Hostile Takeover: Resisting Centralized Government's Stranglehold on America (7 page)

In April 2011, for instance, House Republicans attempted to defund four of Obama’s most prominent and controversial czars, notably his “health care” and “climate change” czars, by including language that defunded the positions in budget legislation that was signed by the president. Obama responded with “a relatively rare ‘signing statement’ after he inked the budget deal in which he argued that the legislative effort to eliminate those positions was an unconstitutional infringement on the executive branch,” according to the
Huffington Post
. That statement read, in part:

The President has well-established authority to supervise and oversee the executive branch, and to obtain advice in furtherance of this supervisory authority. The President also has the prerogative to obtain advice that will assist him in carrying out his constitutional responsibilities, and do so not only from executive branch officials and employees outside the White House, but also from advisers within it. Legislative efforts that significantly impede the President’s ability to exercise his supervisory and coordinating authorities or to obtain the views of the appropriate senior advisers violate the separation of powers. Therefore, the executive branch will construe [the law as to] not to abrogate these Presidential prerogatives.
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Translated, for us non-legal-scholar types, this says: “Screw you, Congress. We’re doing it.”

The late senator Robert Byrd (D-W.V.), who was highly critical of the George W. Bush administration for its accumulation of executive power, expressed alarm over Obama’s czar power grab early in his administration. “As presidential assistants and advisers, these White House staffers are not accountable for their actions to the Congress, to cabinet officials, and to virtually anyone but the president,” Byrd wrote in a letter to the president. “They rarely testify before congressional committees, and often shield the information and decision-making process behind the assertion of executive privilege. In too many instances, White House staff have been allowed to inhibit openness and transparency, and reduce accountability.”
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PROGRESSIVELY WORSE

I
N FAIRNESS,
O
BAMA IS CERTAINLY NOT THE FIRST PRESIDENT TO USE
czars as an end run around Congress. The practice appears to have begun in earnest with the administration of Franklin Delano Roosevelt. And the idea of centralizing power to “experts” in Washington who can sagaciously determine how best to improve social welfare goes back to the Progressive movement of the late nineteenth and early twentieth centuries. The Progressive aim was to concentrate more and more power in the executive branch, where enlightened experts—today we call them czars—would govern the country.

In effect, the Progressives were turning the Founders’ vision upside-down. Individual liberty was not viewed as the standard by which to judge policy. Rather, Progressives sought to improve society as a whole, which meant a far greater degree of intervention into the affairs of its citizens. Hayek’s attack on “scientism”—the belief that well-educated public servants have the knowledge and skills to better run society with a certainty sought in the physical sciences—applies in spades to the Progressives and their reform agenda, which included two constitutional amendments that were perhaps the most direct attacks on individual freedom—the Sixteenth Amendment, authorizing an income tax, and the Eighteenth, prohibiting the manufacture and sale of alcoholic beverages. The Progressives also ushered in the Federal Reserve, seeking a central authority to control the money supply.

And much like today’s ever-expanding government, the Progressive movement expanded in the 1870s by seducing both Republicans and Democrats with the lure of federal power. As historian Arthur Ekirch noted, elements of both political parties were drawn to “the idea of reform from the top under the leadership of the patrician or aristocratic classes of the community. . . . The reformers particularly emphasized the necessity of a civil service merit system. Better men in public positions, they hoped, would result in improved government.”
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Perhaps the first major victory of the Progressives was the accession of Theodore Roosevelt to the presidency in 1901. Roosevelt clearly identified with the Progressives and sought to stretch the Constitution to its limits. Viewing himself as a “steward of the people,” he aggressively expanded the role of government at home and abroad. “I did not usurp power,” he famously declared, “but I did greatly broaden the executive power.”
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Others did not view this expansion so kindly. Writing on Roosevelt, the legendary journalist H. L. Mencken (using the term
liberal
in the classic sense, before Progressives hijacked it to hide their true motives) wrote:

He didn’t believe in democracy; he believed simply in government. His remedy for all the great pangs and longings of existence was not a dispersion of authority, but a hard concentration of authority. He was not in favor of unlimited experiment; he was in favor of a rigid control from above, a despotism of inspired prophets and policemen. He was not for democracy as his followers understood democracy, and as it actually is and must be; he was for a paternalism of the true Bismarckian pattern, almost of the Napoleonic or Ludendorffian pattern—a paternalism concerning itself with all things, from the regulations of coal-mining and meat-packing to the regulation of spelling and marital rights. His instincts were always those of the property owning Tory, not those of the romantic Liberal. All the fundamental objects of Liberalism—free speech, unhampered enterprise, the least possible governmental interference—were abhorrent to him.
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Franklin Delano Roosevelt’s New Deal piled on to the Progressive movement’s push for more government, expanding government far beyond its constitutional mandate, and creating the culture of dependency through Social Security and other welfare programs that have categorically changed the relationship between citizens and the state. Likewise, President Johnson’s Great Society expanded the entitlement state’s future promises far beyond our ability to finance them.

Even Charles Beard, one of the most popular Progressive intellectuals, became disillusioned with the FDR’s New Deal and the federal spending it entailed: “The principal weakness of the whole program is its heavy dependence upon government spending and lending policies. . . . Only one thing seems to be certain. When all the merits and accomplishments are duly appreciated, it remains a fact that this dispensation has been made possible only by enormous increases in the national debt.”
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The only way the new welfare state could survive is by commanding more and more of the nation’s resources.

In addition to the direct expansion of government, the New Deal also ushered in the era of the rent-seeking society.
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If you fill the trough, feeding will commence. As the reach of government grew, more and more decisions that were once left to the market were now routed through Washington. This centralization of economic power tended to favor the crony capitalists and corporate interests with the resources required to influence the federal government. Economist Mancur Olson explained the issue very precisely in
The Logic of Collective Action,
first published in 1965. Specifically, he examined how interest groups operated, highlighting the benefits that accrue to small groups.

Creating an interest group is not cheap; there are resources required to maintain a presence in Washington. Further, the more members of the group, the more difficult it becomes to reach a consensus opinion for the group. Consequently, Olson reasoned, small groups will form first. In addition, the only motive to participate in a group is if it provides benefits to the individual members, and the fewer members, the greater benefits per member. For Olson, this meant concentrated benefits provided the rationale for creating special interest groups. At the same time, the costs of their demands—higher tariffs, tax complexity, barriers to entry—will be spread across the entire taxpaying population.

This iron trap of concentrated benefits and dispersed costs provides incentives for groups to come to Washington, and feeds the progressives’ push to centralize and expand the role of government, creating a symbiotic relationship between the moochers and the looters. The rest of us pick up the tab. It’s a downward spiral that is driven by the concentration of money and power in Washington.

Unfortunately, it will be the larger, well-heeled interests that come to Washington, such as GE and other corporate giants, because they have the resources to hire an army of lobbyists. Smaller businesses struggle to make payroll and their voices are not heard, just as consumers are often left out of the top-down approach to economic policy, because they have no time or resources to devote to politics and federal regulations. The larger government grows, the more inequitable things become.

This should come as no surprise to proponents of big government. After all, such concerns were raised during the Progressive era. Charles B. Spahr raised these concerns about the centralization of power in 1896: “The smaller the area, the stronger the pressure of public opinion. As a rule, the middle class can control the legislation enacted under their eyes by those whom they know, but only the wealthier classes can act unitedly and effectively upon legislation at the national capital.”
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The great push to centralize economic decision making from the top down was a fundamental departure from the laissez-faire principles that our nation was founded on, contrary to the
republican
ethos of Jefferson and Madison and the decentralized gaggle of pamphleteers and citizen activists that drove the Spirit of ’76. Those at the top have failed to solve the knowledge problem. Economic decision makers in Washington can never grasp the particular knowledge of time and place that Hayek so eloquently described in his study of prices and information—essential knowledge that is generated from the bottom up, not from the top down.

The Progressive goal of centralizing decisions, power, and authority in the presidency seems utterly contrary to the trends everywhere else in life. We live in a world that is more decentralized than ever before. Individuals have more power and control. We are more mobile, get our news and information from a multitude of sources, communicate via Twitter, and connect on Facebook. We are typically free to choose our own destiny, thanks in large part to the liberating forces of the Internet.

And yet we see this trend toward centralization in government and the proliferation of czars wanting to tell us what we can and can’t do with our lives and our hard-earned pay. At the top, the president is gathering executive power, wanting to redesign things in a way that no human possibly could.

Something’s got to give, one way or another.

But think about the power of decentralization, how it is possible for millions and millions of people located in disparate places—each individual in possession of a unique perspective, particular goals, wants, and needs, and a personal knowledge of their community and circumstances—to come together in voluntary cooperation and to create something far greater and more valued than any one individual could have done alone. Is it possible that freedom, from the bottom up, can beat entrenched management, from the top down?

The answer, I think, is yes.

CHAPTER 3
T
HE
T
RUTH
C
ARTEL

Information is not knowledge.
Knowledge is not wisdom. Wisdom is not truth.

—Frank Zappa

H
OW DO WE GET TO THE TRUTH OF THE MATTER?
I
S WHAT WE BELIEVE
to be true more legitimate if it’s vetted and dispensed by the experts, from the top down?

There once was a time in the United States when we relied on Walter Cronkite to tell us what to think. He was “the most trusted man in America.” We had no choice but to trust him, along with some nameless producer behind the scenes at
CBS Evening News,
two other television networks, and a handful of national newspapers, all part of an insular cartel that sorted through the infinite bits of information of the day and determined, for us, the Truth. In this top-down system, Truth came in a one-size-fits-all package, and was allocated to the public twice daily, with delivery of the morning paper and the start of the six o’clock news.

“And that’s the way it is,” Cronkite would say, concluding the half-hour right on cue, effectively ending any debate on the subject. There would be no argument, no alternative opinions. There was no easy mechanism by which viewers could push back. An individual’s only recourse if he wanted a different set of data filtered through a different conventional wisdom was to switch channels to the strikingly similar versions of the truth offered by ABC and NBC.

Not surprisingly, Cronkite was a big believer in the positive power of centralization. He believed that the smartest people could get together in one room to solve the world’s greatest problems, even the most elusive of challenges to social order and the human condition itself. Consider the quixotic quest for world peace, as an example. “It seems to many of us,” he pronounced in an October 1999 speech before UN delegates, “that if we are to avoid the eventual catastrophic world conflict we must strengthen the United Nations as a first step toward a world government patterned after our own government with a legislature, executive and judiciary, and police to enforce its international laws and keep the peace. To do that, of course, we Americans will have to yield up some of our sovereignty,” he continued. “That would be a bitter pill. It would take a lot of courage, a lot of faith in the new order.”
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According to America’s most trusted man, you and I need to stop clinging to our outdated notions like individual sovereignty and find more “faith in the new order.” The experts have it all figured out. And that’s the way it is.

Frank Zappa, the contrarian musician and guitarist, had zero faith in the journalistic profession, or in any journalistic pronouncements from the top down. Circa 1979, the halcyon days of Walter Cronkite’s power over what average Americans could see and hear, Zappa was particularly peeved with the complete centralization of journalism in highly controlled, exclusive enclaves. Someone else’s conventional wisdom, based on someone else’s information, determined the rules of the game and the perceived truth of things. Reporters “walk in the door seeking a method by which they can reinforce conclusions they’ve already arrived at,” Zappa said.
2

This was true in Los Angeles for entertainment news, what the late Andrew Breitbart dubbed “Big Hollywood.” It was equally true in New York and Washington for political news. As the only markets in the country with a national reach, these three cities enjoyed significant control over the flow of information, framed by someone else’s values, filtered by preconceived notions of what the story was, and organized for us, creating an unchecked echo chamber—a one-size-fits-all message of the day.

Even as ideas based on economic freedom and individualism gained a foothold in politics, it seemed the flow of information would always be handicapped in favor of predetermined big government agendas. The Cronkite-Chancellor-Reasoner Cartel in the 1970s gave way to the Rather-Brokaw-Jennings Cartel of the 1980s. New names, same bent. It had become, for all intents and purposes, a single manufacturing facility for the political establishment to craft and distribute its messages, keeping the voters in the dark about many things, by omission, with the help of their friends at the networks and big newspapers.

This centralization of control and power in journalism was bad news for the American people, who rightly view the free and unfettered dissemination of information as foundational to the working of a free society. Because of the centralized media, they didn’t have access to relevant information about what the government was up to with their money and their personal liberties.

One-size-fits-all press was not just a concern from right-of-center. As the iconic leftist press critic A. J. Liebling wrote in
The New Yorker
in 1960, “Freedom of the press is guaranteed only to those who own one.” Liebling had a detailed critique of the problems with centralized journalism even in the 1960s. “What you have in a one-paper town is a privately owned public utility that is Constitutionally exempt from public regulation, which would be a violation of freedom of the press,” he wrote. “As to the freedom of the individual journalist in such a town, it corresponds exactly with what the publisher will allow him. He can’t go over to the opposition, because there isn’t any.”
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The problem Liebling saw wasn’t just for journalists who lacked diverse job opportunities. “In any American city that I know of,” he wrote, “to pick up a paper published elsewhere means that you have to go to an out-of-town newsstand, unless you are in a small city that is directly within the circulation zone of a larger one. . . . Even in New York, the out-of-town newsstands are few and hard to find. The papers are, naturally, late; they cost more; and most people would use up a sizeable part of every day just traveling to get one.”

Who controlled the distribution of information, knowledge, wisdom, and truth was a question that got to the very functioning of our democratic republic. It was the very life blood of the bottom-up system established by the Founders. In January 1789, while in Paris, Thomas Jefferson wrote to British minister Richard Price about the adoption of the Constitution and his hope for a government of and by the people in spite of consolidation:

I did not at first believe that 11 states of 13 would have consented to a plan consolidating them as much into one. A change in their dispositions, which had taken place since I left them, had rendered this consolidation necessary, that is to say, had called for a federal government which could walk upon it’s [
sic
] own legs, without leaning for support on the state legislatures. A sense of this necessity, & a submission to it, is to me a new and consolatory proof that wherever the people are well informed they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights.
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Jefferson, the most radically democratic of the Founding Fathers, was deeply distrustful of consolidated government power. He had great faith in the ability of the people to self-govern, to constantly question the prerogatives of centralized authority, and to limit, through grassroots vigilance, the power of government. But he understood the clout of information. He knew that a “well informed” public was required as a check on the necessary evil of the accumulation and centralization of control in the new federal government. And, he noted, it was within an informed public’s rights to change the government if things “get so far wrong as to attract their notice.”

THE FCC WON’T LET ME BE

O
NE OF THE MAIN CONTENTIONS OF THIS BOOK IS THAT THE CONSOLIDATION
of power in so-called “private” enterprise is often the result of an unholy alliance between big business and big government. The two often collude to fix prices, limit supplies, and prevent choice and competition. It is a symbiotic arrangement in a politically defined marketplace—you scratch my back and I’ll scratch yours—which is mutually beneficial to the colluders but harmful to the rest of us. Monopoly market power typically has to be enforced by the power monopolists, that is the politicians and bureaucrats, the “dictators” and “czars” of the government. Thus, the special relationship between the Truth Cartel in top-down media and the string-pullers inside the political establishment. Committee chairmen and information czars are protected by their effective control of the media’s message, and those granted a special position in media markets grow fat on a privileged market stake. Host or parasite, puppet or master, both feed off you and me.

The first customer served by the crony capitalists in Big Media is “their man in Washington, D.C.”

Not surprisingly, the heavy hand of government played a key role in propping up the cartel that created Walter Cronkite. From the earliest years of radio, federal regulators seized control over the airwaves and established rules to allocate the airwaves according to the “public interest,” a nebulous term akin to “social justice,” open-ended and conveniently defined by the bureaucrats. Not only did the Federal Communications Commission control the allocation of the airwaves, it also controlled the radio and television markets. The FCC viewed anyone granted a license to broadcast as a “public trustee,” which meant there were strings attached. Pulled just right, the strings will make the puppet dance.

In fact, this is where the Fairness Doctrine emerged, the necessary result of puzzling bureaucratic logic. Because broadcasters were federally created monopolists, regulators required stations to ensure that both sides of the debate were heard, all in the name of fairness. Equal time for the opposition, as it were. Additional restrictions on media ownership and reach were also imposed. For example, no broadcaster could own stations that reached more than 35 percent of the population. In other words, media was the perfect example of a top-down, centrally controlled market with a rule for everything. Did it ever occur to the bureaucrats that removing barriers to entry might be an easier way to ensure all sides of the story are heard? Probably not, because the lucky station owners benefited, along with their political allies, who had an interest in how the news was told.

As economist Thomas Hazlett notes, “The licensing bargain struck between broadcasters and regulators was a political accommodation that drove the 1927 Radio Act and has determined essential aspects of spectrum allocation ever since. The bargain relied on spectrum regulation to create gains for both parties. Allocation and ‘technical’ rules protected broadcasters from competition as well as from fees or competitive bidding (for licenses), and gave political incumbents (both in Congress and the executive branch) the opportunity to leverage ‘public interest’ discretion for some measure of control over content. Given the ban on regulation of free speech in the U.S. Constitution, this was a formidable regulatory achievement.”
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The establishment’s stranglehold on information flow was so bad that, in 1987, a group of conservative news junkies started the Media Research Center to act as a watchdog against the liberal press. They couldn’t break into the carefully guarded ivory towers of New York newsrooms, so they decided to at least document what the media were up to. As it happened, 1987 was also the year that the Reagan administration repealed the Fairness Doctrine and laid the groundwork for conservative talk radio. A year later, Rush Limbaugh would begin his wildly successful radio show.

It was only the push of technology that offered any relief to the stifling regulations. For decades most Americans had, at best, access to only a handful of stations: the Big Three—ABC, CBS, and NBC—along with a PBS channel and perhaps a few fuzzy UHF channels on a clear day. But technological innovation has pushed us into the information economy, fueled by rapidly decreasing computing costs and increasing bandwidth through both wireline innovations such as fiber optics as well as the booming new market for wireless communications and products.

Technology has transformed the way we live, touching almost every aspect of our lives, from how we talk to others, to how and what we listen to, to what we watch and where we watch it. Smartphones, tablets, and other computing advances are at the forefront of a technological revolution that is providing dramatic consumer benefits. Indeed, the entire technology sector is in the midst of a paradigm shift. And these changes occurred because market forces chipped away at the government’s information cartel. The Fairness Doctrine fell in 1987, ownership rules began to ease after the Telecommunications Reform Act of 1996, and soon auctions were created as an alternative approach for allocating spectrum. As the market was allowed to evolve, consumers went from set-top rabbit ears to high-definition television. We don’t have to worry about getting two sides to a story; with a few simple keystrokes we can find hundreds of perspectives competing with one another.

As long as technology keeps one step ahead of the regulators, the benefits to consumers are astounding. Today, instead of four channels, we can access hundreds of channels provided by cable and satellite, 255 million websites, and 152 million blogs that provide information virtually in real time.
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While most of us are awestruck by the new world of technology, bureaucrats at the FCC see an open-ended world of communications that makes no sense to a planner.
Who’s in charge?
Today’s dynamic marketplace is striking evidence that the FCC has outlived any purported purpose. Indeed, its continued meddling in markets only undermines the public interest. As media titans of the past lose their grip on political power, a new group of tech giants are fast rising to the top, none faster than Google. As if to justify its existence, the FCC is shifting gears to control the Internet, pushing new regulations that will benefit the new industry leaders. This is nowhere clearer than in the debate over “net neutrality,” a debate couched in terms of Internet freedom, but very much a power play that provides immense benefits to corporations with a large Internet presence like Google. Despite the fact that prices for Internet services are falling and consumer choice is booming, the FCC asserts the need to intervene in this actively functioning marketplace.