University of South Florida Professor Loyd S. Pettegrew
The following appeared in Ludwig von Mises on 3-23-2012.
One of Wolfman Jack’s favorite tongue-in-cheek commercials, delivered in his raspy voice, went like this: “You say ya kids ain’t got no clothes, ya ain’t got no food in the frigerator — THEN BUY YOURSELF A COLOR TV BABY!”
This facetious admonition, spending way beyond ones means, is exactly how government at the federal, state, and local levels have been behaving over the past 50 years. Even worse, government at all levels has been enabling Americans to do the same.
Gone are the days when both the people and their government lived within their means. With 44 percent of households receiving some form of federal subsidy and the majority of Americans not paying any taxes, our country is now more the land of entitlements than the land of opportunity (Boskin, 2011; Heritage Foundation Report, 2011).
University of South Florida Professor Carol A. Vance
With the current challenge of reducing the run-away government spending and an entitlement mentality by citizens, it is quite possible to trim $4 trillion dollars by reining in just our federal bureaucracy. Thomas Sowell suggested that to do so, we must further examine and challenge the giant economic leviathan of our government bureaucracy. The Office of Management and Budget revealed that the executive branch of our federal government grew by 23 percent since President Obama took office. The Wall Street Journal (2012) opined that the president has “presided over the largest expansion of government since LBJ — health care, financial regulation,” and in so doing has spent 24 percent of our nation’s GDP.
Unfortunately, both taxpayers and the media get social amnesia, seldom holding bureaucrats’ feet to the fire when programs they created fail or simply don’t do what they were designed to do. Sowell (1995, p. 257) reveals part of this problem in The Vision of the Anointed:
When the government creates some new program, nothing is easier than to show whatever benefits that program produces.… But it is virtually impossible to trace the taxes that paid for the program back to their sources and to show the alternative uses of that same money that could have been far more beneficial.
Even worse, bureaucrats and their supporters are loath to admit when their programs have harmful consequences and are inclined to double-down on a failing policy once it has proven its worthlessness. The classic example is Representative Barney Frank who as recently as 2009 announced that he was planning to introduce legislation that would increase the FHA loan ceiling by an additional $100,000 to $839,750 (New York Times, 2009).
In order to understand the foundation of America’s morass, we must examine bureaucracy. At the root of this growing evil is the very nature of bureaucracy, especially political bureaucracy. French economist Frédéric Bastiat offered an early warning in 1854 that laws, institutions, and acts — the stuff of political bureaucracy — produce economic effects that can be seen immediately, but that other, unforeseen effects happen much later. He claimed that bad economists look only at the immediate, seeable effects and ignore effects that come later, while good economists are able to look at the immediate effects and foresee effects, both good and bad, that come later.
Both the seen and the unseen have become a necessary condition of modern bureaucracy. Max Weber, considered the father of modern bureaucracy largely in response to the Industrial Revolution, is credited with formalizing the elements of bureaucracy as a fundamental principle of organization. He was also painfully aware of the arbitrariness of bureaucratic decision processes. In a speech he gave to the German Association for Social Policy in 1909, he trumped his abiding commitment to bureaucracy with a decided uneasiness of its adoption by government and universities (Mayer, 1944).
That the world should know not me but these: it is in such an evolution that we are already caught up, and the great question is therefore not how we can promote and hasten it, but what we can oppose to this machinery in order to keep a portion of mankind free from the parceling-out of the soul, from this supreme mastery of the bureaucratic way of life.
Free-market economists have challenged government bureaucracies since the 1920s. Ludwig von Mises, in the preface to his 1944 edition of Bureaucracy, asked if Americans should give away their individual freedom and private initiative for the guardianship of the bureaucratic state. He warned,
America is an old democracy and the talk about the dangers of bureaucracy is a new phenomenon in this country. Only in recent years have people become aware of the menace of bureaucracy, and they consider bureaucracy not an instrument of democratic government but, on the contrary, the worst enemy of freedom and democracy. (Mises, 1944, p. 44)
Harry Teasley warns us that US history is full of examples of government bureaucracy arbitrarily passing out benefits and, in so doing, overriding and sometimes punishing the free market. The perfect example of this is the recent housing bubble, the grounds for which started with the Fair Housing Act and government underwriting of Fannie Mae and Freddie Mac. Yet amid the chaos of the ensuing financial meltdown, Congress decided to punish banks and further regulate them to make risky mortgage loans in the name of social justice (see Sowell’s The Housing Boom and Bust, 2009). Teasley concludes that the free market has historically done a better job of distributing benefits justly and adjusting to any unintended consequences efficiently and effectively.
Department of the Navy, 1918
One of the truisms of bureaucracies, be they government or private sector, is that if left to their own devices, they will grow bigger, bolder, and less manageable over time. Teasley has seen this happen over and over again and put his considerable intellect to how its apparatus works. John Baden has offered us one of the most promising, yet ignored, solutions to the bureaucratic leviathan. Baden (1993) puts the problem at the feet of politicians concentrating benefits and dispersing costs and believes “predatory bureaucracies” would allow bureaucracies to feed on themselves with the most effective and efficient bureaucracy taking money and responsibility away from those that are less efficient and effective. While a provocative theory, the problem lies in the very rules that underpin bureaucracies. Despite the concept being nearly 20 years old, it has not been attempted, let alone enacted in any meaningful or widespread way.
Harry Teasley has spent his life confronting bureaucracy. This has given him superb insight into the dynamics that give rise and cover to bureaucracies. He has also fought governmental bureaucracies successfully. We argue that knowing these rules can help Americans set a course away from statism and political service as a profession and career, and lead our country back to fiscal solvency and exceptionalism through dismantling bureaucracy.
Rules of Bureaucracy
Rule #1: Maintain the problem at all costs! The problem is the basis of power, perks, privileges, and security.
Teasley correctly points out that problems, not solutions, are the basis of bureaucratic power, perks, privilege, and political security. In politics, the tougher the problem appears, the more resources must be devoted to it. Political careers have been made by bureaucrats promising to fix problems. Bureaucrats feign trying to fix problems while usually making them worse. This is because maintaining the problem creates constituent dependency and allows the bureaucrat to show tangible evidence that he or she is working hard for constituents and their cause. It also allows bureaucrats to spend lavishly and, seemingly endlessly, on new government programs and employees. Examining the three “wars against” created by politicians in the last 50 years provides ample illustration of rule #1.
The biggest drop in the poverty rate was BEFORE the "War on Poverty" was declared. From a poverty rate of 15% when the war on poverty was declared and billions latter to 15.1% today. Another war lost to government stupidity.
The War on Poverty
In 1964 President Lyndon Johnson declared the war on poverty. This led to an explosion of poverty programs including the Economic Opportunity Act, the Office of Economic Opportunity (OEO), the Job Corps, Volunteers in Service to America (VISTA), Upward Bound, Head Start, Legal Services, the Neighborhood Youth Corps, the Community Action Program (CAP), the College Work Study Program (CWSP), and recently the new White House Office of Urban Affairs. Texas A&M economics professor Edgar K. Browning estimates that 80 targeted federal, state, and local government programs comprise the legions in this war. US Census figures show that in 1964, the year this “war” began, the poverty rate was 15 percent and in 2010 it was 15.1 percent. Any fifth-grader can see that there hasn’t been much progress on the poverty front, especially given the trillions of dollars spent since then. Not surprisingly, once started, most of these programs have never gone away and demand an ever-increasing amount of taxpayer dollars.
The War on Drugs
Richard Nixon and Elvis Presley declare war on drugs
President Richard Nixon declared the war on drugs in 1971 to support the Comprehensive Drug Abuse Prevention and Control Act of 1970. With this war came the creation of the Drug Enforcement Administration (DEA), the Office of National Drug Control Policy (ONDCP) and its head bureaucrat the Drug Czar, the National Youth Anti-Drug Media Campaign, and nearly three decades later, the Treasury and General Government Appropriations Act of 1998 and the Drug Free Media Campaign Act the same year. In 1982 Vice President George H. Bush began pushing for the involvement of the US military and CIA in drug interdiction. As recently as 2009 the National Southwest Border Counternarcotics Strategy was announced by Homeland Security Chief Janet Napolitano. This was a coordination of counterterrorism and drug interdiction forces. This war has also spawned drug-enforcement divisions in most police departments across the United States. The apparatus grows larger while the problem grows worse.
Like many wars the nation fights, the war on drugs has been long term, costly, and ineffective. Articles in the Economist (April 16, 2011) and the Wall Street Journal (January 14, 2012) conclude that the US war on drugs has thrown all of Latin America into the cartel drug-production and smuggling enterprise, increasing drug production and smuggling into this country and elsewhere around the world. Despite the expanding price tag, the National Institute for Drug Abuse concluded, “The decline in illicit drug use by the Nation’s adolescents since the mid to late-1990s has leveled off.” The unintended consequences of the war on drugs have been far worse. Through US drug-interdiction efforts, the cost of naturally growing weeds (marijuana and opium poppies for example) has risen spectacularly, creating market wealth for the producers and smugglers that has attracted international terrorists and compromised the US war on terror.
On the home front, America today is no less ravaged by drug trafficking and drug use despite more than a trillion dollars our government has spent waging this war. The National Institute of Drug Abuse reports that among 8th-, 10th-, and 12th-graders, lifetime, past-year, and current illicit drug use remained unchanged during the last decade.
The results of the 2001 National Household Survey on Drug Abuse and Addiction revealed that, while millions of Americans habitually smoke pot, drink alcohol, snort cocaine and swallow prescription drugs, most who need treatment fail to recognize they have a drug abuse problem. The figure of those “in denial” of their drug abuse is estimated at more than 4.6 million — a significantly higher number of individuals in need of professional help than had been previously thought. (US No Drugs, 2009)
The growing cost of fighting the US war on drugs amid mounting evidence of its ineffectiveness can be seen by tracking the recent annual budget increases. Between 2008 and 2012, the president’s war-on-drugs budget increased by $1.7 billion (Office of National Drug Policy, 2012). For this extraordinary increase in local, state and federal bureaucracy and the attendant king’s ransom of taxpayer dollars that feed it, Americans should expect a reasonable return on their tax dollar. But yet another federal drug agency says otherwise:
In 2007, 114 million Americans — 46 percent of the US population over the age of 12 — reported having used illegal drugs at least once in their lifetime and about one-third of these individuals (36 million Americans) reported having used illegal drugs during the previous year, according to government estimates. (Substance Abuse and Mental Health Administration, 2008)
Rule #2: Use crisis and perceived crisis to increase your power and control.
The 2001 World Trade Center attack is the quintessential, but only the latest, in a series of crises that have been used to increase government power and control. Numerous terrorist attacks had been executed on US sovereign interests before September 11, 2001. These include but are not limited to the 2000 USS Cole attack, the 1998 US embassy bombing in Kenya, the 1996 Kobar Towers bombing, housing the 4404th wing of the US Air Force in Saudi Arabia, the 1995 Oklahoma City bombing of a federal building, the 1993 World Trade Center bombing in New York City, and Pan Am flight 103 over Lockerbie, Scotland.
On the heels of the first World Trade Center bombing, the Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. No. 104–132, 110 Stat. 1214 (a.k.a. AEDPA) was passed by a substantial majority of Congress and signed into law by President Bill Clinton. On October 26, 2001, having only minor opposition by Congress, the Patriot Act was quickly signed into law by President George W. Bush and abridges US citizens’ constitutional rights with little judicial review if you are suspected of terrorist activities or even of providing “material support” to terrorist groups. Muslims point to the fact that the Patriot Act diminishes one’s Fourth Amendment rights against unlawful search and seizure and also directly abridges amendments 5, 6, and 8 (Ghazali, 2004).
The Department of Homeland Security is a new and expensive federal bureaucracy that increases the government’s right to search airline passengers and their luggage, physically pat them down and confiscate items they believe may be hazardous, whether or not they have any links to terrorism. Travelers have no right to protest or to have a higher level of authority review a TSA decision. As a personal note, we were once traveling from my home in Tampa, Florida, to California. A TSA agent spotted the insulin pump I was wearing on my belt and called for a complete screening including swabbing my pump and my hands for traces of explosive, hand searched everything in my carryon bag, and frisked me. When he was finished, another TSA agent quietly apologized and told me that no other agent has authority to stop a TSA agent if he or she wants to execute a detailed and time-consuming search of a passenger. Even with the influence from a new president who criticized the Patriot Act during his election campaign, the law of the land remains securely in place, as does the prison in Guantanamo Bay.
Rule 2a. Force 11th-hour decisions, threaten the loss of options and opportunities, and limit the opposition’s opportunity to review and critique.
In the first year of the Obama presidency, the fact that approximately 12 to 32 million Americans, depending on whose numbers were believed, were without healthcare coverage was turned into a crisis that the US Congress rushed in to fix. Little if any attention was given to the fact that millions of Americans didn’t have health insurance when they could afford it simply because they chose not to purchase it (Wall Street Journal, 2011). It turns out that emergency rooms across the United States treat a great many of these people when sick.
By all accounts of the legislative process, few if any members of Congress had fully read the bill before being forced to vote it into law. Congress and President Obama chose to ignore the pending collapse of Social Security and Medicare, both well-studied and acknowledged crises, to spend a trillion dollars on universal health coverage that the majority of Americans didn’t want or need. The unintended consequences of this action are a flawed piece of legislation that several federal courts have struck down as unconstitutional. Its effects on the economic recovery were harshly negative, driving up the cost of healthcare and creating enough ambiguity among small-business owners to ensure any job creation is stifled.
Rule #3: If there are not enough crises, manufacture them, even from nature, where none exist.
Bureaucracies are always on the lookout for a new crisis. In his “Guiding Principles of Politicians, Bureaucrats, and Bureaucracies,” Harry Teasley points to three examples:
Secretary of Defense Robert S. McNamara in a post-midnight press briefing at the Pentagon points out action in Gulf of Tonkin, Aug. 4, 1964.
The Gulf of Tonkin incident, where an alleged attack took place on two US naval destroyers by a North Vietnamese torpedo boat, allowing President Johnson to deploy conventional military forces to Vietnam without congressional approval.
The attribution of weapons of mass destruction (WMDs) to Saddam Hussein permitted President George Bush to invade Iraq (again, without the need of congressional approval), after which no WMDs were found.
Man-made global warming. The first two resulted in loss of life and a terrible toll of people maimed and injured. We are still in the throes of discovering the effects of the third crisis.
We do know that under President Obama the power of the EPA is at a zenith, growing in size and power as a regulatory agency with all the prosecutorial powers to fine and even imprison violators (and the latitude to ignore violations as fits their interest). Alternative and renewable fuels have become a lightning rod for the EPA. Bill Gates was quoted recently in the Wall Street Journal as saying this about EPA solar-energy subsidies:
I think people deeply underestimate what a huge problem this day-night issue is if you’re trying to design an energy system involving solar technology that’s more than just a hobby. You know the sun shines during the day, and people turn their air conditioners on during the day, so you can catch some of that peaking load, particularly if you get enough subsidies. It’s cute you know, it’s nice. But the economics are so, so far from making sense.… And so unfortunately you get technologies that, no matter how much of them you buy, there’s no path to being economical.
The EPA has also teamed up with the Justice Department and Fish & Wildlife in prosecuting musical-instrument manufacturers and musicians deemed to have endangered hardwoods in their instruments. Musicians who play older instruments that used such hardwoods before it was illegal can no longer safely take their instruments across US borders without “adequate” documentation and hope to return with the instruments back in to the United States without Customs agents seizing their instruments and fining or even imprisoning them. Gibson Guitars, makers of classic instruments, has been singled out in federal raids, and there is now a criminal case, “United States of America v. Ebony Wood in Various Forms” (Felten, 2011). The EPA has enlisted US Customs to enforce problematic environmental policy.
Diversity is another example of creating a social crisis where none had existed. The ongoing need for diversity, never explicitly defined, haunts government bureaucracies particularly. James Taranto (2011) points to a “Diversity bureaucracy” that state universities continue to populate when teachers are laid off. No matter how much progress is made, there are new groups that emerge representing the nation’s continued failure to embrace the crisis of diversity. On campuses these days we must spend scarce resources on glorifying the transgendered; international students (particularly graduate students, because they bring greater monetary reward); gays, lesbians, and bisexuals; Muslims, etc. Like political correctness, diversity has become a primary orthodoxy and a perpetual goal of government that simply cannot be achieved. Once crises are created, they become self-sustaining.
Despite monumental gains in the status of women and minorities in what has always been a diverse nation, the diversity crisis is perpetuated. A series of New York Times articles documents that on college campuses, where women outnumber men by 57 percent to 43 percent, female gender issues remain an imbedded hallmark of diversity worthy of sizable resource expenditure. The American Association of Medical Colleges reported that more than 20 years ago, the number of women equaled the number of men in America’s 40 medical schools (AAMC, 1999). According to a story in the Boston Globe (2007), by 2007 women represented 79 percent of the students in American schools of veterinary medicine and the Journal of Accountancy (2011) reported that half of both undergraduate and masters students in accountancy were women. Despite the rise of women to now be the dominant gender in most professional schools, the government has allowed diversity to be whatever bureaucrats want it to be, no matter what the costs. Heather Mac Donald reported in the City Journal how an entrenched gender bureaucracy in the University of California system has grown despite the majority of students being female:
California’s budget crisis has reduced the University of California to near-penury, claimed its spokesmen. “Our campuses and the UC Office of the President have cut to the bone.…” Well, not exactly to the bone.… The University of California at San Diego, for example is creating a new full-time “vice chancellor for equity, diversity, and inclusion.” This position would augment UC San Diego’s already massive diversity apparatus, which includes the Chancellor’s Diversity Office, the associate vice chancellor for faculty equity, the assistant vice chancellor for diversity, the faculty equity advisors, the graduate diversity coordinators, the staff diversity liaison, the undergraduate student diversity liaison, the graduate student diversity liaison, the chief diversity officer, the director of development for diversity initiatives, the Office of Academic Diversity and Equal Opportunity, the Committee on Gender Identity and Sexual Orientation Issues, the Committee on the Status of Women, the Campus Council on Climate, Culture and Inclusion, the Diversity Council, and the directors of the Cross-Cultural Center, the Lesbian Gay Bisexual Transgender Resource Center, and the Women’s Center.
Race and gender not only continue to flourish at public universities, but often escape accountability. During the height of the 2000 recession, the president and provost of our university created a committee to look for ways to pare their academic budget. Every academic department and school had to produce a report from which cuts would be made that would allegedly save the university and state money. The lowest-scoring academic departments by these performance data, across a wide array of metrics, provided by their own faculty, were Women’s Studies and Africana Studies. The president and provost quickly ignored the need to cut academic programs based on their performance and the two programs were retained.
Rule #4: Control the flow and release of information while feigning openness.
It is telling that the term public relations is not used in government bureaucracies. This is not to say that governmental bureaucracies don’t engage in public influence; it’s just that they don’t want to be seen as doing so. Ironically, they spend huge sums of money at all levels trying to persuade the public and media that they aren’t persuading them. Instead you have “public affairs,” “public information,” “public communication & liaison,” and “public engagement” to duck public criticism of their information-control efforts. The bottom line is that government bureaucracies don’t want people to think that they are controlling the spin and flow of information, so the appearance is all about giving the public the information they want and need and making it sound benign, instead of persuasive.
During the Vietnam War, war correspondents brought death and destruction to television screens every night and kindled immense negative public opposition (see Meyrowitz, 1985). Since then, the government has been strategically engaged in efforts to co-opt the media by organizing carefully controlled combat sorties, led by the US military and their public-relations staff. It is a testament to information control that Operation Desert Storm received rave media reviews and that Operation Iraqi Freedom, despite its questionable validity, had mostly positive news until the war began to drag on and warriors from other Middle Eastern countries began using terrorist tactics.
One of the best examples of controlling information surrounds the information on Iraq’s alleged weapons of mass destruction (WMD) that was strategically released just before the United States and its allies invaded Iraq. Feeling the need to create widespread support for the invasion, the government strategically leaked a CIA report from 2002 that strongly presented the idea that Iraq did have WMDs (see CIA). While this was going on, Secretary of Defense Donald Rumsfeld held multiple press conferences about the invasion and reported WMDs where he would routinely begin by stating the question and then answering it before the press had a chance to probe further.
Another example of government information control comes from the economic recession that began in 2007. While President Obama certainly inherited the recession from President Bush, his administration’s efforts to control the information about it and our progress through it are instructive. As employment continued to decline, the government’s Bureau of Labor Statistics continued to release optimistic monthly reports that would subsequently prove to be wrong. What many people don’t know is that government methods of data gathering are skewed to be much more positive that they ever are. For example, employed persons are anybody 16 years of age or older who did any work for pay or profit during the survey week and all persons who did at least 15 hours of work in a family-owned enterprise operate by someone in their household. Unemployment data from the Bureau of Labor Statistics (2012) do not include retirees reentering the workforce, new college graduates looking for a job, nondeployed military personnel, or people who have been out of work for five months or more. It is instructive that the Department of Labor’s little-known measure of unemployment, U-6, is ignored by the president, Congress, and the media in favor of the rate presented monthly. The U-6 unemployment rate is currently 16 percent.
Rule 4a: Deny, delay, obfuscate, spin, and lie.
"I am not a crook"
There are two classic examples of this rule. The first was from the Nixon administration during the Watergate scandal. When the press called for the president’s ouster after the Republican break-in to the Democratic Party’s offices at the Watergate Hotel was confirmed by W. Mark Felt (“Deep Throat”), President Nixon came on national television and uttered the now famous, “I am not a crook.” In all, six top-level administration officials were indicted and sent to prison. Bill Clinton, whose administration had honed the fine art of spin doctoring into a science, also spoke to the American people as well as Congress and his cabinet and said, “I did not have sexual relations with that woman, Miss Lewinsky.” Hillary Clinton stood by him and attributed the commotion to the “vast right-wing conspiracy.” After DNA evidence was presented by Miss Lewinsky to the federal prosecutor, most of Clinton’s cabinet resigned (presumably for having been lied to by the president). Lying, cheating, obfuscating, and spinning are all tools of the accomplished bureaucrat who is caught doing something wrong.
Rule #5: Maximize public-relations exposure by creating a cover story that appeals to the universal need to help people.
Government bureaucracy is honed on populist rhetoric. Bureaucrats have become skilled at using the “helping the people” angle when making speeches, and especially when dealing with the press. It is a variation of the “people angle” taught in media relations training programs as the best method to attract media attention and promotion. Almost any government program, no matter what its cost in money or personal liberties, can be sold through the media by claiming it is for (1) the children, (2) the environment, (3) the elderly, (4) the poor, (5) the homeless, (6) the national defense, (7) homeland security, or (8) the sick.
For example, CNN (2003) reported that George W. Bush claimed the Medicare Part D pharmaceutical supplement he signed into law was
the greatest advance in health care coverage for America’s seniors since the founding of Medicare. With this law, we’re giving older Americans better choices and more control over their health care, so they can receive the modern medical care they deserve. These reforms are the act of a vibrant and compassionate government.
He forgot to mention the actuarial fiscal liabilities of this law. From the 2009 Financial Report of the United States Government, the long-range unfunded cost projections of the Medicare Part D mandate is $7.2 trillion dollars.
When bureaucrats of any ilk promote their new law or program as being “for the people,” it is important to first look behind the curtain. “Social justice” is the veneer used by bureaucrats to gain positive media exposure while pursuing the building of more bureaucracy. It is so pervasive that your child can even pursue a major in social justice at institutions of higher learning like the University of California, Santa Barbara. Sowell points out in his book The Quest for Cosmic Justice that all justice is, by definition, social, and “social” is most often used in the populist sense of everyone but the wealthy. A cover story that seeks social justice or to right the wrongs of an unjust society is guaranteed media attention, yet very few in the media or the public are inclined to look beneath the veneer of social justice to examine the costs and the unintended consequences.
Rule #6: Create vested support groups by distributing concentrated benefits and/or entitlements to these special interests, while distributing the costs broadly to one’s political opponents.
Jimmy Carter signed the 1977 Community Reinvestment Act that will go down in infamy
The Community Reinvestment Act of 1977, signed into law by President Carter, established the federal government’s role in providing affordable housing to the needy. Over the 33 years it has been in existence, its force has grown the size and reach of the Federal Housing Administration, the Federal Deposit Insurance Corporation, the Federal Reserve, and the Departments of Justice and Housing & Urban Development. It has also given rise to the Federal National Mortgage Association (“Fannie Mae” and “Freddie Mac”). While the initial goal was to provide the less economically advantaged with an opportunity to purchase a home, no one bothered to look at the possible unintended consequences of helping people whose personal credit wouldn’t qualify them to buy a home.
As Sowell (2009, pp. 31–56) points out, “affordable” became the ability for people to buy the home they wanted in the area they wanted and the government’s role was to make it financially possible to purchase it. The Community Reinvestment Act ultimately led to the biggest financial crisis since the Great Depression, yet many of its proponents and even the media failed to see or understand the real problem or the long-term costs and market dislocation that would result.
Even more insidious are government laws that benefit for-profit corporations. These are the recipients of corporate welfare. The poster child of corporate welfare is Archer Daniels Midland (ADM), having received billions of tax dollars from more than 15 federal agencies over the past 50 years. As James Bovard (1995) and Chip Krakoff (2011) point out, to return the favor to the federal bureaucracy, ADM has also been funding reelection campaigns on both sides of the congressional aisle and for both Democratic and Republican presidential candidates. As a testament to ADM’s political ecumenicalism, it has been a long-time sponsor/advertiser of National Public Radio, which attracts a large portion of the left-liberal minded. The EPA is planning to issue an edict to allow 15 percent ethanol to be blended into gasoline, which will result in a 50 percent market gain for ADM’s ethanol-production facilities and a similar market grain in the sale of their dominant field-corn holdings used to make ethanol.
Chip Krakoff (2011) quotes ADM’s Dwayne Andreas as justifying his corporate welfare history:
There isn’t one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians. People who are not in the Midwest do not understand that this is a socialist country.
Our last example of Teasley’s sixth rule of bureaucracy is Solyndra, one of three green-energy companies that received nearly $700 million in federal-government money and filed bankruptcy in the past two years. Solyndra is a photovoltaic-solar-energy-systems manufacturer in California. It has received huge loan guarantees ($535 million) through the American Recovery and Reinvestment Act (itself a huge and expensive federal program to fix the mistakes of the Community Reinvestment Act) and the Federal Financing Bank, as well as being the beneficiary of federal and state policies mandating the use of renewable energy sources (US Department of Energy’s ENERGY STAR Program and by the requirements of the California Title 24 Energy Standard, which prescribes cool roofs to be employed whenever low-slope commercial roofs are constructed or replaced).
The Wall Street Journal (2011) indicated that the company was also backed by the George Kaiser Family Foundation and, along with its founder, were big financial supporters of the Obama presidential campaign as a bona fide for his “green” stand. An additional $75 million loan was made to Solyndra, but the agreement with private investors, including Kaiser, placed them ahead of American taxpayers in case of default. Until the company announced its bankruptcy in August 2011, President Obama had hailed the company as “leading the way toward a brighter and more prosperous future” (Ibid). More than 20 trips were made by company officials, investors, and George Kaiser to the White House between March 2009 and April 2010, and despite reports from industry insiders about Solyndra’s financial health, administration officials dismissed these reports as “B.S.”
Rule #7: Demonize the truth tellers who have the temerity to say, “The emperor has no clothes.”
Telling the truth in America often leads to unemployment and being ostracized. A step up from the firing squad.
There were plenty of people sounding alarms as early as 2003 about the housing bubble and growing deficits that led directly to the devastating economic downturn that lingers today, not only in America but around the world. Most in Washington, including Fannie Mae, Freddie Mac, HUD, the Federal Reserve, Congressman Barney Frank (head of the House Financial Services Committee) and Senator Dodd (head of the Senate Banking Committee), all refused to pay attention to the growing signs of the housing-market collapse and its risk to the US economy, railing against any warnings that Fannie and Freddie were in financial trouble.
Stephen Labaton (2003) of the New York Times quoted Mr. Frank as saying, “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis.”
In the House of Representatives on June 25, 2007, Congressman Frank stated,
We have, I think, an excessive degree of concern right now about home ownership and its role in the economy. Obviously speculation is never a good thing. But those who argue that housing prices are now at the point of a bubble seem to me to be missing a very important point. Unlike previous examples we have had where substantial excessive inflation of prices later caused some problems, we are talking here about an entity, home ownership, homes, where there is not the degree of leverage that we have seen elsewhere. This is not the dot com situation.… Homes that are occupied may see an ebb and flow in the price at a certain percentage level but you’re not going to see a collapse that you see when people talk about a bubble. So those of us on our committee in particular will continue to push toward home ownership.
In 2010 Mr. Frank implicated foreign central banks, particularly China, when attacking a letter written by Republican economists to the Federal Reserve for
joining a broad attack by the foreign central banks who insist that America somehow must subordinate our own legitimate economic needs to their currency requirements. What did disappoint me was to see conservative economists, high-ranking officials of previous Republican administrations, and Republican congressional leaders share the attack by these foreign banks not simply on the Federal Reserve’s proposal, but on the very notion that America has a right to give a primary focus to our own economic need for growth at this time. (McDonald, 2010)
Of course, both political parties demonize the truth tellers who speak out against costly and wasteful policies and their unintended consequences. During the invasion of Iraq, Vice President Dick Cheney, Donald Rumsfeld, and even President Bush frequently took critics to task, asserting that there was “incontrovertible” evidence that Saddam Hussein had weapons of mass destruction. CNN (2005) reported that President Bush said during a Veteran’s Day speech in Pennsylvania,
Some Democrats and anti-war critics are now claiming we manipulated the intelligence and misled the American people about why we went to war. They also know that intelligence agencies from around the world agreed with our assessment of Saddam Hussein. While it’s perfectly legitimate to criticize my decision or the conduct of the war, it is deeply irresponsible to rewrite the history of how that war began.
Rule 7a: Accuse the truth teller of one’s own defects, deficiencies, crimes, and misdemeanors.
One wag said, “Gall was divided into three parts and politicians have all three of them.” We habitually find government bureaucrats, particularly politicians, trying to turn the tables of their accusers in misdeeds. Glen Johnson (2008), Associate Press writer, quoted Congressman Barney Frank, who attended a foreclosure symposium in Boston and challenged the critics of Fannie Mae, implying racism as the motive for the criticism:
They get to take things out on poor people. Let’s be honest: The fact that some of the poor people are black doesn’t hurt them either, from their standpoint. This is an effort, I believe, to appeal to a kind of anger in people.
Former representative Charles Rangel was ultimately accused of 13 ethics infractions by the House of Representatives. Washington Post reporters Leoning & Kane (2010) reported that, after a news conference Mr. Rangel held about the ethics violations, he responded about the possibility of being removed as chairman of the House Ways and Means Committee:
“I don’t see what purpose that would serve, I don’t think reporters should be in the position to remove chairmen, not even temporarily, especially when the reporting is false.” When asked specifically about nearly $80,000 his son had received from his campaign to design a website, he replied, “The reporter should really crawl from under his rock and apologize to my son, a veteran, my friend, my son and a great American,” Mr. Rangel said. “It’s one of the crummiest deviations from the truth that I’ve seen in these recent stories.”
The Road Less Traveled from Here
After presenting Teasley’s rules of bureaucracy, asking where Americans can go from here is not a rhetorical question. Given an economy that is not responding to Keynesian stimulus, proffered by an authoritarian administration and a market-corrupting federal bureaucracy, there are several solutions that we believe will make a difference and take the wind out of the sails of bureaucracy. We offer a series of antidotes to the scourge of bureaucracy.
“Bureaucrat” should not be thought of as a career path. History has proven that “career bureaucrats” do much more harm than good and we must characterize such people as pariahs and scallywags, not saviors of this country. The Democratic and Republican parties will push back from this antidote in their faux political fight for power. Knowing how to get things done in state capitols and in Washington is only an asset to law-making junkies and directly reflects the dark underbelly of the bureaucratic beast.
If Congress comes up with a new “war against,” we should fight it, no matter what the war is against. The federal government’s track record is abysmal and the equivalent of a taxpayer boat — a hole in the water that you sink your money in.
Send all newly elected officials to the state capitol or Washington with the specific goal to reduce legislation. America’s bureaucracies have forgotten that resources are scarce, and most legislation builds bigger government and demands more tax dollars. Federal bureaucracy has grown at an alarming rate under Republican president George Bush and as much in just three years under Democratic president Barack Obama. While legislators keep an informal scorecard with how many pieces of legislation bear their names, does America need Sarbanes-Oxley or Dodd-Frank legislation? While it may inflate bureaucrats’ self-worth and hubris, America must reduce the number of existing laws and agencies significantly.
Sowell (1999) has long advocated that we use an economic analysis to examine our legislative initiatives before they become law. To stem the tide of fiscal irresponsibility leading to unsustainable government size and debt, no bill should pass from committee to a full chamber vote without first being carefully analyzed by the Government Accountability Office using a four-step rubric, the results of which must be presented to the American people before the vote. First, an analysis of what we can do about a problem, including its importance to the economic competitiveness of our country, and how much it will cost. Second, an analysis of what we should do collectively as a nation and what should be left up to individual initiative. Personal health and education are splendid examples. Third, a careful analysis must be undertaken of who will be helped and who will be hurt by any new legislation. As Bastiat warned us more that 150 years ago, political bureaucrats ignore who will be hurt by a new law. Fourth, a careful, econometric analysis must be made of the possible long-term unintended consequences of proposed legislation. Had our legislators done this, instead of trying to seize the political moment and the headlines, much of the federal legislation of the last two decades would never have been passed.
Addressing real problems while reducing government bureaucracies and entitlements will give the United States a new resourcefulness that can go a long way toward making the United States a decidedly freer market, and it will reestablish our exceptionalism in a way that other first-world countries have been unable to do with their stifling bureaucracies and statist programs.
Loyd S. Pettegrew is a tenured full professor of communication at the University of South Florida, where he teaches and studies public influence and also runs his consulting firm, Decision Strategies Group, Inc., which performs research and training for corporations. Send him mail. See Loyd S. Pettegrew’s article archives.
Carol A. Vance is an instructor of accounting at the University of South Florida-St. Petersburg School of Accountancy. She is a principal of Vance & Likens, LLC, an accounting firm, and of Carol A. Vance, ESQ CPA PLC, a tax-law firm specializing in high-net-worth clients. Send her mail. See Carol A. Vance’s article archives.
This essay was developed from a bullet point presentation originated by Harry E. Teasley Jr.
Teasley has spent his life confronting and triumphing over bureaucracy. His business career was spent at The Coca-Cola Company as head of various lines of business. His nickname was “Thor” for his willingness to confront the evils of bureaucracy and its mindless agents. Teasley’s experience with bureaucracy included federal, state, and local government, labor unions, nongovernmental organizations (NGOs), environmental protectionists, Coca-Cola itself and other corporations. Since retiring, Teasley has served as the chairman of the Reason Foundation and has successfully defeated numerous government attempts to infringe on the free market and usurp private-property rights in Tampa, Florida.