Reason Magazine - Staff

No Depression?

matt.welch@reason.com (Matt Welch) — Tue, 02 Dec 2008 09:26:00 EST

It's becoming increasingly clear that the battle of ideas over all things related to our newly certified recession and $8.5 trillion (so far) bailout is boiling down to a fascinating revisionist face-off over the Great Depression: its causes, its effects, its solutions. Are we indeed in, or headed toward, the worst economic crisis since the Great Depression, and if so what lessons apply? A Greek-tragedy twist on all this is that Fed Chair Ben Bernanke is an economic historian who specialized in...the Great Depression! As such, his thoughts on the analogy are both fascinating and crucial. Here's what he said yesterday:

"Well, you hear a lot of loose talk, but let me just ... say, as a scholar of the Great Depression -- and I've written books about the Depression and been very interested in this since I was in graduate school, there's no comparison," Bernanke said in a question period after an address in Austin, Texas.

Bernanke cited "an order-of-magnitude difference" in the current situation compared to the 1930s.

"During the 1930s, there was a worldwide depression that lasted for about 12 years and was only ended by a world war," he said.

"During that time, the unemployment rate went to 25 percent, at least, based on the data that we have. The real GDP (gross domestic product) fell by one-third. About a third of all of the banks failed. The stock market fell 90 percent." [...]

Still, the Fed chief said lessons learned from the Depression may still apply today, including the "excessively tight monetary policy" that led to higher interest rates and deflation of about 10 percent a year over the first three years of the 1930s.

"We have learned from that experience that monetary policy has got to be proactive and supportive of the economy in a situation of difficult financial conditions," he said.

"The other part was -- the other error, the big mistake that policymakers made in the early '30s was they essentially allowed the financial system to collapse and they didn't do anything about it. The Federal Reserve did no action as the banks failed by the hundreds and the thousands."

More here, including a section about President Bush that seems to contradict Bernanke's this-ain't-the-'30s view:

President George W. Bush said in an interview released Monday that Bernanke and Treasury Secretary Henry Paulson warned him weeks ago that bold action was needed to avert a new Great Depression.

"I can remember sitting in the Roosevelt Room with Hank Paulson and Ben Bernanke and others, and they said to me that if we don't act boldly, Mr. President, we could be in a depression greater than the Great Depression," Bush told ABC News.

What has reason been writing on the Great Depression for the past 40 years?

* In January 2004, Julian Sanchez conducted a brief interview with Jim Powell, author of FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression.

* Four years later, Nick Gillespie interviewed The Forgotten Man author Amity Shlaes.

* In October 2004, Damon Root looked at "How FDR made life worse for African Americans."

* In June of this year, we polled seven market-friendly economic observers, all of whom (unlike me!) pronounced that we were either in or entering recession.

* At the height of bailout panic, we sampled another batch of libertarian economists about what they thought.

* And in a wonderfully prescient November 2006 piece, Brian Doherty discussed among five economic analysts (including Milton Friedman and Ron Paul) whether we can bank on the Federal Reserve, and specifically what they thought of Ben Bernanke's analyses of the Great Depression.

"Unlike bank bailouts and auto loan guarantees, state and local aid does not rely on the business strategies of traumatized corporate executives to be effective"

matt.welch@reason.com (Matt Welch) — Tue, 02 Dec 2008 08:17:00 EST

It's almost cute to watch them compete with one another for our money.

Obama's Numbers

matt.welch@reason.com (Matt Welch) — Mon, 01 Dec 2008 15:00:00 EST

I never quite understood libertarian enthusiasm for Barack Obama. Yes, his early and forceful opposition to the Iraq war made anti-interventionists swoon, but candidate Obama was, if anything, more belligerent than John McCain toward Pakistan, Afghanistan, and Sudan. The drug war? The former pot smoker has said he’d call off the Drug Enforcement Administration’s raids on legal medical marijuana facilities, but that’s about it. (Recall, too, that he’ll have as vice president the very senator who created the odious position of “drug czar.”) Executive power? He’s been strangely silent about rolling back the excesses of George W. Bush and Dick Cheney, and he voted in 2008 to expand federal snooping into the affairs of innocent Americans. Property rights? Free speech? Capitalism? Guns? Surely you jest. (For a look at what Washington libertarians expect out of the new administration, see David Weigel’s “Beat the New Boss,” page 18.)

Only one pro-Obama—as opposed to anti-Republican—argument ever really resonated with me, and that was the notion that, unlike McCain and most Republican presidential nominees of recent vintage, Obama did a relatively credible job of making sure his budget figures “added up.” There was, I repeatedly read and heard from economic number crunchers such as The Atlantic’s Megan McArdle, a genuinely impressive attempt to translate the hot air of campaign promises into the cold reality of a plausible balance sheet. “What I’ve done throughout this campaign is to propose a net spending cut,” Obama said in his final pre-election debate with McCain. “I have been a strong proponent of pay as you go. Every dollar [in spending] that I’ve proposed, I’ve proposed an additional cut so that it matches.”

You should never take a politician at his word. But you should listen to what he campaigns on day after day, especially if he goes on to win big. Amid Obama’s host of illiberal campaign ideas—“fair” trade, centralized energy policy, New Deal–style infrastructure projects, more federal dollars into the sinkhole of public schools—the Democratic candidate also spiced his daily stump speech with a firm-sounding nod to fiscal responsibility. Coupled with a sorry budget situation that’s certain to get worse as a result of massive income tax losses from Wall Street, this commitment to fiscal sobriety may strangle many of Obama’s more expensive fantasies in the crib and crack open the door for ending or privatizing any number of inefficient federal programs.

This may sound like wishful thinking, but is it any more unrealistic than the expectation that a Republican administration will push for markets and limited government? As economics columnist Veronique de Rugy details on page 24, the outgoing Bush administration has increased the size of the federal government by just about every meaningful metric, to an extent not seen in several decades. Despite all the Democratic rhetoric to the contrary, this expansion includes a sharp growth in regulation. (For more on Wall Street regulation in particular, see Katherine Mangu-Ward’s “Is Deregulation to Blame?,” page 36.) It may be hard for Republicans older than me to accept, but voters who have known only the Clinton and Bush presidencies have little reason to believe that Republicans are preferable to Democrats on limiting government and keeping budgets halfway sane.

Somewhere along the way, making sure the numbers added up ceased to be a Republican virtue. The 2000 presidential election was fought largely over what to do with all those marvelous budget surpluses, which were estimated then at more than $4 trillion and assumed by all major candidates to stretch out past the horizon. Bush swore that “the best way to…make sure that the federal budgets don’t become bloated and don’t grow” was to cut taxes by more than $1 trillion. When his unified Republican government proceeded to bloat the federal budget in ways not seen since Lyndon Johnson, turning record surpluses into record deficits almost overnight, Bush just shrugged, holstered his veto pen (until late in his second term), and made halfhearted promises in every State of the Union address to “reduce” the deficit and really crack down on spending this time around. It was only slightly more believable than his fabled mission to Mars.

Today’s deficit (currently estimated at $1 trillion for fiscal 2009 alone) is tomorrow’s tax liability, in the form of ever-increasing debt service payments. It’s also a broken windows–like symbol that government has all but given up trying to live within any kind of budgetary discipline. Many Republicans during the Bush era stopped even pretending to care about any small-government notions aside from tax cuts. “The one mistake that could cripple a second Bush term,” Grover Norquist of Americans for Tax Reform told me just after the 2004 elections, “is to accept the campaign promise to ‘cut the deficit in half in four years’ as a central goal of the administration.” That way “tax cuts are a problem,” Norquist said, “and Democrats have an equally valid solution: raise taxes.”

Turns out there was more than one mistake capable of crippling Bush, without his lifting a finger on the deficit. And Republicans’ singleminded pursuit of tax cuts as the only meaningful manifestation of limited government has ended up undermining public support for both.

Obama is perfectly capable of telling economic policy whoppers of his own. In addition to seconding every last bit of financial fear mongering that the Bush administration shamefully deployed to sell a deeply unpopular and ill-advised bailout (see Mike Flynn’s “Anatomy of a Breakdown,” page 26, and Tim Cavanaugh’s “Houses of Pain,” page 40), Obama in his victory speech on election night nonsensically described the current economic situation as “the worst financial crisis in a century,” while continuing to perpetuate the myth that America’s “middle class” is embattled, dwindling, and poor. He has missed few opportunities to bash trade with China, is fond of such absolutist non sequiturs as “we cannot have a thriving Wall Street while Main Street suffers,” and he’s threatening to usher in the most left-bent economic program since at least the final year of George W. Bush.

But to paraphrase Bruce Springsteen, the president-elect has bills no honest man can pay, balanced against a campaign pledge to deal with budgeting honestly. “We’re not going to be able to go back to our profligate ways,” Obama said in the final debate. “We need to eliminate a whole host of programs that don’t work. I want to go through the federal budget line by line, page by page.”

Actually, that level of detail isn’t required. Obama could save more than $20 billion a year just by eliminating farm subsidies (subsidies that help keep the truly poor mired in poverty by blocking their ability to sell farm products to the world’s largest economy). There’s at least another $60 billion worth of federal corporate welfare out there begging to get snipped. Earmarks squander $20 billion a year.

There are bigger fish to fry in the military budget. Withdrawing from Iraq, Obama has estimated, will bring in $150 billion, and there are many billions more of potential savings being thrown every year to places such as the Korean peninsula. Real budgetary discipline would mean that we stop funding the Iraq war, the Afghan war, and any number of unvetted weapons systems through the deceitful and unprecedented “emergency supplemental spending” process.

All over the country, state and local governments are facing blown budgets and untenable pension obligations tied to plummeting stocks. New York Gov. David Paterson came to Washington just before the election rattling the cup for a federal bailout of his own. He won’t be alone. The good news, if there is any, is that Obama won’t be able to deliver medicine for everyone who ails. And if he’s serious about his campaign pledge to be fiscally responsible, Washington may even be the source of a little long-overdue pain.

Matt Welch is editor in chief of reason.

"But what about those of us in the nonprofit world? Where's our bailout?"

matt.welch@reason.com (Matt Welch) — Mon, 01 Dec 2008 11:39:00 EST

Nope, not The Onion. Here's the sales pitch:

My child-care agency, supported largely by government contracts -- federal and state dollars partially matched by county funds -- went nine years without an increase in the rate of funding it receives. During those years, the cost of a child-care worker rose from $23,000 a year to $29,000 a year. Multiply that figure by our 100 child-care workers, and we are facing a $600,000 shortfall in just one job category. No industry in the public or private sector could have survived nine years of flat funding.

How will we make up that shortfall? Fundraising? Unlikely, in this economy. And investment losses have had a profoundly negative effect on endowed organizations. We need a bailout.

reason's sock puppet and assorted goodies here.

$8.5 Trillion and Counting

matt.welch@reason.com (Matt Welch) — Mon, 01 Dec 2008 10:54:00 EST

The L.A. Times on Sunday updated the numbers on 2008's historic (and historically awful) round of bailouts, and came out with a shiny new figure: $8.5 trillion. It's a useful piece of journalism, so I almost hate to complain, but the lead-paragraph framing is really annoying:

With its decision last week to pump an additional $1 trillion into the financial crisis, the government eliminated any doubt that the nation is on a wartime footing in the battle to shore up the economy. The strategy now -- and in the coming Obama administration -- is essentially the win-at-any-cost approach previously adopted only to wage a major war.

What a godawful mix of imprecise, played-out metaphors ("wartime footing," "battle," "major war") and couldn't-possibly-be-accurate absolutism ("eliminated any doubt," "win-at-any-cost approach," "only"). As in the inaccurate, propogandistic usage of "rescue" over "bailout," this paragraph conveys the impression that the financial crisis can be likened to a finite, singular goal, one that can be accomplished if only you marshal enough resources. Neither are true. Globalized economies are organisms that evolve constantly, not stationary mountains that can be climbed with enough sherpas. And by definition, not all government interventions into a national economy get you closer to the goal of allaying a capital-C Crisis, particularly when key elements of said Crisis (politicized lending practices, moral hazard caused by federal guarantees, cheap monetary supply, mark-to-market accounting rules) were caused by...government intervention!

Anyway, the rest of the article is actually about that latter conundrum, which is another reason to read it. Here is a section devoted to sanity:

Once the financial crisis eases, higher interest rates and soaring inflation will be risks. If they materialize, they could dramatically increase the government's borrowing costs to meet its annual debt payments. For consumers, borrowing could become more expensive even as the price of everyday items rise, holding back economic growth.

"We could have a super sub-prime crisis associated with the meltdown of the federal government," warned David Walker, president of the Peter G. Peterson Foundation and former head of the Government Accountability Office.

My only quibble there being with the word "if," since we will have bailout-triggered inflation, mes amis.

And here's a quote that scares me:

"You just throw everything you have at the problem to try to fix it as quickly as you can," said David Stowell, a finance professor at Northwestern University's Kellogg School of Management. "We're mortgaging our future to a certain extent, but we're trying to do things that give us a future."

As the economics journalist Amity Shlaes told Nick Gillespie in a January 2008 interview, such kitchen-sink problem solving, and the uncertainty it creates, certainly prolonged the Great Depression. A selection from that interview:

Both the Hoover and Roosevelt administrations (but especially the Roosevelt administration) were so unpredictable. That hurt the economy very much, and when I went back and saw the extent I was astounded. Uncertainty is a factor that I thought needed to be explored. There were lots of people who said, "I will not invest 'til I know what's going to happen."

During the Depression, you heard the phrase "bold, persistent experimentation" all the time. We've been taught that was good. Somebody had to do something, was what we learned. But what I saw was this enormous cost, especially during the second half of the 1930s.

Where Ano Means Yes

matt.welch@reason.com (Matt Welch) — Wed, 26 Nov 2008 12:51:00 EST

The Telegraph (UK), and by extension the Drudge Report, are expressing wonder that, judging by the credit default swaps (CDS) market, "California is now priced as a greater bankruptcy risk than Slovakia 150."

As a former resident of both states, I can testify that this is an unfair slap...at Slovakia.

An economy that was widely predicted to fail at the time of Czechoslovakia's Velvet Divorce grew at a European Union-leading 10.7 percent last year. Unlike certain countries I could name, the domestic auto industry is booming. Inflation is at 7.5 percent, but trending heavily this past decade in a positive direction. And Bratislava's latest budget deficit figures look a damn sight better than Sacramento's $28 billion nightmare.

In the 1990s a common refrain among Americans journalists covering the great post-communist transitions was, "Would the U.S. ever tolerate economic austerity plans this severe?" In 2008, regrettably, I think we have found our answer.

"This is how you clowns are spending EIGHTY BILLION DOLLARS of taxpayer money, whining to comedy blogs?"

matt.welch@reason.com (Matt Welch) — Tue, 25 Nov 2008 18:45:00 EST

There are probably more effective ways for bailout beneficiary AIG to spend its time than sending multiple e-mails to Wonkette.

At What Price Is Saving a House, When the Savior Might Break the No-Siren Rule?

matt.welch@reason.com (Matt Welch) — Mon, 24 Nov 2008 16:23:00 EST

The L.A. Times has a story out about fire prevention and firefighting efforts paid for by private insurance plan, with the following subhead:

Some residents whose homes were saved in the recent blazes thank response teams dispatched by their insurers. But public firefighters express uncertainty about the private sector.

Juicy conflict! Let's hear why firefighters paid by the state feel uncertain about those paid by insurance companies and homeowners who live in fire zones:

Santa Barbara County Fire Capt. Eli Iskow said the companies can be a valuable resource, but they tend to exaggerate the number of homes they save and sometimes get in the way.

On a more philosophical level, he questions the social benefit of for-profit firms providing services only for some.

"When firefighters battle flames," he said of public crews, "they don't make a distinction between a $50-million Oprah mansion and a tract home."

Ventura County Fire Chief Bob Roper, who is vice chairman of Firescope, a statewide panel that makes recommendations on firefighting policy, believes there is a place for private contractors. But their best use, he said, is early in the fire season when they visit homes and suggest ways to reduce fire risks.

"We have found some very reputable contractors and others that are less than reputable," Roper said. "It's a hazard if they block an access point or if we end up having to rescue them."

Roper said he's seen private trucks using flashing red lights and sirens, violating laws that allow such devices only on public emergency response vehicles.

The problem with private crews, Roper said, is that they are largely unregulated.

To briefly sum up: Private firefighters....
1) "tend to exaggerate"
2) "sometimes get in the way" (no examples cited)
3) work first to protect homes that pay for their services
4) are sometimes "less than reputable" (no examples cited)
5) could conceivably "block an access point" or require rescue (no examples cited because it's a hypothetical)
6) sometimes break the no-siren/lights rule, with adverse consquences we can only guess at
7) are "largely unregulated"

Which is not exactly the level of hysteria brought to the subject during the last fire season by liberal stalwarts Rick Perlstein, Naomi Klein, and Chris Hayes...but it's a pretty thin complaint nonetheless, considering that California has, and always will have, more fire than firefighters each and every October and November.

What's great, too, is that the lead anecdote in the story doesn't actually talk about private firefighters at all, but rather how one house was saved because the owner's $10,000-plus premium coverage included squirting the perimeter of his compound with (commercially available!) fire retardant.

My reason rant against the burn-the-rich set is here.

The Voodooest Economics of Them All

matt.welch@reason.com (Matt Welch) — Mon, 24 Nov 2008 11:00:00 EST

If you've successfully managed to keep your breakfast down for this long, don't read this Bloomberg News analysis of the bailout extravaganza. Your lead paragraph:

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

Gulp. Ignore the misuse of the word "rescue," and the challengable assertion that you couldn't get credit in August of 2007, and plow ahead into one of the most gruesome tabulations since the Jonestown Massacre (or the Brian Jonestown Massacre, for that matter):

The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14. [...]

President Franklin D. Roosevelt's New Deal of the 1930s, when almost 10,000 banks failed and there was no mechanism to bolster them with cash, is the only rival to the government's current response. The savings and loan bailout of the 1990s cost $209.5 billion in inflation-adjusted numbers, of which $173 billion came from taxpayers, according to a July 1996 report by the U.S. General Accounting Office.

The 1979 U.S. government bailout of Chrysler consisted of bond guarantees, adjusted for inflation, of $4.2 billion, according to a Heritage Foundation report.

In other words, comparing the other government interventions during our lifetimes to what we've seen in the Late BushCapitalism era is like comparing fleas to an elephant. Well, at least they're being transparent about it!

Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral.

Collateral is an asset pledged to a lender in the event a loan payment isn't made.

"Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting," Bernanke said Nov. 18 to the House Financial Services Committee. "We think that's counterproductive."

reason on the bailout here.

What Happens When You Decline Pre-Reeducation

matt.welch@reason.com (Matt Welch) — Fri, 21 Nov 2008 18:21:00 EST

Alexander McPherson, professor of molecular biology and biochemistry at UC Irvine, is not the world's biggest fan of AB 1825, the 2004 California bill signed into law by, *cough*, Arnold Schwarzenegger forcing any state employer with more than 50 workers to subject its supervisors to sexual harassment training. So when McPherson continued to tell UCI that he "refused, on principle" to be trained, they were like, "That's cool, this is a university after all."

Ha ha, not really (and not really funny, either).

Last month, the university finally followed through, sending me a letter announcing that my laboratory and the students I oversaw were to be immediately turned over to other university officials and faculty. I continued to refuse to take sexual harassment training, and do so now.

Why so stubborn, professor?

First of all, I believe the training is a disgraceful sham. As far as I can tell from my colleagues, it is worthless, a childish piece of theater, an insult to anyone with a respectable IQ, primarily designed to relieve the university of liability in the case of lawsuits. I have not been shown any evidence that this training will discourage a harasser or aid in alerting the faculty to the presence of harassment.

What's more, the state, acting through the university, is trying to coerce and bully me into doing something I find repugnant and offensive. I find it offensive not only because of the insinuations it carries and the potential stigma it implies, but also because I am being required to do it for political reasons. The fact is that there is a vocal political/cultural interest group promoting this silliness as part of a politically correct agenda that I don't particularly agree with.

The imposition of training that has a political cast violates my academic freedom and my rights as a tenured professor. The university has already nullified my right to supervise my laboratory and the students I teach. It has threatened my livelihood and, ultimately, my position at the university. This for failing to submit to mock training in sexual harassment, a requirement that was never a condition of my employment at the University of California 30 years ago, nor when I came to UCI 11 years ago.

Read McPherson's whole cri du liberte here.

This kind of stuff drives me plum loco. Sexual harassment is already plenty illegal in California; the forced training is because lawmakers were chagrined to discover that criminalization hadn't eliminated every stray ass-grab and Kojak-style boss. More importantly (to me, anyway), is the pile-up of government-enforced behavioral oaths, whether it's to swear to uphold the state constitution (another University of California specialty) or to pretend that marijuana is a dangerous drug. I hope McPherson has an active legal defense fund.

Cathy Young wrote about campus sexual harassment politics for reason back in 1999.

Serve the Servants

matt.welch@reason.com (Matt Welch) — Wed, 19 Nov 2008 17:52:00 EST

If ever you wanted to see the inner workings of an unfocused mind, particularly one plugged into the zeitgeist of the country's momentarily dominant political ethos, you could do worse than reading the output of California's most overrated columnist, the L.A. Times' Steve Lopez. Here Lopez makes the following assertions about National Service, apparently without irony:

* FDR's Civilian Conservation Corps "kept service strong and unemployment low during the Great Depression." (The Corps was created in 1933; unemployment averaged 18 percent for the ensuing six years, and was higher in 1938-40 than it was in 1937.)

* The California Conservation Corps, with significant goosing from an Obamatastic federal government, might just help the Golden State "become the capital of the clean energy industry, using service agencies to recruit and train kids beginning in middle school and high school," which will help them "be linked along the way with clean energy employers who might later hire them."

* Even though "it's a huge cost," and the federal government is "throwing money around like there's no tomorrow" (as Lopez approvingly quotes once-and-future California governor Jerry Brown), that just makes the case for AmeriCorps that much stronger in a world of Wall Street bailouts. "If there's money for them," Lopez concludes, "then why not for our youth, now that they're lined up and ready to march?"

To paraphrase reason Contributing Editor Julian Sanchez from five years back, if the kids are indeed "lined up and ready to march," I'm pretty sure it ain't my tax dollars that's preventing their little legs from stomping in unison. And as Paul Thornton pointed out in our pages this spring, candidate Obama spoke of "a goal of having middle and high schoolers contribute at least 50 hours a year to community service." Also, 18-year-old women under an Obama administration can look forward to the patriotic pleasures of mandatory "selective" service.

There's a l-o-n-g list of Obama National Service ideas up over at The New American. His chief of staff, Rahm Emanuel, called for "universal civilian service" in his book of two years ago. Meanwhile, some are floating the idea that Obama appoint ex-rival John McCain as Service Czar (a prospect I'd put money on), and Arianna Huffington, for one, is keeping the president-elect's feet to the fire on this, one of his most oft-repeated campaign promises. "Obama must turn his words into action and follow through on his promise to emulate FDR's Civilian Conservation Corps, JFK's Peace Corps, and LBJ's Vista," Huffington wrote today, adding: "A crisis is a terrible thing to waste."

House Negro, Please

matt.welch@reason.com (Matt Welch) — Wed, 19 Nov 2008 12:32:00 EST

Al-Qaeda is trying to taunt the president-elect, drive a wedge between post-racial transcendence and Malcom X, or both:

Ayman al-Zawahri said in the message, which appeared on militant Web sites, that Obama is "the direct opposite of honorable black Americans" like Malcolm X, the 1960s African-American rights leader.

In al-Qaida's first response to Obama's victory, al-Zawahri also called the president-elect—along with secretaries of state Colin Powell and Condoleezza Rice—"house negroes."

Speaking in Arabic, al-Zawahri uses the term "abeed al-beit," which literally translates as "house slaves." But al-Qaida supplied English subtitles of his speech that included the translation as "house negroes."

The message also includes old footage of speeches by Malcolm X in which he explains the term, saying black slaves who worked in their white masters' house were more servile than those who worked in the fields. Malcolm X used the term to criticize black leaders he accused of not standing up to whites.

It will be interesting indeed to watch how the outside world–and not just the Islamo-nutsandwiches–react to a half-black American president. Judging by Silvio Berlusconi's early example, we could be in for some comedy.

I Had a Dream, I Had an Awesome Dream

matt.welch@reason.com (Matt Welch) — Wed, 19 Nov 2008 12:00:00 EST

So I pick up the Sunday edition of the Los Angeles Times, and what do I see but a 16-page special section with a heroic, back-lit photograph of the president-elect under the banner headline:

CHANGE
-------------------
OBAMA'S MOMENT

It is an incredible thing to behold. The first words of defenestrated Washington bureau chief Doyle McManus' portentiously laid-out cover text were "WE ARE A DIFFERENT COUNTRY NOW." Page two featured a steely Norman Rockwell-style half-page illustration of the man; page four was topped by the following quote:

'He might be the best president we ever had. But even if he's the biggest jerk in the world, he's done an awesome thing for this country already.'
-- Anna Kormos, who struggled with doubts before voting for Obama

Page seven was a photo essay entitled "A CITY CELEBRATES." The page 8-9 double truck was dominated by this photograph:

The page 10 Michelle Obama story was adorned with the Onion-caliber headline "SPEAKING HER MIND, HEART," and on page 14, in case you didn't see it the first time around, my ex-colleagues over on the editorial board reprinted their "Obama for president" endorsement.

What the hell is going on here? In part, you have a major metropolitan newspaper taking the rare (for it) step of reacting to audience demand. The LAT was stunned and delighted to discover in the first several days after the election huge lines of readers actually demanding product, in the form of a reprint from the first post-election paper. Coupled with Obama's recent audience-spiking appearances on 60 Minutes and The Daily Show, we are beginning to see a strange new trend: The liberal media temporarily reversing its long decline by hyping the liberal president.

The second interpretation is somewhat less generous. Namely, the media is in full-on, unembarrassed (OK, maybe slightly embarrassed) gush mode. Connoisseurs of media bias will certainly have their hands full for at least the next six months.

The Anti-Socialist Wealth Redistributors

matt.welch@reason.com (Matt Welch) — Mon, 17 Nov 2008 10:50:00 EST

George Will on Sunday furthered his valuable recent service to the nation by giving Republicans the kind of intellectual shock therapy they'll need if they are to learn anything both useful and objectively pro-freedom from their electoral drubbing earlier this month:

Conservatism's current intellectual chaos reverberated in the Republican ticket's end-of-campaign crescendo of surreal warnings that big government -- verily, "socialism" -- would impend were Democrats elected. John McCain and Sarah Palin experienced this epiphany when Barack Obama told a Toledo plumber that he would "spread the wealth around."
America can't have that, exclaimed the Republican ticket while Republicans -- whose prescription drug entitlement is the largest expansion of the welfare state since President Lyndon Johnson's Great Society gave birth to Medicare in 1965; and a majority of whom in Congress supported a lavish farm bill at a time of record profits for the less than 2 percent of the American people-cum-corporations who farm -- and their administration were partially nationalizing the banking system, putting Detroit on the dole and looking around to see if some bit of what is smilingly called "the private sector" has been inadvertently left off the ever-expanding list of entities eligible for a bailout from the $1 trillion or so that is to be "spread around." […]
Hyperbole is not harmless; careless language bewitches the speaker's intelligence. And falsely shouting "socialism!" in a crowded theater such as Washington causes an epidemic of yawning.

Whole thing, well worth a Monday morning read, here.

Now He Tells Us

matt.welch@reason.com (Matt Welch) — Mon, 10 Nov 2008 16:21:00 EST

Remeber when Arnold Schwarzenegger was a Milton Friedman-quoting fiscal conservative out to clean up the irresponsible budgets of Singapore Gray Davis? Ah, memories:

"I think the important thing for the Republican Party is now to also look at other issues that are very important for this country and not to get stuck in ideology," the governor said in an interview broadcast on CNN. "Let's go and talk about healthcare reform. Let's go and . . . fund programs if they're necessary programs and not get stuck just on the fiscal responsibility."

reason on Schwarzenegger here.

The Palin Wars

matt.welch@reason.com (Matt Welch) — Mon, 10 Nov 2008 10:02:00 EST

It was clear within the first few days of her nomination as vice president that can-do Alaska Governor Sarah Palin was a peculiarly divisive political figure. But who knew she would become a one-woman Republican civil war?

Here's George Will, in a Sunday Washington Post column that I shall decorate with a few reason hyperlinks:

Some of the Republicans' afflictions are self-inflicted. Some conservatives who are gluttons for punishment are getting a head start on ensuring a 2012 drubbing by prescribing peculiar medication for a misdiagnosed illness. They are monomaniacal about media bias, which is real but rarely decisive, and unhinged by their anger about the loathing of Sarah Palin by similarly deranged liberals. These conservatives, confusing pugnacity with a political philosophy, are hot to anoint Palin, an emblem of rural and small-town sensibilities, as the party's presumptive 2012 nominee.
These conservatives preen as especially respectful of regular -- or as Palin says, "real" -- Americans, whose tribune Palin purports to be. But note the argument that the manipulation of Americans by "the mainstream media" explains the fact that the more Palin campaigned, the less Americans thought of her qualifications. This argument portrays Americans as a bovine herd -- or as inert clay in the hands of wily media, which only Palin's conservative celebrators can decipher and resist.
These conservatives, smitten by a vice presidential choice based on chromosomes, seem eager to compete on the Democrats' terrain of identity politics, entering the "diversity" sweepstakes they have hitherto rightly deplored.

Meanwhile over at RedState and Michelle Malkin's blog, there is, well, Operation Leper.

An intriguing subplot in all of this has been the role of certain magazines of opinion, and what that might say about a conservative moment that once embraced a distinct style of intellectualism. Here's Mark Lilla writing about "Populist Chic" in the Wall Street Journal:

John McCain's choice was not a fluke, or a senior moment, or an act of desperation. It was the result of a long campaign by influential conservative intellectuals to find a young, populist leader to whom they might hitch their wagons in the future.
And not just any intellectuals. It was the editors of National Review and the Weekly Standard, magazines that present themselves as heirs to the sophisticated conservatism of William F. Buckley and the bookish seriousness of the New York neoconservatives. After the campaign for Sarah Palin, those intellectual traditions may now be pronounced officially dead. [...]
Over the [last] 25 years there [has grown] up a new generation of conservative writers who cultivated none of their elders' intellectual virtues -- indeed, who saw themselves as counter-intellectuals. Most are well-educated and many have attended Ivy League universities; in fact, one of the masterminds of the Palin nomination was once a Harvard professor. But their function within the conservative movement is no longer to educate and ennoble a populist political tendency, it is to defend that tendency against the supposedly monolithic and uniformly hostile educated classes. They mock the advice of Nobel Prize-winning economists and praise the financial acumen of plumbers and builders. They ridicule ambassadors and diplomats while promoting jingoistic journalists who have never lived abroad and speak no foreign languages. And with the rise of shock radio and television, they have found a large, popular audience that eagerly absorbs their contempt for intellectual elites. They hoped to shape that audience, but the truth is that their audience has now shaped them.

I am not now and will never be a Republican (nor any other kind of political tribesman), but I have an active interest in seeing the two dominant political parties in this country embrace the maximum amount of freedom. Which, these days, isn't very maximum at all. What's particularly curious to me about this whole "We need new ideas to connect with those Sam's Club voters we never hang out with" meme is that I've seen very little enthusiasm for adopting a policy that has real juice out there in the grassroots of both parties–opposition to the ill-planned, panic-brokered, $2 trillion-and-counting bailout. The effects of which will be with us long after we remember the cruise-ship habits of star-struck opinion journalists.

Who Shall They Give my Money to Next!

matt.welch@reason.com (Matt Welch) — Fri, 07 Nov 2008 17:39:00 EST

In addition to the horror-show of government giveaways listed below, it now appears as though America's crappy car companies will be seeking another $50 billion from the money factory formerly known as the United States Treasury. And if President-Elect Obama's first press conference is any indication, there'll be more green where that came from come January:

The news coming out of the auto industry this week reminds us of the hardship it faces, hardship that goes far beyond individual auto companies to the countless suppliers, small businesses and communities throughout our nation who depend on a vibrant American auto industry.

The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.

I would like to see the administration do everything it can to accelerate the retooling assistance that Congress has already enacted.

In addition, I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States of America.

And I was glad to be joined today by (Michigan) Gov. Jennifer Granholm, who obviously has great knowledge and great interest on this issue.

I've asked my team to explore what we can do under current law and whether additional legislation will be needed for this purpose.

"Today there is a categorical difference between what Republicans stand for and the principles of individual freedom"

matt.welch@reason.com (Matt Welch) — Fri, 07 Nov 2008 15:46:00 EST

So sayeth Dick Armey, former Gingrich revolutionary and House majority leader from 1995-02. Armey, who now heads up Freedom Works, has uncharitable things to say about the last eight years of Republicanism:

Too often the policy agenda was determined by short-sighted political considerations and an abiding fear that the public simply would not understand limited government and expanded individual freedoms. How else do we explain "compassionate conservatism," No Child Left Behind, the Medicare drug benefit and the most dramatic growth in federal spending since LBJ's Great Society? [...]

The response by Mr. McCain to the financial crisis on Wall Street was the defining moment of the campaign. In what looked like a tailor-made opportunity to "clean up Washington," the Republican nominee could have challenged the increasingly politicized nature of Federal Reserve policies, and the inherently corrupt relationships between Fannie Mae, Freddie Mac and various Democratic committee chairmen. Instead, his reaction was visceral and insecure: He "suspended" his campaign and promised "to put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street." [...]

Republicans lost control of Congress in 2006 because voters no longer saw Republicans as the party of limited government. They have since rejected virtually every opportunity to recapture this identity. But their failure to do so must not be misconstrued as a rejection of principles of individual liberty by the American people. The evidence suggests we are still a nation of pocketbook conservatives most happy when government has enough respect to leave us alone and to mind its own business. The worrisome question is whether either political party understands this.

I don't know if Armey is right about the political calculus of it all, but I do know that if Republicans react to Tuesday's drubbing by embracing less individual freedom in the form enhanced cultural conservatism, they are flirting with the possibility of going extinct. Ask newspapers, for one, how that whole, don't-attract-customers-under-30 thing has worked out for them.

Some Dick Armey hits from the reason archives: Before the 2006 elections he explained why Republicans deserved to lose. A few weeks before that, he kicked social cons square in the be-hind. In 1997, he was interviewed by contributing editor Caroyln Lochhead. And earlier this year he was on reason tv, talking about immigration:

And the Bailout Rescue Goes on

matt.welch@reason.com (Matt Welch) — Fri, 07 Nov 2008 09:45:00 EST

The federal government is preparing to take tens of billions of dollars in ownership stakes in an array of companies outside the banking sector, dramatically widening the scope of the Treasury Department's rescue effort beyond the $250 billion set aside for traditional financial firms, government and industry officials said. [...]

Since the announcement of the program to inject capital into banks, a number of industries, including automakers, insurers and specialty lenders for small businesses have approached the Treasury with hat in hand. Some have been turned away because they are not banks and thus not eligible for capital.

The new initiative would make it easier for the Treasury to aid a wider variety of firms if their troubles put the wider financial system at risk, government and industry officials said.

Whole Washington Post story here. A sampling of reason pieces on the bailout here.

McCain's Classy Concession

matt.welch@reason.com (Matt Welch) — Wed, 05 Nov 2008 02:12:00 EST

Aside from the speech's almost astounding graciousness, note McCain's visceral disgust at the anti-Obama/Biden sentiments in the crowd. Sentiments he knows, on some basic level, that his campaign–especially the Sarah Palin wing of it–whipped up. As I mentioned in my column of this morning, McCain was extremely proud of the way he waged his campaign in 2000, and some important part of him must be flabbergasted that it was Barack Obama taking the comparative high ground this time around. McCain has always seen partisan politics as kind of dirty; to really compete on the presidential level, he convinced himself, he had to hold his nose, at least until the stench became too much to bear.

It's in that context that you should take in McCain's comment about Sarah Palin, that she's a "great campaigner." It played like a compliment to a ravenous Phoenix crowd that loved the Alaska governor much more than their own semi-native son. But coming from a man who chose his concession speech to make a forceful and moving address about race and unity in America, and who will no doubt be doing some serious soul-searching these next few weeks about the conduct of his failed campaign, it was probably more of an insult.

Re-Districting

matt.welch@reason.com (Matt Welch) — Wed, 05 Nov 2008 01:24:00 EST

Continuing my octennial tradition, I spent part of Election Night at the Ralph Nader party inside the National Press Club before taking a post-victory stroll around the White House. At Nader HQ, I had a very pleasant conversation with a Hit & Run-reading Nader-backer about Milton Friedman's ideas on the negative income tax.

The front of the White House, like indeed much of Washington D.C. right now, is a very big, very joyous young-people party. It's like Del Playa on a Friday, only starring every model who ever appeared in a Benetton ad. I saw two different two-man brass bands perform enthusiastically received versions of "When the Saints Go Marching In," which is a statement either about Hurricane Katrina, or about the limited repetoire of happy white dudes with trombones.

Unlike in 2000, the crowd outside was much more celebratory, much less shouting angry taunts in the direction of the presidential bedroom, for whatever little that's worth. It's a bit startling to have people roll down their windows and yell "O-ba-ma!" at you, but they seemed pleasant enough. Not for the first time, I wonder what it must feel like to vote for the winning team.

"Would I Stay True if...My Personal Ambitions Seemed... Achievable?"

matt.welch@reason.com (Matt Welch) — Tue, 04 Nov 2008 12:00:00 EST

In 1998, Sen. Russell Feingold (D-Wis.) faced a tough re-election fight from a Republican congressman named Mark Neumann. Feingold, co-author of the eventually successful (in passage, not in impact) Bipartisan Campaign Reform Act of 2002, decided to put his soft money where his mouth was, refusing any of the then-legal stuff to be spent on his campaign, even while outside groups contributed $2 million in soft money for Neumann. After sweating bullets, Feingold eked out a win by less than 40,000 votes.

This demonstration of principle over politics impressed the hell out of Feingold's campaign reform partner, Sen. John McCain (R-Ariz.)

"I thought about that experience when I decided that I would try to win the Republican presidential nomination in 2000," McCain wrote in his 2002 political memoir Worth the Fighting For. "I knew I was a long shot, and given the curious place I now occupied in the affections of much of the Republican establishment, and the causes I had come to be identified with, I didn't expect much help, financial or otherwise, from party regulars."

The rest of this revealing passage should be mandatory reading for every morning-after media weeper who frets about where "the real McCain" went in the fall of 2008: "I thought about Russ's principled risk in his reelection campaign and wondered if I would have the guts to protect my integrity even if it meant lengthening the odds against me. I didn't worry that I would betray my positions or myself as long as I remained a dark horse. But would I stay true if by some unexpected turn of events my personal ambitions seemed a little more achievable? There was no point in worrying about that, I decided. I was unlikely to get close enough to the prize where such temptations would become a concern."

The rich are indeed very different than you and me; rich politicians like McCain even more so. But how many grown-ups do you know who honestly don't know whether they would hold onto their principles if they got within shouting distance of a lifelong goal? That's not the worry of a settled man who automatically puts "country first"; it's the anxiety of an aging adolescent who knows too well the potential weakness of his knees.

The John McCain that the national press fell in love with (literally) back in 1999-2000 was a John McCain who knew he was going to lose to George W. Bush. The man was openly referring to Bush and the Repblican establishment that overwhelmingly backed the 41st president's son as "the Death Star," in a Republican primary. He called Christian conservatives "agents of intolerance," made speech-stifling (and GOP activist-handcuffing) campaign finance reform his central theme, and thundered against the "false front" of "national prosperity." Non-Republican reporters (including yours truly) might have eaten it up at the time, but it was a strategy designed explicitly for failure, and maybe a little longshot fun.

"My decisions about how I would try to win were made out of political necessity as much as principle," McCain wrote in Worth the Fighting For. He could afford to talk down Iowan ethanol, because he couldn't afford to campaign in Iowa (one of many strategies and political positions that changed between 1999 and 2007). Even his comparative lack of enthusiasm for tax cuts at the time was heavily influenced by political positioning, not necessarily philosophy. "Republican primaries had long featured a bidding war to see which candidate could promise the biggest tax cut," he wrote. "I chose to offer the smallest, targeted to middle- and lower-income families.... Lest anyone think my positions were brave, if self-defeating, honesty obliges me to note that every poll my campaign conducted (and we took as many as could afford) found greater support for paying down the debt than cutting taxes for upper-bracket incomes." Country first!

Above all, McCain campaigned on a promise to "always tell the truth," to avoid "pandering," and to elevate the tone of political discourse. "'Judge all candidates,' I asked [voters], 'by the example we set; by the way we conduct our campaigns; by the way we personally practice politics.'" In 2008, many former McCain supporters have judged him precisely on those criteria, and switched their support to Barack Obama.

Should we care that a politician has so profoundly changed his positions and tactics in an effort to actually win this time around? For me, part of the answer lies within that startling quote above: "[I] wondered if I would have the guts to protect my integrity."

Note how McCain almost sounds like a helpless bystander in that mini-sentence. It's as if campaign politics were a filthy river at flood tide; dip a toe and you're off in the muck. This helps explain both why McCain started getting swept off to "crazy base land" three years ago, and why his apologists in the media could still manage to absolve him of guilt for doing so. It's not the Great Man, they cried, it's that tawdry party beneath him.

But such apologia wears its fatal flaw on its sleeve. You can't be a Great Man on one hand and an unwitting victim on the other.

The tone and results of the McCain campaign cannot be blamed on conflicting advisers, or "crazy base" Republicans yanking their standard-bearer hither and yon. The man who has run such a lackluster, unconvincing, and uninspiring race in 2008 is the exact same guy who seemed so hopelessly interesting in 2000. The only difference is, this time he thought he could win.

When you lack core philosophical belief or interest of your own, stuff like policy positions and campaign strategy are just malleable means to an alluring end. The John McCain we've seen these past two months is, in many senses, the real real McCain: A guy who, just as he worried six years ago, yields to the "temptations" of seeing his "personal ambitions" come tantalizingly close to fruition. We are fortunate we can see him respond to such a test before holding the reins of ultimate power.

Matt Welch is editor in chief of reason, and author of McCain: The Myth of a Maverick.

How Ya Votin', Libertarian?

matt.welch@reason.com (Matt Welch) — Tue, 04 Nov 2008 09:52:00 EST

Esteemed Reason Foundation trustee Manuel S. Klausner says Barr in uncontested states (such as his native California), but McCain in battleground states as "the lesser of two evils." The kicker: "No doubt we all agree that these are horrendous times for libertarians." Actually, I feel a Righteous Wind behind the intellectual argument for free minds and free markets, being a firm believer in both the Plexiglass Principle and the anecdotal/polling data that Americans detest the bailout that their two major parties foisted upon them. Whole Klausner argument here.

Want to see who Canadian libertarians and conservatives would vote for, if they had the chance? Check out the Western Standard, here and here. Last week we polled our staff and the broader reason universe; results here (and a Reader's Digest condensed version of regular reason contributors here).

Back to the Barricades

matt.welch@reason.com (Matt Welch) — Tue, 11 Nov 2008 12:00:00 EST

September 24, 2008, should go down in the history books as a day of infamy. And clarity.

That's when President George W. Bush looked into the eyes of anxious Americans and told them they weren't being nearly anxious enough. "America could slip into a financial panic," he warned (or was it threatened?), just hours before Washington Mutual became the biggest bank to fail in U.S. history without generating as much as a fluttered eyelid from blasé depositors (including me). "Millions of Americans could lose their jobs," he said, one week before new federal data showed unemployment unchanged at 6.1 percent, lower than it was for any month between January 1980 and June 1987. "The value of your home could plummet," he added, the same day new August housing figures showed the median U.S. house price to be $203,100. While down $73,000 in real terms from the height of the bubble two years ago, that's still a full 40 percent higher than it was at the beginning of 1997.

Aside from the innumerate hysteria, Bush sketched a worldview in which the federal government is single-handedly responsible for making sure all assets appreciate indefinitely. "The stock market would drop even more, which would reduce the value of your retirement account," he said, as if Americans were forced at gunpoint to invest for their retirement in equities instead of bonds or commodities. "Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college," he said, as if he didn't understand that the financial crisis was triggered in the first place by unprecedented access to easy credit.

If you want to know when this country's political class, even those hailing from the allegedly pro-market Republican Party, lost faith in the single greatest economic organizing principle ever devised by mankind, look no further than the following six terse sentences from Bush's decidedly unpresidential speech: "I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly." Italics mine, to highlight the favored lament of reluctant central planners everywhere.

Bush's laundry list of horror was not predictive; it was conditional. We could avoid the cruel fate of "a long and painful recession" if and only if Congress agreed right now to allocate around $700 billion more in money it doesn't have so the Federal Reserve could use powers it never previously contemplated to buy up huge swaths of "toxic" mortgage-related financial instruments no bank currently wanted to sell (except to the government, at a premium above the market price). The details weren't important; as House Financial Services Committee Chairman Barney Frank (D-Mass.) said at the start of bailout negotiations, "We don't have a choice now of debating whether this is a good or a bad thing." The elite opinion leaders in Washington and New York were nearly unanimous in their contention that only deeply irresponsible "nihilists" (in New York Times columnist David Brooks' phrase) and the "lunatic fringe" of "wing nuts" and "zealots" (The Washington Post's Dana Milbank) failed to recognize the urgent need for massive yet vague reregulation. "The fine points of financial reform can wait," The Washington Post's editorial board thundered. "For Congress, the immediate task is to avert economic disaster."

And it wasn't just the Bush administration and a bunch of newspaper columnists talking imminent collapse. GOP presidential nominee John McCain predicted that should a bailout fail to pass, "the present crisis will turn into a disaster," and "the gears of our economy will grind to a halt." Sen. Hillary Clinton (D-N.Y.) warned that "this is a sink-or-swim moment for America." Many commentators pointed to the 778-point drop in the Dow Jones Industrial Average on September 29, the day the House of Representatives temporarily rejected the bailout package, as proof that (in Milbank's words), "in the Congress of the United States, the insane are now running the asylum." When the Dow dropped 800 points the first full trading day after the bailout bill passed, most of the Dow-drop-proves-it crowd was oddly silent.

Political hyperbole and editorial board do-somethingitis aside, there is no exaggerating the importance of this moment. While congressional Republicans wobbled and eventually caved (see "Atlas Blinked," page 18), the Democrats were ready from day one to cooperate with the Bush administration's power grab. Polls in late September and early October showed the crisis had a beneficial impact on not just Democratic presidential nominee Barack Obama but also a variety of down-ticket Democratic legislators. If the party that cares even less about markets converts anti-market rhetoric into electoral gains, and tops that off with a Democratic president who ran to the economic left of Bill Clinton, Al Gore, John Kerry, and arguably even Howard Dean, we could find ourselves come January with an immediate governing crisis.

But I would suggest that something even deeper is afoot. When a Republican administration arbitrarily (and "temporarily") bans short selling just one decade after Malaysian Prime Minister Mahatir bin Mohamad was globally (and deservedly) mocked for blaming his country's self-inflicted woes on "speculators," when a Republican presidential nominee unleashes retrograde attacks against the "casino culture" of Wall Street "greed," and when a Democratic Congress holds nearly daily hearings suggesting any number of "windfall profits" taxes and forced reductions in private-sector CEO pay, that sound you hear is a fragile consensus shattering and a warning bell clanging in the night.

After the collapse of communism and the attendant discrediting of Marxian economic models, the industrialized world more or less settled on democratic capitalism as the best available option for countries to grow and prosper (see "The Libertarian Moment," page 62). Old Europe slashed government involvement in industry, New Europe rode mass privatization to massive growth, East Asian countries went from emergingmarket "tigers" to full-fledged market economies, and China used markets to yank hundreds of millions up from poverty. One could perhaps be forgiven for thinking the 20th century's great economic argument had been settled.

Well, no more.

In June I read what I thought I'd never see again: a mainstream column, by a mainstream columnist (The Washington Post's David Ignatius), arguing against the effects of airline deregulation, one of the most liberating government acts of the last four decades (see "40 Years of Free Minds and Free Markets," page 28). When reregulation is suddenly on the table even for an industry where market forces have cut prices in half while doubling the customer base, it's time to get back to first principles and fight like hell to secure victories we'd long thought won.

It is times like these that reason magazine was made for, 40 years ago. As we argue throughout this commemorative anniversary issue, many aspects of our lives are considerably better than they were in 1968, but some old debates never die. Now that the historic 2008 bailout-the ramifications of which we'll be sorting out for as long as, if not longer than, those of the equally rushed PATRIOT Act of 2001-has been signed into law, there has rarely been a more fitting time to engage in the basic argument that it is capitalism, not "emergency" intervention from Washington, that makes us freer, more prosperous, and more interesting. We hope we won't be making these same arguments 40 years from now, but we're fully prepared to do so if necessary.

Matt Welch is editor in chief of reason.

The Libertarian Moment

gillespie@reason.com (Nick Gillespie) matt.welch@reason.com (Matt Welch) — Tue, 25 Nov 2008 12:00:00 EST

If someone looked you in the eye in 1971 and said “Man, you know what? We’re about to get a whole lot freer,” you might have reasonably concluded that he was nuts, driven mad by taking too much LSD and staring into the sun.

Back during that annus horribilis, a Republican president from the Southwest, facing an economy that was groaning under the strain of record deficits and runaway spending on elective and unpopular overseas wars, announced one of the most draconian economic interventions in Washington’s inglorious history: a freeze on wages and prices, accompanied by an across-the-board 10 percent tariff on imports and the final termination of what little remained of the gold standard in America.

Though the world wouldn’t learn until later that this president was using federal law enforcement agencies to attack his real and imagined enemies, Richard Nixon’s yen for paranoid secrecy and executive branch power-mongering was well-established, providing an actuarial foreshadowing of corruption. Which isn’t to say that the Democrats of the time were any less statist: In 1972, their presidential nominee was even more economically interventionist than Tricky Dick. Widely (and rightly) considered the most liberal Oval Office candidate in decades, George McGovern actually claimed that wage and price controls were applied “too late—they froze wages but let prices and profits run wild.” And individual states were passing income taxes like so many doobies at a beachside singalong.

Yet even during that dark night of the American soul, with all its eerie echoes of George W. Bush’s final miserable days in office, premonitions of liberty-loving life abounded for those who knew where to look. The contraceptive pill, which gave women unprecedented control over their sexual and reproductive lives, had been made legal for married women in 1965, and was on the verge of being legalized for unmarried women too. A new political group, the Libertarian Party, started in December 1971, and a larger libertarian movement manifested itself in a host of young organizations and publications. Free agency in sports, music, and film, triggered by a series of legal battles and economic developments, ushered in a wild new era of individualistic expression and artistic independence. It was an unfree world but, as bestselling author (and eventual Libertarian presidential candidate) Harry Browne could attest, it was one in which you could still find plenty of freedom.

Widespread middle-class prosperity gave the average American the tools and the confidence to experiment with a thousand different lifestyles, many of them previously the sole dominion of the rich, giving us everything from gay liberation to encounter groups, from back-to-the-garden communes to back-to-the-old-ways fundamentalist churches, from Bob & Carol & Ted & Alice to Looking Out for #1. In 1968, the techno-hippies at the Whole Earth Catalog announced, “We are as gods and might as well get good at it.” A year later, a new technology allowing university computers to communicate with one another went live, laying the foundations for what would become the Internet. And the magazine you are holding, in its September 1969 issue, made what might have been the craziest argument of all during the Age of Nixon: If you abolish the Civil Aeronautics Board and get the federal government out of regulating “every essential aspect” of the airline business, Robert W. Poole wrote, then air traffic will grow while prices plummet. (For more on Poole’s story, see “40 Years of Free Minds and Free Markets,” page 28.)

By the end of the 1970s, the Civil Aeronautics Board was in the dustbin of history, sharing much-deserved space with price controls, the reserve clause, and back-alley abortions. What started out as a decade marred by pointless war and Soviet-style central planning ended up being the decade that ended military conscription and—arguably even more stunning—regulation of interstate trucking. The personal computer introduced possibilities few people had ever dreamed of (though reason did; see “Speculation, Innovation, Regulation,” page 44), a property tax revolt in California spread like a brush fire across the country, and the Republican Party went from the big-government conservatism of Nixon and Nelson Rockefeller to the small-government rabble-rousing of Barry Goldwater and Ronald Reagan. The Libertarian Party…well, it kept trying, winning one electoral vote in 1972 and 921,299 popular votes in 1980.

Most importantly, individuals burned through the 1970s with the haughty grandeur and splashiness falsely predicted of Comet Kohoutek. Stagflation be damned: Americans finally learned to live, dammit, in a no-collar world where both electricians and executives dressed like peacocks and women starting earning real money, not just as entertainers but as doctors and lawyers. Boys grew hair longer than girls, and girls started playing Little League baseball. As Tom Wolfe wrote in his era-naming 1976 essay, “The Me Decade and the Third Great Awakening,” “But once the dreary little bastards started getting money…they did an astonishing thing—they took their money and ran! They did something only aristocrats (and intellectuals and artists) were supposed to do—they discovered and started doting on Me! They’ve created the greatest age of individualism in American history! All rules are broken!”

Everything solid dissolved into the Bermuda Triangle, or at least a long series of Chariots of the Gods sequels. During the 1970s, we undoubtedly felt more discombobulated (Hal Lindsey’s The Late Great Planet Earth and Richard Bach’s Jonathan Livingston Seagull shared the bestseller lists), but there is no question in retrospect that we were considerably more free even by the time Thatcher padlocked the coal mines in Olde England and the Reagan Revolution ushered in the 1980s as a glorious decade of greed.

That ’00s Show

As in 1971, there is no shortage of reasons to grumble about the state of American liberty at the end of 2008. As this issue went to press, Congress had passed the economic equivalent of the PATRIOT Act, a nearly trillion-dollar bailout of the financial industry, involving whole-scale nationalization of the mortgage lending business (see “Back to the Barricades,” page 2, and “Atlas Blinked,” page 18). Despite (or perhaps because of ) eight years of a president who has increased regulatory spending by more than 61 percent in real terms, “deregulation” has become a concept even more panic-inducing than Janet Jackson’s nipple. Whether in international security, the financial world, or the cultural arena, the answer to everything seems to be a new clampdown. It is nearly impossible to cross a North American border without showing a passport, revealing biomedical information, and being entered into a database for decades. Every day across this great country some city council is finding a new private activity to ban, whether it’s selling food cooked with trans fats, using a cell phone behind the wheel, or smoking a cigarette outdoors. And the two major-party candidates for president are trying to out-populist one another with Oliver Stone–level attacks on Wall Street “greed,” while advancing economic plans filled with centralized industrial policy and extravagant promises that would undoubtedly burst the federal government’s already near-broken budget.

Yet if 1971 contained a few flickers of light in the authoritarian darkness, 2008 is chock full of halogen-bright beacons shouting “This way!” Turn away from the overhyped prize of the Oval Office and all the dreary, government expanding policies and politics that go with it, and the picture is not merely one of plausible happy endings to our current sob stories of mortgage-finance meltdowns and ever-lengthening war, but something far more radical, more game-changing, than all that we’ve grown to expect.

We are in fact living at the cusp of what should be called the Libertarian Moment, the dawning not of some fabled, clichéd, and loosey-goosey Age of Aquarius but a time of increasingly hyper-individualized, hyper-expanded choice over every aspect of our lives, from 401(k)s to hot and cold running coffee drinks, from life-saving pharmaceuticals to online dating services. This is now a world where it’s more possible than ever to live your life on your own terms; it’s an early rough draft version of the libertarian philosopher Robert Nozick’s glimmering “utopia of utopias.” Due to exponential advances in technology, broad-based increases in wealth, the ongoing networking of the world via trade and culture, and the decline of both state and private institutions of repression, never before has it been easier for more individuals to chart their own course and steer their lives by the stars as they see the sky. If you don’t believe it, ask your gay friends, or simply look who’s running for the White House in 2008.

This new century of the individual, which makes the Me Decade look positively communitarian in comparison, will have far-reaching implications wherever individuals swarm together in commerce, culture, or politics. Already we have witnessed gale-force effects on nearly every “legacy” industry that had grown accustomed to dictating prices and product and intelligence to their customers, be they airlines, automakers, music companies, or newspapers (it was nice knowing all of you). Education and health care, handicapped by their large streams of public-sector and hence revanchist funding, lag behind, but even in those sorry professions, practitioners are scrambling desperately to respond to consumer demands and compete for business. Politics, always a crippled, lagging indicator of social change, will be the last entrenched oligopoly to be squashed like a bug on the windshield of history, since the two major parties have effectively rigged the game to their advantage in a way no robber baron ever could. But the Dems and Reps, more bankrupt as brands than Woolworth’s and Sears Roebuck, are already in ideological Chapter 11.

The Libertarian Moment is based on a few hard-won insights that have grown into a fragile but enduring consensus in the ever-expanding free world. First is the notion that, all things being equal, markets are the best way to organize an economy and unleash the means of production (and its increasingly difficult-to-distinguish adjunct, consumption). Second is that at least vaguely representative democracy, and the political freedom it almost always strengthens, is the least worst form of government (a fact that even recalcitrant, anti-modern regimes in Islamabad, Tehran, and Berkeley grudgingly acknowledge in at least symbolic displays of pluralism). Both points seem almost banal now, but were under constant attack during the days of the Soviet Union, and are still subject to wobbly confidence any time capitalist dictatorships like China seem to grow ascendant in a time of domestic economic woe. Though every dip in the Dow makes the professional amnesiacs of cable TV and the finance pages turn in the direction of Mao, there is no going back to the Great Leap Forward.

Or the Great Society, for that matter. Try as politicians might, citizens continue their great escape from grand designs. Financially ruinous entitlements such as Social Security and Medicare are going nowhere slow, but all of us are getting better at finding ways to work around such stultifying bureaucracies. Virtually across the board, the government’s pension plan is becoming less important to retirees and the medical cartel is slowly losing its death grip on providing basic services. Even across old Europe, government spending as a percentage of GDP has fallen over the past several decades. The Heritage Foundation’s Index of Economic Freedom has charted nothing but global increases since it began in 1995.

The ne plus ultra change agent as we lurch through the finish line of yet another electoral contest between our 19th century political parties is the revolutionary, break-it-down-and-build-it-back-up power of the Internet, and all the glorious creative destruction it enables at the expense of lumbering gatekeepers and to the benefit of empowered individuals. No single entity in the history of mankind has been so implicitly and explicitly libertarian: a tax-free distributed network and alternative universe where individuals, usually without effective interference from government, can reshape their identities, transcend limitations of family, geography, and culture. It’s a place where freaks and geeks and regular folks can pool their intelligence and compete (even win!) against entities thousands of times their size.

The generation raised on the Internet has essentially been raised libertarian, even if they’ve never even heard of the word. Native netizens now entering college exhibit a kind of broad-based tolerance toward every manner of ethnic, religious, and sexual-orientation grouping in a way that would have seemed like science fiction just a generation ago. The products and activities they enjoy and co-opt most, from filesharing to flying discount airlines to facebooking, are excrescences of the free-market ideas of deregulation and decontrol. Generations X, Y, and those even younger swim in markets—that is, in choices among competing alternatives—the way those of us who grew up in the ’70s frolicked on Slip ’n Slides.

Feelin’ Groovy

Understanding the Libertarian Moment is fundamental to understanding the 21st century. Power—economic, cultural, political—will accrue to those people who recognize that it’s over for existing power centers. The command economy, the command culture, and the command polity have all been replaced by a different model—that of a consultant, a docent, a fixer, a friend. The individuals and groups that will flourish in the Libertarian Moment will be those who open things up, not shut them down.

The first step toward understanding is to recognize that the moment is indeed upon us. In reason’s 20th anniversary issue, the most talked-about piece was Robert Poole’s then-controversial contention that 1988 was a lot “groovier” than 1968. (For Poole’s take on the freedoms to emerge since then, see “Groovier and Groovier,” page 14; also, consult Veronique de Rugy’s “Are You Better off Than You Were 40 Years Ago?,” page 24.) The single biggest piece of good news in the past 20 years (and arguably the past 90) was the collapse of the Soviet Union, and with it the final discrediting of Marxism as an economic and social model. Communism had ironically sided with the producer rather than the consumer, the factory owner rather than the workingman, by trying without success to shove unwanted commodities on unmanageable customers.

If the end of World War II hastened the end of old-style colonialism (by the mid-1960s, virtually all the conventional Old World empires had been thoroughly dismantled), the end of the Cold War marked the end of countless proxy wars between the two major superpowers. The erosion of top-down hegemony resulted not in chaos (as many feared) but a new era of freedom and mostly peaceful coexistence. As of the end of 2007, Freedom House ranked 90 of 193 countries as “free,” 60 as “partly free,” and 43 as “not free,” which is up from 81/57/53 in 1997, and 58/51/51 in 1987.

Not only are countries increasingly independent and free, but thanks to global trade they are increasingly prosperous as well, with an estimated 600 million people lifted out of poverty in China alone over the past three decades. War is declining, too: As the political scientist John Mueller documents in 2004’s The Remnants of War, armed global conflicts in which 1,000 people have died yearly have been in decline for decades.

Global freedom and prosperity may be the greatest single cause for rejoicing, but the Libertarian Moment affects our humdrum daily lives here in America as well. As Madge always told us about Palmolive, we’re soaking in it.

The Internet alone has created entire new economies, modes of scattered and decentralized organization and work, and a hyper-individualization that would have shocked the Founding Fathers. Liberated from the constraints of geography and 20th century career paths, Americans are more productive than they ever have been and their jobs are more personalized than ever, with strictly enforced punch-the-clock jobs morphing into flextime, telecommuting gigs. In less than two decades, we’ve moved from a “You want fries with that?” world to one in which “You want soy with that decaf mocha frappuccino?” no longer elicits laughs—except unintentionally, when John McCain tries to use Starbucks flavors as a stand-in for Americans’ lack of seriousness.

Critics continue to worry about the demise of what John Kenneth Galbraith and others described in the 1950s and ’60s as The Affluent Society and The New Industrial State, in which too-big-to-fail megacorporations such as IBM and General Motors replaced the welfare state as a cradle-to-grave provider of social welfare services, status, and meaning. But fears of “a great risk shift” in which post-industrial free agents are left to fend for themselves is based on what the management guru Tom Peters once called, in a reason interview, the “‘false-nostalgia-for-shitty-jobs phenomenon’: Oh for the halcyon days when I could sit on the 37th floor of the General Motors Tower passing memorandums from the left side of the desk to the right side of the desk for 43 years. It’s just total shit. It really is. Life was not as glorious as imagined.”

The era of the blockbuster and the bestseller has been replaced with something new and wonderful: a world in which individuals are free to express themselves by tapping into millions of different book titles at Amazon, tens of thousands of different songs at Rhapsody, and dozens of different beers at even the least-provisioned supermarket (at least those that aren’t banned outright from selling alcohol). Smart retailers realize that the key to the future is to give the customer more choices, not to act as a chokepoint. In a similar way, social networking sites such as MySpace and Facebook do not structure interaction as much as provide a not-so-temporary autonomous zone to facilitate it. Individual users tailor the experience to their own desires rather than submit to a central authority. The inhabitants of such a world are instinctively soft libertarians, resisting or flouting most nanny-state interference, at least on issues that affect their favorite activities. When it comes to online commerce, at least, both producers and consumers scream bloody murder every time 20th century politicians attempt to levy taxes or restrictions on goods and services.

This wave of individualized creative destruction is battering incumbents in seemingly every industry except politics, where the status quo parties keep partying like it’s 1899. But look closer, and you’ll see they’re hemorrhaging market share just like broadcast dinosaurs on network TV. In 1970, the Harris Poll asked Americans, “Regardless of how you may vote, what do you usually consider yourself—a Republican, a Democrat, an Independent, or some other party?” Fully 49 percent of respondents chose Democrat, and 31 percent called themselves Republicans. In 2007, the latest year for which data is available, those figures were 35 percent for Democrats and 26 percent for Republicans. The only real growth market in politics is voters who decline political affiliation, and the only political adjective seemingly gaining in popularity is…libertarian.

From lefty comedian Bill Maher to righty columnist Jonah Goldberg, from in-the-tank Democratic blogger Markos “Daily Kos” Moulitsas to in-the-tank Republican talk show host Neal Boortz, you can’t turn around in a political discussion anymore without hearing someone identify themselves at least partially (whether rightly or wrongly) as a “libertarian.”

The 2008 presidential campaign, and to a heartening degree the public debate and all-too-temporary congressional defeat of the Wall Street bailout, gave the first hints at what may soon become a permanent libertarian strain in politics. An uncharismatic libertarian congressman from Texas, Ron Paul, ignited a decentralized swarm of money-bombing donors to the Republican presidential primaries with his message of not wanting to run people’s lives (“we all have different values”), or the economy (“people run the economy in a free society”), or the world (“we don’t need to be imposing ourselves around the world”).

Though the Paul movement didn’t end up coalescing behind a single candidate for president after the primaries were over, its impact could still be felt in the fall, when, faced with a historic opportunity to socialize losses by throwing tax money at investment banks, Main Street Americans shrugged at least temporarily while Wall Street Atlases wept. As the chattering classes, politicians, and analysts compared a run of recent bankruptcies and market downturns to an economic Pearl Harbor requiring an immediate call to arms, more than half of the House of Representatives said that prudence dictated taking a deep breath or three.

On the stump, Barack Obama preaches a less-interventionist foreign policy and an interventionist domestic agenda; John McCain presents roughly the obverse. Despite each of them claiming to foment change, their adherence to old forms and old labels represents not the first real choice in the new era but the last presidential contest of the 20th century. Yet between them, and outside of their spheres, is a glimmering of a fusion that just might appeal to most Americans: engagement and integration with the world via cultural and economic exchange, and a more personally autonomous society at home in which individuals are responsible for charting their own course.

It’s wrong to look at politics as anything other than the B.A. Baracus of American society, the last one through the door and the last member of The A-Team to get the joke. And a simple study of incentives will tell you that political parties will use whatever is at their disposal to stay in power, particularly the government they control. Expecting Washington to cut back its main instrument of power after a capitalism-bashing political campaign is like expecting Michael Moore to share his Egg McMuffin with a homeless man.

But when the gap grows too wide between voter desire and government policy, between the way people actually live their lives and the way government wants them to behave, then a situation that looks stable can turn revolutionary overnight. Richard Nixon may have been sitting pretty in 1971, but he was sent packing to San Clemente by 1974. As back then, we emerge from life under George W. Bush bruised and battered but looking forward not to a protracted twilight struggle with an existential foe but to a new and largely unimaginable world of wonders. There is a learning curve at work here, one that human beings have been struggling with for 40 years, 400 years, 4,000 years. In context, it has only been recently that the concept of individual liberty has been prototyped and subjected to testing in anything approaching real-world conditions. Advances are inevitably followed by setbacks, and we stagger into the future punch-drunk, more like Muhammad Ali than Rocky Marciano.

But the power to swarm in the direction of freedom is the new technology fueling an idea that is as old as the American republic itself: No central government shall interfere with our life, liberty, and pursuit of happiness. The Libertarian Moment is taking these self-evident truths and organizing them into a comprehensive approach toward living. It started where it always does, in business and culture, where innovation is rewarded. Statist politicians—it’s not fully clear that there is any other kind—will ignore that epochal shift at their peril. And will eventually be forced to fly to their own personal San Clementes.

Nick Gillespie is editor of reason online and reason.tv. Matt Welch is editor in chief of reason.