Something for Nothing

There was a candidate who ran for senate in my state this summer; he was eliminated by the primary, as expected, but he serves as a useful example of a common phenomenon in the United States these days. He is a farmer of sorts, and stood with the Tea Party in saying that he and his fellow agribusinessmen of Eastern Washington are taxed far too highly and receive nothing but grief from the government in return. Yet his farm is watered by the Grand Coulee Dam, a New Deal project, and he receives government subsidies from the Department of Agriculture. In short, without the Federal Government his farm, and all the others between the Cascades and the Palouse, would not exist. Not profitably, anyway. So his insistence that he pays more in taxes than he receives in benefits is puzzling. His distaste for taxes is understandable; I even share his dislike. Yet the Feds are undoubtedly pouring money into his farm, not taking it out, in the form of subsidies and water–and both are paid for by taxes. In short, until recently we had a candidate for senate who swears he owes DC nothing, when in fact he owes DC everything. He, the rest of the Tea Party, and often the rest of the GOP as a whole, seem to expect something for nothing–and how often does that work?

To be perfectly honest, however, I can’t really blame them. It’s what they’ve been taught. They learned a story about business and government that has had enormous influence on politics and society for decades.

The story goes like this: once upon a time, the US and state governments knew their place. They stayed out of the way of business, and business in turn made America rich through the beauty of the free-market system. Laissez-faire economics, therefore, made the US great. Then along came mean old Franklin Roosevelt with his New Deal, which was basically grand theft combined with mollycoddling, and nasty old Lyndon Johnson with his Great Society, which was essentially extortion combined with outright socialism. Between the two of them they broke the laissez-faire system. If not for Ronald Reagan and George W. Bush and their tax cuts, we’d all have been in the poorhouse long ago.

It’s an exciting story; after all, it has heroes and villains, beating the villains means getting rich, and we’re all a part of it! Everyone’s got a chance! The problem is, there’s at least one gaping hole in the story: this country has never had a free market.

Take the railroads, for instance, the jewel of America’s business crown in the 19th century. How did they get rich? Did they provide quality service that met a demand? Did they streamline productivity and decrease overhead while increasing revenue? Did they find a need and fill it? Hardly. They made their fattest profits off of government gifts. The US government often subsidized railroads by the mile, meaning that the railroads built their tracks on the most circuitous path possible. This was not a case of government regulation leading business down the wrong path, since the railroad moguls essential wrote that law. Moreover, the Federal government also made an outright gift to every railroad crossing public land (which was all of them, out west): the railroads were given land grants eventually totalling 175 million acres, or roughly one-tenth all US territory. The railroad barons made a fortune selling off this prime real estate, its value suddenly skyrocketing by the proximity–or potential proximity–of the tracks.

The railroads were not unique: the mining industry made a similar killing. The only mining law ever written in the US (passed by Congress in 1887) permits mining companies to explore, extract, and sell what they find on public property. While mining does have significant overhead in comparison to the railroad giveaways, the fact was that all the great mining companies at one time or another have benefitted from mining on public land, either paying a tiny nominal fee or no fee at all. In short, public property was sold off for a pittance, and the public saw next to none of the real profits.

Finally the railroads, the mining companies, and every major industry in the US benefitted hugely from government–again at small or no cost–in one routine way: suppression of strikes. All of the aforementioned industries tried to cut costs by working their employees for long hours at low wages, or by firing the workers whenever a boom turned to a bust. Efficiency became sheer cruelty, and the workers struck, time and again, for some measure of protection. 1877, the great railroad strikes. 1892, Homestead. 1893, Pullman. 1917, Ludlow. I could name a hundred others, too. In almost every case the workers struck for a living wage, for reasonable hours (neither too many nor too few), or for improved safety; in almost every case the strike was broken, harassed, or outright attacked by law enforcement. In the strikes I mentioned, the National Guard was turned out, and in all four cases the Guard used deadly force to end the strike, killing dozens or scores of workers each time.

Along the frontiers, the railroads and mining companies also had a use for Federal troops: getting rid of Indians. Again, no fees were ever assessed against those who stood to benefit; the Feds offered genocide on demand as a service free of charge; when Gen. Phil Sheridan, speaking as the commanding Army officer in the west, said that “The only good Indian is a dead Indian,” he was succinctly stating the de facto Federal policy toward the First Nations.

This has always been the way with ethnic minorities in the US, actually; instead of getting something for nothing, they have given everything–and gotten nothing.

Time and again, therefore, the prosperity of American business in the 19th Century was derived from the free or below-cost sale and use of public lands, from subsidies, or from the use of government-supplied military force for private security.

Lest anyone think this is all in the distant past, the Eisenhower Interstate Highway System was a huge indirect subsidy to the automotive industry, as was the Federally-subsidized network of gas stations along said highways. While many mines across the American West are now played out, the mining companies have routinely left the public lands contaminated by their extraction efforts, and generally the cleanup is paid for by the public. The Superfund system is a good one on paper, but it is routinely ducked, evaded, or hobbled. The timber and oil industries continue to benefit from harvesting and exploring on public land. The state of Alaska, so frequently claiming to be that bastion of independence, is unique in setting up a system whereby the profits from oil drilling on public land (the government owning most of the land in the state) are paid back to the citizens. Every other state would be well within its rights to set up such a system. Moving beyond public lands, agribusiness as currently practiced is profitable only because of the Federal handouts that flow in for growers of major crops like corn and milk, not to mention the water issues mentioned earlier.

In the most recent excesses, of course, we also have the big banks: theoretically struggling and requiring aid, Goldman Sachs received $10 billion in bailout money, then reported record quarterly profits and handed out massive bonuses.
It is clear, therefore, that business in America has never operated in a laissez-faire environment; the Federal, state, and local governments, for minimal fees or no cost at all, have handed immense wealth and service to businesses routinely. Vast fortunes have been made, and continue to be made, off such practices. There may not be a single “boom” era in US history that has not, at bottom, been rooted in or benefitted hugely from Federal giveaways.

So when the libertarians cry for the government to keep its hands off of business, and when the Tea Party on one hand insists that we pay too much in taxes and on the other insists on the Medicare (and the wars) that the Federal government has provided them, it is schizophrenic and cognitively dissonant, true–but it is also extremely understandable. Those who want to repeal the 16th Amendment and criminalize the income tax, those who howl for deregulation and insist that even the Wall Street invention of cap and trade on carbon emissions would be too much of an interference, those who whine that even letting temporary tax cuts for the utterly rich expire would devastate our economy–they all want something for nothing. But why shouldn’t they? The Feds have been giving business something for nothing right along.

The hitch is that there’s no such thing as a free lunch. To pull the “public land” stunt the Feds first had to kill all the Indians. To pull off the bailouts and subsidies of the current era, they’ve had to run up a defecit and a debt so massive it will likely never be paid. Without a tax base to fall back on, that pyramid scheme will falter, maybe fall. The oil on public land will run out. The mines will turn into toxic cleanup sites. The farms will collapse when the oil and water stop coming cheap.
We have always expected something for nothing in this country, and since we vote for our government, it has always given us what we ask. But the piper will be paid.

I burn my candle at both ends;
It shall not last the night.
But oh, my foes, and oh, my friends,
It gives a wondrous light!
–Edna St. Vincent Millay


4 thoughts on “Something for Nothing

  1. Personally, I don’t see “socialization” as a bad thing. We’re about the only nation with any means whatsoever that permits large portions of its population to be medically destitute, simply because they are poor. I think we have a lot to learn from Europe, but I don’t air these opinions in public much, as most Americans don’t know enough about the “socialization of Europe” that it’s always an unproductive conversation.

    We certainly should have every public school start including an exercise in calculating how much they have gotten versus what they’d have to pay for those same things if all services and all business were sustained on a more privatized basis. I don’t think you’d have to be a welfare recipient to discover that you owe the government more than it owes you.

    I live in an old mining town, and many here would buy houses that Phelps Dodge Mining company would sell to them. But they wouldn’t sell the land under those houses. When they came back with possible plans to use that land, they approached the homeowners and settled very fairly quite quickly.

    How much would you argue with a guy offering to buy your house which is on his land? But, they didn’t take advantage of the situation (to their credit) and they mined absolutely essential minerals to our nation in the 1800’s. As a nation, we got a good deal and so did Phelps Dodge.

    And no one got hurt. 🙂

    So, no villians were required. 😉

  2. Clarification of my last post:

    I meant the public schools should make students perform an exercise in calculating… etc…

    Sorry if that was confusing. I did not mean the schools, but the students.

  3. My favorite – if that’s the appropriate word – government subsidy is the support for wool and mohair. All the sources I’ve checked admit that no one really knows why mohair (wool of angora goats) got into the subsidy program in the first place, back when wool was considered a strategic material (e.g.,for military uniforms). All agree that mohair is not, honestly, essential to Civilization As We Know It. The mohair subsidy got a lot of adverse notice in the early 1990s and was actually phased out in 1995 – then, somehow, reinstated in 2000. The 2008 Farm Bill supported wool and mohair with marketing assistance loans (which imply to my non-economist mind that there is not a lot of demand to go with their supply) and “loan deficiency payments”, which I wish someone could explain to me. We are as a society facing all the issues you have described, and more. Yet for 50+ years we have been paying people to produce … mohair. And no one even really knows why. It’s small potatoes (sorry!) compared to federal support for sugar or other agricultural commodities. It’s certainly “something for nothing” in microcosm, though. Laissez-faire? Not so much, no.

  4. Pingback: Neoliberal Sustainability « The Generous Grasp

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