Opinion: Carolina Journal Opinions

Smith Sneers Dismissively at Free Market While Pushing Statism

• Hedrick Smith, Who Stole the American Dream? Random House, 2012, 557 pages, $30.00.

RALEIGH — American dreams are as numerous as Americans, but for Hedrick Smith there’s only one: a steady job with good benefits, a home of your own, rising living standards, and so forth. That dream did not fade on its own. Somebody stole it and Smith flags the thief as Corporate America.

The former New York Times reporter and Pulitzer Prize winner has collected stories of workers cut loose after years of faithful service. These will resonate with many readers, and the author surely is right that baby boomers are in for a rough ride. In Smith’s view they have been shunted aside because foreigners do the same work for less money. He finds no shortage of skilled American workers in science, technology, engineering, and mathematics. But for companies, it’s all about the bottom line.

The author shows how major corporations outsource operations to China at the expense of American workers. Smith is also adept at exposing the tax-dodging machinations of corporations through loopholes the average worker cannot exploit. But the book is riddled with clichés that lazy journalists have used to defend statism for decades. His book may comfort liberals seeking a seemingly nonpartisan voice to vindicate their biases. But there’s little value for a reader looking for a critical analysis of why so many believe the American dream is receding from view.

Smith sees U.S. military expenditures as a wasteful drain on the economy. He cites a Heritage Foundation report that the U.S. military is deployed more than at any time in our history, and that in 2010 our network of bases cost $41.6 billion. But that is about the limit of any concern he shows for government spending and government expansion as a contributor to current inequities.

The flywheel of corporate malfeasance is the U.S. tax code, by all accounts a monstrosity, though Smith appears comfortable with high corporate taxes. A flat tax would resolve the complexity problem, but neither a flat tax nor lower taxes figure in Smith’s list of solutions. Indeed, he quotes President Obama, who claims that under tax cutting proposals, “millionaires would get a check of $100,000.”

Of course, they would get no check at all. Instead, like other taxpayers, they simply would retain more of what they already earn. Smith sees no disincentives in high marginal tax rates. He appears to have no problem with the top income tax rate of 92 percent under Eisenhower and 77 percent under Kennedy. He also writes approvingly of the inheritance tax of 77 percent on estates of more than $250,000 that prevailed from the Wilson administration until the 1970s.

That’s when things began to go wrong, according to Smith, whose memory proves faulty. He places the “Misery Index” in the 1990s, but that term gained popularity during the administration of Jimmy Carter as a measure of unemployment and inflation, both high at the time and devastating for American families. Who Stole the American Dream? contains little about Carter’s economic failures and nothing about the Carter-era Community Reinvestment Act and its role in the housing crisis. In Smith’s view, that crisis resulted from predatory lending.

The author repeatedly slams Ronald Reagan for charging that government is the problem. That makes sense, because in Smith’s view government is not only the solution but also the source of all good things. Steve Jobs and Steve Wozniak may have toiled in a garage, but in Smith’s view everything the Apple Computer founders created began in or received support from a government office. So it was all Big Brother’s idea.

Smith wants an “industrial policy,” and says we have a de facto one now through military contracts with such companies as Boeing and Lockheed. But contracting with companies to provide items the government needs is not the same as a broad-based industrial policy, under which bureaucrats pick winners and losers using subsidies, tax breaks, and regulatory favors. Smith does lament that the solar-panel maker Solyndra went bust after getting $500 million in federal loans, one of the author’s few concessions to government fallibility. “Government has to be much smarter in picking the companies it funds,” he says, “and much tougher overseeing their performance,” Good luck with that, especially on the infrastructure projects Smith sees as key to reform.

He laments that the Martin Luther King memorial in Washington, D.C. was designed by a Chinese architect and made in China. Likewise, the new span of the Oakland-San Francisco Bay bridge used Chinese steel. Smith fails to note that the bridge is some 10 years late and $5 billion over budget. That might cast a chill on the saving prospects of such projects.

While government is infallible, consumers are stupid, Smith writes. Millions of them have proved incapable of providing for their own retirement. During tough economic times, he’s OK with creating new federal departments such as the Consumer Financial Protection Bureau and vast new entitlements such as Obamacare, here described uncritically as a plan to “extend health insurance to 32 million financially strapped Americans.” In his view, Americans simply cannot advance to middle-class status without student loans, Medicaid, food stamps, child care, housing assistance, and the Earned Income Tax Credit.

The New York Times vet strikes a bipartisan pose but telegraphs his bias with a flare gun. He laments the rise of the “radical right,” but the radical left is nowhere to be found. Smith sneers at the “free market fundamentalism of economist Milton Friedman,” but gives Paul Krugman and Robert Reich a free pass. And apparently no command-economy fundamentalism exists anywhere.

“Right to work” goes into dismissive quotes. The Tea Party is a collection of millionaires and conservatives who demonstrate wisdom only when they cave to liberal policies. And here we find the “unlikely-looking Pied Piper, the stocky, bearded, owl-eyed anti-tax lobbyist named Grover Norquist.” But Smith indulges no demeaning descriptions of liberals such as Evan Bayh, a “moderate centrist Democrat with a shot at the presidency.”

Who Stole the American Dream? is one of the more comprehensive statist manifestoes around. In forthcoming campaigns, it will doubtless pull heavy duty as a Democratic Party playbook.