Sorry, Congressman, but Your Vision Is Crushing Us

January 23, 2015

by Ryan Cummins

“I know, up on the top you are seeing great sights, but down here at the bottom we, too, should have rights.” — Yertle the Turtle by Dr. Seuss

Two articles that came across my desk recently illustrated such poor understanding of what government is — what it actually does and the consequences — that I must speak out.

The first is by a former Indiana congressman turned academic, Lee Hamilton, generally considered an elder statesman whose opinion about government is taken seriously by many people. That is troubling, though, given his thesis. It recommends a course of action that is immoral, unethical and destructive. (1)

Writing for the Center on Congress at Indiana University, Hamilton contends that government failures (he cites the Veterans Administration, the roll-out of ObamaCare, the attack on the World Trade Center, among others) could be solved if we had better people in government doing a better job.

“No matter how good a policy, if good people aren’t available to carry it out, it will fail,” he states.

I have little doubt he means well — don’t they all? — but his evaluation is wrong, and the solution will make a bad situation worse. To paraphrase software writers, what Hamilton sees as government failures are not mere “bugs” but features.

Sorry to say, I wouldn’t expect better analysis from someone who has spent 34 of his adult years in government. But I’m just a guy who sells flowers in a small town in western Indiana. Who am I to challenge the word of a congressman?

I’ll answer this way: I have spent about the same number of years working in the private sector as Mr. Hamilton has spent in office. These last three decades I paid my own payroll, paid my own invoices, paid the price of regulations imposed by all levels of government and was the unfortunate bearer of actual burdens resulting from those government “failures” described so clinically and dispassionately by the congressman.

And like Dr. Seuss’ Yertle the Turtle, the experience has taught me that the solution is to step off the rock and out from under the crushing burden of someone else’s grand, self-serving vision. Indeed, it tells me that the state is acting, operating, imposing, legislating and regulating exactly as any reasonable person might expect — that is, not very well, even destructively.

The point here is that the scandals and problems cited by Hamilton are the inevitable outcomes resulting from disincentives that are fundamental to government in general and to politicians and bureaucrats in particular. And they are not limited to Washington, D.C.; the same disincentives exist for state and local governments.

Hamilton’s retort might be that when good people in government do good work, the incentives in government align for the better. If this were true, my argument — that the very nature of government, the “state,” leads to bad results, to a diminution of both individual liberty and property rights — could be safely dismissed.

A Statist Success Story?

But it cannot be so dismissed, and this leads to a second unsettling and related article. It was published by Inside Indiana Business and was coupled with a press release from the U.S. Department of Agriculture. (2) It reflects the type of good news, the success of the state, that Hamilton might put forward as an example of what happens when competent people implement “good” policy in government.

To summarize, the article and release tout a government program known by the tongue-twisting name of “USDA Rural Development Value-Added Producer Grant Program.” With a name like that, believers in government might say, it’s got to be good. Anyone with even a modicum of faith in the state would consider this glowing report as evidence of a successful government program, run by qualified people. It is, perhaps, the congressman’s view of what good work is possible, what keeps people like him going.

The report tells of several businesses receiving government “grants” to fund new commercial activities. Presumably, these firms can now expand, hire more local people, sell more and enjoy greater potential because of this government program.

Indiana’s lieutenant governor encourages similar programs under the umbrella of the state’s Office of Small Business and Entrepreneurship. Here is a sample of its acronym-studded gobbledygook: (3)

“Our teams at the Office of Community and Rural Affairs (OCRA), Indiana Housing and Community Development (IHCDA), the Indiana State Department of Agriculture (ISDA) and the Indiana Office of Defense Development (IODD) are already providing outreach and opportunities for Indiana small businesses. We believe the synergies created by our cross collaborations will foster greater capacity building for individuals and their communities as they explore new ways to create jobs and expand.”

Is that Hamilton’s vision for us? Such programs are anything but successful. In fact, they are much more than just unsuccessful. Those politicians and bureaucrats who enable such programs, as well as the business owners who participate, should be ashamed and embarrassed rather than congratulating themselves in press releases.

Frederic Bastiat, in his famous 1848 essay What is Seen and What is Unseen, wrote this:

“In the economic sphere, an act, a habit, an institution, a law produces not only one effect but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

“There is only one difference between a bad economist and a good one. The bad economist confines himself to the visible effect while the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” (4)

We can find the unseen of the USDA Rural Development Value-Added Producer Grant Program in its own press release and related article.

The U.S. Secretary of Agriculture is quoted as announcing “investments” to help rural businesses grow, diversify and create jobs. That is obviously a good thing because successful private businesses do things such as grow larger, diversify into new products and services, and hire more people as a result. Oddly, though, no explanation is given as to why rural businesses would need that help and suburban or urban businesses would not.

Be that as it may, the agriculture secretary further describes in detail the size of this “investment” — $25 million in 2014, over $100 million since 2009. The word investment is in quotes when referring to this money because the secretary’s meaning of the word is at odds with its commonly accepted economic meaning. Investing, as truthfully understood, means to risk one’s own money in hopes of creating profit, ROI (Return on Investment) being a common financial term.

But you should suspect that the secretary and former Representative Hamilton have in mind something else entirely. For what is going on here is not an investment in any free-market sense but rather usurpation. The money did not come from the private funds of the secretary or the representative or even monies accountably budgeted to the USDA or the federal government. Neither the government nor this particular bureaucracy earned any profits on other operations with which they are now “investing” in rural businesses.

Rather, the state confiscated, under severe penalty, the property (profits) of successful businesses and turned it over to those clever enough to have lobbied for it. Economists call this “rent seeking,” the spending of wealth on political persuasion to increase one’s share of already existing wealth without creating any new wealth.

But that doesn’t make for a compelling political speech or press release, does it? It is not even news. The Indiana businesses receiving the money merely used the force of government to get what they could not gain voluntarily, a distressingly common occurrence throughout history when the state intervenes in a market. This supposedly successful government program constitutes welfare pure and simple, fancy names and fuzzy wording notwithstanding.

The Destruction

Earlier, I described this general approach as immoral, unethical and destructive. Bastiat helped us understand why it is immoral and unethical. Let’s turn to Henry Hazlitt and his seminal book, Economics in One Lesson, for why it is destructive:

“The government spenders forget they are taking money from A in order to pay it to B. Or rather, they know this very well, but while they dilate upon all the benefits of the process to B, and all the wonderful things he will have which he would not have had if the money had not been transferred to him, they forget the effects of the transaction on A. B is seen; A is forgotten.

“It sees the people in whose hands the capital is put; it forgets those who would otherwise have had it. It sees the project for which the capital is granted; it forgets the projects from which the capital is withheld. It sees the immediate benefit to one group; it overlooks the losses to other groups, and the net loss to the community as a whole” [emphasis mine].

“Government aid to business is sometimes as much to be feared as government hostility. The government can give no financial help to business that it does not first or finally take from business. The government’s funds all come from taxes. When the government makes subsidies to business, what it does is to tax successful private businesses in order to support unsuccessful private businesses.” (5)

Not only are successful business people deprived of their property and the ability to use it as they see fit, Hazlitt tells us, but also inferior and less-capable business people are given the use of the confiscated property.

How can I call the business recipients of this government program inferior and less capable? It is self-evident. They came into possession of the money through force and coercion, not through voluntary exchange or increased productivity. It is crony capitalism, a destructive aberration of the morally superior voluntary actions found in true free-market capitalism.

The profitable, more efficient businesses will now have less ability to grow, diversify and create jobs. The less efficient businesses now have use of the property but because they are less efficient, and they will not grow, diversify and create jobs to the same extent. This is a net loss (destruction) in production and wealth; the nation is now poorer than before.

This is failure by any reasonable person’s definition but it is touted as a “successful government program.” You should doubt if this country could stand much more success of this nature.

There are identifiable villains in this story. They are the politicians like Lee Hamilton who fail to understand the fundamental nature of government and wreak destruction in their attempts to “do good” with the force of the state. These same politicians are the enablers of the bureaucrat, the source of rationalization for such policy, and, when in office, their votes put the stamp of approval on destructive tax expenditures.

There are the bureaucrats, such as the secretary of agriculture, who claim to work for the common good but actually work to perpetuate the existence of bureaucracy. They indulge a fatal conceit in trying to pick winners and losers with other people’s money. They make it their job to make sure the USDA Rural Development Value-Added Producer Grant Program continues regardless of its destructive consequences.

Finally, there are those rent-seeking business owners, large and small, local and national. It is critical to make the distinction between those who make a profit because they provide a good or service others value, and those who are wealthy because they are close to government and are granted special privileges by the state and not the market. They gladly accept the Faustian bargain of a short-term gain for themselves at the cost of long-term loss for everyone else, including, eventually, their own companies.

Conclusion

Is there a way out of this?

Well, the first thing is to reject the self-serving clichés of Congressman Hamilton. Indeed, he finished his article for Indiana University with the suggestion that it is our fault, that as an electorate we have not been diligent: “As election season approaches, insist that your favored candidate work harder on making government more efficient and effective.”

Really? Hardly a candidate in the history of this country hasn’t made that claim at some point in a campaign. And if everyone wants efficiency and effectiveness from their government, why are the results of statist efforts so pervasively, so uniformly the opposite?

Obviously, the solution is not a matter of a simplistic posture of “better people governing better.” If we are going to have government that truly exists by the consent of the governed, it will be a matter of strictly and severely limiting government to only the protection of the individual rights of life, liberty and property.

It begins and ends with each of us rejecting the state’s siren call of the subsidy, educating ourselves on the benefits of real liberty, defending without compromise our rights to life, liberty and property. We might learn that, like Yertle the Turtle, we can step off that rock and out from under that burden. We might realize it is a consequence of the flawed vision driving men like Lee Hamilton.

Ryan Cummins, a business owner and an adjunct scholar of the Indiana Policy Review Foundation, is a former chairman of the appropriations committee of the Terre Haute Common Council.

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Endnotes

1. Lee Hamilton. “Why government Fails, and What We Should Do About It.” The Center on Congress at Indiana University. Aug. 6, 2014.

2. Inside Indiana Business. “Hoosier Farmers Harvest Federal Dollars.” U.S. Department of Agriculture Report, Aug. 19, 2014.

3. Indiana State News Release. “Governor Pence and Lt. Governor Ellspermann Launch the Office of Small Business and Entrepreneurship.” June 27, 2013.

4. Bastiat, Frédéric. Selected Essays on Political Economy. Seymour Cain, trans. 1995. Library of Economics and Liberty. Retrieved January 11, 2015, from the World Wide Web: http://www.econlib.org/library/Bastiat/basEss1.html.

5. Hazlitt, Henry. Economics in One Lesson. (New York, New York: Harper & Brothers, 1946), 23, 31-32.



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