Michael S. Swisher

Michael S. Swisher

Thursday, 26 April 2018 12:23

Animadversions

Animadversions

Michael S. Swisher

Michael S. Swisher is chairman of the board of Religion and Society, the foundation that publishes The St. Croix Review.

Bugaboos of the Chattering Class — Populism

     What is “populism”? According to many editorial-page writers, think-tank pundits, television commentators, and opinion journalists, it is one of the factors to credit — or more often, to blame — for the passage of the Brexit referendum and the election in 2016 of President Donald Trump.

     Merriam-Webster defines a populist as “a believer in the rights, wisdom, or virtues of the common people.” Other descriptions characterize populism as “support for the concerns of ordinary people” or as “the quality of appealing to or being aimed at ordinary people.”

     Such definitions make populism seem almost synonymous with democracy, which is a word derived from the Greek demokrateia, or government by the people. Yet, in its present usage, populism is almost always employed in a pejorative sense, as it was in a recent article headlined “Populism’s Challenge to Democracy.”[1] How can a polity based on belief in the wisdom, rights, or virtues of the common people “challenge” democracy?

     Before its recent revival, the word “populism” was a term most commonly associated in American politics with the career of William Jennings Bryan (1860-1925). Bryan entered politics in 1890, having been elected to Congress from the First District of Nebraska. Depressed agricultural conditions prevailed there, and his victory, as a Democrat in a normally Republican district, was an upset. He was an accomplished debater, and soon drew national attention to himself by two noteworthy speeches — one in 1892, against protective tariffs, and another in 1893 against the repeal of the Sherman Silver Purchase Act. Bryan blamed the rigidity of the gold standard for the panic of 1893. He advocated a policy of “easy money,” which was to be achieved by monetizing silver at a fixed ratio of 16:1 with gold. This was a highly inflationary proposal in its effect, since at the time, the market price of silver per ounce was much less than 1/16 that of gold. Bryan rode his free-trade, easy-money platform to the Democrats’ presidential nomination in 1896, 1900, and 1908.  

     Slightly later, what has sometimes been called “prairie populism” swept across the upper Midwest drawing on widespread antipathy to eastern bankers, railroad men, mill owners, who where seen as benefiting at the expense of small farmers. It ran the gamut from the liberal Republicanism of Sen. Robert M. LaFollette, Sr. (1855-1925) in Wisconsin, to the shifting allegiance of Rep. Charles August Lindbergh (1859-1924), the father of the aviator, who had begun in political life as a Republican was by its end a candidate of the Farmer-Labor Party, to the Nonpartisan League in North Dakota, which began as a Republican faction, but ended up pursuing overtly socialist policies, establishing a state-owned bank, a state-owned elevator and flour mill company, and a state-owned railroad. Prairie populism even spread into the western provinces of Canada, with the foundation of the Co-operative Commonwealth Federation (CCF), which described itself as “Farmer-Labour-Socialist.”

It is clear that what is called populism today has very little to do with this historic populism. Bryan was opposed to tariffs and favored an inflationary policy; Trump is, if not a protectionist, using the threat of tariffs to extract more favorable trade agreements with foreign countries. The prairie populists were of a decidedly left-wing disposition; Trump has, according to the Heritage Foundation, implemented more conservative policy goals in his first year as president than any previous incumbent had since 1977, when Heritage began keeping track.

     In short, Brexit and the 2016 presidential election were unpleasant surprises for the intelligentsia — the “chattering class.” The people, the “basket of deplorables,” are at fault. Their political action is represented as “populism,” and “challenge to democracy,” because the intelligentsia has fetishized democracy for so long — World War I was fought to “make the world safe for democracy,” after all — that it cannot bring itself to attack democracy itself, even though that is what it wishes to do, and is in fact doing.

     The Founding Fathers mistrusted democracy. As educated eighteenth-century gentlemen, they were far better acquainted with the Greek and Latin classics than most people are today. They knew that Aristotle had considered democracy an unstable form of government, prone to fall into tyranny. They bore in mind the examples of the failure of the ancient Athenian democracy before the aggression of Alexander the Great and his successor, and of the descent of the Roman republic into civil war followed by the principate of Augustus Caesar. They knew how a prevailing majority could oppress and crush political minorities, and therefore incorporated anti-democratic features in the Constitution — the apportionment of two senators to each state, regardless of population; the indirect election of senators; the Electoral College; and the requirement of super-majorities to ratify treaties and amendments to the Constitution. Even more important than these were the checks and balances that separated and limited the power of each Constitutional branch, and the Bill of Rights, which absolutely forbade certain actions on the part of government.

     Yet the objections of the intelligentsia to democratic results with which they disagree are not satisfied by the Constitution’s restraints on democracy. Indeed, the intelligentsia finds the Constitution, with its limits on governmental power, to be itself a source of frustration. The roots of their antipathy to limited government go back at least a century, to about the same period when the original populism of Bryan and the prairie populists was flourishing. Indeed, if populism arose in response to plutocracy, then the intelligentsia’s embrace of technocratic government perhaps arose as a reaction to populism. The great theorist of technocracy was Walter Lippmann, the long-time doyen of America’s public intellectuals.

     In his 1922 book, Public Opinion, Lippmann argued that the masses are incapable, on their own, of enlightened self-government, while the commercial and social leaders are myopically self-interested. Therefore, he thought, policies should be formulated by an educated elite — a clerisy or mandarinate, capable of disinterested and wise judgment. The job of the press and politicians would then be to propagandize and promote those policies, and to “manufacture consent” for them through the electoral process. As he wrote:

It is no longer possible, for example, to believe in the original dogma of democracy; that the knowledge needed for the management of human affairs comes up spontaneously from the human heart. Where we act on that theory we expose ourselves to self-deception, and to forms of persuasion that we cannot verify. It has been demonstrated that we cannot rely upon intuition, conscience, or the accidents of casual opinion if we are to deal with the world beyond our reach.”[2]

     By manufacturing consent for the preferred policies of the clerisy, the outward form of Constitutional government could be maintained, though empty of real substance. A classical parallel to this might be the way in which Rome under the principate kept up the pretense of maintaining its historic senate, consuls, and tribunes, though these were without real power, and the city was ruled by an emperor put in place by his Praetorian guard.

     The application of Lippmann’s theory in domestic political practice was accompanied by Congress’s cession of its legislative authority to “alphabet agencies” that made a travesty of the separation of powers — combining in each one the power to promulgate regulations having the force of law through publication in the Federal Register; the power to enforce it through field agents (many of them armed and authorized to use deadly force); and the power to adjudicate alleged violations before internal tribunals. This is the so-called administrative state that has predominated since the New Deal, and is decried by the Heritage Foundation and Steve Bannon alike.

     Anyone who might doubt that manufacturing consent is a burgeoning operation of government should be invited to contemplate two of its prominent exponents. Remember Jonathan Gruber, the “key architect” of Obamacare?

In November 2014, a series of videos emerged of Gruber speaking about the ACA at different events, from 2010 to 2013, in ways that proved to be controversial; the controversy became known in the press as Grubergate.’ In the first, most widely publicized video, taken at a panel discussion about the ACA at the University of Pennsylvania in October 2013, Gruber said the bill was deliberately written ‘in a tortured way’ to disguise the fact that it creates a system by which ‘healthy people pay in and sick people get money.’ He said this obfuscation was needed due to ‘the stupidity of the American voter’ in ensuring the bill's passage. Gruber said the bill’s inherent ‘lack of transparency is a huge political advantage’ in selling it. The comments caused significant controversy.

 

“In two subsequent videos, Gruber was shown talking about the decision (which he attributed to John Kerry) to have the bill tax insurance companies instead of patients (the so-called ‘Cadillac tax’), which he called fundamentally the same thing economically but more palatable politically. In one video, he stated that ‘the American people are too stupid to understand the difference’ between the two approaches, while in the other he said that the switch worked due to ‘the lack of economic understanding of the American voter.’. . .”[3]

     Perhaps the most prominent of today’s exponents of Lippmannism is Cass Sunstein, a former Obama advisor and currently the Robert Walmsley University Professor at Harvard Law School. His thinking is described in a lengthy and laudatory article in Harvard Magazine of which the following extract is a representative sample:

“In the conception of republicanism designed by James Madison and reflected in the Constitution, he wrote, ‘the system of checks and balances provided a serious obstacle to national regulation.’ As a result, ‘the vast majority of regulatory functions were undertaken by the common law courts’ in the states, in lawsuits about contract, property, and tort (wrongful acts) disputes, public as well as private.

“New Deal regulation rested on the conviction that the common-law system ‘reflected anachronistic, inefficient, and unjust principles of laissez-faire’ and was inadequate ‘because it was economically disastrous, insulated established property rights from democratic control, failed to protect the disadvantaged, and disabled the states and the national government from revitalizing or stabilizing the economy.’”[4]

     Sunstein, as the above makes clear, is not only a leading defender of the administrative state — he is also perhaps the leading advocate of state manipulation of public opinion. Where Gruber is contemptuous and gloating, Sunstein is condescending and paternalistic, betraying just as low an esteem for the intelligence of his fellow citizens. Government, he contends, ought not be confined to its customary role of enacting laws to prohibit crime — it should also encourage desirable behavior by “nudging” people in a preferred direction.[5] In a more sinister vein, he has proposed that government should employ “cognitive infiltration of extremist groups” whereby “Government agents (and their allies) might enter chat rooms, online social networks, or even real-space groups and attempt to undermine percolating conspiracy theories by raising doubts about their factual premises, causal logic or implications for political action.”[6]

That Sunstein trusts in the benignity of government, present or future, in the implementation of such “nudging” or “cognitive infiltration” activities, evinces either a remarkable ignorance of history on his part, or an overweening confidence that he and people of like mind will always be in charge — or perhaps both. The fears that Madison and his contemporaries felt are nowhere to be discerned in Sunstein’s writing — they were, after all, at fault for the “serious obstacles to national regulation” posed by the Constitution.

     From the time of Walter Lippmann to that of Cass Sunstein, there has been a concerted effort to supplant the substance of Constitutional government with technocracy. Elective politics has increasingly become a charade in which the technocrasy’s managerial class allows the public a strictly limited range of choices. The result is that when an election is held, whatever may be the result will serve the ends favored by the “well-informed.” This is then held out as exemplary of democratic self-government.

     So, to return to the question at the beginning of this essay — what is “populism”? It is what happens when an electoral process has escaped the control of the technocrats — as it did in the cases of the Brexit vote and the 2016 presidential election. It is nothing more or less than actual democracy, as opposed to the sham of manufactured consent. Populism does not challenge democracy, nor is it a threat to liberty, so long as we observe and enforce the constraints of genuine Constitutional government.     *

 


[1] William A. Galston, “Populism’s Challenge to Democracy,” Wall Street Journal, March 17-18, p. A11.

[2] Lippmann, Public Opinion (1922), chapter XV.

[3] https://en.wikipedia.org/wiki/List_of_scandals_with_%22-gate%22_suffix

[4] “The Legal Olympian,” by Lincoln Caplan. Harvard Magazine, January-February 2015. https://harvardmagazine.com/2015/01/the-legal-olympian

[5] “Nudging: A Very Short Guide,” 37 J. Consumer Policy 583 (2014)

[6] “Conspiracy Theories,” Cass R. Sunstein and Adrian Vermeule, Harvard University Public Law and Legal Theory Research Series, Paper No. 199, and University of Chicago Law School Law and Economics Research Paper Series, Paper No. 387. Electronic copy available at: http://ssrn.com/abstract=1084585

Wednesday, 21 February 2018 11:05

Animadversions

Animadversions

Michael S. Swisher

Michael S. Swisher is chairman of the board of Religion and Society, the foundation that publishes The St. Croix Review.

Do Cuts in Tax Rates Cause Deficits?

The tax reform bill recently passed by Congress and signed by President Trump cut the corporate income tax rate from 35 percent to 21 percent, reduced personal income tax rates slightly, and cut the rate at which income from so-called “pass-through” business entities such as subchapter S corporations and limited partnerships is taxed to their owners.

One argument that opponents of cutting tax rates always advance is the claim that doing so leads to deficits. Many of the opponents of tax rate cuts are, to be sure, leftists, who regard business and “the rich” as enemies, and the tax code as a stick with which to beat them. On the other hand, even supposedly conservative writers fall all too easily into the habit of assuming that reductions in tax rates necessarily imply reductions in tax revenues.

One example is the National Review writer Kevin Williamson, who recently wrote: “It [the tax bill] will also add about $1.5 trillion to the national debt.”

This claim takes “static scoring” at face value. It is based on the favorite assumption of economists, cœteris paribus — a Latin phrase meaning, “all other things being equal.” Yet, in real life, they never are. Taxes are the price of government, and like any price they are subject to the law of diminishing marginal returns. People change their economic behavior in response to taxation, just as they do when any price rises or falls.

Tax rates and tax revenues never change in direct proportion. Is it too much to ask that persons writing about economics be familiar with the data?

The cuts in tax rates during Ronald Reagan’s and George W. Bush’s administrations are often blamed for the deficits that occurred during their time in office. For this to have been the case, tax revenues would have had to fall — and they did not.

Total Federal tax revenues in fiscal year (FY) 1980, the last full fiscal year of Jimmy Carter’s administration, were $517.112 billion. In FY 1981 they rose to $599.272 billion; in 1982 to $617.766 billion; in 1983 they fell to $600.562 billion; in 1984, rebounded to $666.438 billion; in 1985, rose to $734.037 billion; in 1986, to $769.155 billion; in 1987, to $854.288 billion; in 1988, to $909.238 billion.

Thus, during the entire administration of Ronald Reagan, Federal tax revenues each year exceeded those collected during the last, or any previous year of Jimmy Carter’s, and rose every year except for FY 1983. The highest revenues were those collected in 1987 and ’88, during which the maximum personal income tax rate was reduced from 50 percent to 28 percent.

In FY 2003, the year during which the 2003 so-called Bush tax cuts were passed (which reduced the Federal tax rates on qualified dividends and capital gains to 15 percent), total Federal tax revenues were $1,782.314 billion. In 2004 they rose to $1,880.114 billion; in 2005, to $2,153.611 billion; in 2006, to $2,406.869 billion; in 2007, to $2,567.985 billion; in 2008 they fell to $2,523.991 billion, signaling the start of the recession.

All of the above information is readily available on the informative website of the Tax Foundation.

Deficits in the referenced periods occurred because spending exceeded revenues — not because revenues fell.

Williamson cannot bring himself to say anything in Trump’s favor — so he wants to blame the tax bill in advance for deficits that will undoubtedly occur in the future. Yet if the past is any guide to the future, the cuts in tax rates just enacted will not result in lower revenues. Deficits will originate, as they have before, from a failure to restrain spending.

One benefit of Trump’s policy goals, if he can achieve it, would be a reduction in the number of low-skilled unassimilable aliens present in the United States. They undoubtedly inflate the welfare rolls and will do so at an increasing pace unless their numbers are dramatically reduced. Higher welfare expenditures socialize the cost of the private benefit that the wage-depressing effect of untrammeled immigration delivers to employers of unskilled labor.

We conclude with the observation that a really good way to reduce entitlement spending would be to quit importing future welfare beneficiaries.

Is Trump Really a Protectionist?

We constantly hear that President Trump is a “protectionist.”

What protectionist measure has Trump actually put into force? The only concrete action he has taken of this kind has been to impose “safeguard” tariffs on imported solar panels and washing machines. This was done in response to petitions under existing U.S. trade law, using presidential authority last exercised in 2002 by no less a free-trader than George W. Bush. According to the Washington Post:

“In the solar panel case, massive Chinese government subsidies and industrial planning were blamed for a surge in China’s production of solar cells and modules, and the demise of up to 30 U.S. solar panel makers. China’s share of global solar cell production rose from 7 percent in 2005 to 61 percent in 2012, according to the USTR.”

“In the dispute over washing machines, the Commerce Department imposed duties on South Korean washing machine makers Samsung and LG in 2013 in response to Whirlpool’s complaints that its rivals were receiving government subsidies and selling their products in the U.S. below the cost of production.”

It is not clear that in such egregious cases, any other president might not have done the same. Indeed, this use of existing statutory authority is a useful reminder that the status quo is not one of “free trade” but rather one of managed trade, as it always has been.

For the most part, the difference between President Trump’s approach to trade issues as compared to that of previous incumbents has been in his public skepticism about multi-lateral trade agreements such as NAFTA, and his expressed willingness to threaten protectionist actions, rather than to take them.

Threatening to do something — in this case, to impose punitive tariffs — is not the same as doing it. Threats can be a useful negotiating strategy, as no doubt Trump has found in business.

It is somewhat surprising that none of the defenders of multi-lateral “free trade” arrangements who usually attack Trump for his “nationalist, protectionist” positions has noticed a recent article from The Financial Times. Its headline reads:

“China Offers Concessions to Avert Trade War with U.S.”

The article goes on to remark,

“China will offer the Trump administration better market access for financial sector investments and U.S. beef exports to help avert a trade war, according to Chinese and U.S. officials involved in talks between the two governments.”

So, here is an instance where Trump’s tough words prompted a trading partner to level the playing field a little bit more in America’s favor, with the result that China (which has been unapologetically mercantilist in its own trade policies) now has fewer, not more, barriers to competition from American businesses.

Apparently his critics would have preferred that Trump hadn’t secured freer trade with China in a way that was to American advantage.

Similarly, the reduction in corporate tax rates has now made manufacturing in America more attractive than it was, to the extent that it has caused China to respond with tax breaks of its own. From the Mercury News:

“China offers tax breaks to counter US tax cuts.”

Australia has also taken notice. From The Guardian:

“Scott Morrison says Australia needs tax cuts to offset hit from U.S. cuts”

Note that no tariff or duty has been imposed — instead, business tax cuts in the U.S. have made American products more competitive. Can those who attack Trump on trade explain how such “protectionist” results are so terribly bad for the United States?

New York Still Above Water!

According to a prediction made in 2008 by James Hansen, the former director of NASA’s Goddard Institute for Space Studies, a significant part of Manhattan was supposed to be submerged by 2018. He claimed that: “The West Side Highway (which runs along the Hudson River) will be under water. And there will be tape across the windows across the street because of high winds. . . . ”

The New Year has arrived — and this has not happened, nor is there any indication that it will in the immediate future.

Does anyone remember the Club of Rome, and the disaster predictions of Paul Ehrlich, who forecast a future of desperate shortage? Julian Simon proposed a bet of a market basket of commodities — if their prices went up, Ehrlich would win; if they went down, Simon would win. Simon won; no shortage materialized.

Does anyone remember the predictions of “Peak Oil”? There was no peak; the U.S. is now the world’s largest producer of petroleum — fracking having opened previously undiscovered supplies — and proven reserves are larger than ever.

Now, New York remains above water, despite Hansen’s prediction.

It is time to recognize that these people are not relying on “settled science,” but are rather acting in the tradition of apocalyptic prophecy. As so many people have abandoned the faith of their fathers, something has to fill the empty space left in their consciousness by its absence. For some it is occultism; for others, it is the existence of extraterrestrial life; and for others, it is the cult-like environmentalist prophecy of doom.

It is not surprising that Hansen is without embarrassment or shame — neither were the Club of Rome, Paul Ehrlich, or the “peak oil” prognosticators.

I am reminded of the Millerites, who anticipated the second coming of Christ “sometime between March 21, 1843 and March 21, 1844.” When it failed to happen, they first re-calculated that it would take place on April 18, 1844; then on October 22 of the same year. After that day passed like any other, the sect referred to it as “The Great Disappointment.” So, no doubt, it is for Hansen. He will persist in his delusion to the grave. The sad thing is that his followers are still so numerous and so over-represented in positions of influence over public policy.   *

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