Friday, June 10, 2005

When conservatives become socialists

Modern liberals (not the classic definition of "liberal") are often synonymous with "socialists." I suppose some conservatives don't want to be left behind. For the longest time I considered myself more "conservative" than libertarian, but now I question what "modern conservatives" really are. Calling myself "conservative" puts me in company that, more often than before, leaves a sour taste in my mouth. A growing number of conservatives today have no right to invoke Reagan's name, because they've lost sight of the necessity of limited government.

John Gambling, whose "conservative" talk show is based on NYC's WABC, always supported the West Side Stadium. Thus, since Monday, he's lamented the proposal's defeat. I always opposed it as a violation of good economics, and because it is far beyond legitimate government's authority to construct a venue for private business, no matter how much it allegedly will benefit the tax base. Incredibly, Gambling still believes the Bloomberg Fallacy, that spending $1 billion in public funds on the stadium would create all these wonderful jobs and new businesses in the area. Not once has he considered that depriving taxpayers of $1 billion would have a detrimental effect on taxpayers spending and saving elsewhere. Once again, what did Bastiat tell us?
Well, then, suppose I arrange to have a navvy dig me a ditch in my field for the sum of a hundred sous. Just as I conclude this agreement, the tax collector takes my hundred sous from me and has them passed on to the Minister of the Interior. My contract is broken, but the Minister will add another dish at his dinner. On what basis do you dare to affirm that this official expenditure is an addition to the national industry? Do you not see that it is only a simple transfer of consumption and of labor? A cabinet minister has his table more lavishly set, it is true; but a farmer has his field less well drained, and this is just as true. A Parisian caterer has gained a hundred sous, I grant you; but grant me that a provincial ditchdigger has lost five francs. All that one can say is that the official dish and the satisfied caterer are what is seen; the swampy field and the excavator out of work are what is not seen.
The stadium would have generated jobs all over the West Side of Manhattan, to be sure. It would have also deprived taxpayers across the state of New York of over $1 billion, meaning destroyed jobs. Cato and others have also done studies on stadiums, which illustrate that the transfer extends also to consumer spending: people will spend money at a stadium, but they will cut back elsewhere. The difference is in perception. It's easy to see huge sums spent at a stadium, but not that it means fewer drinks ordered at a bar in Buffalo, fewer trips up to the American side of Niagara Falls, reduced grocery purchases at a Schenectady grocery store, and fewer lunches ordered from a Manhattan restaurant. When the scale is in the millions of dollars, it's too hard to quantify all these resulting small decreases in consumer spending, which by definition add up precisely to the few large increases in public spending.

Adam Smith believed that there are certain public projects of such magnitude and expense that only society could provide them, because things like roads and bridges are typically not worthwhile endeavors for individuals. The venerable Dr. James Buchanan took it further, explaining what is a public good. The proposed Manhattan stadium, though, would always have been a strictly private good. Spending the taxpayers' money on it, then, is bad economics, bad government, and immoral. Yet Gambling and others cannot see past the mythical "lost jobs," failing to realize that any jobs gained would necessitate the destruction of jobs elsewhere.

"But it would improve the economy on the West Side and generate more taxes!" Yes, at the cost of decreasing the tax base everywhere else. Furthermore, "it will increase the tax base" is the same excuse by which government uses "eminent domain" to force homeowners to sell their private property to businesses (who would pay more taxes).

Then on Wednesday morning, one of his callers mentioned his father having worked in the CCC. Gambling then proceeded to laud the CCC and WPA, two of FDR's programs. "We wouldn't have half of the projects," he outrightly boasted, were it not for the various public works organizations. These, however, are no exception to Bastiat's rule that public spending is only a transfer -- a "conservation of money," if you will. Yet so many modern conservatives have fallen for the lie that government spending can boost the economy without consequences.

Once more, increasing a person's taxes by a dollar means that the person has a dollar less to spend elsewhere or save. In 1936, FDR boosted the top tax rate to 79%; some marginal tax rates were 98%, and as I have argued, this was why the Great Depression got worse in the late 1930s, not because of FDR's "balanced budget." Whether it's the poor, middle class or the rich who have less money (and the poor are dependent on "the rich" spending and saving their money), depressed consumer spending hurts businesses. That translates into businesses cutting their employees' hours, or laying them off. Economics teaches us that nothing comes without cost, and it is true.

And what about Gambling's assertion that only government could have built such projecs? Bastiat had also addressed that, so long ago, in The Law:
Do those worshippers of government believe that free persons will cease to act? Does it follow that if we receive no energy from the law, we shall receive no energy at all? Does it follow that if the law is restricted to the function of protecting the free use of our faculties, we will be unable to use our faculties? Suppose that the law does not force us to follow certain forms of religion, or systems of association, or methods of education, or regulations of labor, or regulations of trade, or plans for charity; does it then follow that we shall eagerly plunge into atheism, hermitary, ignorance, misery, and greed? If we are free, does it follow that we shall no longer recognize the power and goodness of God? Does it follow that we shall then cease to associate with each other, to help each other, to love and succor our unfortunate brothers, to study the secrets of nature, and to strive to improve ourselves to the best of our abilities?
Socialists like to claim that the government must engage in charity and public construction, because the private sector wouldn't, or it couldn't be as efficient as government. But except for a very few public projects of tremendous expense, if there's a market for something, private Schumpeterian entrepreneurs will seize the opportunity. Perhaps the CCC and WPA did build some useful public projects, but to more than an equal extent, they involved no more than digging holes and the like, merely for the sake of putting someone to work. Each dollar spent on that worthless employment meant a dollar less to employ someone productively.

The more I think about it, the more "It'll create jobs" sounds like FDR's public works project: spending public money to employ people, focusing on creating jobs instead of useful production. And the proposed Manhattan stadium was projected to have a lifespan of only 25 to 30 years. The Jets not only sought public funding, but they were desperate for taxpayers' money to cut the long-term cost of their ill-planned, inefficient stadium that wouldn't last beyond a few decades. Contrast it with Shea Stadium and Yankee Stadium, which are indeed old but still perfectly usable. Shea opened in 1964. Yankee Stadium is opened in 1923, though it was renovated from 1973 through 1976.

There's been talk for a decade about replacing Shea, but there's more talk about a new home for the Yankees (which will cost NYC about $300 million for the railroad station and other "improvements" in the area). Among the cheerleaders is former NYC Mayor Rudy Guiliani, who many support as the Republican presidential candidate in 2008. The private sector would never do this unless it absolutely had to. The private sector is frugal and wants to get its money's worth, which is also why it won't spend a dollar to employ someone who will produce less than a dollar. Government doesn't have to worry about any sort of efficiency. As Milton Friedman said, "If I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government."

To conclude, look at what the Reagan Revolution has come to. Reagan stood for limited government and shifting responsibility back to the people, not just the states: "In this present crisis, government is not the solution to our problem. Government is the problem." In a 1975 interview with Reason, Reagan said:
If you analyze it I believe the very heart and soul of conservatism is libertarianism. I think conservatism is really a misnomer just as liberalism is a misnomer for the liberals–if we were back in the days of the Revolution, so-called conservatives today would be the Liberals and the liberals would be the Tories. The basis of conservatism is a desire for less government interference or less centralized authority or more individual freedom and this is a pretty general description also of what libertarianism is.
After five Congresses, Republicans haven't just become the profligate tax-and-spenders that they used to accuse Democrats of being. They've become heirs to Nixon and his Keynesians: they believe in using the power of government to manipulate the economy, under the pretenses of "more jobs" and "progress." Let's stop mincing words and call that what it is.

But, few dare call it socialism.

4 Comments:

Blogger TKC said...

Two things.

First is a Cato article on the scam of publicly funded stadiums. It is a .pdf

http://www.cato.org/pubs/regulation/regv23n2/coates.pdf

Second is an article on Mises about the history of Republicans.
http://www.mises.org/fullstory.aspx?control=1476

However, when push comes to shove, I'll usually hold my nose and vote for the GOP. Especially lately how the DNC has become blatantly socialistic.

Friday, June 10, 2005 3:40:00 PM  
Blogger Quincy said...

Perry,

You need a to start putting out WWBS bumper stickers!

Friday, June 10, 2005 4:03:00 PM  
Blogger Perry Eidelbus said...

That's a great Mises article. Thanks TKC. I've read Cato's and other studies about stadiums' effects, which are great empirical additions to Bastiat's theories.

I'd like to take credit for "What Would Bastiat Say?", Quincy, but Bryan Kaplan of GMU said it first, on a quiz he gave one of his classes. It's a great question to pose to any public policy.

Saturday, June 11, 2005 1:04:00 AM  
Blogger Quincy said...

Well, you could always distribute them freely, like sticking one on every government building across the US.

Monday, June 13, 2005 2:40:00 AM  

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