cash being handed over
News Flash: Free Things From Government Are Never Really Free

July 9, 2023

By Dr. Thomas Patterson |

American school children are instructed that the late 19th century, the Gilded Age, was dominated by “robber barons” who made great fortunes creating monopolies that exploited the poor and middle classes.

Howard Zinn‘s best-selling textbook, which introduced generations of Americans to their own history, informed them that “ordinary people who lived through the Gilded Age… experienced tremendous hardships and losses… While they got poor, the rich were getting richer.” Another noted economist concurred that “the poor grew helpless, the middle class got swept away.”

But let’s look again. In fact, by the numbers, it was a golden age for American workers.

As Phil Gramm and Amity Shlaes documented in the Wall Street Journal, between 1870 and 1900, the national GNP rose 233%, per capita GNP surged by 90%, and wages increased 53%, all inflation adjusted. Meanwhile, food costs and other necessities fell by 70%. Better yet, the illiteracy rate fell by 46%, life expectancy rose12.5%, and infant mortality declined by 17%. The people did OK when government stayed on the sidelines.

But Americans, then as now, misread their history and so were doomed to repeat it. Modern progressivism was born in response to the purported outrages of the plutocrats. Government controls stifled economic growth and innovation. Later, big government was credited by many with pulling us out of the depression.

By the 1970s, the damaging effects of the dead hand of government were so obvious that Ted Kennedy and Jimmy Carter led a massive deregulation movement – airlines, communications, energy, and other sectors – that ushered in the tech revolution and renewed prosperity.

But the tendency to regard socialistic policies as inherently good is so ingrained in human nature that once again we have already forgotten the lessons learned. Now the Biden administration is creating a new industrial policy in which government handouts are lavishly dispensed but conditioned on compliance with progressive mandates.

For example, America’s semiconductor chip producers scored a $280 billion subsidy recently, on the grounds that their sector was ailing financially, and its health was so important to the economy generally, that it was, you know, too big to fail. Commerce secretary Gina Raimondo was very explicit about the strings attached, “if Congress wasn’t going to do what they should’ve done [in the Build Back Better bill], we’re going to do it in the implementation.”

She meant it. For starters, chipmakers receiving $150 million or more in federal aid will be required to provide childcare to their employees and construction workers that has been crafted in “tandem with community stakeholders including…local groups with expertise in administering childcare” (i.e., lefty nonprofits).

Chipmakers will also have to pay construction workers prevailing wages set by unions and abide by “project labor agreements” which allow unions to mandate conditions and benefits for all workers, union members or not.

That’s not all. The “lucky” chipmakers must also provide “paid leave and caregiving support” to employees as well as wraparound services such as adult care, transportation, and housing assistance to the disadvantaged or underserved.

Centralized economic planning is once again butting up against economic reality. Chip manufacturers have already been transferring production overseas because costs are 40% higher stateside. Any benefit from the subsidies will be so offset by the increased costs that the net profit may be questionable.

Still, other industries are eagerly lining up for their government handouts. In their ceaseless efforts to socialize their losses while retaining profits to themselves, banks lobbied the FDIC to guarantee uninsured deposits without limit after the recent midsize bank collapses. Broadband providers received tens of billions in grants from states to build high-speed broadband to subsidize low-income purchases of Internet service plans.

Years ago, EV producers received temporary subsidies as start-up inducers, which, of course, aren’t going away at all. They just keep expanding, like $523 billion over 10 years for vehicle consumer and battery production tax credits.

As the chipmakers are discovering, the effect of all this free stuff from government is to make big businesses the compliant wards of the state. Thus, the administration imposes a cradle-to- grave welfare system through centralized industrial policy, while unconstitutionally usurping congressional authority in the bargain.

It’s the path to nowhere – again.

Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.

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