Partial review of The Road to Prosperity: How to Grow Our Economy and Revive the American Dream, by Patrick J. Toomey and Nachama Soloveichik. NY: Wiley, 2009.
A few years ago I wrote a lengthy multi-part review of Rick Santorum’s book. I’d like to do something similar for Toomey’s Road to Prosperity. Each post will discuss one or more chapters of the book with a post at the end with a linked list of all the entries and some final thoughts.
The book opens with a foreward by Larry Kudlow which is primarily a criticism of the first months of the Obama administration. This is followed by a preface by Toomey, dated May, 2009, which focuses on economics, and the simplicity of economic principles. He states, for example:
We all know intuitively, from a very early age, that, all else being equal, a shortage of something makes it more precious and an excess makes it less so. We understand without questioning that people respond to economic incentives because, as consumers, we are bombarded with and often take advantage of clearance sales, coupons, volume discounts, and the like. (xv)
He also references zero percent financing and how popular it is when it is available.
I kind of disagree with him on several of these points. Supply and demand only works when enough people actually want the good or service. I have an almost complete set of Star Wars bubblegum cards from the first movie back in the late 1970’s. Not many people have a set like that but it doesn’t have a lot of street value. You might say that is understood, but if you are spelling out economic principals, or principals of any kind, it is more effective when you go into all of the underlying motivations. I think there are also a lot of people, my household included, that view zero percent financing with some skepticism because there are often less desirable strings attached.
Toomey lists some acknowledgements, just a list of names with no further information.
Chapter 1 (pp. 1-24) “Principles of Prosperity" sets out his four basic tenets: “private property rights, a relatively unfettered market, low tax burdens and government spending levels and a stable currency” (3). Toomey believes that these principles have led to America’s economic succeess.
Toomey includes intellectual property in his definition of private property. He also thinks one role of the government is to record ownership, in the form of deeds, titles, and patents. Conversely, restrictions on the use of sale of private property are detrimental. As examples he gives is the restriction the sale and use of land in the New Jersey Highlands. A theme throughout the book is first used here – that government restrictions automatically blocks what would have been positive outcomes. In this case he mentions the houses that could not be built on the land, and all the jobs not created there, and the farm workers not employed. He applies this to more mundane matters as well, by mentioning laws that prevent ticket scalping and therefore preventing sports fans from making a profit by selling their tickets. He does not take into consideration professional scalpers that artificially drive up the cost of tickets until they are outside the ability of true sports fans to afford them.
The second principle is a free market economy. Toomey believes that in a free market competition will keep product and service value up and costs down, and also innovation. It also leads to specialization of skills and worker cooperation in a process such as an assembly line. He views regulations as perhaps well-intentioned but always accompanied by unintended consequences. As specifics he mentions government set prices and licensing requirements for haircutters or taxi drivers. Health care mandates are also thrown in. Reading through I was surprised that monopolies were not mentioned, nor is there a heading for it in the index. [update: the index does have one listing for monopoly but it leads you to a page on public school's monopoly on education.] In this book monopolies do not seem to exist. Nor does he mention food safety, product safety, or, in fact, any regulation that might be viewed positively.
The third principle is taxation, “the lower the better” (12). He views a sales tax as “less objectionable” (13) than other taxes, but is opposed to taxing some issues and not others.. His philosophy in a nutshell is “The higher we tax people’s income, the less they work” (14). This section of the chapter also includes government spending as the opposite side of the coin from taxation. One passage I found surprising was his shock at the number of lobbyists who wanted him to continue or expand government spending programs. He seems equally shocked that no one lobbied for less spending (16).
Returning to something mentioned earlier in the chapter he expands on his “the seen trumps the unseen” theme, wherein in all government spending prevents private spending. On page 17 he uses the example of a bridge, which he feels would have been built with private funds if it were truly needed, as opposed to being built with government money. This one really threw me. I’m not sure what private enterprise would go around building bridges. Are residents to have bake sales to repair the aging infrastructure?
While they will be dealt with in greater detail later in the book Toomey introduces the concept of entitlement programs, such as medicare and social security which he views as unsustainable and simply redistributes wealth from one group to another.
The fourth principle is a stable currency. The guiding views of money are as a unit of measure, a medium of exchange, and to store value over time. In a rare show of support for a government agency Toomey says he agrees with giving the Federal Reserve the power to control the supply of money, but only because giving that power to Congress would be much worse, and the purview of the Fed should be limited
Toomey ends the chapter by saying that a laundry list of good things, “life spans, child survival, health care, scientific knowledge, sanitation, living conditions, opportunities to pursue interests and leisure, the state of our environment, and all forms of material will-being” (24) improve when these four principles are followed. To my mind, some of these improvements are also the result of labor unions, federal funding of medical research, and environmental regulations, but, hey, that’s just me. Economic principles certainly played a role but so did rule of law, government policies, and social movements.