POTUS is All In: Notes on the Fair-Weather Free Market

by Joshua H. Liberatore

In the midst of the most recent bailout offering from the White House, this time to the ailing automakers of Motor City, Michigan, POTUS has witnessed a remarkable transformation in his own rhetorical vocabulary. Usually a happy defender of the “free market” system, POTUS has spent the last few months explaining his views both to his traditional fellow travelers and his staunchest critics. A review of some of the most prominent themes from his last three months of speechmaking is most instructive.

What was the question on autos? (December 18, 2008)

Limited government interference is the surest path to economic prosperity, unless . . .

In a few moments, Secretary Paulson and other members of my Working Group on Financial Markets will explain these steps in greater detail. They will make clear that each of these new programs contains safeguards to protect the taxpayers. They will make clear that the Government’s role will be limited and temporary, and they will make clear that these measures are not intended to take over the free market, but to preserve it. (October 14, 2008)

Bureaucratic oversight does not equal command-and-control measures (i.e. socialism):

The Government intervention is not a Government takeover. Its purpose is not to weaken the free market; it is to preserve the free market. (October 17, 2008)

The much-vaunted “ownership society” still exists as a functional goal:

So overregulating the overall economy will make it harder for the ownership society and I just hope that doesn’t happen. I don’t think it will. I understand the concerns, I share the concerns, and there’s going to be a lot of people like AEI [American Enterprise Institute] speaking out against keeping the government at the helm of the economy. And good tax policy and good regulatory policy beyond that will help small businesses grow. That’s an integral part of the ownership. Same with housing. The key on housing is obviously interest rates: How much does it cost to buy a house? And people are going to own homes. And the housing market will lead this recovery when it starts. And it’s going to take a while though – I’m not an economist. But it’ll take a while. And there are some encouraging signs – not many, but some. Evidently the amount of mortgage applications rose, which is a good sign. I don’t know whether that’s working off unsold homes yet, but it’s a good sign. (December 18, 2008)

Much like the blessings of liberty – according to POTUS, “a gift from the Almighty to every man, woman, and child on the face of the Earth” – which often require guns and ground forces to protect and propagate here and abroad, the mythical free market demands its own version of trench warfare under present circumstances:

In the wake of the financial crisis, voices from the left and right are equating the free enterprise system with greed and exploitation and failure. It’s true this crisis includes failures by lenders and borrowers and by financial firms and by governments and independent regulators. But the crisis was not a failure of the free market system. And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe. (November 13, 2008)

Now, most honest observers will point out that The Free Market, as the phrase is commonly deployed by politicians and their acolytes, is largely a fiction. Readers of Adams Smith can only concur. In the age of permanent industry subsidies (agribusiness, pharmaceuticals, airlines), forced demand (defense manufacturing and services), and corporate welfare (everything else), the markets we follow so closely are anything but free in practice. In fact, they are aggressively, jealously managed at the highest echelons of authority. Nevertheless, The Free Market is a comforting myth still worth its weight in gold in narratives like this one:

Free market capitalism is far more than economic theory. It is the engine of social mobility, the highway to the American Dream. It’s what makes it possible for a husband and wife to start their own business or a new immigrant to open a restaurant or a single mom to go back to college and to build a better career. It is what allowed entrepreneurs in Silicon Valley to change the way the world sells products and searches for information. It’s what transformed America from a rugged frontier to the greatest economic power in history, a nation that gave the world the steamboat and the airplane, the computer and the CAT scan, the Internet and the iPod. (November 13, 2008)

So, what it boils to is that the free market gives us jobs, stuff, and well, more stuff. Rhetorical invocations of the free market, it seems, form an inseparable component of our national discourse. To admit otherwise is not only un-American, it is simply unconscionable.

The United States has taken some extraordinary measures. Those of you who have followed my career know that I’m a free market person – until you’re told that if you don’t take decisive measures then it’s conceivable that our country could go into depression greater than the Great Depression. (November 15, 2008)

I guess the lesson is that even the most precious constructions of our national imagination are subject to structural improvement and occasional massaging from the organs of government, the institutional version of “just a little help from my friends”:

I know in the wake of the financial crisis, free markets have been under very harsh criticism from the left and from the right. It’s true the free market system is not perfect. It can be subject to excesses and abuse. As we’ve seen in recent months, there are times when government intervention is essential to restart frozen markets and to protect overall economic health. (November 22, 2008)

Things got so bad in the stock market (even as the price of oil blessedly dropped, relinquishing wide concern for alternative energy production and investment) and capital flow charts that POTUS has been forced into some awkward rhetorical backpedaling. Even when the subject is his own imminent retirement, POTUS pleas distraction:

And so I – even though I haven’t had much time to think about it, since I’ve been interested in the free market system – [laughter] – by taking non-free market action to save the free market system – [laughter] – but when we get out of here, it will be to – this whole discussion we’ve had here is-will be a part of the institute. (December 1, 2008)

A frank confession here actually, but the nervous laughter betrays the stark political reality of POTUS’s present position: you’re damned if you do, and you’re damned if you don’t. In short, POTUS can see that he’s in a very tight spot.

This is a difficult time for a free market person. Under ordinary circumstances, failed entities – failing entities should be allowed to fail. (December 18, 2008)

Fair enough. What good are eight years of tax cuts and deregulation if not to provide the bona fides required in facing down fiscal conservatives at times like these? POTUS is after all adaptable, contrary to the long-held criticism that he is a stubborn zealot. What turned him was the 3 a.m. call dreaded by all apostles of the free market.

And what makes this issue difficult to explain is – to the average guy is, why should I be using my money because of excesses on Wall Street? And I understand that frustration. I completely understand why people are nervous about it. I was in the Roosevelt Room and Chairman Bernanke and Secretary Paulson, after a month of every weekend where they’re calling, saying, we got to do this for AIG, or this for Fannie and Freddie, came in and said, the financial markets are completely frozen and if we don’t do something about it, it is conceivable we will see a depression greater than the Great Depression. (December 18, 2008)

If the fear mongers and terrorist-baiters of the presidential campaign season didn’t persuade Americans that we are living in extraordinary times, facing unprecedented dangers, requiring retired visionaries like Rudy Giuliani to show us the way, POTUS knew all along that the economic crisis felt at the top levels of decision-making might not trickle down into popular understanding:

These aren’t normal circumstances, that’s the problem. This is a hard issue for political people, because people never know how bad it could have been. And so the decisions you make are easy for people to say, why did he do that? Why is he wasting our money on this? Or, why is he doing that? Because without a catastrophe, the reasoning doesn’t, it just doesn’t really make it down to the grassroots. (December 18, 2008)

It’s true: we tend to wait for cataclysmic events to inspire direct action, a strategy that has shown varying degrees of success. As for his partisan duty to defend the timeless value of the injured free market, POTUS is well aware of the thin ice on which he treads:

People look at, “My money being used because Wall Street got excessive.” And I make the case that I didn’t want to do this. It’s the last thing I wanted to do. Nevertheless, I felt compelled to do it, because it would make life worse for you. We lost 533,000 jobs last month. What would another million jobs lost do to the economy? What would that do to the psychology in markets? What would that do – how would that affect the working people? And so as you can tell, we’re all in, in this administration. And if need be, we’ll be in for more. (December 18, 2008)

Am I the only one troubled by such confident use of a gambling analogy to articulate cause for national optimism? I suspect I am not.

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