Saturday, March 1, 2008

more examples of reversing Robin Hood

From Brian Doherty's interview with New York Times reporter David Cay Johnston in Reason-- on the occasion of the publication of his book, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)...

I wrote about this topic at great length in my first book, Poor Policy. First, I laid out a common model from "Public Choice" economics-- of wealth redistribution where small, subtle costs are imposed on the general public and a special interest group receives concentrated benefits. One implication of this is that the general public is "rationally ignorant and apathetic" because the costs to it as so small-per-person and not worth learning about or addressing. A sad punchline to this is that the recipients can be wealthy, undeserving or both.

Then, for seven chapters, I explained how this model extended to food, clothing and shelter, from education to drug prohibition, from health to housing, from indirect to direct redistribution.

Doherty says that Johnston's book is...

-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

-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

But Doherty provides this caveat:

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.

Now, an excerpt from the interview...

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]....


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