Losing Arguments

Are free market ideas beating a retreat?


"We're losing," is the provocative and depressing starting point from which Fox Business Network host John Stossel begins his meditation on how liberty is counterintuitive. In the never-ending battle of political and philosophical ideas, the facts on the ground'"current government policy and the way we talk about it'"would seem to indicate that the free market, limited government, individual freedom side of the debate has consistently and convincingly lost the argument.

Take federal spending: In March, Rep. Paul Ryan (R-Wisc.) proposed, and House Republicans passed, a budget blueprint that increases federal spending over the next decade from $3.6 trillion to $4.9 trillion (in current dollars), and according to the Congressional Budget Office never once comes close to balancing any year's budget during that time frame. At a time when debt levels and entitlement time bombs are putting the nation at severe financial risk, Ryan's budget should be seen as inadequate to the task of averting catastrophe. Instead, he's being accused of deliberately starving the poor.

Ryan's budget, President Barack Obama said in early April, "is a Trojan horse. Disguised as deficit reduction plans, it is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism. It is antithetical to our entire history as a land of opportunity and upward mobility for everybody who's willing to work for it." 

Instead of laughing off the social Darwinism charge'"which remains as inaccurate today as when historian Richard Hofstadter popularized it a half-century ago to slime Victorian philosopher Herbert Spencer'"the nation's commentariat applauded the president's truth telling. "His remarks," The New York Times editorialized, "promise a tough-minded campaign that will call extremism and dishonesty by name." Economist Jared Bernstein, a former top adviser to Vice President Joe Biden, seconded the motion at Rolling Stone's website. "According to Rep. Ryan's plan, the trouble is this: The poor and middle class have too much and the rich have too little," Bernstein wrote. "The Ryan plan wants to vastly shrink the role of government."

Bill Clinton's last submitted budget was $1.8 trillion. Barack Obama's first was $3.6 trillion. We are growing government so fast and so programmatically that the choice between jacking up the federal price tag to either $5.8 trillion (Obama's preference) or $4.9 trillion (Ryan's) is being portrayed as the difference between tightening our belts and hacking off our own limbs. No wonder the GOP is afraid to actually cut government: Just slowing down the rate of increase gets you branded as a murderer. 

This state of affairs represents a failure of limited government counter-narratives. Public opinion polls have shown a widespread aversion to bailout economics and Keynesian stimulus since the fall of 2008, but that still hasn't bubbled up into the brains of the political class. Consider the way we're still talking about the financial crisis.

"For much of the last century, we have been having the same argument with folks who keep peddling some version of trickle-down economics," Obama charged in his social Darwinism speech. "Now, the problem for advocates of this theory is that we've tried their approach'"on a massive scale.…Huge, reckless bets were made with other people's money on the line. And our entire financial system was nearly destroyed."

Totally absent from the president's rogue's gallery were the Butch Cassidy and Sundance Kid of the mortgage meltdown: A Federal Reserve that flooded the market with artificially cheap dollars, and a government housing apparatus that dominated the mortgage industry and helped create the market for exotic and highly leveraged derivatives. The biggest "reckless bet" that was made "with other people's money" was the federal government's own guarantee of more than 90 percent of the country's mortgages.

Obama's version of events, which remains popular in the media, is important because it was translated into both official research and policy. The government's Financial Crisis Inquiry Commission (FCIC), a bipartisan but majority-Democrat group of economic thinkers, concluded last year that the crisis should be pinned not on moral hazard or central planning follies, but primarily on "widespread failures in financial regulation and supervision," mixed with corporate misbehavior. 

On page 30, Reason Foundation Director of Economic Research Anthony Randazzo talks with an FCIC commissioner who was on the losing side of that particular argument: American Enterprise Institute scholar Peter Wallison. "If they'd done an honest job," Wallison says, "we would have had a different answer to what happened in the financial crisis. They didn't." The result? The Wall Street-regulating Dodd-Frank Act, which Wallison claims "is the principal cause of the semi-recession that we are still struggling through."

Should those who see government fingerprints all over the financial crisis just acknowledge defeat? Not yet. As Wallison points out, "Every Republican presidential candidate has said the cause of the financial crisis was Fannie Mae and Freddie Mac and government housing policy.…If a Republican beats Barack Obama in the next election, we will have, at least in the White House, someone who accepts the correct narrative."

Even if Obama wins re-election (which is what I'd bet), there remains a small but growing bloc in Congress '"Republican so far'"that not only embraces a different housing policy narrative, but actively seeks to cut instead of slow-grow government. Sens. Rand Paul (R-Ky.), Jim DeMint (R-S.C.), and Mike Lee (R-Utah), the same month Ryan announced his plan to balance the budget some day in the distant future, unveiled a far more radical blueprint that would do the job in just five years, by (among other things) lopping off the Departments of Energy, Commerce, Education, and Housing and Urban Development. If Republicans re-take control of the Senate in November, such proposals may start winding up on President Obama's desk.

But looking at these arguments purely through the lens of short-game electoral politics misses some important points. For one, party identification matters a whole lot less than principle, as anyone who remembers unified Republican government under George W. Bush can attest. Mitt Romney campaigned his way to the nomination not by embracing tough-minded fiscal reform, but by running to President Obama's left on Medicare cuts, to Texas Gov. Rick Perry's left on Social Security, and to former House Speaker Newt Gingrich's right on military spending. If you aren't talking about the big three growth areas of the federal budget, you are not a credible budget-balancer, let alone a cutter. And if you can't screw up the courage to discuss such things in a GOP primary campaign after nearly four years of calamitous and unpopular economic policy, when exactly are you planning to bring it up?

The battle of ideas is a long slog, with surprising victories awaiting the persistent and defeats facing the complacent. As this issue of reason was going to print, the Supreme Court heard three days of oral arguments about the Patient Protection and Affordable Care Act, better known as ObamaCare. Supporters of the bill had spent months in the run-up ridiculing the notion that compelling Americans to buy health insurance might run afoul of the Constitution's Commerce Clause, and predicted a lopsided victory for the administration.

But libertarian legal scholars, who for decades have been playing the long game on Commerce Clause jurisprudence against overwhelming numbers, ran circles around the government's lawyers in the courtroom, paving the way for a final vote that will be much closer than many esteemed legal analysts thought possible. Perhaps the lesson is as simple as this: People who get used to winning eventually stop competing. We may be losing, but as long as we keep up our end of the argument, anything is possible.

Editor in Chief Matt Welch is co-author, with Nick Gillespie, of The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America (PublicAffairs).