Tuesday, July 17, 2018
Opinion

Column: How the Freedom Caucus misunderstands economics and endangers our freedom

The Freedom Caucus, a group of extreme right-wing Republican members of Congress who call themselves "conservative," seeks freedom from government solutions to social problems. They contend that when government interferes with free markets, it reduces individual freedoms — even for the individuals it is trying to help.

Accordingly, they oppose cash and in-kind transfers to poor people, government regulation of pollution and emission of greenhouse gases, any interference with labor markets such as minimum wages or safety regulations, and any progressivity in the income tax system since that would redistribute income and wealth. In all these cases, they argue that the unfettered free market will lead to optimum conditions, which means that government actions will only lead away from that optimum.

The free market concept that the Freedom Caucus invokes is derived from an elementary economic model taught in introductory economics courses in high schools and colleges. The model leads to conclusions about markets from idealized preconditions. It is a teaching model intended to explain how markets react under various conditions, much like the Ideal Gas Law in chemistry class or the frictionless inclined plane in physics class. Students are taught that markets that do not have these preconditions cannot be explained by the model.

As it turns out, the Freedom Caucus often ignores this instruction and uses this elementary model to reinforce their preconceptions; as a result, their decisions are often at odds with what sound economics recommends. For example, their position that individual freedom is increased when government regulations are reduced is contrary to the loss of freedom when de-regulation leads to more pollution or danger.

Real economic freedom is derived from greater command over resources, as when incomes rise, or prices fall, or recessions abate, or when innovation brings better products or working conditions. Such improvements allow people to spend time thinking or enjoying more leisure pursuits; they increase economic freedom whether they are brought about by market activity or by government intervention.

Government and markets are complements, not substitutes. For markets to exist, government must first restrict freedom by enacting and enforcing laws. Common law elements of contract law, accident law and property law are all essential prerequisites to the efficient functioning of markets. The most essential role that markets play — the facilitation of trade between willing buyers and sellers — would be impossible without these legal restraints on freedom.

Consider two important examples.

• CLIMATE CHANGE AND THE CARBON TAX. When businesses can pass costs on to society at large, they have an incentive to ignore those costs and to proceed to overproduce and underprice their products. That is, the market becomes inefficient. Climate scientists warn that this is happening in the fossil fuel industries, where refiners and end users emit pollution, leading to dangerous climate change.

Economists respond by recommending a carbon tax, a remedy that strengthens the market by forcing firms to treat the environment like a scarce resource rather than a free-disposal site. Recently, the Climate Leadership Council, led by conservative giants George Shultz and James A. Baker III, both former U.S. secretaries of state, backed a $40 per ton carbon tax to forestall the predicted severe weather calamities.

Note that their proposal would strengthen the market's power to serve society by requiring decisionmakers to regard the environment as a scarce resource to be economized. Because the Freedom Caucus reflexively denies a constructive role for government, they refuse to use powerful market forces to free society from the damaging health and climate impacts of pollution.

• THE AFFORDABLE CARE ACT. As the recently passed American Health Care Act was being negotiated in the House of Representatives, the Freedom Caucus opposed premium subsidies for those with pre-existing conditions.

They would deny the sickest people the power of pooled risks. Instead, they plan to assign these individuals to separate free markets (high-risk pools, where they will be required to pay premiums that are far more costly than the community rate approach of Obamacare.)

Although those with high-risk conditions would have "access" to health insurance, it is phony access since few would be able to afford it. The Freedom Caucus would deny the sick the freedom afforded by a market strengthened by risk pooling.

William L. Holahan is emeritus professor of economics at the University of Wisconsin at Milwaukee. Charles O. Kroncke, retired dean of the College of Business at UW-M, is also retired from USF. They are co-authors of "Economics for Voters."

Comments
Editorial: Sacrificing two kayaks and a Toyota for free speech

Editorial: Sacrificing two kayaks and a Toyota for free speech

Maggy Hurchalla joked this spring that all she could offer a billionaire who won a $4.4 million judgment against her after she exercised her free speech rights were "two kayaks and an aging Toyota.’’ The billionaire didn’t laugh. This week, Martin Co...
Updated: 8 hours ago
Editorial: Trump sides with Putin over America

Editorial: Trump sides with Putin over America

In one of the most surreal news conferences of our time, President Donald Trump actually stood next to Russian President Vladimir Putin Monday and called the federal investigation into Russia’s meddling into the 2016 election "a disaster for our coun...
Published: 07/16/18
Editorial: A vote for preserving waterfront parks by St. Petersburg City Council

Editorial: A vote for preserving waterfront parks by St. Petersburg City Council

The St. Petersburg City Council made the appropriate but difficult decision to reject a contract with renowned artist Janet Echelman for one of her aerial sculptures. It would be wonderful for the city to have one of her signature works, but Spa Beac...
Published: 07/13/18

‘Everybody needed to know what happened’

The brutal murder of Emmett Till, a black Chicago youth, in Mississippi nearly 63 years ago went unpunished, but not forgotten. A decision by his mother, Mamie Till-Mobley, to allow an open casket at Emmett’s Chicago funeral represented an act of def...
Published: 07/13/18
Editorial: Personal bias taints Florida’s clemency system

Editorial: Personal bias taints Florida’s clemency system

A recent exchange between the governor and Cabinet and a felon seeking to have his civil rights restored underscores the arbitrary unfairness of Florida’s clemency system. A long waiting period, a ridiculous backlog of cases and elected officials who...
Published: 07/11/18
Updated: 07/13/18

Trump should work with Congress on immigration

Donald Trump’s resounding victory in the 2016 presidential election came at least in part because the New York businessman grasped the disconnect between how millions of Americans and the political establishments of both parties felt about immigratio...
Published: 07/11/18
Updated: 07/13/18
Editorial: Trump’s trade war hurts American consumers

Editorial: Trump’s trade war hurts American consumers

Voters who looked to Donald Trump to make America great might want to look at their wallets. The president escalated his global trade war this week, threatening new tariffs on $200 billion worth of Chinese imports — everything from seafood, beef and ...
Published: 07/11/18
Updated: 07/12/18
Editorial: Rays stadium cost should be fairly shared

Editorial: Rays stadium cost should be fairly shared

The imaginative Ybor City ballpark proposed by the Tampa Bay Rays fits nicely into the 21st century vision of a sophisticated city and would secure major league baseball’s future for the entire region. It also carries an eye-catching cost that will h...
Published: 07/11/18
Updated: 07/12/18
Editorial: Supreme Court pick qualified, but confirmation process should be vigorous

Editorial: Supreme Court pick qualified, but confirmation process should be vigorous

For the second time in less than 18 months, President Donald Trump has nominated a well-qualified, conservative federal appeals court judge to the U.S. Supreme Court. That does not mean Judge Brett Kavanaugh should get an easy pass through Senate con...
Published: 07/10/18
Updated: 07/11/18
Editorial: Nobody uses fireworks to scare off birds

Editorial: Nobody uses fireworks to scare off birds

Americans are accustomed to celebrating the nation’s birthday by blowing up Chinese fireworks for days — a rite of recklessness that kills seven people a year and sends another 13,000 to hospital emergency rooms. The tragic toll struck close to home ...
Published: 07/09/18
Updated: 07/13/18