The Referee
Posted on September 6, 2008
Mike Gerson makes an interesting point in his op-ed in the Washington Post today regarding John McCain's convention speech. Gerson panned the speech and I happen to agree with him. To quote:
“His criticisms of Republican corruption and spending excesses in the past eight years were politically necessary and obviously heartfelt -- does anyone believe McCain has been happy under recent Republican leaders, whom he regularly used for spitball practice? ….And then the policy came -- like a trickling stream in a wide, dry riverbed. He promised to veto wasteful spending, support community colleges, encourage charter schools and educational choice, cut taxes, build nuclear plants, and drill oil wells. All these things may be necessary. None of them are creative, interesting or bold. There was no proposal in the speech that unexpectedly appealed to the political middle, creatively peeled off some Democratic constituency or boldly modified the Republican brand.”
This has been the problem with Republicans for the last several years. They don’t have any new ideas on how to reform the government in such a way as to actually help the economy. There are plenty of places where reform could help.
Government shouldn’t get into the business of picking winners or losers in the private sector, but they should be in the business of calling penalties when an industry, a business or a labor group abuses the public trust. All too often, business comes to the Congress not for regulatory relief but for a regulatory advantage over their competitors.
Just look at the Farm bill or at the ethanol program for examples of industries using the government to promote profit for themselves at the expense of the public good. If the free market was allowed to function, food prices wouldn’t be as high, energy prices (for ethanol) wouldn’t be as high, and welfare programs like WIC wouldn’t cost as much.
The housing meltdown is a direct result of lax government oversight on one hand and unrealistic government policies on the other. The tax code is geared towards helping promote home ownership. But owning a home should only be promoted for people who can afford to own one. Renting a home is perfectly fine alternative for millions of Americans who are not in the right position to own. Overspeculation in housing should be no surprise to anybody who has observed the government’s priming of the real estate pump. And the folly of government intervention in this industry is now coming clear to all with the federal takeover of Fannie Mae and Freddie Mac. Taxpayers are on the hook for at least twenty billion dollars. Just imagine if only people who could afford to buy a house would buy a house.
Health care seems immune to the free market, except that it really isn’t. The tax code, once again, sharply favors one part of the marketplace over the other. Big companies get big tax breaks to offer their employees health insurance but small businesses don’t. Medicare and Medicaid, incredibly popular programs, distort the free market. Prescription drugs are artificially high in the United States, artificially low in the rest of the world, thanks to bad trade policies.
But government does have a role in playing referee in order to regulate fair commerce and free competition. Teddy Roosevelt called it trust-busting. When trade laws distort international commerce, when monopolies destroy the free market, when companies don’t play by the rules, when labor unions use corrupt tactics and abuse the trust of their members, government does have a role to play.
Here’s one example. Executive compensation should remain the purview of the private sector, unless of course, the oversight system breaks down and it suddenly becomes a license to steal for a small cadre of modern day robber-barons. I am all for executives getting paid for that they are worth in the market-place, but I am against guys getting paid millions even when they fail spectacularly. It is especially troubling when a group of CEO’s are in charge of each others compensation. They have a vested interest in keeping salaries for each member of their club high.
There are plenty of ways that the John McCain can play referee on behalf of the public good and a stronger economy. Mostly, he can stop government from distorting the free market. Sometimes, he can make certain that certain members of the private sector are not distorting the free market.
So many members of the intellectual class are ready to throw in the towel on the free market, now that we are encountering some troubles in our economy. But freeing the market of unhelpful government interference while vigilantly ridding the market-place of unscrupulous monopolists is the best way to solve the problems that ail this nation. Adding more government just for the sake of adding more government is not the answer.
Teddy Roosevelt was the first trust-buster. Perhaps John McCain can be the first referee of our nation’s economy.