Iain Murray, vice president of strategy at the Competitive Enterprise Institute, is author of the new book Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You. He talks to National Review Online’s Kathryn Jean Lopez.
KATHRYN JEAN LOPEZ: “Government FAT CATS” “stealing you blind”? Come on. How is that new and how does that help anyone?
IAIN MURRAY: The problem of public-sector bloat has largely flown under the radar. Most people still seem to think that public-sector employees earn less than their private-sector counterparts. That’s not true, even before you take benefits and hours worked into consideration. I wanted to wake people up to the problem, and the title of the book certainly makes them pay attention. Yes, the book is a polemic, but this is a war that has to be fought.
LOPEZ: Isn’t it insultingly and unconstructively simplistic to make America out to be government vs. “the People”? Aren’t there people in government, too, some of whom actually have “best interests” and even good stewardship in mind?
MURRAY: As I say right up front in the preface to Stealing You Blind, this is about the system, not the people (with a few egregious exceptions). Most government workers are ordinary, decent Americans who are just looking for the best employment deal for themselves and their families. They’ve made a perfectly rational decision in their choice of career. They’re also often intelligent and well-educated, as Paul Krugman keeps reminding us. Yet they’re not employed in wealth creation, but in wealth abstraction. The system actually represents a massive, national misallocation of resources.
LOPEZ: Isn’t “bureaucrat” just a dirty word to conservatives? And don’t we have to get beyond everyone playing on their separate sides of the playground?
MURRAY: Every society has room for bureaucrats — the town clerk (along with his colleagues) was always a respected position among conservatives because citizens could see the benefits he and his office provided to them through the orderly administration of public affairs. The trouble is that the government sector has grown to absorb so much of the economy that it is now a significant obstacle to progress and innovation. This shouldn’t be a right-versus-left battle — self-described “progressives” should be just as angry about this as libertarians are. Oppression and exploitation by government are things both conservatives and liberals have historically worried about.
LOPEZ: What is the scandal of the public-employee sector?
MURRAY: It’s that the balance between risk and reward has been lost. The previous social contract — to use a liberal phrase — was that government workers received less compensation in return for less risk, as well as greater job security and a guaranteed pension. Today, public-sector workers make more than their direct counterparts in the private sector, get better benefits, work fewer hours, and retain their historic job security as well as pension schemes that are so generous they are massively underfunded. There’s no better example of this than the prison doctor in California who has been judged unfit to be around patients — or even prisoners — but can’t be fired. So Californians are paying him over $200,000 a year to review paperwork. Reward and risk have to be properly balanced in government, just as in other areas of society.
LOPEZ: Would you fix pensions first?
MURRAY: The unfunded-pensions liability is a problem as big in scale for states and local governments as the entitlements crisis is for the federal government. We have to address it, and reforms such as those in Wisconsin have already proved beneficial. For example, one Badger State school district was able to turn a projected deficit of $400,000 into a projected surplus of $2 million thanks to the reforms — allowing it to reduce class sizes, which is what the teachers’ union wanted. So fixing pensions now can provide real, immediate benefits.
LOPEZ: Isn’t that a hard case to make when people we like, such as teachers, are public employees?
MURRAY: As we’ve just seen, the current system actually works against them because it misallocates resources so badly. Another example is the importance of seniority in education. In Stealing You Blind, I relate the story of an underperforming school district in Los Angeles, where a budget crisis meant that the district had to let go its best teachers. Without seniority rules, it could have let go of fewer teachers, mostly those who were burnt out. Indeed, with an end to these rules, districts could pay enthusiastic junior teachers — who are underpaid — much more. That would be a real boon to young teachers, and to our children.
LOPEZ: So how is it the Department of Misallocating Education Dollars?
MURRAY: The state of Montana has reached a point where it is unable to comply with No Child Left Behind (NCLB). We knew this was coming — as far back as 2003 the state of Ohio reckoned it would need to spend over $1 billion a year administering NCLB. There are a bunch of other federal programs administered by the Department of Education that have nothing to do with our kids and which, if they need to be done at all, would be better done at the local level. There’s a list of them in my book.
LOPEZ: What happened to that plan to eliminate it and Commerce and HUD and HHS and . . . ? You see why people might be a little frustrated when they hear what sounds like the same old rhetoric?
MURRAY: I’m frustrated, too! I’ll keep saying we should do it until it happens. For some reason, Americans very rarely see government programs come to an end. That’s why we’re still paying a tax enacted to fund the Spanish-American War.
LOPEZ: What do you have against the Consumer Product Safety Commission? Do you like lead in toys?
MURRAY: No, I don’t like lead in toys, but I don’t like people who make toys that have never been anywhere near lead being forced to pay $30,000 to prove that to the CPSC, which gets to almost double its budget to administer these ludicrous requirements. I don’t like the fact that libraries have had to sequester children’s books that were printed before 1985 and may have to burn them. Above all, I don’t like the fact that the people who did put lead in our children’s toys were able to lobby for and win an exemption to the testing requirements. Again, this is an issue where people who like wooden toys — often, in my experience, on the liberal end of the political spectrum — can come together with conservatives to oppose this insanity.
LOPEZ: Is anybody doing this reform right?
MURRAY: People such as Scott Walker in Wisconsin and John Kasich in Ohio have twigged that current conditions are unsustainable and have shown political courage in standing up to the government-sector special interests. It’s been a long fight so far and they may yet lose, but they’re showing the way. At the local level, there are municipalities that have done it right, essentially doing away with their government sector entirely. Sandy Springs in Georgia springs to mind. Some places, such as the Southside Fire Department, also in Georgia, have even worked out how to protect public safety without the bureaucracy.
LOPEZ: Does the Tea Party know this?
MURRAY: The Tea Party understands this can’t go on, but isn’t great when it comes to promoting workable solutions. I’m completely with the Tea Party in terms of motivation, so that’s one of the reasons I wrote the book, to give them some suggestions for workable solutions that can get us from here (Greece) to there (a functioning liberal democracy).
LOPEZ: How much of this is about the New Deal and the Great Society?
MURRAY: The New Deal showed the way, but much of this is more recent. In 1990, we spent $2 trillion in today’s dollars. By 2000 we’d only added $300 billion to that, but in the past decade that’s gone up by a further $1.4 trillion. Moreover, even at the height of the New Deal, FDR recognized that allowing government workers to unionize was asking for trouble.
LOPEZ: So what are your fixes?
MURRAY: I outline a comprehensive program: Shrink the federal government, recharter executive agencies to make them properly responsive to the taxpayer, reform federal pay and conditions, tackle entitlement spending, make federal contracts public and abolish grants, introduce significant tax reform, enact genuine regulatory reform, end labor-union privileges, privatize appropriate government functions, and re-engineer public education. If you want the details, you’ll have to buy the book.
LOPEZ: You want regulatory reform. But just today I heard someone say that’s why we had a financial crisis. Not enough regulation. Are you part of the problem?
MURRAY: Prof. Laurence Kotlikoff of Boston University estimates that there are 115 different regulatory agencies for financial services. Not enough regulation? Yeah, right. The administration itself estimates the cost of complying with regulation at $1.75 trillion a year. If the Obama administration were serious about stimulating the economy, it would cut the burden of regulation in half and add almost $1 trillion back into the economy at virtually no cost.
LOPEZ: So are you squarely in the Fair Tax camp? There is some controversy, as you know. Are you Mike Huckabee?
MURRAY: I actually suggest several different ways of reforming the tax system — the Fair Tax, the flat tax, the consumption tax, and Milton Friedman’s negative income tax. I think any of those would meet my main criteria for tax reform, which are to reduce the complexities of the 2.1-million-word tax code to something anyone can understand, to ensure that wealth is only taxed once, and to reduce the enforcement abuses of the IRS.
LOPEZ: Why would you abolish grants? That’s no way to win the future, is it?
MURRAY: All the empirical evidence I’ve seen suggests that scientific innovation is not a public good. Research by the OECD, for instance, suggests that governments that heavily support science see no increase in scientific advances over those that leave the job to the private sector. If anything, as the global-warming scandal shows us, government support of science increases the likelihood that it will be misdirected. As for winning the future, as Prof. Terence Kealey says, “To tax industry to enable government to subsidize it [with research grants] must, in general terms, be absurd.”
LOPEZ: How much of this has to be state-led?
MURRAY: The entitlement programs aside, the problem of over-government is if anything more prevalent at the state and local levels than at the federal level, so much of it indeed must take place in the states. The good thing to note is that several states are already in relatively good shape, aided by such things as right-to-work and zero state income tax. Even in the best states, however, things can go wrong at the local level, so we need to reform there as well. This is truly a multi-level problem.
LOPEZ: You don’t come from here. Are there lessons from Europe that could help us?
MURRAY: Yes, don’t let your executive usurp the powers of the legislature! In the European Union, the executive (the European Commission) has the sole right to propose legislation to the European Parliament, which is crazy. However, seeing how much power Congress has delegated to the administration, we may not be too far off from that in reality. A happier example to follow comes from Margaret Thatcher, who significantly reduced the size and power of government through privatization, restructuring, and outright abolition of agencies (she abolished the U.K. Department of Energy, before Tony Blair brought it back — to deal with climate change, of course). I’m proud to say that I ceased to be a government worker in the U.K. by privatizing myself out of a job. And I haven’t looked back since.
— Kathryn Jean Lopez is editor-at-large of National Review Online.