David Cay Johnston is a Pulitzer-winning New York Times reporter. His latest book, just out this week, is called Free Lunch: How The Wealthiest Americans Enrich Themselves At Government Expense (and Stick you With the Bill).It’s valuable from a small government perspective because of its detailed stories of government attempts to manipulate or adjust the market, leading—predictably, a libertarian might say—to benefits for the well-off and well-connected rather than the disadvantaged or the masses.
Free Lunch is full of sharp, heavily reported takedowns on eminent domain, expensive special favors for sports teams, legislative deals that put taxpayers on the hook for private train company’s crimes and errors, giveaways from small towns to attract big-box stores, and how heavily government-managed markets in areas such as power and health care can enrich some at everyone’s expense.
While almost every depredation recorded in Free Lunch can be traced back to government actions or decisions (generally combined with some individual or company’s decision to act like a bit of a creep), Johnston engages in a fair amount of rhetoric along the lines of how “the ideology of blind faith in markets” is somehow implicated in this or that crime or ripoff.
Still, he often uses sound free market arguments to make his case—for example, noting how some government action places on everyone an often-unnoticeable little burden in order to give a big special benefit to a few. Unfortunately, he’s apt to forget that sort of argument when he, say, condemns outsourcing of jobs overseas, or trucking deregulation.
As Johnston tells me, he’s not selling any consistent ideology about government. He sees himself as an investigative reporter, looking for interesting untold stories. In this interview, conducted by phone on Thursday, Johnston is nonetheless aware his book has a distinct moral message.
reason: What is the theme of Free Lunch, and what made you write it?
David Cay Johnston: Ronald Reagan famously asked Americans if we were better off than we were four year ago; Americans said “no” and elected him. This empowered a great change, supposedly, in government. It was supposed to lead to less government, more market solutions, and lower taxes.
What I’m asking in Free Lunch is: Are you better off than you were a generation ago when Reagan was elected? Government is just as big, there are vastly more regulations, and as I show, we have many new rules and regulations that handcuff the invisible hand of the market and instead, in subtle, sometimes hidden, ways, extract money from the pockets of the many and funnel it to the politically connected few. It’s the very thing that Adam Smith said would ruin the benefits of markets. I would think libertarians would like everything in the book, except for the parts about health care [where he calls for nationalized health care, European-style].
reason: Which of the many stories you tell sums up your book’s message best?
Johnston: I tell in detail the story of a little merchant [Jim Weaknecht] with lower prices than his bigger competitors, like Cabela’s, in the business of selling fishing and outdoor gear, who was run out of business in his little town [of Hamburg, Pennsylvania] because of $32 million in subsidies [provided by local government] to Cabela’s. That’s $8,000 for every man, woman, and child in town, equal to the entire budget of the little town for a decade. Imagine that you are that competitor, with some big outside competitor getting a huge leg up, one that’s essentially worth doubling their profits as a practical matter, so they can run you out of business.
On the brighter side, I do tell a story about Gander Mountain [another big company in the hunting/camping/fishing business] that actually employs a lobbying firm to fight against [special favors and subsidies] for [their competitors] Cabela’s and Bass Pro. Cabela’s was actually praised by Bush and Cheney as models of enterprise.
It’s not surprising Bush would praise a company like Cabela’s though. His own fortune, as I show from the public record and from interviewing his friends and from his own tax returns, derives from a subsidy that was derived from a tax increase! There’s an irony—George Bush got rich from a tax increase [a sales tax passed by voters in Arlington, Texas] that was funneled into his pocket inefficiently. The people who had to pay the tax got no benefit—most of them were not baseball fans—from this subsidy to build a stadium for the Texas Rangers [baseball team Bush owned].
You might think that companies that get subsidies would make bigger profits than normal. But Adam Smith told us that subsidies bring in brash adventurers who often end up making no profit, and the evidence is that Cabela’s doesn’t appear to be particularly profitable. Cabela’s in fact, in its first three years as a publicly traded company, had $223 million in profit, and subsidy deals worth $293 million. I argue that they are not in the business of selling sporting goods; they are in the business of reeling in subsidies.
reason: Why do you think these practices continue if the towns and cities that agree to them are getting reamed?
Johnston: When I ask town burghers why they indulge in this practice, they generally say, “Excuse me, if we don’t they’ll build in the next town over and we lose that business; we have to do this.” I think, “Excuse me, what happened to the notion that it’s part of your duty to protect the pockets of the people you represent?”