After he lost 42 of the 48 states in 1932, Herbert Hoover wrote: “Democracy is a harsh employer.” Sometimes appropriately so.
Joe Biden’s failed presidency is ending with a blizzard of decisions that validate voters’ rejection of his vice president, who, when asked, could not think of a flaw in his record. He and she pretended, from opposite directions, to be what they are not.
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Two months into his presidency, the seeds of its ruin were sown with the American Rescue Plan, which pumped up demand for goods and services beyond the capacity of the economy to produce them. The predicted result, inflation, was exacerbated by the Inflation Reduction Act’s torrent of subsidies in the service of “industrial policy.”
Three weeks after the 2024 election, Biden’s administration, rushing to open wide the spending sluices before Jan. 20, provided almost $8 billion in subsidies to chip-maker Intel. Five days later, Intel’s CEO retired, effective immediately, his company having lost $16.6 billion in the previous quarter. The chair of Intel’s board of directors said the CEO’s departure would facilitate “restoring investor confidence.” The Biden administration’s investors of other people’s money already had sky-high confidence.
In December, the Biden administration gave a $15 billion low-interest loan to California utility PG&E. This loan is the largest ever from the Energy Department’s incorrigibly overconfident Loan Programs Office. The second-largest was made the day before — a $9.6 billion loan for a joint-venture Ford Motor battery plant.
In November, the LPO had funneled $6 billion to Rivian, an electric vehicle start-up that the New York Times reports “has had trouble ramping up sales beyond about 50,000 vehicles a year.” Fewer might be better: The Wall Street Journal reports that Rivian lost $107,043 on every vehicle it sold in the first nine months of 2024, even with Biden’s $7,500 tax credit per vehicle (up to $40,000 for its heaviest commercial EV). Rivian blames a “more challenging consumer environment” — customers are pickier than the Biden administration’s investors.
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(In 2009, the LPO served Barack Obama’s industrial policy by sinking $535 million in solar panel manufacturer Solyndra, which filed for bankruptcy in 2011. In 2010, the LPO gave a $465 million loan to Tesla. Henceforth, such transactions might be subjected to the withering squint of Elon Musk’s new “Department of Government Efficiency.”)
James Hohman understandably is no fan of government handouts to corporations.
GMU Econ alum Alex Salter’s letter in today’s Wall Street Journal conveys wisdom:
Jason Furman wisely reminds us that public policy always involves trade-offs (“Left and Right Alike Are Blind to Trade-Offs,” op-ed, Jan. 8). Nevertheless, I have some reservations about cost-benefit analysis as a “framework” that “offers a path to better policy.” The economic way of thinking is necessary but not sufficient to improve governance.
There are two issues. The first is that the cost-benefit paradigm too easily becomes an excuse for rule by experts. Who decides what the relevant trade-offs are, as well as the best way to navigate them? Economists and public-policy experts, presumably, in which case we’ve inadvertently subjugated democratic deliberation to technocratic tinkering.
Second, and more important, cost-benefit analysis takes values as given. We call “benefits” what people like and “costs” what people dislike. This is appropriate for economics as a descriptive social science. But it won’t do for public policy, which is inherently prescriptive. Every law, regulation or other reform presumes an “ought,” not merely an “is.” Maximizing net benefits means people are getting what they want, but people often want what they shouldn’t have and don’t want what they should have.
Mr. Furman is correct that partisanship is a bad guide to good governance. But the technocratic approach isn’t much better. What we need is a prudential evaluation of the proper ends of man and the best means to secure those ends. In a word, what we need is statesmanship.
Also worth reading is this letter by Mark Schiller:
Mr. Furman isn’t really talking about economic decision-making. He is referring to political decision-making in which a small number of people impose their decisions on society. As Thomas Sowell has written: “Political, and especially legal, decision making tends toward categorical rather than incremental decisions.”
The alternative is economic decision-making in which myriad companies and individuals make choices based on their own unique knowledge, preferences and situations. These are incremental and not categorical in nature and allow for valuable feedback, which is direct and significant.
Mr. Furman chides conservatives for excessive focus on the costs of liberals’ expansive social goals. But the reality is that thoughtful conservatives and free-market proponents understand the inherently inefficient and frequently catastrophic nature of political decision-making and would prefer allowing market processes to function unhindered by political control.
At his Facebook page, Sam Grove shares this news story about the Los Angeles wildfires:
