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Free Market Fantasy Friday

The State Journal published a piece by former WV Delegate Pat McGeehan where he says that the only way to create jobs in the Mountain State is “[I]f Government Gets out of the Way.” He lists the usual conservative/libertarian ideas of less regulation, protect private property, abolish the income tax, and decentralize government.  As my friend Dean Baker says, “money does not fall up.” Therefore, you need to create policies that push it up from the poor and middle class to the rich. These policy prescriptions have been around for decades and have recently resulted in the largest rise in income inequality since the 1920s.

The real irony is that conservatives like McGeehan love government every bit as much as liberals and progressives. They just want to use it to distribute money upward to benefit their friends and themselves. Case in point. McGeehan works for Frontier Communications. Frontier received $40 million from the federal stimulus (ARRA) last year to expand broadband access in West Virginia. In a free market, broadband would take care of itself and Frontier would reject the money out of principle. But that is not what we see. There are tons of examples just like this one. Just read this book, this book, this book, this book, and this book.

Another irony is that McGeehan went to the U.S. Air Force Academy. The armed forces are not a product of the “free market” or decentralized government, it is about the closest thing to communism as you can get.   (however, some principled libertarians would like to reduce the size of the military.) 

In terms of economic development, the military industrial complex is responsible for most of the technological innovation in today’s knowledge-based economy, including fiber optic cable, transistors, semi-conductors, nuclear power, the laser, Internet, computers, microchips, and on and on. Drug research, is also dominated by the public sector.

As President Bill Clinton noted in 2000:

Many of the products and services we have come to depend on for our way of life in America – the Internet, the Global Positioning System (GPS), lasers, computers, magnetic resonance imaging (MRI), teflon and other advanced materials and composites, communications satellites, jet aircraft, microwave ovens, solar-electric cells, modems, semiconductors, storm windows, genetic medicine and biotechnology, and many others – are the products of Federal R&D investments made over the past 50 years.

You can like or dislike government involvement in the economy, but let’s have an honest discussion about the role of government in economic development. Chances are, once you see past the theoretical and binary logic of the “no government” people and look at their policy ideas, like abolishing the state income tax, they are nothing more than redistributing wealth upward. Our state income tax is progressive and it brings in $1.6 billion in taxes revenues or about 40% of our state General Revenue Budget. Without this money, the state would have to make unimaginable cuts in public schools and universities, health care for children and seniors, and public safety. Does this sound like a good way to create jobs in West Virginia? Laying off teachers, robbing children of an education and health care, and drastically increasing college tuition? Yea, that sounds like a great way to bring prosperity to the state.

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