Of Politics and Economic Reality, by Amar Bhide, New York: Basic Books, 224 pp., $15.95
If politicians are corrupt, then why not, as economist Milton Friedman once mischievously suggested, auction political office to the "highest bidder? In this way, free-market competition would drive up the price of holding office (to an amount approaching, but less than, the anticipated profits from political corruption). Proceeds could go to the state's general fund, rather than to television and radio stations, printers, political managers, and pollsters (like me).
In fact, the problem is not that most politicians are crooks. Thieves can steal only so much. In contrast, systematic expropriation (that is, as a matter of public policy) overwhelms us, as politicians curry favor by redistributing wealth to a myriad of special interests.
Amar Bhide's thesis, spelled out in Of Politics and Economic Reality, is "that Western governments have not really been pandering to their electorates' short-term needs (as many critics of government decisionmaking argue) and that politicians have failed to realize how sound economic policies can also be popular." If Bhide means by sound economic policies those that allow the free market to work (and I'm not sure that he does), then he means that libertarianism, which staunchly supports such policies, can now win elections, which it cannot (maybe someday, but not now).
He points to public disenchantment with government, such as the increasing percentage of those who believe government is "pretty much run by a few big interests looking out for themselves." But big-government politicians and limited-government politicians both cite public disenchantment. So should we argue whether nonregistered or stay-at-home voters are turned-off libertarians who want government to do less, or poor people who want government to do more?
Many people are distressed by the National Education Association (NEA) or the farm subsidy program or the Export-Import Bank. But teachers who oppose tobacco subsidies support federal aid for education, and business executives who criticize education boondoggles lobby for taxpayer-guaranteed, low-interest loans for exports. Voters who oppose special interests do not see themselves as a special interest.
Candidates flatter the voter by appealing to his or her "common sense." But voters are uninformed, usually by choice: they are lazy or feel helpless or consider other pursuits more important or some combination. Bhide criticizes those of us who say politicians can be marketed, like detergents, through TV ads. Drawing an analogy between political candidates and expensive stereo systems or automobiles, Bhide argues that neither can be sold like soap. But autos were sold like soap for many years in this country, with General Motors seeking product differentiation through TV advertising, just as Procter & Gamble seeks to differentiate similar soap products. Candidates, too, are like undifferentiated products seeking identity. Without issues, they win on the basis of personality.
What Bhide's work lacks is a grasp of the real political world. Consider a few examples.
Says Bhide, "Spending projects…do have political costs: the taxes needed to pay for the expenditures alienate voters even if they do not directly associate their higher taxes with the spending projects." What Bhide overlooks is that political costs are aggregate (people are willing to pay their "fair share"—whatever that means—of taxes). Benefits, however, are perceived as individual (people generally will not oppose a program seen, rightly or wrongly, as in their own self-interest, if "someone else" is paying). Thus, Los Angeles taxpayers will continue to support an absurd Metro subway system if the federal government will foot the bill. But they will oppose it if they have to pay for it entirely themselves. Moreover, many voters are inconsistent—wanting lower taxes and more programs.
Bhide also asserts that "more spending did win votes at the time of the New Deal, but it doesn't any longer." In fact, the Democratic platform of 1932 was to cut spending; and political rhetoric, more often than not, has been either (a) to limit or cut spending or, more precisely, (b) to limit or cut their spending; that is, spending for programs that benefit others, but not spending for one's own favorite government program. Gary Hart talked Bhide's line, but were Hart and Mondale really significantly different? What about the liberals who expediently argue that we simply need to make the welfare state more efficient? Bhide is right about one thing—politicians don't argue in favor of government waste.
On another point, Bhide claims that "if spending had no political costs, fiscal conservatives would find it nearly impossible to dislodge free-spending governments.…[But] many profligate politicians have been trounced." What about the role of style, personality, or effectiveness of campaign advertising? Big-spender US Sen. Alan Cranston stays in power because he gets plenty of favorable news coverage, provides effective "constituent service," and has been blessed with weak opponents. Bhide ignores that perception, not reality, controls. Even if his thesis about the rejection of big-spending politicians were correct, observe that such politicians mail (at public expense) newsletters that headline their (contrived) budget cutting. My surveys show that voters who believe that the (big-spending) US Congress is doing a poor job also believe their (big-spending) member of Congress is doing a good job.
Bhide goes on to argue that "where…spending is so high that the majority of voters, including all the middle class and many poor, feel oppressed by their taxes…public spending [is in a] 'failurezone.'" He seems to forget that the poor are less likely to vote. Moreover, while they may pay imputed taxes (the tax burden as passed to them in the price of goods or services), they do not make such a calculation. Nor do they perceive sales taxes as regressive to them. Again, Bhide does not understand that although programs such as welfare, for example, may be unpopular in principle, voters do not consider their favorite projects to be welfare.
Of so-called failure-zone spending, Bhide says, "since voters don't like (even accidentally) to be robbed by a misguided Robin Hood or bullied by a Big Brother, failure-zone spending is obviously not rational." However, Bhide again forgets that politics is perception, not reality. (And most voters do favor the graduated income tax.)
Bhide summarizes his conclusions in terms of their significance for politicians: "Whereas politicians of twenty years ago could hope for only modest advantages by changing the level of spending, politicians today can expect major payoffs if they can satisfy the electorate's hunger for real reductions in their tax burden." However, surveys indicate that voters are willing to support tax hikes to pay for programs they like or, in some cases, in order to cut the federal deficit. In another section, Bhide also confuses voter dissatisfaction with property taxes (as evidenced in the passage of Proposition 13 in California) with dissatisfaction with taxes in general; my own surveys show substantial support for a "split-roll" concept, in which businesses pay sharply higher taxes than individuals.
Making specific recommendations in light of his overall thesis, Bhide argues that "radical cuts should be made in unemployment and sickness benefits since these provide the least benefit to most voters." He forgets that they do provide benefits to those who get the money, and recipients of these benefits will not give up without a fight. Also, voters who empathize with those believed to be the "truly needy" will oppose such cuts. Bhide does not understand that wishing will not make it so. Furthermore, he neglects the point made by Milton Friedman, among others, that each special interest fights aggressively to protect its own programs, while the rest of us are spread thinly in opposition to the countless programs that don't directly benefit us.
"To get spending out of the failure zone," says Bhide, "welfare has to be cut." But just what does Bhide mean by welfare? Some of us might include entitlements in welfare, but Americans do not include Social Security, Medicare, veterans benefits, etc., in that category.
Bhide lectures us ("public services cannot be given away to win votes") and tells us the obvious ("protectionism is a stultifying force") and speaks down to us ("monetary policies have a major impact on the economy and on the pocketbook of voters"). Nowhere, however, does he come to grips with the tragic political reality that politicians are too liberal, too cynical, or too dumb to consider the longterm economic consequences of short-term political actions. Henry Hazlitt taught us years ago that people (voters) are more likely to see the short-term benefits than the long-term costs. Politicians, like elections, are for the short term, and that's the problem, not the solution.
Arnold Steinberg is an independent political consultant.