America Is Close to Losing Its Freedom

If you don’t know who John Cochrane is you should.  He blogs at The Grumpy Economist.  He recently wrote a piece entitled, “The Rule of Law in The Regulatory State”.  It is one of the clearest eyed things I have read in a long time.   If you are of the Democrat or Republican political persuasion, you ought to read it.  Then, pour yourself a glass of something and ponder it for a while.  This is should be the topic of conversation in political debates, and at dinner tables.

When the founding fathers walked out of Independence Hall in July of 1776, someone asked Ben Franklin what they had done.  A Mrs. Powel of Philadelphia asked Benjamin Franklin, “Well, Doctor, what have we got, a republic or a monarchy?” With no hesitation whatsoever, Franklin responded, “A republic, if you can keep it.”

We are in danger of losing our republic.  America is on the brink of becoming something else, a regulatory state.

Regulatory states don’t pay attention to the rule of laws.  The law bends, dances, jumps and moves whatever way the regulator wants it to move.  This is not an isolated instance.  It’s happening in almost every vertical business silo.

Yesterday I was talking with a medical startup.  They told me that doctors were sick of the consolidation that has been happening and accelerating in the medical industry.  Doctors are being treated as commodities. I responded that this is repeating itself in every American industry.   Cochrane makes the same point.

We’re headed for an economic system in which many industries have a handful of large, cartelized businesses— think 6 big banks, 5 big health insurance companies, 4 big energy companies, and so on. Sure, they are protected from competition. But the price of protection is that the businesses support the regulator and administration politically, and does their bidding. If the government wants them to hire, or build factory in unprofitable place, they do it. The benefit of cooperation is a good living and a quiet life. The cost of stepping out of line is personal and business ruin, meted out frequently. That’s neither capture nor cronyism.

“Bureaucratic tyranny,” a phrase that George Nash quotes Herbert Hoover as using is a contender.

There is blowback to all this regulation as the information economy forms.  The fight about Uber is emblematic, and instructive.  People love the sharing economy.  It turns out, government bureaucrats and the cartels they oversee hate it.  Who is going to win?  It’s up to us.

In the industry I grew up in, Dodd-Frank has decimated it.  It’s almost impossible to set up a community bank these days from scratch.  Independent commodity traders are being squeezed out of the business.  Mid size banks are combining to gain heft to defend against the regulatory onslaught.  Our financial system is no safer.  It’s just more concentrated and more cartelized.

Donald Trump said something interesting in the debate the other night.  He was talking about how as a businessman that wants to give medical benefits to his employees in various states, he gets to get a bid from one company.  One.  That’s not competition and it drives up the cost for everyone.  Why is that?  Bureaucratic regulation.

In the past several years, we have seen firsthand the tyranny of government at both the national and statewide level.  The IRS was used to target political opponents of this administration.  Nixon used to joke about it.  Obama actually did it.  Once the line is crossed, it gets easier for future generations to keep doing it to their opponents.

In Wisconsin, law enforcement was deliberately utilized to try and silence political opponents.  Cindy Archer, one of the lead architects of Wisconsin’s Act 10 — also called the “Wisconsin Budget Repair Bill,” it limited public-employee benefits and altered collective-bargaining rules for public-employee unions — was jolted awake by yelling, loud pounding at the door, and her dogs’ frantic barking. The entire house — the windows and walls — was shaking. She looked outside to see up to a dozen police officers, yelling to open the door. They were carrying a battering ram.  This isn’t different than what happens in totalitarian states, or banana republics.

Centralized bureaucracy usually makes pretty bad decisions.  It makes political decisions frequently.  All of a sudden in the information age, we have tools to upend the bureaucratic overlords.  The bitcoin blockchain is one example of a decentralized system that works.  There are plenty of other ways to design decentralized systems to achieve the balance and regulatory restraint, while preserving the opportunity for competition and economic growth.  Freedom and individual liberty accompany that goal too.

Cochrane is deliberate.  One by one he goes through some agencies that everyone who’s paying attention will know.  One by one, he shows how those agencies are capricious and tyrannical with the power they have to either silence people, or get people/businesses to bend to their will.  Many businesses settle and pay a fine rather than fight.  Ask Mark Cuban about fighting.  He fought the SEC.  He won.  He knows what it’s like to be in the cross hairs.  Few people have the gumption, or the money to fight a federal regulator like Mark Cuban.

This issue is not party specific.  It’s about the people versus tyrannical bureaucracy.  The Bill of Rights defends the people against tyrannical government.  It protects us.  The massive bureaucracy that has been created since President Woodrow Wilson’s time is an end run around it.  It must be stopped, and it must be stopped now.

It’s not just our economic prosperity that depends on it, but our individual freedom depends on it too.