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The Economic Views of John Stossel as revealed in his book No They Can’t – Why Government Fails But Individuals Succeed (New York, Threshold Editions, Simon & Schuster, 2012)
Raymond Richman, 5/29/2012

John Stossel is well-known as the host of a one-hour weekly Fox Business Network show and his one-hour special on Fox News but is best known as the journalist who cries “the king is naked” when people succumb to the image of a demagogue masquerading as a man possessing a  solution to a problem. A self-described libertarian, he attacks popular fallacies of the right, the left, and center. His book is must reading for everyone regardless of political persuasion because he forces the reader to think for himself to sustain his beliefs. It should be read by every political independent and by all our representatives in federal, state, and local legislatures. As a retired professor of Public and International Affairs, I agree with my mentor, the late Milton Friedman, that Stossel was “that rare creature, a TV commentator who understands economics, in all its subtlety.” Stossel modestly acknowledges that there is much that he does not understand. As an economist, I can testify that there are many academic economists who do not understand economics in all its subtleties either.

He begins with the widespread belief that increased government spending stimulates private spending and is capable of getting the economy moving again after a recession. The media are baffled by the fact that the president’s economic stimulus spending of nearly a trillion dollars since 2009 “has not paid off” especially since, as the Washington Post noted, “Companies were sitting on billions of dollars of cash.” The fact is that as soon as the “new deal” cut back its spending, the economy slid back into recession in 1937. The economic stimulus of increased government spending may give temporary employment but only so long as the spending lasts.

 Businessmen will invest when there are profitable opportunities to do so. The Obama government has created a great deal of business uncertainty with its attacks on big business, increased business regulation, its anti-fossil fuel policies, and setting aside long-existing rights of creditors as it did in the case of General Motors. Obama shoved them aside in favor of  government ownership and union control, the very unions whose rules contributed to GM’s bankruptcy. As Stossel says, “When government interferes in a market . . . bad things happen.”

 Stossel argues that government’s attempts to “make life fair” has caused the economy to  stagnate and impoverished millions of workers that they were intended to benefit. He takes on the likes of Michael Moore and Sen. Bernie Sanders, citing the failures of socialism everywhere it has been tried. He cites the folly of government policy to put every family in its own home whether they could afford it or not. Both Republicans and Democrats were responsible for the housing bubble; both supported loans to unqualified households.

 Stossel dislikes crony capitalism, the government picking winners and losers. He decries licensing requirements whose effect is to protect politically connected business from fair competition.

 The one area where Stossel is wrong is when he accepts the arguments for free trade. For free trade to improve the living standards of all trading partners requires the free movement of labor, capital, and the absence of artificial barriers to imports and an end to subsidizing export industries;  Stossel appears not to understand the reality that such mercantilist policies are used by nations to secure a favorable balance of trade and to take jobs and industries from its trading partners. This was the case of Japan in the last century and China in recent decades that has cost the U.S. millions of manufacturing jobs. Those who believe in free markets tend to favor free trade and so do those who pursue “beggar they neighbor” trade policies. Only balanced trade ensures that both trading partners benefit from increased trade. 

Stossel argues that much of medicare and Obamacare has raised the cost of medical care enormously. He favors limiting government health programs to catastrophic care and creating health insurance accounts to cover expected and routine health problems. His argument is a must read.

Stossel calls attention to the unintended consequences of minimum wage laws that reduce employment opportunities and cause increased teen-age unemployment, USDL regulations requiring interns be paid likewise result in fewer getting the experience of on-the-job training,

He takes on the obesity and fat foods crowd that wants government to deny free choice in decisions of what households consume. He takes on those who want government control over private ownership of guns, those who make seat belts mandatory, etc. “Let’s start treating people as though their bodies belong to them, not to a coddling and protective government.”

He discusses restrictions on “offensive” speech which gives power to the easily offended and violates the first amendment. He supports the Supreme Court’s decision that the McCain-Finegold restrictions on corporate funding of political ads was unconstitutional. In his view, suppressing anyone’s speech is dangerous.

Stossel reviews the record of public schools, preferring to call them “government schools” because public has so little input, and the superior performance of charter and private schools. He believes that teachers unions and their bureaucratic allies are an obstacle to improving the schools. Simply giving them more money has resulted in no improvement in educational outcomes. Tenure rules prevent the dismissal of incompetent teachers. Even Head Start was and continues to be an expensive failure.  In his view, “Education is too important to leave to a government monopoly.” With competition from charter schools and other private experiments, public schools may be forced to remove the obstacles to good primary and secondary education.

People believe that “drugs cause crime” whereas Stossel argues that the war on drugs causes crime. Adults should be able to decide for themselves what, if any, drugs they choose to consume and most people who try drugs give them up on their own volition. The drug war corrupts cops and politicians. On our site, we have several times attacked the drug prohibitions arguing instead for taxing drugs. Thousands have died here and abroad in the effort to produce and ship illicit drugs to the U.S. Why should so much money and lives be wasted in an unsuccessful effort to protect the foolish from their self-destructive habits?

Stossel makes the case for fewer military interventions abroad and especially against any  attempts at nation-building. The failure rate of installing democracy American style is 100 percent. The Transportation Security Administration comes in for criticism. “Government failed on 9/11, and the politicians’ response to its failure is always the same. ‘Give us more money and power'.”

Our environmental policies come under Stossel’s scrutiny. Pres. Nixon banned the use of DDT on the basis of Rachel Carson’s book, Silent Spring. Many scientists disagreed. It led to DDT’s suppression worldwide even though it was never proved harmful to human beings. The result was that millions of people died unnecessarily of malaria. The World Health Organization and some environmental groups, according to Stossel, have relaxed their positions against the use of DDT as a result. As Stossel writes, “authoritan environmentalists kill people.

Now we have the man-made global warming scare. Stossel writes, “I instinctively want government to pass laws that encourage others to ‘go green’ – ride bikes, use less energy, shrink our carbon footprint. But reality has taught me that so much ‘going green’ is just bunk, combined with wishful thinking.”  We would go further, end all subsidies in the name of fighting global warming.

Stossel produces a graph that shows the growth of federal spending from 1792 to 2008. It shows little growth until WWII during which it spiked to a trillion 2005 dollars and fell post-war to about $300 billion. Since Lyndon Johnson’s Great Society program of 1964 and the Vietnam War, it has grown to over $3.5 trillion. The budget deficit in 2011 was about 1.3 trillion.  Stossel finds that federal revenues regardless of the marginal tax rate hovers at about 20 percent of GDP. He proposes cuts in spending including whole departments like the Departments of Education, Housing and Urban Development, and Energy, Commerce and Labor, elimination of agriculture subsidies, privatization of the Army Corps Engineers, TSA, and the Postal Service, changes in social security, medicare and Medicaid, and reducing the military budget.

Read his book and consider whether you need to change your own thinking. Stossel may not be an economist but he is a very wise man.

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Comment by Fernando M. Maag, 3/23/2013:

The power of public opinion is palpable at an inauguration ceremony, a strange and handsome hybrid of coronation and political rally. see. 

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]