Free Lunch (4 page)

These contract workers typically cost twice as much as civil servants doing the same work, yet they are even
less accountable. In Iraq we court-martial and imprison soldiers who under the stress of relentless urban combat kill innocents in a
fit of anger or misjudgment. But the contract soldiers who fight alongside them, at two to ten times the pay, operate in a law-free
zone, any killings they commit for foul reason unpunished and, some of our leaders assert, beyond the reach of any
law.

At home, government and companies cooperate in withdrawing contracts and other
documents from the public record. The profits generated by these companies are used, in part, to lobby for more contracts that
drive up costs even further. Executives of these companies are also strategic donors to politicians, helping to ensure the
continuing flow of tax dollars to their businesses. This is a benefit unavailable to even the most empire-building
bureaucrat.

On another front, government is easing up on rules that ensure clean water to
drink and fresh air to breathe. When companies dump toxics instead of cleaning up at their own expense, they force everyone to
bear the costs of environmental pollution. The Cuyahoga River in Cleveland was so polluted with flammable chemicals that it
caught fire at least nine times starting in 1868. But it was not until the 1969 fire brought national news coverage that national debate
ensued about pollution and economic growth. Only then did government adopt rules to give us cleaner air and water—and thus
save us some of the anguish and the cost of asthma, cancer, and heart disease. But under the guise of deregulation, many of those
rules are being relaxed, repealed, or ignored.

Now we face a similar problem that damages
lives and costs us dearly. A growing array of businesses and whole industries profit by dumping their real costs of capital,
equipment, and even labor onto the taxpayers. This new problem is
economic
pollution.

We shall see the economic pollution caused by just one industry in
which Tyco International, General Electric, and Honeywell are major players. This industry owes its entire profits not to unleashing
the forces of competitive business, but to silently shifting its largest labor expense onto the taxpayers.

Under deregulation we have created a host of dependent companies that hold out their very large hands to
take money from Washington, the state capitals, and towns and cities everywhere. Wal-Mart, Target, and a host of lesser-known
retailers all count on government handouts when they open new stores. These subsidies serve not only to enhance their profits,
but also to undermine locally owned businesses that are crucial to the social fabric of communities. These retailers are not, by far,
the worst offenders, however. Examples abound of companies and industries that foul the national ledgers, degrading the income
and wealth of us all through economic pollution.

Sometimes the banner of deregulation can
make people rich at the cost of others' lives. We will follow the career of an economics professor who embraced the idea of getting
government out of the way of business, yet made his business career cultivating government, leaving behind a trail of deaths and
costs that were shifted onto the taxpayers. His name is John W. Snow and he rose to become our government's Treasury
secretary.

The benefits of the nation's overall growth in incomes and wealth flow like a mighty
river of greenbacks to the powerful, wealthy men and women who have twisted Mr. Reagan's revolutionary creed. They want more
government, just so long as it makes them richer. They have captured for themselves and their class the benefits and rewards of a
government that is today as intricately involved with the private sector as it ever has been. They have found the proverbial free
lunch, enjoying a sumptuous feast and leaving their bill for the rest of us.

There is, of course,
no such thing as a free lunch. Every cost must somehow be accounted for and paid. When bars offered a free lunch in the 1800s,
the cost was built into the nickel charge for beer. For our purposes, a “free lunch” refers to an economic benefit received by one
party that is paid for by another by government action or inaction.

For example, when a
developer receives a plot of land free or at a discount, your taxes may have paid to buy it, the original owner may have been
cheated out of its market value, or someone else not at all obvious got stuck with the real cost. When an executive shortchanges
the pension plan, making his company appear to be more profitable, he inflates the value of the company stock and therefore his
stock options. When the pension later fails and the workers get less than what they were due, or the taxpayers have to make up the
part of the shortfall guaranteed by the government's Pension Benefit Guarantee Corporation (PBGC), the executive gets a free
lunch. Our economy is riddled with these subsidies, many of which are intentionally subtle and hard to detect.

Executives' free lunch is a major factor in America's growing inequality and why our economy is closest to
those of Brazil, Mexico, and Russia in how it distributes resources.

The evidence of a growing
divide between the superrich and everyone else in America is so overwhelming that all but the few lightweight ideologues among
economists acknowledge this harsh truth. When George W. Bush was running for president in 2000 he famously referred to a
white-tie audience at a Waldorf-Astoria dinner as the “haves and the have mores.” He said that “some people call you the elite. I call
you my base.” By 2007 even the Bush White House had publicly acknowledged that the divide between the superrich and
everyone else was a real concern.

Since that talk about the “have mores,” a national debate
has arisen over just what is going on. Why are the rich getting so much richer, while the middle class struggles and the poor fall
behind? Why are the richest of the rich—billionaires—pulling away even from those whose net worth is in the many millions? The
cable and broadcast television networks, national news magazines, and scholarly conferences have all examined the question of
why inequality is growing and what it means.

Is education behind increasing inequality, as the
White House says? Or could it be globalization, with cheap labor in China and India combining with free trade to create new
world-scale fortunes? Or is it technology, from ever-faster silicon chips to drugs that soothe what ails you? Or maybe it is just a
proper reward for talent, with corporate executives getting their fair share of the wealth they create for shareholders.

All of those answers are right—and wrong. What they all have in common is that they are just superstructures
arising from the same foundation. The real answer, like the focal point of Edgar Allan Poe's “The Purloined Letter,” is right in front
of our eyes. We just have to discern it amid the clutter of daily living.

Since 1980 it has become
official policy to ensure that the rich receive the benefits of government. This is a shift from government policy in the years after
World War II to grow the middle class, remaking America into a land of better-educated and healthier people, a land of suburbs and
single-family homes where opportunity was based less on status and wealth than on hard work and merit.

So who is better off today than they were 30 years ago? The middle-aged factory worker whose plant closed
even though it earned a healthy profit or the Wall Street investment banker who brokered the deal to ship the machine tools
overseas, where pay is three or four dollars per day? The billionaire CEO or the middle manager whose company health insurance
has been cut yet again? The war contractor or the brain-injured veteran?

Nearly three decades
after Mr. Reagan's revolution, the single biggest piece of our economy, a third of it, is still government. From raking leaves in city
parks to buying stealth bombers that cost $2 billion a copy, government takes the same share. But money for the basics that make
society work is growing scarce. From those leaves in the park to textbooks to highway bridge maintenance to food safety
inspections, money is dwindling because so much has been diverted to the already rich through giveaways, tax breaks, and a host
of subsidies that range from the explicit to the deeply hidden.

Evidence that the elites have
captured the government and are milking it for their own benefit is so overwhelming that, on one level, you can find it as an
unstated assumption in everyday news reports. With this idea in mind, the degree to which it has become part of the background to
our national political, economic, and social discussions will leap out at you from the pages of the newspapers and the
observations of the pundits. It has become the basis for advertisements about how buying a luxury home or a share of a corporate
jet may be within your reach, thanks to an assist from the government.

In the pages ahead we
will examine just how thoroughly government has become the servant of the rich, showing how: