The Golden Age of Libertarianism That Never Was

Thomas Frank's Pity The Billionaire bounces a reality check.

In one of his reportedly few sober moments, the legendary statesman and tippler Sen. Daniel Patrick Moynihan (D-N.Y.), is rumored to have said, "Everyone is entitled to his own opinion, but not his own facts." Weirdly, the lack of definitive sourcing for that quotation only confirms its essential validity.

But what happens when the facts seem so different among people that there's virtually no common ground for conversation, much less resolution of basic differences?

I thought a lot about that question — not to mention drinking — while reading Thomas Frank's new book, Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right, which he announces as "a chronicle of a confused time, a period when Americans rose up against imaginary threats and rallied to economic theories they understood only in the gauziest of terms." A University of Chicago-trained historian who co-founded the hip left-wing journal The Baffler and pulled a stint as the token liberal on the Wall Street Journal's opinion pages, Frank has written a series of books about American culture and politics, most famously What's the Matter with Kansas? (2004).

To Frank, fears that government intervention into the economy and debt-fueled spending helped to cause and perpetuate the financial crisis are plainly "imaginary." He believes that the economic "theories" America is currently embracing are hardcore austerity measures ripped from the playbook of Herbert Hoover, circa 1929. "The revival of the Right," says Frank, "is as extraordinary as it would be if the public had demanded dozens of new nuclear plants in the days after the Three Mile Island disaster; if we had reacted to Watergate by making Richard Nixon a national hero."

Where to begin separating facts from opinions? For starters, it's simply wrong to claim, as Frank does, that "the main political response to [the financial crisis of 2008] is a campaign to roll back regulation, to strip government employees of the right to collectively bargain, and to clamp down on federal spending."

Certainly the tea party, a handful of people in Congress (most of them with the last name Paul) and some policy wonks would welcome such moves. But far from being power brokers, such folks are little more than utopian dreamers, as likely to be attacked by their allies as by their enemies. The toughest fight that tea party favorite Rand Paul had in becoming the junior senator from Kentucky in 2010 came from House Minority Leader Mitch McConnell, who did everything he could to keep him from gaining office.

Lest we forget, the major response to the financial crisis in 2008 was the bailing out of Wall Street and the auto companies under a conservative Republican president and the implementation of an $800 billion stimulus plan promoted by a Democratic president.

That's not to mention a health-care reform package that was routinely described as "historic" and "transformational" at its passage. Ironically, such immediate, massive and — in the case of the stimulus — ineffective actions are in keeping with those of Herbert Hoover. After all, the stimulus failed to achieve any of the targets set by its proponents.

Contrary to Frank's claims, Hoover was never a fan of government austerity (at least while he was in office). According to economist Randall G. Holcombe, Hoover increased federal expenditures in real terms by 88 percent between 1929 and 1933.

Perhaps the major interventions of the last few years sneaked through under the wire because too many of us were traumatized by the collapse of Bear Stearns (and yet another Pittsburgh Steelers victory in 2009's Super Bowl). But in fact, spending and regulations ballooned tremendously all through George W. Bush's presidency — and still show no sign of slowing down.

In constant 2010 dollars, the federal government spent about $2.3 trillion in 2001. By 2010, the total was around $3.6 trillion. And though the federal government has not passed (and will not pass) a budget for a third straight year, the two plans currently on the table envision spending either $4.7 trillion or $5.7 trillion in 2021. The lowball figure comes from the budget that passed the GOP-controlled House last spring. The higher number comes from President Obama's budget proposal.

If austerity is the new black, the news has yet to reach the people who actually wield power in the capital. And if the Washington elite aren't serious about cutting spending, they sure aren't hell-bent on cutting red tape and regulations either.

For self-evident reasons, George W. Bush and the Republicans soft-pedaled the fact that, over the course of his presidency, he hired 90,000 net new regulators, signed the Sarbanes-Oxley bill that radically complicated corporate accounting practices, passed a record number of "economically significant" regulations costing the economy $100 million or more and, says economist Veronique de Rugy, spent more money issuing and enforcing federal regulations than any previous chief executive.

Obama is continuing the trend by increasing employment at regulatory agencies by more than 13 percent and issuing 75 major rules in his first two years.

All this happened during what Frank calls "the golden years of libertarianism." So I have problems understanding what he is talking about when he issues dicta such as "free-market theory has proven itself to be a philosophy of ruination and fraud."

He is surely correct that many anti-government types conveniently minimize the role bad actors played in banks, financial houses and elsewhere in the private sector in causing the financial crisis. But he also never provides a compelling response to the argument (common among libertarians) that the root of the problem remains implicit and explicit bailout guarantees that securitize irresponsible risk-taking. When it comes to free markets, I feel more like quoting Gandhi's answer when asked how he felt about Western civilization: "I think it would be a good idea."

"Pity the Billionaire" suffers not just from a lack of engagement with what I consider reality. It dismisses out of hand those with whom the author disagrees. Members of the broadly defined right, says Frank, "blow off the facts when they feel like it; they swipe symbols from the other side." I hear him, and I even have some sympathy when he cries in exasperation, "What kind of misapprehension permits the newest Right to brush off truths that everyone else can see so plainly?"

What indeed, brother, what indeed? We live in an era of "beer summits" and diplomatic "resets" and a screwed-up economy in which inflated housing prices are not allowed to fall to the depressingly low levels they might actually be worth. In ways he surely didn't mean to, Thomas Frank's "Pity the Billionaire" has helped explain why so many of us seem to be talking past each other.

Nick Gillespie is the editor in chief of Reason.tv and Reason.com and the co-author, with Matt Welch, of The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America (PublicAffairs). A version of this ran originally at The Daily on January 7, 2012.