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View related content: Free Enterprise
There is a major cultural schism developing in America. But it’s not over
abortion, same-sex marriage or home schooling, as important as these issues are.
The new divide centers on free enterprise–the principle at the core of American
Despite President Barack Obama’s early personal popularity, we can see the
beginnings of this schism in the “tea parties” that have sprung up around the
country. In these grass-roots protests, hundreds of thousands of ordinary
Americans have joined together to make public their opposition to government
deficits, unaccountable bureaucratic power, and a sense that the government is
too willing to prop up those who engaged in corporate malfeasance and mortgage
The data support the protesters’ concerns. In a publication with the ironic
title, “A New Era of Responsibility,” the president’s budget office reveals
average deficits of 4.7% in the five years after this recession is over. The
Congressional Budget Office predicts $9.3 trillion in new debt over the coming
And what investments justify our leaving this gargantuan bill for our
children and grandchildren to pay? Absurdities, in the view of many–from
bailing out General Motors and the United Auto Workers to building an
environmentally friendly Frisbee golf course in Austin, Texas. On behalf of
corporate welfare, political largess and powerful special interests, government
spending will grow continuously in the coming years as a percentage of the
economy–as will tax collections.
Still, the tea parties are not based on the cold wonkery of budget data. They
are based on an “ethical populism.” The protesters are homeowners who didn’t
walk away from their mortgages, small business owners who don’t want corporate
welfare and bankers who kept their heads during the frenzy and don’t need
bailouts. They were the people who were doing the important things right–and
who are now watching elected politicians reward those who did the important
Voices in the media, academia, and the government will dismiss this ethical
populism as a fringe movement–maybe even dangerous extremism. In truth, free
markets, limited government, and entrepreneurship are still a majoritarian
taste. In March 2009, the Pew Research Center asked people if we are better off
“in a free market economy even though there may be severe ups and downs from
time to time.” Fully 70% agreed, versus 20% who disagreed.
Free enterprise is culturally mainstream, for the moment. Asked in a
Rasmussen poll conducted this month to choose the better system between
capitalism and socialism, 13% of respondents over 40 chose socialism. For those
under 30, this percentage rose to 33%. (Republicans were 11 times more likely to
prefer capitalism than socialism; Democrats were almost evenly split between the
The government has been abetting this trend for years by exempting an
increasing number of Americans from federal taxation. My colleague Adam Lerrick
showed in these pages last year that the percentage of American adults who have
no federal income-tax liability will rise to 49% from 40% under Mr. Obama’s tax
plan. Another 11% will pay less than 5% of their income in federal income taxes
and less than $1,000 in total.
To put a modern twist on the old axiom, a man who is not a socialist at 20
has no heart; a man who is still a socialist at 40 either has no head, or pays
no taxes. Social Democrats are working to create a society where the majority
are net recipients of the “sharing economy.” They are fighting a culture war of
attrition with economic tools. Defenders of capitalism risk getting caught
flat-footed with increasingly antiquated arguments that free enterprise is a
Main Street pocketbook issue. Progressives are working relentlessly to see that
it is not.
Advocates of free enterprise must learn from the growing grass-roots
protests, and make the moral case for freedom and entrepreneurship. They have to
declare that it is a moral issue to confiscate more income from the minority
simply because the government can. It’s also a moral issue to lower the rewards
for entrepreneurial success, and to spend what we don’t have without regard for
our children’s future.
Enterprise defenders also have to define “fairness” as protecting merit and
freedom. This is more intuitively appealing to Americans than anything involving
forced redistribution. Take public attitudes toward the estate tax, which only a
few (who leave estates in the millions of dollars) will ever pay, but which
two-thirds of Americans believe is “not fair at all,” according to a 2009 Harris
poll. Millions of ordinary citizens believe it is unfair for the government to
be predatory–even if the prey are wealthy.
Political strategy aside, intellectual organizations like my own have a
constructive role in the coming cultural conflict. As policymakers offer a
redistributionist future to a fearful nation and a new culture war simmers, we
must respond with tangible, enterprise-oriented policy alternatives. For
example, it is not enough to point out that nationalized health care will make
going to the doctor about as much fun as a trip to the department of motor
vehicles. We need to offer specific, market-based reform solutions.
This is an exhilarating time for proponents of freedom and individual
opportunity. The last several years have brought malaise, in which the
“conservative” politicians in power paid little more than lip service to free
enterprise. Today, as in the late 1970s, we have an administration, Congress and
media-academic complex openly working to change American culture in ways that
most mainstream Americans will not like. Like the Carter era, this adversity
offers the first opportunity in years for true cultural renewal.
Arthur C. Brooks is the president of AEI.
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