-approved drugs without sneaking off to Mexico or breaking the law. As an added benefit, all of us would learn something valuable by their doing so. I'd argue further that we don't need the FDA to perform this research. As a rule, government agencies are inefficient. If we abolished the FDA, private groups like the publisher of Consumer Reports would step in and do the job better, cheaper, and faster. In any case, wouldn't that be more compatible with what America is about? Patrick Henry never said, "Give me absolute safety or give me death!"

Lawyers and Liability

If we embrace the idea of free markets, we have to accept the fact that trial lawyers have a place. Private lawsuits could be seen as a supplement to Adam Smith's invisible hand: the invisible fist. In theory they should deter bad behavior. But because of how our laws have evolved, this process has gone horribly wrong. It takes years for victims to get their money, and most of the money goes to lawyers. Additionally, the wrong people get sued. A Harvard study of medical malpractice suits found that most of those getting money don't deserve it, and that most people injured by negligence don't sue. The system is a mess. Even the cases the trial lawyers are most proud of don't really make us safer. They brag about their lawsuit over football helmets, which were thin enough that some kids were getting head injuries. But now the helmets are so thick that kids are butting each other and getting other kinds of injuries. Worst of all, they cost over $100 each. School districts on the margin can't afford them, and as a result some are dropping their football programs. Are the kids from these schools safer playing on the streets? No.
An even clearer example concerns vaccines. Trial lawyers sued over the Diphtheria-Pertussis-Tetanus Vaccine, claiming that it wasn't as safe as it might have been. Although I suspect this case rested on junk science, I don't know what the truth is. But assuming these lawyers were right, and that they've made the DPT vaccine a little safer, are we safer? When they sued, there were twenty companies in America researching and making vaccines. Now there are four. Many got out of the business because they said, "We don't make that much on vaccines. Who needs this huge liability?" Is America better off with four vaccine makers instead of twenty? No way.
These lawsuits also disrupt the flow of information that helps free people protect themselves. For example, we ought to read labels. We should read the label on tetracycline, which says that it won't work if taken with milk. But who reads labels anymore? I sure don't. There are 21 warning labels on stepladders—"Don't dance on stepladders wearing wet shoes," etc.—because of the threat of liability. Drug labels are even crazier. If anyone were actually to read the two pages of fine print that come with birth control pills, they wouldn't need to take the drug. My point is that government and lawyers don't make us safer. Freedom makes us safer. It allows us to protect ourselves. Some say, "That's fine for us. We're educated. But the poor and the ignorant need government regulations to protect them." Not so. I sure don't know what makes one car run better or safer than another. Few of us are automotive engineers. But it's hard to get totally ripped off buying a car in America. The worst car you can find here is safer than the best cars produced in planned economies. In a free society, not everyone has to be an expert in order for markets to protect us. In the case of cars, we just need a few car buffs who read car magazines. Information gets around through word-of-mouth. Good companies thrive and bad ones atrophy. Freedom protects the ignorant, too.
Admittedly there are exceptions to this argument. I think we need some environmental regulation, because now and then we lack a market incentive to behave well in that area. Where is the incentive for me to keep my waste-treatment plant from contaminating your drinking water? So we need some rules, and some have done a lot of good. Our air and water are cleaner thanks to catalytic converters. But how much regulation is enough? President Clinton set a record as he left office, adding 500,000 new pages to the Federal Register—a whole new spiderweb of little rules for us to obey. How big should government be? For most of America's history, when we grew the fastest, government accounted for five percent or less of GDP. The figure is now 40 percent. This is still less than Europe. But shouldn't we at least have an intelligent debate about how much government should do? The problem is that to have such a debate, we need an informed public. And here I'm embarrassed, because people in my business are not helping that cause.

Fear-Mongering: A Risky Business

A turning point came in my career when a producer came into my office excited because he had been given a story by a trial lawyer—the lazy reporter's best friend—about Bic lighters spontaneously catching fire in people's pockets. These lighters, he told me, had killed four Americans in four years. By this time I'd done some homework, so I said, "Fine. I'll do the exploding lighter story after I do stories on plastic bags, which kill 40 Americans every four years, and five-gallon buckets, which kill 200 Americans (mostly children) every four years." This is a big country, with 280 million people. Bad things happen to some of them. But if we frighten all the rest about ant-sized dangers, they won't be prepared when an elephant comes along. The producer stalked off angrily and got Bob Brown to do the story. But several years later, when ABC gave me three hour-long specials a year in order to keep me, I insisted the first one be called, "Are We Scaring Ourselves to Death?" In it, I ranked some of these risks and made fun of the press for its silliness in reporting them.
Risk specialists compare risks not according to how many people they kill, but according to how many days they reduce the average life. The press goes nuts over airplane crashes, but airplane crashes have caused fewer than 200 deaths per year over the past 20 years. That's less than one day off the average life. There is no proof that toxic-waste sites like Love Canal or Times Beach have hurt anybody at all, despite widely reported claims that they cause 1,000 cases of cancer a year. (Even assuming they do, and assuming further that all these cancer victims die, that would still be less than four days off the average life.) House fires account for about 4,500 American deaths per year—18 days off the average life. And murder, which leads the news in most towns, takes about 100 days off the average life. But to bring these risks into proper perspective, we need to compare them to far greater risks like driving, which knocks 182 days off the average life. I am often asked to do scare stories about flying—"The Ten Most Dangerous Airports" or "The Three Most Dangerous Airlines"—and I refuse because it's morally irresponsible. When we scare people about flying, more people drive to Grandma's house, and more are killed as a result. This is statistical murder, perpetuated by regulators and the media.
Even more dramatic is the fact that Americans below the poverty line live seven to ten fewer years than the rest of us. Some of this difference is self-induced: poor people smoke and drink more. But most of it results from the fact that they can't afford some of the good things that keep the rest of us alive. They drive older cars with older tires; they can't afford the same medical care; and so on. This means that when bureaucrats get obsessed about flying or toxic-waste sites, and create new regulations and drive up the cost of living in order to reduce these risks, they shorten people's lives by making them poorer. Bangladesh has floods that kill 100,000 people. America has comparable floods and no one dies. The difference is wealth. Here we have TVs and radios to hear about floods, and cars to drive off in. Wealthier is healthier, and regulations make the country poorer. Maybe the motto of OSHA should be: "To save four, kill ten."
Largely due to the prevalence of misleading scare stories in the press, we see in society an increasing fear of innovation. Natural gas in the home kills 200 Americans a year, but we accept it because it's old. It happened before we got crazy. We accept coal, which is awful stuff, but we're terrified of nuclear power, which is probably cleaner and safer. Swimming pools kill over 1,000 Americans every year, and I think it's safe to say that the government wouldn't allow them today if they didn't already exist. What about vehicles that weigh a ton and are driven within inches of pedestrians by 16-year-olds, all while spewing noxious exhaust? Cars, I fear, would never make it off the drawing board in 2001.
What's happened to America? Why do we allow government to make decisions for us as if we were children? In a free society we should be allowed to take risks, and to learn from them. The press carps and whines about our exposure to dangerous new things—invisible chemicals, food additives, radiation, etc. But what's the result? We're living longer than ever. A century ago, most people my age were already dead. If we were better informed, we'd realize that what's behind this longevity is the spirit of enterprise, and that what gives us this spirit—what makes America thrive—isn't regulation. It's freedom.

---

John Stossel joined the ABC newsmagazine 20/20 in 1981, and began his critically acclaimed series of one-hour prime-time specials in 1994. He has received 19 Emmy Awards and has been honored five times for excellence in consumer reporting by the National Press Club. Among his other awards are the George Polk Award for Outstanding Local Reporting and the George Foster Peabody Award. Mr. Stossel is a 1969 graduate of Princeton University with a B.A. in psychology.
The following is an abridged version of Mr. Stossel's speech delivered on February 20, 2001, in Fort Myers, Florida, at a Hillsdale College seminar. 

---

Copyright © 2011 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325. 

The Tea Parties and the Future of Liberty

The Tea Parties and the Future of Liberty

Stephen F. Hayes

Barack Obama was inaugurated on January 20, 2009. Within a month he signed a $787 billion “stimulus package” with virtually no Republican support. It was necessary, we were told, to keep unemployment under eight percent. Overnight, the federal government had, as one of its highest priorities, weatherizing government buildings and housing projects. Streets and highways in no need of repair would be broken up and repaved. The Department of Transportation and other government agencies would spend millions on signs advertising the supposed benefits of the American Recovery and Reinvestment Act. I saw one of them on Roosevelt Island in Washington, D.C. It boasted that the federal park would be receiving a generous grant to facilitate the involvement of local youth in the removal of “non-indigenous plants.” In other words, kids would be weeding. We need a sign to announce that? And this was going to save the economy?
Then there was American Recovery and Reinvestment Act project number 1R01AA01658001A, a study entitled: “Malt Liquor and Marijuana: Factors in their Concurrent Versus Separate Use.” I’m not making this up. This is a $400,000 project being directed by a professor at the State University of New York at Buffalo. The following is from the official abstract: “We appreciate the opportunity to refocus this application to achieve a single important aim related to our understanding of young adults’ use of male [sic] liquor (ML), other alcoholic beverages, and marijuana (MJ), all of which confer high risks for experiencing negative consequences, including addiction. As we have noted, reviews of this grant application have noted numerous strength [sic], which are summarized below.”
So what were those strengths? “This research team has previous [sic] been successful in recruiting a large (>600) sample of regular ML drinkers.” Also, “the application is well-written.” Well-written? With three spelling mistakes? But who am I to judge? As for the other strength, there is no question that the team’s recruitment had been strong. But is that really a qualification for federal money? After all, they were paying people to drink beer!
These same scholars were behind a groundbreaking 2007 study that used regression analysis to discover that subjects who got drunk and high were more intoxicated than those who only abused alcohol. The new study pays these pot-smoking malt-liquor drinkers at least $45 to participate. They can buy four beers per day for the three-week project—all of it funded, at least indirectly, by the American taxpayer.
Perhaps not surprisingly, when President Obama visited Buffalo in May, he chose to highlight other stimulus grants. On the other hand, he could have pointed out that the beer money goes right back into the economy. Think of all those saved or created jobs! In any case, the findings of this new study are expected to echo those of the first study, which found: “Those who concurrently use both alcohol and marijuana are more likely to report negative consequences of substance use compared with those who use alcohol only.” Reading results like this, I tend to think that those who concurrently get drunk and high are also far more likely to believe the stimulus is working.
And have I mentioned that the estimated cost of the stimulus was later increased from $787 billion to $862 billion? That’s a cost underestimate of nearly ten percent. Anyone in private business who suddenly had to come up with ten percent more in outgoing funds than previously anticipated would likely go out of business.
All of this set the stage for a revolt. The accidental founding of the Tea Party movement took place in February 2009, when CNBC commentator Rick Santelli let loose a rant against the stimulus package, and in particular the proposal to subsidize what he called “the losers’ mortgages.” He proposed a ceremonial dump of derivative securities into Lake Michigan, and a few hours later a website popped up calling for a Chicago Tea Party. The video clip raced around the Internet, and it was soon clear that many average Americans were furious about the massive new spending bill and the plan to subsidize bad mortgages.
The stimulus was bad, but by itself it was probably not enough to sustain an entire movement. This is why the larger context matters: Under President Obama, federal spending has been growing at an unprecedented pace. We are adding $4.8 billion to the national debt every day. The long-term viability of Medicare and Social Security isn’t merely uncertain—as so many analysts would have us believe. In fact, their failure is a sure thing without structural changes. By adding a massive new entitlement with the health care bill, we are simply going to go broke faster. Americans understood much of this even before Mr. Obama was elected.
Consider this story from the recent presidential campaign: In July 2008, Republican nominee John McCain stopped in Belleville, Michigan, to par-ticipate in a town hall. After several friendly questions, he took one from Rich Keenan. Wearing a shirt with an American flag embroidered over his left breast, Keenan told McCain that he would not be voting for Obama. But then he said: “What I’m trying to do is get to a situation where I’m excited about voting for you.”
The audience laughed, and many in the crowd nodded their heads. Keenan explained that he was “concerned” about some of McCain’s views, such as his opposition to the Bush tax cuts and his views on the environment. Keenan allowed that he was grateful that McCain had begun taking more conservative positions. But he concluded: “I guess the question I have, and that people like me in this country have, is what can you say to us to make us believe that you actually came to the right positions? We want to take you to the dance, we’re just concerned about who you’re going to go home with.” The audience laughed again. McCain laughed, too, but then he grew serious: “I have to say, and I don’t mean to disappoint you, but I haven’t changed positions.” He defended his vote against the Bush tax cuts and, at some length, reiterated his concerns about global warming. Later, he went out of his way to emphasize his respect for Hillary Clinton and boast about his work with Joe Lieberman, Russ Feingold and Ted Kennedy.
I talked with Rich Keenan after the town hall. He described himself as a conservative independent. He said he often votes Republican but does not consider himself one. He added, “I do think that there are millions of Americans out there like me who are fairly conservative, probably more conservative than John McCain, and I think a lot of them are concerned about what’s going to happen if he does get elected.” Keenan was right. There were millions of people out there like him—conservatives, independents, disaffected Republicans, and many of them stayed home on election day. These people form the heart of the Tea Party movement.
In recent years, the Republican Party has seen its approval levels sink to new lows. In 2005, 33 percent of registered voters told Gallup they considered themselves Republican. By 2009, that number was 27 percent. The number of voters who identified themselves as independent showed a corresponding rise. But what’s interesting is that over that same time-frame, the number of voters self-identified as conservative stayed relatively constant: 39 percent in 2005 and 40 percent in 2009. (Self-identified liberals constituted 20 percent of respondents in both 2005 and 2009.) So even as the number of self-identified Republicans declined and the number of self-identified independents grew, the number of self-identified conservatives was constant. Of course, it’s too simple to postulate a one-for-one swap, but the trend seems clear. The Tea Party movement arose in an environment in which a growing number of Americans believed neither party was voicing its concerns.
All of this has liberals in the mainstream media and elsewhere flummoxed. At first they were dismissive. Think of the footage of Susan Roesgen of CNN going after Tea Party enthusiasts at a Chicago rally, suggesting they were irrational and stupid. And consider a few of the many other examples:
Eugene Robinson of the Washington Post wrote: “The danger of political violence in this country comes overwhelmingly from one direction—the right, not the left. The vitriolic, anti-government hate speech that is spewed on talk radio every day—and, quite regularly, at Tea Party rallies—is calibrated not to inform but to incite.”
MSNBC’s Ed Schultz said: “I believe that the Tea Partiers are misguided. I think they are racist, for the most part. I think that they are afraid. I think that they are clinging to their guns and their religion. And I think in many respects, they are what’s wrong with America.”
Actress Janeane Garofalo: “This is about hating a black man in the White House. This is racism straight up. These are nothing but a bunch of tea-bagging rednecks.”
Comedian Bill Maher: “The teabaggers, they’re not a movement, they’re a cult.”
Perhaps the most stunning comment came from prominent Democratic strategist Steve McMahon: “The reason people walk into schools and open fire is because of rhetoric like this and because of attitudes like this. The reason people walk into military bases and open fire is because of rhetoric like this and attitudes like this. Really, what they’re doing is not that much different than what Osama bin Laden is doing in recruiting people and encouraging them to hate America.”
We’ve seen this before. On November 7, 1994, the Washington Post ran an article about the loud, hateful fringe on the right: “Hate seems to be drifting through the air like smoke from autumn bonfires. It isn’t something that can be quantified. No one can measure whether it has grown since last year, the 1980s, or the 1880s. But a number of people who make their living taking the public’s temperature are convinced it’s swelling beyond the perennial level of bad manners and random insanity. It’s fueled, they say, by such forces as increasingly harsh political rhetoric, talk radio transmissions, and an increasing sense of not-so-quiet desperation.” The next day, Republicans took Congress.
Are today’s Tea Party supporters on the radical fringe? In a National Review/McLaughlin Associates poll conducted in February, six percent of 1,000 likely voters said that they had participated in a Tea Party rally. An additional 47 percent said they generally agree with the reasons for those protests. Nor is the Tea Party movement “monochromatic” and “all white,” as Chris Matthews claimed. Quite the contrary: the National Review poll found that it was five percent black and 11 percent Hispanic.
Perhaps that poll could be dismissed as the work of a right-leaning polling firm and a conservative magazine. You can’t say that about the New York Times and CBS. Their poll, which has a long history of oversampling Democrats, found that Tea Partiers are wealthier and better educated than average voters. It also found that 20 percent of Americans—one in five—supports Tea Parties. That’s an awfully big fringe.
Other polls confirmed these findings: a Washington Post/ABC poll found that 14 percent of voters say the Tea Party is “most in synch” with their values; 20 percent say Tea Parties are “most in tune with economic problems Americans are now facing.” The most interesting poll, in my view, came from TargetPoint Consulting, which interviewed nearly 500 attendees at the April 15, 2010, Tax Day rally in Washington, D.C. Here are some results:
Tea Partiers are united on the issues of debt, the growth of government, and health care reform.
They are socially conservative on the one hand and libertarian on the other, split roughly down the middle.
They are older, more educated, and more conservative than average voters, and they are “distinctly not Democrat.”
This new information complicated the mainstream media’s narrative about the Tea Party movement. This was not a fringe. Nancy Pelosi, who had earlier dismissed Tea Parties as “Astroturf”—meaning fake grassroots activism—revised that assessment, telling reporters that, in fact, she was just like the Tea Partiers.
This brings us to the present day. The president’s approval ratings are low, and Congressional Democrats’ are even worse. Members of the president’s party are not only running away from him in swing districts, but even in some relatively safe ones. Many analysts are suggesting that control of the House of Representatives is in play, and perhaps even that of the Senate.
This dissatisfaction flows directly from the president’s policies and those of his party. It is not simply “anti-incumbent,” as many of my press colleagues would have it. This voter outrage—and it is outrage, not hate—is specific and focused: Americans are fed up with big government and deeply concerned about the long-term economic health of their country. The stimulus was unpopular, and most Americans do not believe it’s working. Obama’s health care plan was unpopular when it passed. The American people understood the rather obvious point that it wouldn’t be possible to cover 30 million additional people, improve the care of those with insurance, and save taxpayers money, all at the same time.
Does all of this add up to big Republican gains in November? Not according to the mainstream media. The Boston Globe’s Susan Milligan recently wrote: “The Tea Party movement is energizing elements of the Republican Party and fanning an anti-Washington fervor, but the biggest beneficiaries in the mid-term elections, pollsters and political analysts say, could be the main target of their anger: Democrats.” CBS News reported the same thing just a few days later. What nonsense! I think there is little question that the Tea Parties—and the enthusiasm and energy they bring—will contribute to major Republican gains in November.
One final point: For many Tea Partiers, the massive and unconstitutional growth of government is the fundamental issue. But I think there’s something deeper, too. After her husband had won several primaries in a row in the spring of 2008, Michelle Obama proclaimed that for the first time in her life she was proud of her country. It was a stunning statement. It also foreshadowed what was to come: Since Barack Obama took office in January 2009, he has devoted much of his time to criticizing his own country. He apologizes for the policy decisions of his predecessors. He worries aloud that the U.S. has become too powerful. He has explicitly rejected the doctrine of American exceptionalism.
And this is not mere rhetoric. For the first time ever, the U.S. is participating in the Universal Periodic Review—a United Nations initiative in which member countries investigate their own nation’s human rights abuses. The State Department has held ten “listening sessions” around the U.S. during which an alphabet soup of left-wing groups aired their numerous grievances. These complaints are to be included in a report that the U.S. will submit to the United Nations Human Rights Council. It will be evaluated by such paragons of human rights as Burkina Faso, Saudi Arabia, Pakistan, China, and Cuba.
When President Obama spoke before the United Nations General Assembly in September 2009, he declared that a world order that elevates one country or group of countries over others is bound to fail. So he’s changing that order. If his domestic policy priority is the redistribution of wealth, his foreign policy priority seems to be the redistribution of power.
Most Americans don’t agree with the president’s priorities. And many of these Americans are now active in the Tea Party movement, a movement that has succeeded in starting a serious national conversation about a return to limited government.

---

Stephen F. Hayes is a senior writer at The Weekly Standard and a FOX News Contributor. His work has been featured in the Wall Street Journal, the Los Angeles Times, Reason, National Review and many other publications. He is the author of two New York Times bestsellers: The Connection: How al Qaeda's Collaboration with Saddam Hussein Has Endangered America and Cheney: The Untold Story of America's Most Powerful and Controversial Vice President. His great-great uncle was a president of Hillsdale College and many of his relatives have attended Hillsdale, including two grandparents.
The following is adapted from a speech delivered on June 6, 2010, during a Hillsdale College cruise from Rome to Dover aboard the Crystal Symphony.

---

Copyright © 2011 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325.

Richard Epstein, George Soros, and Bruce Caldwell Discuss Hayek's Constitution of Liberty

Richard Epstein, George Soros, and Bruce Caldwell Discuss Hayek's Constitution of Liberty