Where Have Those Champions of Small Government and Private Enterprise Gone?
Before getting to today's topic, I must not allow myself to skip over the news that Donald Trump has now deployed troops in the nation's capital and wrested control of the local police force away from that city's elected government. He apparently did so because, on a recent outing to play golf, he looked through the window of his limousine and saw some homeless people. I am not kidding. In fact, it is somehow even more insane than that. In the second link above, The Guardian notes that Trump's social media announcement of his latest lawless power grab
was illustrated with four photographs, all apparently taken from the president’s motorcade along the route from the White House to his golf course. Two of the images showed a total of 10 tents pitched on the grass along a highway on-ramp just over a mile from the White House. The third image showed a single person sleeping on the steps of the American Institute of Pharmacy Building on Constitution Avenue. The fourth image showed the line of vehicles that whisk Trump to his golf course passing a small amount of roadside litter on the E Street Expressway, near the Kennedy Center.
This perfectly illustrates both the authoritarian instincts and the delusional mindset of the Trump regime. They could have chosen to publish any images that they wanted (and as many as they wanted), including deepfakes, but they were satisfied with that petty inanity. I continue to see reasonable people deny that Trump is a dictator, with even Paul Krugman hedging yesterday by saying "I know, Trump isn’t a full-on dictator, yet, but he’s clearly a wannabe." Maybe bypassing all legal limits to put a second major US city under martial law will be enough to move him from wannabe to full-on? I understand the desire not to seem like an alarmist, but the alarm bells are (and have been) deafening.
Having stipulated that I am very aware of at least one of the scariest things that has happened recently in the United States, I will note that that story has already been demoted on the main page of The New York Times, now appearing below an analysis of the latest inflation report. Even that seemingly dry subject, however, is not free of the stench of totalitarianism, given Trump's recent firing of the government's chief statistician as part of a tantrum about unfavorable economic data. This makes me feel a bit more justified in choosing today to analyze some other economic issues, because every issue is now ultimately about the death of the rule of law in the United States.
Anyway, as the title of this post asks, where are the small-government ideologues and brave defenders of free markets? Those used to be the shopworn, reliable poses by American and British conservatives when they preened about their commitments to deep principles. But the poseurs are no longer bothering to keep up the pretense.
In conversation with a friend recently, I suggested that supporting Trump's tariff madness is one of the least defensible capitulations on the part of Republicans, because although large numbers of them have long been in favor of other parts of the Trump agenda -- most obviously tax cuts for the rich, shredding the social safety net, and attacks on racial minorities, women's bodily autonomy, and LGBTQ+ people's right to exist -- it would be nearly impossible to find a Republican of any prominence prior to 2016 (or 2024, really) who was a crude trade protectionist.
Immigration might be a candidate for that short list as well, because as recently as 2013 Republicans (including then-Senator Marco Rubio) were promoting relatively humane reforms. Even so, nativism has been such a big part of American conservatives' DNA for so long that one would have a hard time calling their hard-right turn toward Trump's deportation agenda wholly surprising. Yes, one might have imagined that the business crowd at Republican strategy meetings would have pushed harder to keep cheap and easily exploited workers inside the borders, but that particular tradeoff apparently became untenable.
Again, however, what of the defenders of the private sector? Another friend asked me to comment on yesterday's news that, per a newsletter in The Times, Trump has announced "deals with Nvidia and AMD to take 15 percent of their A.I. chip sales to China." Of course, we know that the word "deal" no longer means what we thought it meant, and the press gives Trump a free pass by calling anything that he announces a deal. But set that aside. As that friend put it (both rhetorically and indelicately): "And just like with Nippon Steel, the U.S. government is now running parts of private businesses? It is literally what Hayek warned about in the road to serfdom, front and center. Where the fuck are all the libertarians who have always pushed this shit down our throats?"
Where indeed? In addition, Professor Dorf pointed out to me privately that there is an enormous constitutional matter involved, because what Trump has done is to impose a tax without congressional authority. He is obviously correct, and the separation of powers continues to wither.
My reaction, however, is that there really should be nothing surprising about seeing the Republicans lining up to support a big-government takeover of private businesses, notwithstanding their decades of pious rhetoric to the contrary. Just as their purported commitment to states' rights was always a joke -- as we now see with Republicans' flirtations with national abortion bans after years of "let the states decide," or for that matter with Trump's commandeering of California's National Guard -- their supposed commitment to keeping the government out of business decisions was always merely a fake principle waiting for the moment when it could be opportunistically abandoned.
This conservative hypocrisy comes up more often than one might think. In my years of writing about Social Security, for example, one of the more eyebrow-furrowing suggestions from conservatives whose ultimate goal is to privatize the system has been that the government should invest the Social Security trust fund in private companies' stocks. It is a bit technical, but please bear with me, because this is a very instructive example.
By design, starting in 1983 the Social Security system collected more in tax revenue each year than it would pay out, and the accumulated annual surplus is what we now know as the trust fund. What to do with that extra money? Imagine that in a given year, Social Security revenues are $8, benefits paid are $6, and the rest of the federal government runs a deficit of $3. How to account for all of that? Under longstanding law, the trust fund reflects the idea that Social Security will "loan" those $2 to the US Treasury, which means that the government only has to borrow $1 from private savers.
Ah, but what if the Social Security system invested those $2 in the stock market, thus buying into the higher returns that have historically been earned by owning private equity? The reason this is silly as a technical matter is that, in the system that the US actually uses, the "interest rate" that the Treasury pays to the Social Security trust fund is set by law. That is, those Treasury securities that are counted in the trust fund are not traded on a private market but are instead deemed to earn an interest rate set by law. And that means that, if Congress truly wanted the trust fund to earn a higher rate of return, it could make it so. Doing that, however, would mean that the Treasury's borrowing costs would go up, so we sensibly do not go through the silliness of sending $2 into the private financial markets only to borrow those $2 (plus another $1) back right away.
Again, the "but Social Security could be earning a higher return" argument is nonsense, because its deemed return is whatever Congress says it is. Had Congress decided that the trust funds were earning, say, 10 percent interest per year, the trust funds would be more than flush, but cashing in the trust funds during the current drawdown period would still require borrowing from private investors (including the Federal Reserve, state and local governments, and foreign sovereigns).
For the purpose of today's topic, however, the amusingly ridiculous aspect of this policy idea is that conservatives were seriously arguing that the United States federal government's massive and nearly universal social insurance program should for decades have been buying up common stocks -- that is, ownership -- of private companies.
How much money would have been involved? The trust fund (even though Congress has deemed it to have a relatively low rate of return on its non-tradeable bonds) peaked at $2.9 trillion in 2020 and was still above $2.7 trillion six weeks ago. Those are trillions, with a "t." That puts the AMD/Nvidia thing (which is estimated to generate $2 billion -- with a "b" -- in annual tax revenue) to shame, no? The US government would have had an ownership stake of almost $3 trillion in the US private sector. All to convince people that "the market" can offer higher returns on an accounting convention.
But it does not stop there. After I wrote my most recent column about Social Security two weeks ago, that same inquisitive friend pointed out that conservatives like to talk about portfolio managers' predictions of how much money people will earn in retirement but fail to acknowledge (and, to be honest, are probably too lazy or stupid to understand) that those relatively optimistic retirement scenarios include Social Security benefits. That is, the argument in favor of getting rid of Social Security boils down to this: "Look at how much money you'll receive in retirement (a key chunk of which is Social Security benefits)! So you don't need Social Security after all. See?"
This is all part of a longstanding sleight-of-hand from the right. In a Dorf on Law column all the way back in 2014, I noted that the man who recently became Trump's infamously dishonest chief economist argued that we should measure inequality in the US only after including government transfer payments, because those payments are progressive and thus make the distribution of income look less extremely unequal. But as I put it back then,
when we talk about the "transfer payments" that supposedly make things acceptable, we are talking mostly about Social Security and Medicare. Hassett ... is generally part of the conservative chorus that claims that those transfer programs are unsustainable. When he said on Tuesday that we can rely on those programs well into the future, so long as they are "funded," he essentially said that the way to keep the current distribution going was to raise taxes to pay for Social Security and Medicare.
But of course, Hassett joined everyone else in his chorus last month to sing paeans to the loss of trillions of dollars of revenue that could have been used to support those two transfer programs, while outright cutting the third big transfer: Medicaid. The message: "Don't worry your pretty little heads. The US is not as unequal as it could be, so long as we keep funding the programs that I've been trying to eliminate."
The deceptive two-step, then, can involve being against government even while using what the government does to justify policy changes, and it can also involve having the central government literally buy and control private companies. Suddenly, they no longer care that the government is "picking winners and losers," which they have always claimed to abhor. Leviathan is apparently not always to be feared, so long as conservatives believe that they have locked it down to be permanently under their control.
- Neil H. Buchanan