CHAPTER 1
There Is No “Free” Market

Look at history and you will find that the middle class was the creation of liberal democracies. George Washington and Thomas Jefferson did not fight a bloody war to create a country only for wealthy property holders. (See chapter 4 to fully understand how wrong is the corrosive myth of the “rich Founders.”) Our Founders believed that every Bob Cratchit willing to work for his living should be able to earn enough to own his house and support himself and his family. That’s what it means to be middle class—and part of why Jefferson put “life, liberty and the pursuit of happiness” into the Declaration of Independence.

The Founders also knew that the middle class doesn’t just materialize out of thin air. That’s why, in the preamble to the Constitution, they wrote that one purpose of government was to “promote the general welfare.”

Two centuries later, when the middle class was in danger of disappearing during the Great Depression, Franklin D. Roosevelt almost single-handedly created a new middle class through his New Deal policies. Roosevelt’s success demonstrates that government can and must “promote the general welfare” because only government can create the conditions that make a middle class possible. And FDR was able to do it only because an overwhelming majority of Americans voted for it in a relatively free and open democracy.

THE LIE OF THE “FREE” MARKET

Listen to the right-wing pundits—the people I call the cons—and they will tell you something completely different. They suggest (and some actually believe) that a middle class will naturally spring into being when the kingdoms of corporate power are freed from government restrictions.

The way to create good jobs, according to the cons, is to “free” the market. When business gets to do whatever it wants, they say, it will create wealth, and that wealth will trickle down to the rest of us, creating a middle class.

The cons’ belief in “free” markets is a bit like the old Catholic Church’s insistence that the Earth was at the center of the solar system. The free-market line is widely believed by those in power, and those who challenge this belief are labeled heretics—and it’s wrong.

Here’s a headline for these cons who are masquerading as economists without having studied either economics or history:

There is no such thing as a “free” market.

Markets are the creation of government.

Governments provide markets with a stable currency for financial transactions. They provide a legal infrastructure and a court system to enforce the contracts that make the market possible. They provide an educated workforce through public education, and those workers show up at their places of business after traveling on public roads, rails, and airways provided by the government. Businesses that use the “free” market are protected by police and fire departments provided by the government, and they send their communications—from phone to e-mail—over lines that follow public rights of way maintained and protected by the government.

And, most important, the rules of the game of business are defined by the government. Any sports fan can tell you that without rules and referees football, baseball, basketball, and hockey would be a mess. Similarly, business without rules won’t work. In a corporate kingdom—a corporatocracy—those rules are made by the businesses themselves and will inevitably screw workers and citizens. In a democracy those rules are made by We the People, both through our elected representatives and through union negotiations with the business kings/lords/CEOs.

THE “SMALLER-GOVERNMENT” CON

The cons believe that what business does is business’s business and that government should keep its nose out of it, even when the business is run by Ebenezer Scrooge and leads to centuries of sick Tiny Tims and terrified Bob Cratchits.

Talk-show cons and TV talking-head cons and political cons—both Republicans and “conservative” or “middle of the road” (euphemisms for corporate connected) Democrats—say that government just gets in the way of the market. They want to “let the market decide” our economy.

Unspoken is their belief that if economic and social policy are made by the market, we don’t need government—the voice and the will of We the People—for most domestic affairs. One of the most vocal cons, Grover Norquist, told National Public Radio’s Mara Liasson in a May 25, 2001, interview, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”

During the Golden Age of the American middle class, people routinely voted themselves tax increases to invest in new schools, better roads, higher pay for police and firefighters, and a multitude of other infrastructure and public works projects. Hospitals were owned and run by local communities, as were water and sewage systems and, in most of the United States, power plants and other public utilities. Taxes by and large were thought of as investments in civil society and community and were routinely embraced by the majority of the middle class. Of course, people made jokes about not liking taxes, but they still knew that without taxes there would be no services, and people wanted and needed those services.

Ronald Reagan and his public relations (PR) machine, funded by huge corporations and wealthy people like Joseph Coors, promoted the thought virus—the meme—that taxes are bad and government is bad. Reagan ran as an “outsider” to government (although he was the former governor of California) and even ran for reelection as president “against” government.

Reagan put forward the point of view of the wealthy elite, who felt that they were paying large sums of their vast wealth to help “the little people” have good schools and communities that worked. He changed laws like the Fairness Doctrine, in 1986, so that sycophants like Rush Limbaugh could appear on the public airwaves (with heavy corporate funding) to help convince the “average person” that taxes were bad and government was bad.

Reagan stopped enforcing the Sherman Antitrust Act, which since 1881 had held at bay the aggregation of corporate power, and the media began forming huge monopolies that were then used to reinforce on national TV and radio the perspectives of commentators like Limbaugh. Increasingly, across America two-, three-, and four-newspaper towns became one-newspaper towns, as the era of mergers and acquisitions swept the nation. Labor pages vanished from these new multistate, chain-owned newspapers and were replaced exclusively by “business sections.” Labor almost entirely vanished from the American press.

An entire generation has been indoctrinated in this smaller-is-better view to the point where polls showed that when Bill Clinton said “smaller government,” people reacted positively. Clinton signed the Telecommunications Act of 1996, the North American Free Trade Agreement (NAFTA), and the General Agreement on Tariffs and Trade (GATT), further reducing the power of We the People to regulate business and the media. The result was another explosion of mergers and the near total takeover of the American media and the American workplace by multinational corporations that have little or no allegiance to the USA or the concept of democracy. Today the bottom line rules and workers be damned.

But the cracks are now showing. In 2005 we found out just what happens when you follow Grover Norquist’s advice and wash government down the drain. When Hurricane Katrina hit, more than a thousand people drowned in the basin of New Orleans. Our nation failed in its response because for most of the past twenty-five years cons who don’t believe in governance have been systematically dismantling every aspect of our government except that part they can use to punish us or spy on us.

Here’s the con game these pundits are playing: “smaller government” doesn’t mean fewer taxes for you and me. It doesn’t mean fewer politicians. It means government of, by, and for corporations and inherited wealth rather than of, by, and for We the People.

The cons’ mantra is “Let the markets decide.” But there is no “market” independent of government, so what they are really saying is “Let’s make government work to help corporations instead of people. Let’s provide all the services corporations need and then make the people foot the bill. Let’s let corporations decide how much to pay for labor and when, where, and how to trade.”

Thus “con government” is not “smaller government.” Under George W. Bush, for example, inflation-adjusted government spending is as high as it was during World War II, at almost $20,000 per person per year.¹

What the cons don’t say is that the reason they want a smaller government is because they can then make an enormous amount of money when they privatize formerly governmental functions. They want a power vacuum so that corporations and the rich can step in and profit from things that used to be nonprofit.

Privatizing Social Security will bring a windfall to Wall Street. Our private health-care system has produced a huge crop of multimillionaires and multibillionaires like Bill Frist and his brother and father. One in twenty Americans is now getting tap water from a non-U.S. private corporation that is extracting profits from local American communities and taking those profits overseas. Large swaths of America’s electrical infrastructure have been privatized and deregulated, leading to rate manipulation, brown-outs in California, and huge profits for utility corporations. CEOs are looking forward to buying more Gulfstreams and nicer yachts, while America’s middle class is paying more and more for basic and necessary services.

Making government smaller is a nice-sounding phrase in this post-Reagan world, but those who promote it are really pulling what Bernie Sanders² calls a “reverse Robin Hood.” It’s cover for a system that takes from the poor and gives to the rich.

In his budget proposal for 2007, Bush called for spending that will benefit the biggest U.S. corporations, including money for defense, drugs (under the new Medicare drug benefit), coal mining, and ethanol (that’s corporate agriculture to you and me).³ To pay for this corporate largess, Bush proposed cutting programs for the poorest among us, including the Commodity Supplemental Food Program, which provides food to low-income mothers with children. And he proposed further cutting programs that directly affect the middle class, including Medicare, education spending (including funding for arts education, parent resource centers, and education technology grants), and spending on the environment (including a program designed to update aging sewer systems and a $300 million cut to the Environmental Protection Agency).⁴

“Smaller government,” it turns out, is not actually smaller government but different government. It’s government for the rich instead of government for the rest of us. It’s a departure from democracy and a shift toward the old hierarchical systems of kings and kingdoms, with the new kings being named Trump and Cheney and Bechtel and the new kingdoms being their corporations.

GOVERNING FOR PROFIT

In the corporatocracy, politicians are paid by economic interests rather than by We the People. Instead of fighting against this system, Reagan suggested that the problem was not the corporatocracy and its lobbyists but the existence of politicians and government. Reagan was the first American president to actually preach that his own job was a bad thing. His speechwriters once wrote for him: “Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first.”

The Jack Abramoff scandal of 2006 and the pervasive evidence that so many of our elected officials have been willing to trade their votes for cash demonstrates that politicians often act as if Reagan was right. But that’s not the way it has to be.

Men like Thomas Jefferson (D), Abraham Lincoln (R), Theodore Roosevelt (R), and Franklin Roosevelt (D) were drawn to politics out of a sense of idealism, not a desire to advance their own interests. There really was a time when politicians chose politics because they wanted to represent the will of the people.

It seems that today’s cons can’t imagine anybody wanting to devote his or her life to the service of the nation. The highest calling in their minds is to make a profit.

Ronald Reagan certainly couldn’t imagine why anyone would want to be in government. He said: “The best minds are not in government. If any were, business would hire them away.”

This mind-set—that the only purpose for service in government is to set up the interests of business—may account for why not a single military-eligible member of the Bush or Cheney family enlisted in their parents’ “noble cause,” whereas all four sons of Franklin Roosevelt joined and each was decorated—on merit—for bravery in the deadly conflict of World War II. There are, after all, no reasons in the cons’ worldview for government service other than self-enrichment.

The cons say they want smaller government—small enough to “drown in a bathtub"—but what they mean is that they want to provide government services only to business on the theory that what is good for business will eventually trickle down far enough to be good for the rest of us. And they admit that they expect to benefit very nicely themselves from aiding their superrich pals.

The cons don’t really care about the “free” market. They care about taking care of their own. In fact, the cons are more than willing to toss their smaller-is-better mantra right out the window and grow government if it increases their profits and helps them stay in power.

GOVERNMENT FOR MY SIDE AND NOT FOR YOURS

The cons aren’t stupid. They know that government makes a real difference in people’s lives. Look at the difference in the response to Hurricane Katrina in 2005 versus Hurricane Charley, which hit Jeb Bush’s state a year earlier, just months before the 2004 elections.

Damage estimates from Katrina are well over $100 billion, with more than $34 billion in insured losses, according to the National Climatic Update Center.⁵ This is four times more than the combined damage done by Hurricanes Charley, Frances, Ivan, and Jeanne in Florida last year, which came to almost $21 billion combined.⁶

We still don’t know how many people died from Katrina, and we may never know. More than 1,300 bodies have been found, but more than two thousand people are considered “missing persons,” who may have died in the hurricane and whose bodies may never be found.⁷ By contrast Hurricane Charley caused the deaths of only eleven people.

But with Hurricane Charley, in Jeb Bush’s red state, in the year of a presidential election, the response of the Federal Emergency Management Agency (FEMA) was considerably different than for blue-state Louisiana a year later. The day before Hurricane Charley hit, FEMA had mobilized 100 trucks of water, 900,000 Meals Ready to Eat (MREs), more than 7,000 cases of food, and tens of thousands of tarps. Disaster medical assistance teams, urban search-and-rescue teams, and FEMA officials were already in place; and 4,100 troops were called up and waiting to aid flood victims and assist in the distribution of supplies. In short, the government did exactly what it was supposed to do. The federal government was mailing checks to hurricane victims within a week of Charley’s passing—including “victims” as far as 500 miles from the damage area.⁸

But when Katrina hit—with no election looming and with death stalking a Democratic state with a Democratic governor unrelated to the president—the Reagan philosophy held ascendant. George W. Bush’s call to Americans in response to Hurricane Katrina? “Send cash to the Red Cross.” While people were drowning, Bush traveled to Arizona to cut a birthday cake with John McCain and play golf; he then went to California, where he played guitar with a country singer at a fundraiser. It wasn’t until three of his top aides drew straws to determine who would give him the bad news that people were dying—four days after the hurricane struck—that he saw a three-hour video they compiled of news reports over the past week and realized he needed to go into quick-PR mode and fly to Louisiana.

Vice President Dick Cheney stayed on vacation in Wyoming while thousands died in New Orleans; his former (and perhaps future) company, Halliburton, was busy, however, obtaining a multimillion-dollar contract to profit from Hurricane Katrina’s cleanup.

Instead of preparing in advance, FEMA head Michael Brown waited until five hours after Katrina made landfall to finally ask his boss, Michael Chertoff, secretary of the Department of Homeland Security, for authorization for a thousand FEMA staff, active and reserves, to go into the flooded areas—and then suggested they be given two days to respond.⁹ Chertoff, in turn, waited thirty-six hours to declare Katrina an “incident of national significance,” which was necessary to trigger federal assistance.

Governor of Louisiana Kathleen Blanco asked FEMA if the mayor of New Orleans, Ray Nagin, should mobilize school and city buses to transport people out of the city; she was told by federal officials that he should not use them but instead wait for FEMA buses to arrive. The buses never came—the FEMA director and the Homeland Security director and the president and the vice president had more important business to attend to.

We all saw what happened next: thousands of people trapped in a flooded city with no food, no fuel, and no way out. No tents, trailers, or other temporary shelters were made ready before Katrina struck, leaving those whose homes had been destroyed to gather in the Superdome for days on end.

The aftermath hasn’t been much better. Though Congress has appropriated more than $85 million, the Republican Party itself noted that the Bush administration had misspent much of it. As I write this, New Orleans is still a mess and they’re still finding bodies.

When it benefited one of their own, the cons sure knew how to make use of government in Florida. Louisiana, however, was another matter.

American democracy was not designed as a government of, by, and for special interests. It is a government of, by, and for We the People. And it’s time We the People took it back.

GOVERNING REQUIRES GOVERNMENT

A listener to my radio program called in and pointed out: “You can’t govern if you don’t believe in government.”

The conservatives who are now in the driver’s seat are steering us away from government. But when you diminish the role of government, you aren’t left with a “free” market. You’re left with feudalism.

When George W. Bush and his cronies say that they want to make government smaller, they are making explicit their undeclared war on the middle class. We can’t expect the cons to have a change of heart: that occurs only in fiction. If we want to preserve a middle class in America—and the democracy that the middle class alone can maintain—we must take our government back.