Reagan Was Wrong: The Nine Most Terrifying Words Are, "I'm a Libertarian and the Market Will Save You"

[PhiLandShiR 18]

http://www.huffingtonpost.com/mitchell-bard/reagan-was-wrong-the-nine_b_628022.html

I was tailgating with my wife and two friends in the parking lot of Miller Park before a Brewers game yesterday, when a guy with a pasted-on, plastic, local-news-anchor smile approached our group. He wanted us to sign a petition to get his "buddy" on the ballot for state treasurer. Of course, the first question I asked him was which party his "buddy" belonged to, and the guy told us he was a Libertarian.

Poor guy, he didn't realize he was approaching a liberal blogger and his progressive friends. Not an audience that was going to easily buy what he had to sell. I politely told him that I wouldn't support a Libertarian candidate, and like a telemarketer dutifully and mechanically following a script provided to him to handle rejection, he asked why I didn't support Libertarians. I explained that I did not harbor a dislike or distrust of government, and that I thought there were certain jobs that only government could do. Without removing the wooden smile from his face, he moved to the next page of his telemarketer script and asked me if he could have one minute to "rebate" what I had said, and he proceeded to tell us that the free market is perfectly efficient and the best way to solve problems. I started to laugh and told him that, yes, the financial collapse two years ago was a great example of the market solving problems. And also, another great example was the oil pouring into the Gulf of Mexico. My wife and friends joined in the laughter, and our Libertarian guest could no longer maintain his fake smile. His voice and facial expression turned angry, and he stormed off to the next group of tailgaters, spitting out something barely intelligible at us as he left.

I thought this interaction perfectly encapsulated the anti-government, pro-market-solution obsession currently running through the right, especially among tea baggers and self-proclaimed libertarians. They love to cite Ronald Reagan's line that the "nine most terrifying words in the English language are, 'I'm from the government and I'm here to help.'" But I'm far more afraid of someone telling me, "I'm a Libertarian (or Tea Party member) and the market will save you."

You would think from listening to the rhetoric that we have two choices in this country: Either you adopt the right's notion of deregulation and an unfettered free market, or you are a socialist. There is no in-between. Which is, of course, patently false, but also maddeningly ignorant of recent American history. Taking the financial industry as an example, after the election of Franklin Roosevelt, Congress quickly enacted legislation, like the Securities Act of 1933, the Banking Act of 1933 (Glass-Steagall), and the Securities Exchange Act of 1934, meant to curb the excesses of an unfettered financial system, which had led to the stock market crash of 1929 and the depression that ensued. And for the next 45 years, the country was able to avoid any mass financial collapses.

Then, beginning with Reagan, and continuing through George H.W. Bush and Bill Clinton, and reaching its peak with the ultimate deregulation messiah, George W. Bush, the government took down the post-Depression financial regulation structure brick by brick, following a mantra that deregulation helped the market to function freely, and a free market will produce the best results.

What did we get? The savings and loan scandal, the Enron-induced power outages in California, corporate fraud (Enron, etc.) and, ultimately, a financial industry run amok (arcane financial instruments, insanely risky investments that banks profited from regardless of their success, and credit rating agencies handing out AAA ratings like candy to keep customers, just to name some examples), all leading to a near financial collapse that plunged the country (and the rest of the world) into a job-sapping, deep recession.

All evidence would seem to point to the need for some regulation to keep the banks from running amok, but the right still clings to its mantra of deregulation and unfettered free markets.

I also thought it was not a coincidence that not once, not twice, but three times during his two-minute pitch to us, our Libertarian petitioner talked of having the opportunity to "rebate" what I had said about his cause. (Not "rebut" or "debate" or whatever else he actually meant, but "rebate," which had me secretly hoping he had a way to refund to us some of our time he had wasted.) It was fitting because so much of the right wing/Tea Party/libertarian anger is based on false notions (much of it, no doubt, a product of Fox News, Rush Limbaugh, and the right wing media misinformation machine), and the urgency of his words was not supported by a basic ability to use the English language to make an argument, leaving the content of his claims even more suspect.

I can already hear the complaints now: I'm an elitist snob for chiding someone for making a mistake. If I was pointing out that, say, the guy who scanned our tickets at the Miller Park gate had been less than smooth with his words, I would deserve the criticism (that didn't happen, it's just an example). But here was a guy who was so sure of his beliefs, he not only gave up a Sunday to walk around a baseball stadium parking lot to collect signatures (admirable commitment), but he felt empowered to tell everyone there that he was right and they were wrong. And if you are going to take such a position and hold yourself out as an authority, it is fair to question the knowledge and intelligence underlying the strong assertions.

Our Libertarian petitioner's certainty isn't just simplistic, it is a real impediment to solving our country's problems. The alternative to unfettered free markets is not socialism, but rather, it is free markets with basic regulations in place to prevent abuse, just like the financial regulation architecture that protected the country after the Great Depression. (Somehow, I don't think we were living in a socialist state when Eisenhower and Nixon held the presidency.) I know subtlety is a lost art in modern politics, but if we are to survive, we will have to recognize that there are more than two extreme choices. These same right wingers don't seem to mind when the government subsidies the oil industry, and I doubt that they want to shut down the libraries, public schools, fire departments, and highway maintenance departments, all of which are run by the government (and would not exist if left to a private, free-market model). Conservatives, tea baggers and libertarians want you to think it's a simple dichotomous choice: free markets or socialism, or no government or all government. But such a reductionist view fails to account for how complicated and integrated the relationship between public and private actually is. (Yes, I know, asking for nuance rather than black-and-white distinctions is tragically 20th century.) Let's remember the angry town hall attendees last summer telling members of Congress to keep their government hands off of their Medicare. Even they liked a government program, but they didn't even know it.

There was one aspect of our Libertarian petitioner's approach that especially rang true to me: The false smile covering his real anger. Tea Party leaders are quick to say there is no place in their movement for racism, but at those same rallies you see racist signs about President Obama. Let's not forget the March Harris poll that revealed that 57 percent of Republicans think Obama is a Muslim, and 45 percent think he wasn't born in the United States. Somehow, I doubt these people would be concerned about the religion or place of birth of John Kerry, Hillary Clinton or John Edwards, let alone John McCain, Mitt Romney or Rudy Giuliani. When right wingers talk about taking "their" country back, it's hard to see "their" as meaning anything but a system in which power rested in white, male, Christian hands. When tea baggers put a happy, smiley face on the movement, I can't help but be wary of the angry snarl underneath. So I wasn't the least bit surprised when our Libertarian petitioner's plastic grin quickly devolved into an angry scowl when he realized that he didn't have the ammunition to win over someone who was even marginally informed.

These are not merely philosophical questions. Late last week, financial reform legislation was watered down at the last minute to ensure its passage. After what happened in 2008, opposing real reform in areas like derivatives and the so-called "Volcker Rules" defies logic. With unemployment hovering around 10 percent thanks to a recession precipitated by a near financial industry collapse, I don't agree with Ronald Reagan. I'm not scared of the government trying to help. But I am terrified of an unfettered free market allowing industry leaders, whether they be in the financial industry or the oil business, ruled by greed, putting the country at risk to unfairly further line their already bulging pockets.

Mitchell Bard

[Trumplestiltskin 5,791]

Libertarianism is claptrap - it relies on too many assumptions about the market and the nature of free-market capitalism to ever really work in the real world.

[mawilson 2,133]

I started to laugh and told him that, yes, the financial collapse two years ago was a great example of the market solving problems.

Except of course it wasn't. The two largest mortgage underwriting agencies, Fannie Mae

and Freddie Mac, created a backstop for the mortgage industry, undermining market discipline

by federal guarantees of private debt and other forms of moral hazard.

[mendeleev 67]

Except of course it wasn't. The two largest mortgage underwriting agencies, Fannie Mae

and Freddie Mac, created a backstop for the mortgage industry, undermining market discipline

by federal guarantees of private debt and other forms of moral hazard.

Oh, come on, Mawlinson. Yeah, Freddie and Fannie got into trouble -- but that was a consequence, not a cause, of the crisis. Too often I see cause and effect muddled here, along with what came first.

[mawilson 2,133]

Oh, come on, Mawlinson. Yeah, Freddie and Fannie got into trouble -- but that was a consequence, not a cause, of the crisis. Too often I see cause and effect muddled here, along with what came first.

Moral hazard was the cause - financial institutions taking outrageous risks without fear of consequences.

[mendeleev 67]

Moral hazard was the cause - financial institutions taking outrageous risks without fear of consequences.

Let's see if I can parse that right. Financial institutions to whom the government has no legal arrangement other than perhaps an ancient corporate charter (and those are given by the States, not the federal government), that the government did not create, that the government did not and had never owned, are not to blame for their own reckless behavior and should not be expected to take responsibility of it because the government did sponsor some other organizations to rectify an unmet social need.

Let's see if I understand. The government owns and manages lots of land out west and offshore. So, are western landowners somehow in a privileged position, compared to say, people in Vermont, and can claim that because the government does reckless things with their land (like allowing oil companies to drill in deep water without a clue on what to do if something goes wrong) and the government steps in to try to make things right on their land, that those private landowners can act in a similar reckless fashion and expect a government bailout?

I thought conservatives were into responsibility for ones actions. In this case, though, it is convenient to blame government for outrageous recklessness of private companies. Doesn't look like a responsible conservative (or responsible progressive) standard to me!

I heard once that sometimes people in the government are dishonest. Do you think a moral hazard argument (excuse) should protect me if I'm dishonest, too?

The real moral hazard in the financial crisis is that some financial institutions realized that they were basically unregulated but since they were so big their failure would destroy the economy, they could do whatever they wanted. Since they were unregulated, they could do pretty much anything and that they did. Since they knew they couldn't be allowed to fail, they were emboldened to be absolutely outrageous in the risks they took. (Notice that Canadian banks, which are pretty tightly regulated, did just fine these past few years?) That moral hazard would be eliminated if the government had a more vigorous resolution authority so they could seize assets of companies (and perhaps of officers and executives, too, so they don't get the idea that they can win at the public's expense) and wind them down, destroying the careers of those who took reckless risk. That authority was simply not there in 2007, so Bush II had a bad choice: bailout people who didn't deserve it, or preside over the biggest economic catastrophe in the history of the nation.

Edited June 28, 2010 by novotul

[evli1966 88]

I agree there has to be a medium.

but it seems you blame deregulation as the cause for the economic issues.

But the deregulation allowed the industries to either succeed or fail.

Thise that failed were the ones that were corrupt.

I also think that with the new trancpariency laws some regulations should be enforced.

The libertarians tend to be angry people who spout as much hate as any conservative and any Liberal speaker.

Also big government is not the answer; allowing them to regulate every aspect of our lives is not what we need.

Big government such as we are seeing now brings on dictator like decisions that hurt everyone and the economy.

Also it is not racist to ask if he was born in the USA as he states but does not prove unlike the people you stated as examples.

Also it may not matter if Obama is a muslim but it does matter if he claims he is of Christian faith to hide his muslim heritage or faith. Why would he do this if he is?

[DEDixon 39]

and reaching its peak with the ultimate deregulation messiah, George W. Bush

what did GWB deregulate? got a list?

Repeal of Glass–Steagall .....the legislation was signed into law by Bill Clinton.

[mawilson 2,133]

The real moral hazard in the financial crisis is that some financial institutions realized that they were basically unregulated but since they were so big their failure would destroy the economy, they could do whatever they wanted. Since they were unregulated, they could do pretty much anything and that they did. Since they knew they couldn't be allowed to fail, they were emboldened to be absolutely outrageous in the risks they took.

That's almost exactly what I said. The question is, how did they know that they wouldn't be allowed to fail?

Because in a true free-market system, they most certainly would be.

[mendeleev 67]

That's almost exactly what I said. The question is, how did they know that they wouldn't be allowed to fail?

Because in a true free-market system, they most certainly would be.

It was a game of chicken, and the American people lost because there was no good resolution authority to prevent a catastrophe. Those guys made a bet: I think the rules will be "heads I win, tails you lose, I think" and they were right. An extremely conservative president couldn't stand the consequences of taking his ideology to its logical conclusion.

The implication is clear -- there needs to be a thorough-going financial reform -- to make sure that even the big boys know they can fail and that they government will run them out of business while protecting the rest of us from some of their hubris.

Edited June 28, 2010 by novotul

[mawilson 2,133]

It was a game of chicken, and the American people lost because there was no good resolution authority to prevent a catastrophe. Those guys made a bet: I think the rules will be "heads I win, tails you lose, I think" and they were right. An extremely conservative president couldn't stand the consequences of taking his ideology to its logical conclusion.

The implication is clear -- there needs to be a thorough-going financial reform -- to make sure that even the big boys know they can fail and that they government will run them out of business while protecting the rest of us from some of their hubris.

Google LTCM, if you're too young to remember.

[mendeleev 67]

Google LTCM, if you're too young to remember.

That's cute and entirely fair -- LTCM happened under Clinton's watch and he continued to deregulate. Looks like things are changing, though.

[alienlovechild 75]

An extremely conservative president couldn't stand the consequences of taking his ideology to its logical conclusion.

The implication is clear -- there needs to be a thorough-going financial reform -- to make sure that even the big boys know they can fail and that they government will run them out of business while protecting the rest of us from some of their hubris.

There was little conservative about Bush's spending where the Dems differ little with the exception for spending on Iraq. The Democrats were critical he spent too little on domestic spending and they've acclerated government spending that's actually dragged the economy down with a hodgepodge of poorly targeted stimulus spending hurting credit availibility and continuing to artificially prop up housing prices. In short, Obama has worsened a bad situarion in which voters are likely to revolt.

Some financial regulation seems ok it was clear we got in the position of privatizing profits while allowing big business to take ridiculous risks thinking the government will act as insurers/financiers of last resort.

Edited June 29, 2010 by alienlovechild

[Texanadian 10]

"I'm a Libertarian. And the market will save you."

To break it down to the simplest way of putting things, the good businesses and products survive. The crummy ones don't. Nintendo made a good product. They still do. Atari didn't. They're gone. The companies that sell cars that people like are still around. The ones that build cars people don't like are gone. Similarly the car companies that put in good financial ideas for the future are doing well. The ones that promised lifetime health insurance and full pay job banks for layed off workers are not. The unsafe products disappear from the market. The safe products stay.

Public-private plans generally don't work. You get private industry getting subsidized by low cost deals offered by government. Why should any private business pay less than the going rate? A forest owned by government will rent the land out to a logging company. The logging company will clear cut the forest and make the money once. The land is then baron. A privately owned forest will be logged and then re-planted. This is the financially smart thing to do. Long term planning. But to government, the cost of replanting occurs now for a benefit that exists after the current government is out of office. Thus there is no reason for government to re-plant.

Enron? This is a perfect example of Libertarianism and why it works. What was the result of Enron? Skilling is in jail for 25 years. Lay is dead. The people working there making $100K/year were unemployed afterwords. If they had a company pension plan, that doesn't exist. If the government had an obligation to fund the company pension plan, the government (aka taxpayers) would be on the hook. At least Enron had a matching 401K plan. It was the Enron worker's own fault for maxing out their 401K plan with company stock.......But how and why did the California power crisis occur? Again, it was a public-private partnership. The local utilities had to sell the electricity to the residents at a fixed rate (mandated by state law). But the private companies could set higher rates. The result was a bankrupting of the local power utilities. Government law in California said that out of state electricity would be sold at a higher rate than local electricity. This caused Enron to sell California electricity to other states and then buy back the electricity at a higher rate to sell to Californians. Enron and California wouldn't have happened in either a government monopoly or a fully private system. In a private system, it makes sense for power companies to run full power. Sell as much as they can. In a government monopoly, you get inflated prices due to government laws prohibiting others to sell in the marketplace. Or you get rationing caused by a lack of new capital spending by government (because government is always broke). The same happens in public school systems. They're always underfunded because they're run as government monopolies. It's in government's best interests to underfund them and have crummy test scores. They have little competition.

I don't know why people assume that Libertarians are Republicans. Libertarians are neither left nor right. They're their own party separate from both. Libertarians are just as much against subsidizing business as they are subsidizing the public. Let's take something as simple as house insurance. If you live from south TX to south FL (anywhere along the lower gulf states), it's expensive to buy house insurance. The Libertarian answer is "Tough. Too bad." You live in an area that gets hurricanes. It's going to cost more. The Democrat answer is to have people in Seattle pay higher federal taxes so that people in Miami can get affordable house insurance from government. The Republican answer is to subsidize the insurance industry. Either the Dem or Repub is the same net effect. The insurance company gets subsidized by the taxpayer in one way or the other. By not having to insure risky areas (Dem) or by some loophole/tax break/write off (Repub)

Libertarians believe strongly in allowing companies to fail. Dems and Repubs don't. BP is in a world of trouble right now. They may not make it through this. One of the biggest companies in the world could be bankrupt. They chose to skimp on safety and testing. They're to blame for their loss. Other oil companies who may or may not have similar cost cutting measures are going to think twice about this. Go back to my 1st paragraph.

The reason people have hard core left or hard core right looks at government is simply because what starts off small grows and grows. Income tax started off at 1% in the USA.. It went up to 94% in the USA. It was only a "temporary" measure. Uh huh. What starts off as a basic subsidy to the individual (standing in line to state your case for welfare) became a streamlined measure where all you have to do is go to the post office box and get your mail. Heck, they probably do direct deposit these days. You are now "entitled" to it. Along with section 8, medicaid, dental coverage, foodstamps, and earned income credit.

The Great Depression was obviously terrible for people who experienced it. But the post Depression result has been that people think that government somehow saved the day. But it was government that took a moderate recession and turned it into a global depression. Even as late as 1933, the federal reserve was cutting the money supply. Currency was reduced by 30% from 1929 to 1933. Prior to the federal reserve, the natural booms and busts occured. But once they decided to try and stop this natural occurrence from happening, all hell broke loose. In an effort to have "full employment," the US government has run deficits every year except for two or three years since then. The result is inflation has eroded our purchasing power. Unemployment actually was below 10% in 1930 until the government put up tariffs. (Smoot Hawley) After that, unemployment never dropped below 10% until World War II started up. (Unemployment numbers drop when you take millions out of the labour market and send them to war)

I don't know any Libertarians who supported a bank bailout. A car maker bailout. A continued war effort in the middle east. Or a stimulus program where government taxes people to create more government jobs and/or projects which are not that important

Medicare? Ha. Government is talking about a 21% cut in doctor's payments. And doctors are already saying that Medicare doesn't pay enough. Old people are having trouble finding doctors that take Medicare right now. And the new health care bill aims to pay for itself by future savings in Medicare (aka paying less and for less procedures)

[웃 910]

The bottom line is democrats are retards