The Wisdom of Bastiat, as Revealed by Great Moments in Federal, State, and Local Government
January 30, 2015 by Dan Mitchell
I’ve periodically cited the great 19th-century French economist, Frederic Bastiat, for his very wise words about the importance of looking at both the seen and the unseen when analyzing public policy.
Those that fail to consider secondary or indirect effects of government, such as Paul Krugman, are guilty of the “broken window” fallacy.
There are several examples we can cite.
A sloppy person, for instance, will think a higher minimum wage is good because workers will have more income. But a thoughtful analyst will think of the unintended consequence of lost jobs for low-skilled workers.
An unthinking person will conclude that government spending is good for growth because the recipients of redistribution have money to spend. But a wiser analyst will understand that such outlays divert money from the economy’s productive sector.
A careless person will applaud when government “creates” jobs. Sober-minded analysts, though, will wonder about the private jobs destroyed by such policies.
It’s time, though, to give some attention to another important contribution from Bastiat.
And what’s really amazing is that he reached that conclusion in the mid-1800s when the burden of government spending – even in France – was only about 10 percent of economic output. So Bastiat was largely limited to examples of corrupt regulatory arrangements and protectionist trade policy.
One can only imagine what he would think if he could see today’s bloated welfare states and the various ingenious ways politicians and interest groups have concocted to line their pockets with other people’s money!
Which brings us to today’s topic. We’re going to look at venal, corrupt, wasteful, incompetent, and bullying government at the federal, state, and local level in America.
We’ll start with the clowns in Washington, DC.
Remember when the unveiling of the Obamacare turned into a cluster-you-know-what of historic proportions?
Well, the Daily Caller reports that the IRS has just signed an Obamacare-related contract with an insider company that recently became famous for completely botching its previous Obamacare-related contract.
Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program. …IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database. The IRS contract is worth $4.46 million, according to the FPDS data.
Just one more piece of evidence that Washington is a town where failure gets rewarded.
And CGI is an expert on failure.
A joint Senate Finance and Judiciary Committee staff report in June 2014 found that Turning Point Global Solutions, hired by HHS to review CGI’s performance on Healthcare.gov, reported they found 21,000 lines of defective software code inserted by CGI. Scott Amey, the general counsel for the non-profit Project on Government Oversight, which reviews government contracting, examined the IRS contract with CGI. “CGI was the poster child for government failure,” he told The Daily Caller. “I am shocked that the IRS has turned around and is using them for Obamacare IT work.” Washington was not the only city that has been fed up with CGI on healthcare. Last year, CGI was fired by the liberal states of Vermont and Massachusetts for failing to deliver on their Obamacare websites. The Obamacare health website in Massachusetts never worked, despite the state paying $170 million to CGI.
For a company like this to stay in business, you have to wonder how many bribes, pay-offs, and campaign contributions are involved.
Now let’s look at an example of state government in action.
Kim Strassel of the Wall Street Journal has a column about a blatantly corrupt deal between slip-and-fall lawyers and the second most powerful Democrat in the Empire State.
New York Assembly Speaker Sheldon Silver was last week arrested and accused by the feds of an elaborate kickback scheme. …Mr. Silver is alleged to have pocketed more than $5 million in a set-up in which he directed state funds to the clinic of an asbestos doctor, who in turn provided him with patients who could be turned into jackpot plaintiffs. Weitz & Luxenberg, a class-action titan, paid Mr. Silver huge referral fees for these names, off which the firm stands to make many millions. …when the Silver headlines broke, Weitz & Luxenberg founder Perry Weitz said he was “shocked”… The firm quickly put the Albany politician on “leave.”
A logical person might ask “on leave” from what? After all, he didn’t do anything.
But he did do something, even if it was corrupt and sleazy.
…here’s the revealing bit. Queried by prosecutors as to what exactly the firm did hire Mr. Silver to do—since he performed no legal work—Weitz & Luxenberg admitted that he was brought on “because of his official position and stature.” In other words, this was transactional. Weitz & Luxenberg gave Mr. Silver a plum job, and Mr. Silver looked out for the firm—namely by blocking any Albany bills that might interfere with its business model.
So workers, consumers, and businesses get screwed by a malfunctioning tort system, while insider lawyers and politicians get rich. Isn’t government wonderful!
Just one example among many of how state governments are a scam. Perhaps now folks will understand why I’m not very sympathetic to the notion of letting them take more of our money.
Last but not least, let’s look at a great moment in local government.
As we see from a report in USA Today, a village in New Jersey is dealing with the scourge of…gasp…unlicensed snow removal!
Matt Molinari and Eric Schnepf, both 18, also learned a valuable lesson about one of the costs of doing business: government regulations. The two friends were canvasing a neighborhood near this borough’s border with Bridgewater early Monday evening, handing out fliers promoting their service, when they were pulled over by police and told to stop. …Bound Brook, like many municipalities in the state and country, has a law against unlicensed solicitors and peddlers. … anyone selling goods and services door to door must apply for a license that can cost as much as $450 for permission that is valid for only 180 days. …Similar bans around the country have put the kibosh on other capitalist rites of passage, such as lemonade stands and selling Girl Scouts cookies.
Though, to be fair, it doesn’t seem like the cops were being complete jerks.
Despite the rule, however, Police Chief Michael Jannone said the two young businessmen were not arrested or issued a ticket, and that the police’s concern was about them being outside during dangerous conditions, not that they were unlicensed. “We don’t make the laws but we have to uphold them,” he said Tuesday after reading some of the online comments about the incident. “This was a state of emergency. Nobody was supposed to be out on the road.”
But the bottom line is that it says something bad about our society that we have rules that hinder teenagers from hustling for some money after a snowstorm.
Just like these other examples of local government in action also don’t reflect well on our nation.
Let’s close with my attempt to re-state Bastiat’s wise words. Here’s my “First Theorem of Government.”
And if you think what I wrote, or what Bastiat wrote, is too cynical, then I invite you to check out how politicians are bureaucrats are squandering money on Medicare, the Veterans Administration, the Agriculture Department, Medicaid, the Patent and Trademark Office, the so-called Consumer Financial Protection Bureau, the National Institutes of Health, Food Stamps, , the Government Services Administration, unemployment insurance, the Pentagon…
Well, you get the idea.
Which is why this poster is a painfully accurate summary of government.