INSIGHTS: MIXING MACHIAVELLI, BUSINESS, AND POLITICS
By Guest Columnists:
Dave Corbin, Professor of Politics & Matthew Parks, Assistant Professor of Politics, The King’s College
The Associated Press reported recently that the Obama Administration will spend $684 million marketing Obamacare, attempting to prop up support and secure enrollees for a program Americans oppose by a 54%-36% margin. In the face of overwhelming evidence to the contrary, the Administration continues to believe that it has a PR problem, rather than a policy problem. While it is easy to laugh at talk of athletes and pop stars pushing Obamacare enrollment like cars and sodas, we should not miss the Machiavellian cynicism that lies beneath their effort.
The advertising campaign will, no doubt, target the millions of healthy twentysomethings whose disproportionately high premiums are essential to making the financial numbers work. But it will be difficult to reconcile the content of the ads with the Federal Trade Commission’s truth-in-advertising standards: “Claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based.” Presumably, the copy won’t read, “Pay too much for more coverage than you need: sign up for Obamacare today!”
Among other principles, Niccolo Machiavelli is known for arguing that in a contest between perception and reality, perception wins every time. Spin, spin, spin, the political class concludes, until people lose track of reality or you’ve created a new one. The business community, of course, can be tempted to do the same—as we saw, for example, in the corporate scandals early in the last decade. But more to the point today, the business community may be tempted to make its peace with the political spinners, convinced that it is safer to side with the well-connected elites than with the American public.
A less noticed part of Machiavelli’s teaching warns against this course. The flatterer flatters for his sake, not yours. In other words, to paraphrase Shakespeare, when you think you are using him, he is most using you. The business that makes its peace with Obamacare does the Administration’s work, not its own: helping to make a tenuous, failing program an enduring costly reality.
We need not try to out-cynic the cynics–to redefine truth as effective lies and virtue as the ability to make them stick. Progressivism, like any ideology at war with reality, may depend on propaganda promising increased social solidarity to mask ever more divisive government programs, but the best in the American political tradition does not. It is said that Joseph Stalin kept a copy of Machiavelli’s Prince at his bedside. It would be better for American leaders–in politics and business–to do the same with The Federalist.
The authors of The Federalist wrote eighty-five essays to make their case for the ratification of the Constitution. They hoped to show that “good government from reflection and choice” was possible–and they provided perhaps the best example of what that would look like in the essays themselves, laboring to lead the American public to a wise and truly good choice with the profits of their own reflections. What they sowed, they largely reaped: a self-governing nation more free, more just, and, as a result, more prosperous than any before.
And that is the ultimate reality.
ON THE ECONOMY: DISSECTING THE PRESIDENT’S KEYNOTE SPEECH ON THE ECONOMY
Readers of the Monthly Manifesto know that I am no fan of the current Presidential administration. While this is true, neither was I a fan of the former administration. As an economist, I believe that Presidents should focus on the good of the country and not on political favors for specific interests. Leave that to the lobbyists.
Honestly, the problems with the American economy are not coming from the left or the right, not from Republicans or Democrats, but from the very fact that in a representative democracy, it is difficult to make decisions that – even though they are for the greater good – harm any individual constituency. An indecisive Congress is locked up while the Obama Administration focuses on speeches rather than legislation. Washington has reached a point of complete gridlock that is now harming the American economy.
The President made yet another speech last week, this time in front of an adoring bunch of students at Knox College in Galesburg, Illinois. In this On The Economy we examine a few of the points made by the President in the context of the economy, not to dismiss President Obama’s opinions, but to show how rhetoric is not always backed by facts. It is these statements, these assumptions that underlie the President’s agenda, and they are all somewhat questionable. Namely:
At the beginning of his speech, the President stated that following World War II, a growing middle class was the engine of prosperity. Whether you owned a company, swept its floors, or worked anywhere in between, this country offered you a basic bargain – a sense that your hard work would be rewarded with fair wages and benefits, the chance to buy a home, to save for retirement, and, above all, to hand down a better life for your kids. This is the American story, and for years, politicians have harkened back to the economy under the Democratic Truman administration, and the Republican Eisenhower years. While it was true that the American economy flourished during this period, it was probably a point in history that won’t be repeated. If government spending led to prosperity, the country should be booming today, as total government spending as a percent of total economic activity is approaching the same levels as at the pinnacle of World War II. In fact, only in 1944 and 1945 did overall government spending in the United States reach the levels of 2010, and government spending as a percentage of the economy in 1943 was lower than it is today.
The President then goes on to make a bunch of statements – which together provide his critique on the problems with the economy:
Technology made some jobs obsolete. Of course. Ever since the discovery of fire, new technologies have eliminated tasks. Technologies have also created new opportunities. In the late 1700s, when Ned Ludd led peasant revolts against the industrial revolution in England, populist figures have argued that technological change leads to unemployment. But new technologies lead to increases in productivity, which is exactly what leads to the development of new jobs and industries. While change can disrupt some businesses and individuals, overall the economy benefits. Economists term this argument the Luddite fallacy, or Block of Work fallacy. There are some who believe that there is only so much work that can be done. If technology reduces the need for certain employees than there would be no other opportunities for them. This is simply not true. There are always opportunities, but they may not be as good as other choices, including public assistance, disability, or working in the underground economy.
Global competition sent others overseas. This is the nationalist version of the Luddite fallacy. If populists can’t blame technology for the lack of opportunity for a certain class of people, then they blame the Irish, Jews, Mexicans, or Chinese. As with the productivity enhancements from technology, economies grow by taking advantage of comparative differences in international markets, leading to new opportunities in the home market and higher overall economic activity.
It became harder for unions to fight for the middle class. This is likely a true statement only because the middle class has rejected unions. The percentage of private sector employees covered by unions is only 6.6 percent (versus 35.9 percent in the government sector). Outside of the government, where management and labor unions have formed an alliance against taxpayers, most industries have had little luck unionizing. Even in heavy manufacturing, the traditional union strongholds, firms have found it more productive to locate in states that do not force workers to join existing labor unions, but rather let them organize independently. In these cases, unions have found it difficult to receive enough votes to set up shop.
Washington doled out bigger tax cuts to the rich and smaller minimum wage increases for the working poor. This statement is grossly inaccurate. In fact, looking at data from the Tax Foundation from 1980 through 2009 (well into the President’s term), the percent of Federal income taxes paid by the top 5% of the population rose from 36.84 percent to 58.66 percent. True this is down from 60.61 percent during the Bush Administration, but that hardly represents a big tax cut. On the other hand, half of the population with the lowest incomes paid 7.05 percent of income taxes in 1980 – a figure which had fallen to 20.25 percent by 2009.
The link between higher productivity and people’s wages and salaries was severed – the income of the top 1% nearly quadrupled from 1979 to 2007, while the typical family’s barely budged. While it is true that income distributions have become less even in America, this is mainly due to changes at the bottom. In fact, poor education, disincentives to work and the breakdown of the family have thrown generations of Americans into poverty. In 1965, future Democratic Senator Daniel Moynihan, discussed how the structure of the countries anti-poverty programs led to the breakdown of families thereby keeping people in poverty. In fact, income inequality as measured by the Gini Index has been rising since as far back as the 1960’s. In inflation adjusted terms, income has generally grown across all segments of the population, but that growth has been dramatic in the top 20 percent. So technically the president is correct the rich are getting much richer, but this is not at the expense of the poor.
The rest of the hour long speech outlined the Administration’s agenda, an agenda that is really about choices that need to be made. Whether or not the President’s choices are appropriate is not up to me to decide; however, one thing is certain, decisions made on bad assumptions – like those outlined above – will likely not be good decisions in the end.
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