by Joe Kernen
“Yes, Blake?”
“What’s a recession?”
I didn’t think that my then-nine-year-old daughter wanted the technical answer—two consecutive quarters of negative GDP growth. Or maybe I just didn’t want to have to explain that day what GDP stands for, much less how it’s calculated.
“A recession is when the economy stops growing and starts shrinking.”
“Economy?”
I should have known better.
“The economy is the sum of all the buying and selling that goes on in America. All the stuff we buy and sell, like food and clothes and cars and houses and such; and all the work we do, and we pay for, like your tennis camp or your guitar teacher. When we buy and sell more stuff and services in this year than we did last year, then the economy is growing; when we buy less, it’s in recession.”
“My teacher says the recession is the banks’ fault.”
“That’s way too simple, Blake. For something as big as this recession, there’s a lot of blame to go around.”
“And my teacher says it’s ’cause we care too much about buying stuff, and it might not be so bad if we stopped.”
“Your teacher said . . . what?”
The Great Recession was a wake-up call for everyone, but this exchange had the same effect as a bathtub full of ice water falling on my head. I was panicked at the thought that my very smart young daughter had fallen prey to a media culture and an educational system that were not only completely ignorant of the nature of a free-market economy but, often enough, hostile to it. It was as if I had learned that she was being taught geology by a member of the Flat Earth Society.
How long had this been going on? Probably since the day Blake began kindergarten and started being exposed to the economic philosophies of adults other than her mother and me. But I didn’t really think about how to respond until January 20, 2009.
When Barack Hussein Obama took the oath of office, I admit I understood the proud cheers of the hundreds of thousands of people lining the parade route in Washington that day. I didn’t vote for the guy, but I’m not a complete dolt, and I could see how his election said something pretty positive about America. Pundit after pundit had spent the preceding weeks reminding me that this was something that couldn’t have happened anywhere else, and if they had drunk just a little too much of the Obama Kool-Aid, they weren’t completely wrong. A black man with, shall we say, a foreign-sounding name had just been elected the leader of the free world. You can get pretty drunk on that sort of stuff.
The hangover didn’t take long coming. And it’s gotten so bad since that I can’t even see an Obama bumper sticker without getting the headache, dry mouth, and general depression all over again.
My hangover isn’t the result of concerns about the president’s birth certificate. Or worries that he is some kind of Manchurian candidate in the pay of a foreign power. I don’t think he is Muslim, or racist, or anticolonialist, or un-American. I don’t blame him for the Troubled Asset Relief Program, which was passed by the previous administration (and which, given the circumstances, I actually thought was needed). And while I don’t agree with all his foreignpolicy decisions—okay, with any of them—I know he inherited a pretty poor set of options, and also that I don’t really know enough about Iraq or Afghanistan or Iran to second-guess everything that is happening there.
No, my problems with the president are on an entirely different plane: I hate what he’s doing to my children’s future, and I don’t have to think that Barack Obama is the devil to know that he has a very different idea than I do about what America should look like when Blake and Scott are adults.
It’s a belief thing. Penelope and I believe in free markets—that the best economic decisions are made by the largest number of individuals acting in what they believe to be their own interests. President Obama and most of his administration believe in an economy that depends on the cleverest people acting in what they believe to be the interests of everyone else. We believe in voluntary associations. They prefer compulsory ones, at least when it comes to health insurance or union organizing.
One thing they don’t care much for is business. Like a lot of people, I test out a lot of my thinking by talking things over with my friends. One of them is also one of Squawk Box’s favorite guests, and not just because he was the CEO of CNBC’s parent company from the time the network was founded until he retired—as the most admired businessman in America—in 2001.
Jack Welch isn’t sure why the current administration is antibusiness but doesn’t doubt that it is. Really antibusiness. And really intimidating. Here’s what Jack had to say on Squawk Box back in September 2010:Right off the bat, Joe, he’s in office one month, and what does he do? He vilifies Las Vegas, as a place “fat cats” go to conventions. Now, first off, “fat cats” don’t go to conventions; salesmen go to conventions, which doesn’t show a lot of understanding. And what’s the result: He hammers both the travel industry and the sales business.
Then he bails out the auto industry, and the company’s bondholders get smashed—he called them “speculators”—and hands GM and Chrysler over to the United Auto Workers.
Then, after the Supreme Court decided, in the Citizens United ruling, that corporations can spend money on campaigns in the same way unions already do, the president, in the State of the Union, ridicules the members of the court for their so-called probusiness ruling.
I asked him, “Why doesn’t the administration see the disconnect between what you call antibusiness sentiment and what I’m sure is their real desire to add jobs?”
“Maybe they’re bipolar. Or maybe it’s sleight of hand.”
It doesn’t stop there. The president, and those sympathetic to him, follow the liberal philosopher John Rawls, who used to argue that the best society was the one you’d pick from behind a “veil of ignorance,” the one you’d design if you didn’t know whether you’d be born rich or poor and were determined to make sure that being born poor wouldn’t be so bad. Penelope and I, on the other hand, believe in a “window of optimism”: that the best society is the one that gives people the best chance to achieve. They think property rights are in conflict with human rights; we think property rights are human rights. They believe in the tax system as a way of promoting desirable social goals, like reduced inequality; we think taxes are just a method for funding necessary—necessary—government activity.
What do you call these people? Once upon a time, I would have called them liberals, and most everyone would have understood what that meant. However, one of the consequences of spending some time in the company of Adam Smith, Friedrich Hayek, and Ludwig von Mises is being reminded that that the word “liberal” used to mean something very different: an affection for liberty, free markets, and property rights, along with a hostility to economic cronyism.
Pretty confusing, no?
I’m a little happier calling them “Progressives.” Partly this is because that’s what they’ve taken to calling themselves, but mostly it’s because the history of progressivism—excuse me, Progressivism—really explains the two sides in this battle a whole lot better.
People have been calling themselves “progressives” in America since the end of the nineteenth century and mostly started out with a laudable interest in improving the lot of the poor. Progressives built schools and settlement houses, ran charities, fought corruption in government, and recruited the Bull Moose himself, Theodore Roosevelt, who ran for president in 1912 as—you guessed it—the candidate of the Progressive Party. But the soul of Progressivism was a journalist named Herbert Croly, who published a book called The Promise of American Life in 1909.
If you want to understand modern Progressives—and especially the Progressive wing of the Democratic party—you could do a lot worse than reading Croly. Here are a few of his choicest observations about America: “American history contains much matter for pride and congratulation, and much matter for regret and humiliation.”
America was “save
d from the consequences of its distracting individualistic conception of democracy.”
“The popular will cannot be taken for granted, it must be created.”
In order to govern, according to Croly, people must be shown that the “special interests” really run things, that the pursuit of profit by Haves (Croly’s capitalization) is antidemocratic. It’s not that Croly didn’t like elites; he loved them, since the people didn’t really understand their own best interests, and only powerful leaders could “accelerate the desirable process of social reconstruction.”
However, Progressives, true to their heritage as do-gooders, greatly prefer their elites to be uncorrupted by anything as souldestroying as money. Like, for example, the First Lady of the United States, Michelle Obama, who told a group of women at a day care center in Zanesville, Ohio, in 2008: “Don’t go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse. Those are the careers that we need. But if you make that choice, as we did, to move out of the money-making industry into the helping industry, then your salaries respond.”3
Or the president himself, who said in an interview with Bloomberg BusinessWeek about plans to curb the bonuses being paid to Haves in the financial services industry, “I, like most of the American people, don’t begrudge people success or wealth. . . . I do think that the compensation packages that we’ve seen over the last decade at least have not matched up always to performance.”
Well, everyone hates bankers. But hardware stores?
Bernie Marcus, one of the founders of Home Depot, is a regular guest on Squawk Box, and he sure knows when someone is insulting him. To the Obama administration, he says, people who create jobs “are monsters. We’re disgusting human beings.” His cofounder, Ken Langone, goes even further. He showed up at the president’s townhall meeting in September 2010 and asked him why, since a dynamic economy was so essential to growing the economy, he spent so much time vilifying the people who delivered that growth. The president responded that Ken was part of a group that had been “reckless.” Who had made “bad decisions.” And who needed “guidance” from Washington.
Sound familiar?
“Blake?”
“Yes, Dad?”
“Have you ever heard the word ‘progressive’?”
“I think so.”
“What do you think it means?”
“Maybe . . . something about progress?”
If only. Actually, Progressives have pretty mixed feelings about progress. While it’s true that Progressives have long supported stuff that just about everyone would call progress—like woman suffrage and an end to racial discrimination—and even things that at least some people would call progress—like stronger environmental legislation—when it comes to policies that promote material progress (you know, improving people’s wealth, choice, and living conditions), Progressives are usually the ones pulling back on the reins and yelling, “Whoa!”4
Partly this is because the typical Progressive hasn’t got a clue about what actually produces wealth. This is a truism that turns out to be true, at least statistically: A study by the Federal Reserve Bank of New York clearly showed that the more economics classes you take in college, the less likely you are to support any part of the Progressive agenda. Breaking it down to the most basic kind of free-market thinking, this means that the more economics you know, the less likely you are to believe in the Progressive doctrine that tariffs are necessary to protect domestic jobs and that free trade hurts prosperity (it doesn’t). The more you know about economics, the less likely you are to support the Progressive belief in higher minimum wages (they actually raise unemployment). And the greater your economic literacy, the less likely you are to buy the Progressive idea that governments should set prices or wages (sorry, but duh).
And, no surprise, Progressives love the Progressive (oops, I meant progressive) income tax. Almost as much as they love redistributing income in a way that meets their own definition of fairness, taking money from one group to pay another.
And speaking of taking money: In Las Vegas and other cities that use the mathematics of probability to separate customers from their cash, by far the most profitable “game” of chance is the one played one-on-one with slot machines: Put your money in here, and pray that more comes out there. At the very pinnacle of this one-armed banditry are payoffs that take a small percentage of the total amount of money played in a whole network of machines, tempting arithmeticchallenged players to keep pouring money into slots hoping for a million-dollar payday. Let me repeat that: a slot machine that takes money from other slot machines in order to promise a giant payday. The technical name for this sort of system: progressive slot machines.
Makes you think.
The Progressive opinions held by Blake’s teachers shouldn’t have come as a complete shock, but they did. Like most folks who earn a living in the world of business and finance, I spend my working day around people who take the virtues of free-market capitalism for granted. Partly this is a matter of temperament; planned-economy enthusiasts don’t tend to look for jobs at CNBC. Really, though, it’s the fact that people like me learned what we know about the real-world economy in, well, the real world. When you spend your days with people who are spending their days buying, selling, and trading, Adam Smith’s “invisible hand” isn’t some classroom abstraction; it’s tapping you on your shoulder all day long.
For a lot of people, though (and all children), knowledge about how the economic world works is acquired elsewhere. From television dramas and comedies, for example, whose creators are so convinced of the evil of profit-making business that they depict its participants as many times more likely to commit murder or assault than, say, members of street gangs.
Or from newspapers and news magazines. When they’re not tsktsking over something called “excess profits,” they’re declaring “Free Trade a Casualty of Economic Crisis” (Washington Post) or even wondering whether we’ve arrived at “The End of Capitalism?” (Time magazine; the question mark is a nice touch). Time for Kids, the elementary school edition of Time, even wrote that “lower interest rates give people comfort that government will do whatever it can to solve [this] crisis.” Time for Kids! I guess it’s not that shocking to find the Progressive buffet laid out in any version of Time magazine, but I admit I was a little surprised to see how ten-year-olds eat it up.
The reason, of course, is that ten-year-olds are natural Progressives.
Think about it: All of the components of the modern Progressive agenda are in sync with the way a parent tries to raise a child:• Redistribution: We teach our children to share with others, to not be selfish.
• Regulation: We have rules to order every aspect of a child’s life, from meal choices to bedtimes.
• Dependence: We tell our children that they will be taken care of, that we’ll keep the bogeymen away.
That’s what Penelope and I have taught Blake and Scott. It’s what any decent parent tries to do. Progressivism, at its core, isn’t really anything but the idea that the government ought to act like a parent.
The big difference, of course, is that we’re trying to raise our children—to turn them into adults who can someday raise their own children. The Obamacrats in the White House, the Senate, and the House and a dizzying number of bureaucrats, obedient to their Progressive instincts, want to keep the American people children forever.
So when I tell you I’m ready to rant about what they’re doing to my children’s future, I hope you’ll understand.
“Blake?”
“Yes, Dad?”
“Is greed good?”
“Of course not.”
Blake is way too young to have seen either of Oliver Stone’s R-rated attacks on modern capitalism, but she sure understands that the signature motto of Gordon Gekko in both Wall Street movies is not a sign of virtue. One of the real challenges for any parent—for anyone, really—when defending free-market capitalism is the Gekko problem: the per
ceived conflict between spending time helping others and spending time making money. Even the free market’s biggest supporters find it easier to defend the prosperity it creates than the ways in which it does so. They’re likely to concede that capitalism might put more money in our pockets but warn us to make sure it doesn’t steal our souls at the same time.
The money-in-our-pockets phenomenon is not very controversial, though it’s usually understated. The fact is that for the 98 percent or so of human civilization that occurred before Adam Smith wrote The Wealth of Nations in 1776 (okay, some other stuff happened that year) the worldwide economy grew like pancake batter spreading out in a pan: It got a lot bigger—between 5000 BC and AD 1700, the world’s population grew from about five million to five hundred million—but no higher. The amount produced by the average family (per capita GDP) barely moved during that entire 6,700-year period, which means not only that a weaver or mason or farmer living in Renaissance Europe didn’t produce any more cloth or bricks or wheat than one living in ancient Egypt but also that the value of all that production was, in present-day terms, less than $900 a year per capita.
Today’s worldwide per capita number, after two centuries of free-market capitalism, is more than $10,000 a year—and in the United States, more than $46,000.
You’d think that level of prosperity would be its own moral justification, since it measures not just how much people produce but also how much they can afford to consume; and increasing the average family’s income by 1,000 percent also increases the number of years they live, how tall they grow, and how much food, health care, and education they can afford.
You’d think that. But you’d be wrong. The Obama family, and Progressives generally, make a strong (or, at least, a loud) case for the “helping” professions, as when the soon-to-be First Lady advised her listeners to stay out of corporate life and instead become teachers or nurses. For reasons that only they understand, the Progressives always overvalue a career spent providing people with charity and under value a life spent providing them with jobs.