All Commentary
Friday, May 15, 2009

Government Run Amok

The “federal” government, particularly the executive branch, can do almost anything it wants. The limits are few, and those that survive can often be gotten around through chicanery. Much of what government does is out of public view, thanks to off-budget accounting and other dubious methods that would get the rest of us prosecuted. Even if the average person had the time to monitor what government is up to — a tall order for sure — much of it is so esoteric for a layman as to be nearly incomprehensible. He’d have to give up his job and master several disciplines in order to do a proper job. That puts a new light on the term “educated voter.”

On the other hand, trusting one’s representatives — “misrepresentatives” is a more precise term — to watch over things is pointless: They don’t read the bills they vote on; deal-cutting is a higher priority anyway. In recent years they’ve voted to bail out Wall Street banks, “stimulate” the economy, invade countries, and inflate the power of government to violate civil liberties—all without reading the relevant materials. (Not that the executive always waited until Congress blindly passed the requested authorization.)

By what criterion are we entitled to call this “representative government”? Periodic elections are a necessary condition for that label to apply, but they are hardly a sufficient condition.

A government of self-defined powers is  hardly new in the United States; nor is it the monopoly of any one party. But it has accelerated in the last decade through the exploitation of fear: fear of economic calamity, fear of terrorism, fear of the unfettered market. From the beginning, fear has propelled the growth of the state. H. L. Mencken saw this more clearly than most –“The whole aim of practical politics is to keep the populace in a continual state of alarm (and hence clamorous to be led to safety) by menacing them with an endless series of hobgoblins, all of them imaginary.” — and Robert Higgs has spent a career explaining it.

Using powers the origins of which predate the New Deal, government has now extended its tentacles to encircle the entire economy. Bureaucrats exercise wide-ranging discretion with, at best, murky authority. The unaccountable Federal Reserve System creates money in order to buy not only government securities, but also “troubled” assets from investment banks and other favored firms. The FDIC now insures all bank debt, not just deposits, and guarantees government loans to hedge funds that buy the kinds of securities Treasury Secretary Timothy Geithner prefers. The Treasury last fall asked for $700 billion for one purpose (buying worthless mortgage-backed securities) but uses it for other things instead, such as buying stock in banks and bailing out insurance and auto companies that have earned the right to fail. As George Will writes, “TARP’s $700 billion, like much of the supposed ‘stimulus’ money, is a slush fund the executive branch can use as it pleases.” This points to another unsettling practice: congressional blank-check authorizations to the executive branch: “Here’s some money; do something good with it.” (Of couse it is not only in domestic policy that blank checks are handed out.)

All told, such government-run-amok financial undertakings have the hapless taxpayers on the hook for an amount of money rivaling the gross domestic product. The Fed has created trillions in funny money—portending a horrendous price inflation—and the current deficit is nearly half the entire budget. When Congress is asked to rubberstamp executive activities — as occasionally it is — most of our misrepresentatives faithfully comply. The news media call this being “responsible.” Dissenters, such as those in the House last fall who voted down the first TARP bill, are stigmatized as fringe characters unworthy of serious attention, and quite possibly nihilists.

The Chrysler Intervention

The latest example of government run amok is the Obama administration’s interference with the bankruptcy of Chrysler. Under the administration’s plan the UAW will get 43 cents on the dollar and a majority of the stock shares, while secured nonbank bondholders are offered about 30 cents and have their contractual rights nullified. When they balked in an attempt to fulfill their legal responsibilities to their investor clients, Barack Obama denounced them as greedy speculators. Where does the White House occupant get this authority? Does he know or care that he is engaged in the destruction of wealth? Does the public even wonder about these questions?

It is taken for granted that government can do whatever it wants so long as those doing it seem to be acting in good faith and aren’t benefitting too overtly. This trusting attitude is a far cry from the “jealousy” toward government that Thomas Jefferson prescribed for a free people.

Government has been exercising such power so long that people are accustomed to it. It’s normal. They don’t expect modest government in either domestic or foreign matters. If we think government runs amok in the economy, look at what it’s doing in Central Asia and the Middle East. Foreign policy not only gives government great scope for unmonitored mischief, it also efficiently drains the taxpayers. Like domestic intervention, foreign intervention is madly expensive—not to mention dangerous to innocents and those only suspected of crime but not yet proved guilty. Yet many people  who are distrustful of carte-blanche power over domestic affairs apply a different standard to government’s powers in foreign matters. It’s as though Foggy Bottom the Pentagon, and the CIA weren’t departments of the government — as though war,  intervention, and the resource-eating military budget had no effect on the marketplace. Freedom’s greatest advocates, including Adam Smith, Richard Cobden, and Frederic Bastiat, knew better. There could be no laissez faire at home and continuous war-making abroad.

Thus Rep. Ron Paul wisely writes, “We need to rein in our overseas empire, as quickly as possible. We need to bring our troops home, and get our economy back into the business of production, not destruction. The smartest thing we could do is admit we don’t know all the answers to all the world’s problems. If the new administration can take a closer look at real free trade and no entangling alliances, we would be much better off for it…. But unfortunately, it is not likely to happen.”

So those who understand had better get to work.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.