May 16, 2012
Bartlett gets it right, Friedman gets it wrong
You know it's been a year of change when, in the same Times op-ed page, a prominent conservative economist advocates major government investments in new industries, and a prominent liberal columnist criticizes said investments as "pork," and calls for tax incentives over procurement.
From today's Times, Bush I economist Bruce Bartlett makes the case for big public investments in new industry:
"Since it is just as stimulating to invest money as to buy things with it, it may be possible to bring forward the plans for future investments that businesses and governments already have. But, again, it is essential that these investments be marginal -- over and above what would otherwise be spent -- or else there will be no increase in aggregate spending, and we will be no better off."
Friedman, after extolling the virtues of public infrastructure projects in other countries, claims that what we need are more tax breaks (and, as always, regulations that raise energy prices):
"Generally, I'd like to see fewer government dollars shoveled out and more creative tax incentives to stimulate the private sector to catalyze new industries and new markets. If we allow this money to be spent on pork, it will be the end of us."
Well, no. One man's strategic infrastructure investment is another man's pork. The federal government spends a lot of money on pork -- so do private companies. The VCs Friedman admires routinely lose money on 9 out of 10 investments they make. Is that pork? Pork is just a word to describe spending we don't like. Similarly, one man's "tax incentive to stimulate the private sector" is another man's "tax cut we cannot afford" (both quotes from Friedman's column).
Friedman writes as though the highways, the broadband networks, and the personal computers he loves were created through tax incentives rather than government contracts. It's reminiscent of when Friedman claimed that we would get an E.T. revolution just like we got the I.T. revolution --- through strict regulation -- as though we created cheap microchips and personal computers through a cap and trade on typewriters.
Friedman would do well to devote less time to inventing empty catchphrases ("time to reboot America") and more time to learning and thinking about the history of government funded IT components (microchips, the Internet), the history of government-funded energy breakthroughs (solar, wind and nuclear) and the recent death of market fundamentalism, which had long insisted that it isn't the government's role to make precisely the investments necessary to create the E.T. revolution Friedman wants.