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The Failures of Libertarianism

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It's the policy, stupid: why America needs a Republican Congress - and libertarian economic policies - like it needs a hole in the head

 

 

 

"Those who cannot remember the past are condemned to repeat it."

George Santayana

 

It’s hot outside, but it’s stifling inside the bus.  As the 60-foot-long accordion bus wheezes down Van Ness Avenue, there isn’t a seat to be had.  People are crammed into the aisles body-to-body, like cattle, thankful to have space to plant their feet and an overhead bar to grab hold of. 

The next stop is Van Ness and Grove.  While 100 of us wait in the heat and misery, the bus loads slowly and the driver yells at everyone to move to the rear, though there’s no space there either. 

Just as the doors are about to close, a twenty-something man in jeans and sunglasses with a bag over his shoulder sprints up.  He sticks his arm in the back door to keep it from shutting, then pries it open.  A comically unpleasant ride awaits, but he doesn’t want to wait 15, 20, or 25 minutes in rush hour heat for the next bus.  When he presses in, standing precariously at the bottom of the stairs by the back exit, the doors won’t close, so the driver announces over the intercom that everyone has to get on all the way - or else we’ll wait. 

Welcome to San Francisco, the world-class city with a coach-class public transit system.

Though it's officially a transit-first town with an eye to a green future, San Francisco has done little to coax people out of their cars over the past several years.  Since 2003, the fare for a bus ride has doubled and the cost of a monthly fast pass has increased from $35 to $60-$70, and yet service has declined, with fewer routes, longer waits, and frequent past-capacity crowds.

Much of the revenue/service squeeze is attributable to the recession, and the bus drivers’ unions haven’t helped with self-serving labor rules that generate enormous overtime costs.  And San Francisco’s corporate Democratic mayor hasn’t exactly gone to bat for riders, short as they are on campaign contributions.

But one major source of blame that’s often overlooked is the role of brutal state budget cuts to public transportation, and behind that, the devastation wrought by Proposition 13.

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Throughout the mid-‘70s, California land values soared, which raised property taxes significantly.  The steep increases created hardship, particularly for elderly homeowners on fixed incomes, and anger, as the state sat on a surplus of $5 billion by 1978. 

Up stepped Howard Jarvis, a retired entrepreneur and Republican activist.  Jarvis, who had lobbied thejarvis_642629091.jpg state legislature on behalf of fat cat Los Angeles landlords (to oppose rent control for the hoi polloi), joined Paul Gann, a former Realtor, to come up with Proposition 13.  13 was an extreme response to a serious problem - a ballot measure that limited annual property tax increases to 2%, which guaranteed drastic reductions in state revenues and services.

Backed by the organizational and financial muscle of real estate interests certain to reap tremendous financial benefits from the measure, Jarvis masqueraded as a man of the people, even cleverly titling 13 “The People’s Initiative to Limit Property Taxation,” and manipulated the cynicism toward government borne by Vietnam and Watergate.  

To head off 13’s precipitous cratering of state funds, Governor Jerry Brown and the California legislature passed a measure that cut property taxes about half as much (30%), and put it on the ballot as Proposition 8.

A prescient editorial in the LA Times warned at the time that “Enactment of Proposition 13 would create fiscal havoc among cities and counties in California, and the new and higher state taxes necessary to restore their stability would fall heaviest on those whom the initiative purports to benefit.”  But voters – particularly those higher up the income ladder – bypassed Proposition 8’s substantial tax reductions in favor of 13, taking a leap of faith that government revenues could be decimated and things would magically turn out o-k. 

Homeowners received a 57% tax cut in the first year after passage.  And 13 included a requirement that state and local governments needed a two-thirds vote to raise property taxes,  which essentially locked in a 2% limit indefinitely, regardless of actual property values or infrastructure needs. 

13 had more than its fair share of Trojan horses.  Though the tax reductions on residential property drove the populist marketing of 13 - and its success at the ballot box - the proposition also capped commercial property tax increases at 2%.  This meant that big corporations (Disneyland, Chevron, Bank of America), elite golf clubs, and other highly profitable entities also paid artificially low taxes, so long as their lawyers made sure that at least half of the names on the ownership deed didn’t change.  Standard Oil received a windfall of $47 million in the first year alone.

In addition, 13 created a two-tier tax system:  residential and commercial owners who had property at the time of passage were taxed on their 1975 valuation, while people who made purchases in ensuing years had to pay taxes based on always-high current market values.  As just one example, Warren Buffet pointed out in a 2004 letter to the Wall Street Journal that he paid 10X the tax rate on a home bought in the mid-'90s that he did on a house acquired pre-13.  In effect, new home buyers subsidized government services for corporations and the landed gentry.

Local governments tried to make up the huge shortfall in public monies with regressive taxes, such as sales taxes and user fees, effectively robbing Peter to pay Paul.  The sales tax fallback led to an increase in eminent domain designations and a development model centered on chain-store malls and hotels rather than new housing, as the state’s population doubled. 

Even with all the nickel-and-diming of John and Jane Q. Public, the state has never come close to making up for the revenue drain of 13, which is most noticeable in education.  Earlier this spring The Board of Regents approved a 32% tuition increase for students in the California State University system.  California’s K-12 schools have gone from among the best in the nation to among the worst as per pupil spending has plummeted and class sizes have skyrocketed.  26,ooo public school educators received pink slips earlier this year, and some of those fortunate enough to avoid the chopping block made news when they bought supplies for their classes - to the tune of $1,500/year – out of their own pockets.

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Social libertarianism, or live-and-let live enlightened individualism (tolerance of LGBTs and "alternative lifestyles," support for medical marijuana and other personal freedoms), is the wave of the future.  But economic libertarianism, the notion that we'll be better off if we handcuff government and let the chips fall where they may, has not only crippled the Golden State, but it has laid the whole country low.

It's no secret that the lack of adequate regulation was central to our current recession, and that the father of thisronald_reagan_953614580.jpg Frankenstein is Ronald Reagan.  Jimmy Carter dabbled in deregulation, but Reagan turned deregulation into a religion.  In his first inaugural address, he bellowed that, "Government is not the solution to our problems; government is the problem."  And when he wasn't nearly tripling the debt accumulated by the 39 presidents before him, instituting drug tests for federal employees, putting record numbers of people in prison for victimless crimes, or authorizing extra-constitutional shadow interventions abroad, he meant it.  One of his biggest legacies was the mainstreaming of the Gospel of Deregulation, a simplistic belief system in which Business was inherently good and government regulations were inherently bad, and therefore should be stripped to the bone, rather than calibrated on a case-by-case basis to societal risk.

This one-size-fits-all governing model cost taxpayers dearly when Reagan's deregulation of Savings & Loans turned into the biggest bank failure since the Great Depression, but as with everything else about the Teflon president, accountability vanished and the myth lived on.

In the last few years of his presidency, Bill Clinton, punch drunk from hyper-economic growth and en thrall to the Gospel of Deregulation, triangulated his way to support of the Gramm-Leach-Bliley Act (which removed Depression-era barriers to one entity housing insurance, securities, and commercial banks within its same four walls) and the deregulation of credit-default swaps, both of which were handmaidens to the Crash.  In the ‘00s, Federal Reserve Chairman Alan Greenspan kept interest rates low and credit easy and averted his eyes from the tumorous growth of shady business practices out of what he later admitted was a misplaced conviction that the market always knows best.  In 2004, George W.  Bush's hand-picked servants on the Securities & Exchange Commission allowed five major investment banks to take on greater levels of risk, and in 2007 and 2008, as the storm clouds kicked up by this rampant speculation (on bad debt largely built by predatory lending) massed on the horizon, George W. Bush was slow to act, so convinced was he of the innate goodness of the invisible hand.  By the time he realized the shortcomings of his worldview, it was too late, as Ayn Rand’s rational marketplace actors dealt us a not-so-invisible backhand in the form of the worst recession in 70 years.

In California, unemployment's the highest it has been since World War II.  The state’s credit rating is in the toilet, and Proposition 13’s requirement of a two-thirds vote in the state legislature once again enabled the minority Republicans to hold the budget process (and the bonds needed for public works projects) hostage for months, after which a deal was only reached with accounting gimmicks and wishful thinking.  With unconditional GOP opposition to any taxes, whether on alcohol, tobacco, oil companies and other corporations, or a resumption of the vehicle license fee that Schwarzenegger demagogued during the 2003 recall, the state budget instead scapegoated state workers and cut childcare, foster care, education, and in-home service workers for the elderly and disabled. 

California isn’t alone in its warped priorities.  Voters in Colorado Springs, a Republican redoubt, went to the polls in the fallColorado_Springs_192941852.jpg of 2009 and rejected a measure that would have modestly raised property taxes to fund essential services.  As a result, Colorado Springs took a bite out of public safety by cutting its police force, auctioning off police helicopters, and dousing a third of its street lights.  Florida, until very recently ruled by a Republican governor and legislature for 12 years running, “placed 69,000 people on waiting lists for home or community services last year and more than 5,700 of them ended up in Medicaid nursing homes.”  Firefighters in another Republican bastion, Obion County, Tennessee, stood by as Gene Cranick's home burned down and his pets died because he hadn’t paid the annual $75 fire fee (they did, however, spring to action when the fire spread to the lot of Mr. Cranick’s neighbor, who had paid up.)    

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If ever we needed evidence that the free market has no conscience whatsoever, the time is now.  Nationwide, one in seven families is in poverty, one in eight Americans is on food stamps, and Medicaid enrollment is at an all-time high.  Yet while the masses struggle, Wall Street is doing quite well, thank you.  The Dow has rebounded vigorously, and corporations are once again exhibiting the virtue of selfishness by hoarding record profits, rather than putting America back to work.  

OBAMA__main_post_419735424.jpgSince the private sector is failing to provide for the common good, and the United States cannot starve itself out of the recession, we’ve been fortunate to have a president intent on filling the gap.  

Whatever one thinks of his decisions in other policy areas, Obama has been undeniably aggressive in combating the recession and repairing our frayed safety net.  Soon after coming into office, he signed the American Recovery and Reinvestment Act of 2009.  The stimulus bill, which put $242 billion into Americans’ pockets and gave $232 billion to struggling states to stem the bleeding, has been a model of clean, efficient government and is estimated to have saved 2.7 million jobs

The stimulus bill and the TARP bailouts – which will run taxpayers a fraction of their original cost, if they don't turn a profit – generated anti-government animus, but a bipartisan report by Alan Blinder (chairman of the Federal Reserve in the mid-‘90s) and Mark Zandi (a former advisor to John McCain) shows that these controversial actions – in concert with purchases of toxic bank assets and stress tests on big banks – kept us from going under.  If Obama had taken the do-nothing, libertarian approach in early 2009 that is (retroactively, rhetorically) favored by the right, the fallout would have been markedly worse for the auto industry and everyone else, and the annual deficit would be twice as large.

After pulling the economy back from the brink, Obama extended healthcare coverage to four million children, passed a “Robin Hood” budget that raised taxes on the wealthy and shifted funding to basic needs, signed credit card reform, and won a big boost in funding for community colleges, all in just his first six months in office.

In the fall of 2009, while a John Hopkins study came out showing that 17,000 American children may have died over the past two decades for lack of coverage, Obama took on the white whale of healthcare reform.  Despite a heavy headwind of lies and distortions, and the loss of a Senate seat in Massachusetts, he hung tough and eventually won Americans a right long exercised everywhere else in the developed world.  As part of the budget-neutral healthcare bill, Obama also signed an add-on that took private banks out of the federal college loan process and funneled the savings to economically-strapped students.

After winning that titanic battle, Obama pushed for financial reform to try to curb the abuses that got us into this mess.  He didn’t get as strong a measure as reformers wanted, but the bill did include limits on bank speculation and origination fees for loan-writers, the creation of a Consumer Financial Protection Agency with strong oversight authority, and increased governmental powers to shut down large, failing financial institutions.

Before Congress recessed, Obama signed off on more stimulus to save the jobs of tens of thousands of teachers, inked another extension of unemployment benefits, and passed the Small Business Jobs Act, which provided a $30 billion infusion to struggling small businesses.

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“We’re playing to the reptilian brain rather than the logic centers, so we look for key words and images to leverage the intense rage and anxiety of white working-class conservatives.  In other words, I talk to the same part of your brain that causes road rage.”

-an anonymous GOP consultant, on the Republican election strategy, in “Rogues of K Street

 

 

Despite Obama’s good deeds, Americans are angry.  

Understandably so, considering the state of the economy. 

But what’s amazing is that record numbers of people are angry at “the government,” which under Obama has made lifeteabagger_II_116688523.jpg fairer and more sustainable.  Part of the hostility is racial in nature; as a recent article dryly noted, working-class whites have a “persistent discomfort with President Barack Obama.”  On substance, the right feels Obama has shown too much concern for the human condition, either out of a Wild West ethos that “the government” is monolithic and inherently corrupt, or out of distress about our national debt.  Many on the left feel Obama hasn’t done enough, but too often fail to acknowledge the institutional obstacles he faced:  since Republicans filibustered just about every bill, 60 Senate votes were needed for passage.  Since 60 votes were needed for passage, each piece of legislation was watered down to the demands of the most conservative, corporatized Democrats and/or the one to three Eastern Republican senators that crossed the aisle to cast the filibuster-breaking vote.  

The angriest Americans of all seem to be the Tea Partiers, a reactionary snow-white population of self-proclaimed rugged individualists who tend to hail from red parts of the country that take more from the federal government than they pay in.  A reactionary snow-white population who sincerely believe that a multicultural 21st century majority-female country of over 300 million citizens should be in hock forevermore to the often contradictory values of a tiny elite of 18th century Caucasian males, many of them slaveowners, who ruled a country of 2.5 million.  A reactionary snow white population who sat on their pasty derrieres for eight years while George W. Bush grew the federal government to steroidal proportions with the Patriot Act, a three trillion dollar war of choice, torture, wiretapping, election-rigging, the suspension of Habeas Corpus, and record debt who somehow feel threatened by a black president making sincere attempts to address our long-term problems.  A reactionary snow white population presented as peasants with pitchforks who in point of fact are largely organized and funded by shadowy bazillionaires that are using them as pawns in their twisted games.               

As ever, the gulf between perception and reality is the gift that keeps on giving for the Republican Party.  Obama is president, ergo the downturn is his fault, not the fault of the long line of public officials who drank the Magic of the Marketplace Kool-Aid.  This collective amnesia is leading swing voters deep into battered-wife syndrome, as they march us in lockstep to a Republican House of Representatives.

It’s hard to imagine anyone less suited to healing what ails us – one may was well toss an anvil to a drowning man or hire an arsonist to put out a fire.  Over the past two years, the GOP fiddled while Rome burned.  As their media puppeteers dialed the fog machine up high with a series of distractions calculated to get recession-addled white people riled up at THE OTHER (read:  birth certificates, the ACORN hoax, the new Black Panthers, the Manhattan Mosque), Senate Republicans continually disrupted the legislative process with a record number of filibusters.  

During the whole time, the GOP offered no serious alternatives, as it’s easier to just say no, and frankly, because their hands-off religion renders them utterly unprepared to deal with complex, real world problems.   This summer, Republican election strategists were torn about whether or not to make the pretense of having constructive ideas for taking on the problems we face as their charges campaigned for control of Congress.  Eventually the party relented and came up with the “Pledge to America,” a document about nothing, full of apple pie rhetoric but short on the meat-and-vegetable details of governing. 

While hammering Obama relentlessly for a budget deficit that is mostly attributable to a recession he inherited and the structural debt laid by the previous Republican president and Congress, the one concrete economic policy promise the GOP has made is that they will go to the mat over tax cuts for the most privileged Americans, which would add another $680 billion to our national debt over the next ten years, just as we start getting hit with the colossal costs of retirement benefits for the Baby Boom generation.

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“There’s class warfare, all right.  But it’s my class, the rich class, that’s making war, and we’re winning.”

-Warren Buffet, billionaire


“…belief in the magical powers of tax cuts is a zombie doctrine:  no matter how many times you kill it with facts, it just keeps coming back.”   

-Nobel laureate Paul Krugman

 

The US now has the highest income inequality it has had since the late ‘20s, another era of reckless Republican rule and minimal government oversight that spawned a huge market crash and the desperate need for a sober, adult, Democratic president to come in and clean up the mess. 

This would seem an odd time to lose sleep over small tax increases on the sliver of the population most insulated from our recent economic collapse, but not to worry, Republicans have a number of specious arguments at the ready.  First is the fairness argument, rooted in the idea that the rich are “productive” citizens, while poor and working-class people who receive government benefits are “parasites.”  This postulation presumes that government aid is inherently tainted, while success in the market is not, as the market is a pure, sacrosanct organism, even when it allocates rewards in fantastically disproportionate ways (see:  pay, CEO).   

Even if one accepts the faulty premise, this contention ignores the reality that the rich also receive government benefits, including Medicare and Social Security for retirees, and mortgage interest and other tax deductions that are employed much more often and in far greater amounts in Bel Air than in Compton.  Also, many of the “productive” rich live off inherited or investment income, as opposed to poor and middle-class people, who earn their keep from the sweat of their brow. 

Once the “fairness” argument is buried, Republicans claim that allowing Bush’s tax cuts for the wealthy to expire would hurt small business.  The problem with this argument is that it’s demonstrably false:  only 1 to 2% of small businesses would be impacted, and those few are successful enough that the increases would likely be a wash.

Not far behind is the assertion that the benefits of tax cuts for the rich will trickle down to the other 99% of taxpayers like so much pixie dust.  Here again, history is instructive.

In the years after the Great Depression, up into the ‘70s, a period of Democratic presidents and fiscally responsible Republicans, income inequality shrunk and a broad middle class formed, but this process was reversed with the election of Ronald Reagan in 1980.  In 1981, Reagan lowered the tax rate for the richest Americans from 70-50%, and in 1986 he lowered it from 50-28%.  In combination with globalization, mechanization, and union-busting, this re-writing of the tax code helped shower 80% of the United State’s increase in income between 1980 and 2005 on the upper 1%.  The distribution of economic spoils has become so out of whack that a recent Slate series on inequality found that “according to the Central Intelligence Agency…income distribution in the United States is more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador.” 

After dubious claims about fairness, effects on small business, and trickle down economics are dismantled, the GOP argues that allowing W’s tax breaks for the wealthy to lapse would kill the recovery.  But Republicans said the exact same thing before Bill Clinton raised taxes on the top 1.4% in 1993 and ushered in the biggest economic expansion of all time, creating about as many jobs in two terms as were produced in the five terms of Reagan and the two Bushes combined.  Following Clinton, we tried trickle down economics again under Bush-Cheney, and what we got for it was the Lost Decade - the economy technically expanded, and worker productivity increased 20%, yet average Americans’ income went down.  If all of this doesn't convince you, there's the non-partisan Congressional Budget Office's report, which projects that tax cuts are the least effective way to bring us out of the recession.    

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In the end, The Guardians of Privilege may or may not get tax cuts for millionaires.  But what we do know, based on their actions the last time they controlled the House of Representatives - when they were dubbed "The Worst Congress Ever" - is that the GOP will face the recession head-on with a large dose of theater.  They will piss millions of taxpayer dollars away on show trial hearings in which they will manufacture outrages at Obama administration actions, then feed these fabricated outrages to the restless natives in the right-wing media echo chamber, in hopes that said alleged  “ethical lapses” will then grow like a virus and spread into the broader public discourse, where they can be used against the president when he runs for re-election in 2012. 

While zealously defending our trillion-dollar defense budget so we can maintain the privilege of spending as much on our military as the rest of the world spends in total, they will play to their devout Christian base by attempting to gut healthcare and any other social services, particularly programs that help those who need it the most. 

They will underfund and undercut the EPA and OSHA, and any other federal agencies that regulate their major polluter-extractor campaign contributors. 

They will tie up important government functions by stonewalling votes on administration appointees that don’t meet their rigid right-wing ideological litmus tests. 

And if they get real feisty, they may just try to prove their manhood by shutting the government down. 

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If the definition of insanity is doing the same thing over and over and expecting a different result, then most voters appear to have gone batshit crazy.  Knee-jerk, get-government-off-our-backs notions have their charms.  They’re simple enough to fit on an index card and give one the warm illusion of self-reliance.  And they’re theoretically pure, sealed off as they are in a conceptual vacuum untouched by history or real world events. 

But libertarianism completely fails to bridge the gap between theory and practice, and the world of difference between slogan-ready words like “freedom” and “liberty” and a crass and dehumanizing Social Darwinist state of affairs that stares us in the face every time we walk out the door. 

Nor can libertarianism ever provide a realistic governing blueprint that effectively deals with the increasing interconnectedness and interdependence of modern life, between people and countries and the earth, and between the present and future generations.  More than ever, man is not an island.    

The clock is ticking.  Forward-thinking citizens can only hope that a real moral majority of Americans will eventually evolve beyond the law of the jungle to embrace the higher plane of empathy, before it is too late.

© Dan Benbow, 2010

     

 

 

 

 

 

 

 

 

 

 

 

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