DRI-312 for week of 5-19-13: Our IRS Relationship: Business/Customer or Ruler/Subject?

An Access Advertising EconBrief:

Our IRS Relationship: Business/Customer or Ruler/Subject?

Last week, it was revealed that, over the course of roughly two years between 2010 and 2012, the Internal Revenue Service (IRS) sorted applications for tax-exempt status by right-wing organizations and designated them for special treatment. Special bad treatment, that is; it delayed processing of these applications by an average of more than twice as long as other applications. The organizations complained about the delay and even voiced their surmise that political sabotage by a Democrat administration might have been responsible for the delay. The complaints got them nowhere until last week, when the truth began seeping out.

The first reports gave little hint of a major scandal. According to the mainstream news media, a few crackpot right-wing outfits with the words “patriot,” “tea party” and “9-12” in their names had to cool their heels until their tax designations came through. It was all the work of a few “rogue IRS operatives” in the Cincinnati office. The New York Times buried the story on page 11. The Washington Post, though, apparently remembered that back in 1973 it ran an obscure item about a President named Nixon using the IRS to investigate his political enemies. It ran the story on page one.

The agency harrumphed and allowed as how mistakes had been made, but no serious damage had been done. President Obama assumed his by-now-familiar pose of innocent bystander loitering in the vicinity of a crime scene, remarking breezily that the IRS was “an independent agency.” This was too much for The Wall Street Journal, which ran an editorial titled “The ‘Independent’ Revenue Service,” pointing out sharply that the IRS is a key agency in the Executive Branch of the federal government, with a chief appointed by the President.

Within the next two days, further revelations emerged. The manner of their revelation was as revealing as the revelations themselves. An internal report by the Treasury Inspector General, soon to be released, confirmed the IRS targeting and the fact that IRS officials had known about it for at least two years. The targeting was not confined to one office; it was nationwide. The basis for the “special attention” devoted by the IRS was not merely the names of the groups – it went much further than that. The issues addressed by the groups were also targeted; they included “government spending,” government debt” and “taxes.” Targeted groups included those that “criticized how the country is being run” and sought to “make America a better place to live.” Questionnaires were sent requesting voluminous information; some of the more intrusive questions demanded to know future political plans of employees and the nature of religious beliefs of groups requesting religious exemptions.

President Obama abruptly reversed his previous indifference to the brewing scandal by declaring that if the “allegations” were true, they were “outrageous.” As the Journal noted, the President was referring in the conditional tense to events that his IRS subordinates had already admitted to be true. Equally significant was the fact that both of these admissions came in the form of response to questions rather than at news conferences called to discuss the specific events, as would ordinarily have been expected. The obvious inference was drawn that, had the questions not been asked, the statements made by the IRS and the President would have gone unsaid. Subsequently, it transpired that the IRS question and response had been a preplanned strategy designed to minimize the impact of the eventual Inspector General report.

In general terms, what is the significance of the scandal? In particular, what does it tell us about the relationship between the IRS and American citizens?

“The Power to Tax:” A History of Abuse

Supreme Court Chief Justice John Marshall coined the phrase: “The power to tax involves the power to destroy.” The IRS was created with the birth of the federal income tax in 1913. A centenary is traditionally a time for recapitulation and stocktaking. A good place to begin is by recalling the IRS’s history of political abuses, which reinforces Marshall’s maxim.

President Franklin Roosevelt inaugurated the practice of using the IRS as an all-purpose tool of revenge and intimidation against his political opponents, particularly his bête noire, Col. Robert McCormick, Republican owner/published of the Chicago Tribune. One of the Kennedy administration’s many well-closeted skeletons was an Ideological Organizations Audit Project, devoted to auditing tax returns of administration opponents. Lyndon Johnson was among the beneficiaries of FDR’s influence with the agency, which derailed an IRS audit that might have ended his political career by exposing an early financial peccadillo. Richard Nixon’s famous “enemies list” was a handy source of potential names for IRS scrutiny. The Clinton administration apparently launched hundreds of IRS audits of individuals and organizations that opposed the administration politically.

Now the Obama administration has taken its place on this historical roster of infamy. Its one distinctive talent seems to be one for extreme actions – spending, debt, regulation, exceeding its authority, et al. Now it has become the first administration whose IRS scandal has matured during its time in office.

Collusion Between the President and the IRS

Much of the furor surrounding the IRS scandal has raged over President Obama’s degree of involvement. Considering the history previously recounted, this is not surprising. It is hard to believe that such consummate politicians as Franklin Delano Roosevelt and Richard Nixon should have left an incriminating paper (or audio tape) trail. To date, the President’s defenders have focused on the absence of any such “smoking gun” directly linking him with the agency’s actions.

But critics such as Kimberly Strassel of The Wall Street Journal have denied the need for any such link. President Obama’s public utterances – speeches in the 2010 and 2012 election campaigns, public addresses and his remarks during press conferences – drew a road map for regulators and officials to follow. Sounding uncannily like Henry II, he lamented the burden placed on him, his administration and the country by the actions of his right-wing opponents. The only thing missing was a frustrated, whining cry a la T.S. Eliot’s Henry: “Will no one rid me of these meddlesome right wingers?”

The notion that President Obama could tell the IRS to harass the right-wing groups, not by making direct statements but purely by hinting, is embodied by the term tacit collusion. This concept is well-known to economists who specialize in the field of Industrial Organization. Ironically, academic economists tried for decades to pin the term on certain private markets – which didn’t deserve it – rather than applying to government and regulatory interactions – where it did apply.

In the 1930s, economists such as Edward Chamberlain, Joan Robinson and Paul Sweezy developed theories of “imperfect competition” – markets whose structural characteristics fell in between those of pure monopoly and ideal or “perfect” competition. One popular conjecture was that markets containing a small number of relatively large firms would feature sluggish price competition. The thinking was that each firm would be conscious of the effects of its own pricing and output decisions on the market outcome, as well as the reactions of rivals to its decisions. Instead of lowering price to compete with each other, firms would recognize their mutual interest in pricing and output restraint. Moreover, this recognition would come intuitively, without explicit cooperation on their part. Thus, they would collude tacitly to attain the same result otherwise obtained by formation of an illegal cartel.

In practice, this seldom if ever happened; it was just too difficult to achieve. The reasons for this were the same ones that made successful cartels so rare. Each party to the cartel agreement has an incentive to violate the agreement by cheating – lowering its price to steal customers while its fellow members keep their prices high. The incentive exists automatically whenever price is elevated substantially above marginal cost – which is what accounts for the profit potential of the cartel in the first place. But when all or most cartel members succumb to this temptation to cheat, the cartel falls apart because the large increase in output drives down the price and kills off the profits. This has been the fate of most cartels throughout history. And it is much harder to sustain a tacit cartel, where the terms are merely understood intuitively rather than agreed verbally or in writing, than an explicit cartel.

But collusion between government or regulatory agencies is much easier to achieve and maintain. It involves general actions rather than the specific, quantitative price and quantity decisions faced by private businesses. Instead of puzzling over “how much should we raise price, and how much should that change when our costs change by a certain magnitude?,” an agency like the IRS knows instinctively that its mandate is simply “hurt those right-wingers.” Bureaucrats and regulators do not have the same clear, strong incentives to cheat on the agreement that are present in a business cartel. When a business-cartel member cheats by lowering its price to steal customers from its fellow cartel members, its reward is increased profits. But government bureaus and regulatory agencies do not earn profits, so there is no profit motive to violate their (tacitly) collusive agreement.

Thus, collusive arrangements like the IRS policy can persist for years until and unless they are discovered. It is publicity and fear of prosecution that gives government employees their one and only motive to squeal, thereby upsetting the applecart. But the beauty of this type of collusion – from a Presidential standpoint – is that its strictly tacit character leaves the President untouched. Here, for example, there is no legal evidence – no signed document, no incriminating tape recording, no e-mail – that he instigated the IRS behavior, even though the world knows that he did.

“Was the White House involved in the IRS’s targeting of conservatives?” the Journal’sKimberly Strassel asked (5/17/2013) rhetorically. “Of course it was.” Mr. Obama’s collusive communication with his executive branch underlings began no later than his 2010 State of the Union address, when he “cast aspersions on the Supreme Court’s Citizens United ruling, claiming that it ‘reversed a century of law to open the floodgates for special interests’ (read conservative groups).” He “derided ‘tea-baggers,'” whom his Vice-President “compared to ‘terrorists.'” Then, “in more than a dozen speeches Mr. Obama raised the specter that these groups represented nefarious interests that were perverting elections. ‘Nobody knows who’s paying for these ads,’ he warned. ‘We don’t know where this money is coming from.’…In case the IRS missed his point, he raised the threat of illegality: ‘All around this country there are groups with harmless-sounding names like Americans for Prosperity, who are running millions of dollars of ads against Democratic candidates…And they don’t have to say who exactly the Americans for Prosperity are. You don’t know if it’s a foreign-controlled corporation.’ Short of directly asking federal agencies to investigate these groups, this is as close as it gets.” Strassel noted that the President’s efforts were reinforced by Democratic representatives who publicly called on the IRS to validate the credentials of right-wing groups.

The President didn’t stop at corporate intimidation. His 2012 campaign website listed eight Mitt Romney donors by name and tarred each one with various slurs, the most outrageous being that they were “on the wrong side of the law.” The most prominent was Frank VanderSloot, an Idaho businessman and longtime donor to right-wing causes. This earned him mention by the Obama campaign as a “wealthy individual” with a “less-than-reputable record.”

In April 2012, shortly after the website mention, Democratic activists sought Mr. VanderSloot’s divorce records. In June, he and his wife were audited for two tax years. In July, the Department of Labor audited records pertaining to the guest workers on his cattle ranch. In September, the IRS audited another of his businesses. That was three audits in four months following the tacit signal sent out by the Obama campaign.

The Motivation for the Crime

Although President Obama and IRS officials initially pretended that the IRS targeting of right-wing groups was merely a wayward impulse that struck a few rogue IRS functionaries, it was really a serious crime. The key distinction separating felonious criminal acts from civil torts is mens rea, or criminal intent. This makes the issue of motivation highly relevant.

When the President speaks, the IRS listens. Not only does the President appoint the head of the IRS, he also submits an annual budget – or is legally supposed to, anyway. In this case, the IRS is the agency ramrodding ObamaCare, which means that the President has made it the most important agency in the federal government. Congress votes on budget appropriations for the IRS, so IRS ears are constantly attuned to the Congressional frequency as well. Leading IRS officials recently received annual bonuses worth over six figures. These had to be approved by the President. Recently it was revealed that the President’s counsel was notified in 2012 of the findings of the Inspector General’s report revealing the targeting of conservative groups by the IRS.

What inferences can reasonably be drawn from the above set of facts? That the President and the IRS tacitly concluded in a campaign to harass, intimidate and suppress right-wing political activist groups; that the President knew of its ongoing nature and its success and rewarded IRS officials for it.

Government officials do not commit crimes randomly or capriciously. Like all criminals, they respond to incentives, both positive and negative. In this case, the specific positive incentives were the bonuses received by top IRS officials and the increase in responsibility, size and budget conferred by the award of ObamaCare responsibility. The annual appropriations process left open the potential for additional future rewards in the form of increased appropriations. Because the IRS is a command-and-control, top-down bureaucracy, top officials could give orders to subordinates to commit and support these criminal acts. The negative incentives were the potential discipline of budget cuts administered by the President and/or Congress for failing to collude.

The latest development in Congressional hearings is the refusal by IRS official Lois Lerner to answer questions and her invocation of the Fifth Amendment against self-incrimination, following an opening statement in which she denied wrongdoing.

“Just Bad Customer Service”

Not surprisingly, the IRS from the outset has employed a typical criminal strategy: minimize the crime or redefine it away altogether. In May 17, 2013 testimony before the House of Representatives’ Ways and Means Committee, outgoing Acting IRS Director Steven Miller called the IRS actions “obnoxious” but “not illegal” – in fact, he did “not believe that partisanship motivated” the agency. What was responsible, then? “Foolish mistakes,” suggested Mr. Miller with a straight face – a case of “horrible customer service.”

Fewer recent public comments by a government official have drawn more hilarity. The Wall Street Journal editorially marveled at his equating of “the coercive power of taxation” to “rude service at a Best Buy.” But the full meaning of Mr. Miller’s comparison seems to have eluded observers.

The difference between the IRS and Best Buy is not a joke. It accounts for the existence and magnitude of the abuse itself. When private citizens approach the IRS, they do so with hat in hand, virtually begging not to be destroyed. Alternatively, they arrive in the company of a lawyer who does all the talking. But when Americans walk into a Best Buy, they are in control. They may complain about prices or service, but they hold the whip hand. They can always take their business elsewhere. And, in the particular case of Best Buy, they have done just that – its stock price has been decimated in the last few years. The company has been the one to go hat in hand to the public and capital markets in order to hang on by its fingernails.

The difference between the two cases is that we are not “customers” of the IRS because the IRS faces no competition. Our relationship to them is not “business/customer” but rather “ruler/subject.” They dictate and we obey – or go to jail. Under those circumstances, any demands we make for better customer service ring hollow indeed.

That is the key to the IRS scandal. To the degree that commentators have offered solutions, they have been the usual thin gruel of reform – politicians should behave better, the press should be more vigilant, the public gets the government it deserves, ad infinitum, ad nauseum. But the only way to get better customer service from the IRS is to provide it with competition. Since that is impossible, the only solution is the removal of the IRS. And that requires the replacement of taxation as a basis for funding the federal government.

End the Power to Destroy

Several of the agencies scrutinized by the IRS are supporters of the Fair Tax, a measure designed to replace the federal income tax with a national sales tax. An ancillary result would be the elimination of the IRS. No wonder the IRS tried to harass and intimidate these groups!

Leaving taxation in place, however, would provide government with an ongoing weapon to hold at the public’s head. In order to make sure that we didn’t end up with the worst of both worlds – a national sales tax and a federal income tax still in place – we would have to amend the Constitution to end income taxation so as to eliminate the IRS. Since we have to go to this much trouble anyway, it would be far preferable to end taxation itself. That would allow us to solve the overriding crisis of our time by ending the welfare state and its mortal threat to our freedom and financial lives.

Taxation is a continual source of inefficiency and a serious hindrance to productivity. The true solution to the threat to freedom and productivity represented by taxation and the IRS is to fund government by user fees. Government would charge a price for each service it provides. Any private business could compete with government in the provision of any service.

This would allow the public to scrutinize government activities at the margin, comparing the price paid for each one with the value received. It would provide an automatic check on overspending. Coming at a moment when the civilized world is drowning in sovereign debt, it would provide an Alexandrian solution to the Gordian knot of big-government welfare-statism – a solution that probably will otherwise elude us.

Vested interests, starting with the executive and regulatory branches of government, would oppose this reform to their last breath. That and its inherent logic are two of the strongest arguments in its favor.

The chief difficulty in moving to a system of user fees lies in funding a big-ticket item like national defense, where the product must be funded and produced in advance of its “consumption” – that is, before citizens have an opportunity to gauge the value of what they are buying. Defenders of the status quo will insist that we cannot live with such a system and must put up with the bureaucratic behemoth of a defense establishment that we have now.

Increasingly, though, it is becoming clear that we cannot live with the system we have, which is now proceeding down F.A. Hayek’s famous “road to serfdom” at a breakneck pace.

DRI-336 for week of 4-7-13: ‘The Pattern of the Anointed’ Strikes Again

An Access Advertising EconBrief:

‘The Pattern of the Anointed’ Strikes Again

How many times have you seen it happen? The intelligentsia and the mainstream news media discover a crisis. It starts as a single news story or a documentary. Gradually it builds into the crisis of the week, or the month. Eventually, there is a consensus – this is a disaster, or an epidemic, or malaise, or an Armageddon in the making. The remedy is a program, or a national effort, or the moral equivalent of war. Only full-bore, full-speed-ahead action by the federal government can solve the problem.

Agencies are created and staffed. Programs are created, legislated and implemented. The federal government spends oceans of money. What happens? For awhile – nothing. Then, slowly and almost imperceptibly at first, but soon clearly and gnawingly… the problem gets worse.

Ultimately, we find out that the problem was actually getting better all long – until the federal government acknowledged it and tried to solve it. This reversed the pattern of improvement and got things headed in the wrong direction. And they stayed that way.

After watching this sequence of events more than once, it probably occurred to you that it was more than just happenstance. You may even have contemplated announcing your observations to the world in the form of a theory about how government works – or fails.

Congratulations. You have undergone the scientific experience known as independent discovery. Unfortunately, you were too slow in getting your ideas down on paper, so you won’t be able to claim credit for them. That belongs to the great black economist, Thomas Sowell.

Sowell called his discovery “The Pattern of the Anointed.”

The Pattern of the Anointed

Sowell identified what he considered “the prevailing vision of our time” in social theory. The intelligentsia – consisting of leading figures in academia and the mainstream communications media – has been anointed by themselves and the political left as the agenda-setters for big government. This visionary process has four stages.

In Stage 1, a Crisis is identified. “Some situation exists, whose negative aspects the anointed propose to eliminate…even though all human situations have negative aspects, and even though evidence is seldom asked or given to show how the situation…is either uniquely bad or threatening to get worse. Sometimes [it] has in fact already been getting better for years.”

In Stage 2 comes the Solution. “Policies to end the ‘crisis’ are advocated by the anointed, who say these policies will lead to beneficial result A. Critics say that these policies will lead to detrimental result Z. The anointed dismiss these latter claims as absurd and ‘simplistic,’ if not dishonest.

Stage 3 brings the Results: “The policies are instituted and lead to detrimental result Z.”

Of course, this is not the end of the process. In Stage 4, we witness the Response: “[Predictors of] detrimental result Z …are dismissed as ‘simplistic’ for ignoring the ‘complexities’ involved, as ‘many factors’ went into determining the outcome. The burden of proof is put on the critics to demonstrate to a certainty that these policies alone were the only possible cause of [the result]. No burden of proof whatsoever is put on [proponents of the Solution]. Indeed, it is often asserted that things would have been even worse, were it not for the wonderful programs that mitigated the inevitable damage from other factors [emphasis added].”

Sowell observed that evidence for his theory was “abundant.” He cited three well-known examples.

The War on Poverty

The “War on Poverty” is associated with the “Great Society” programs of the Lyndon Johnson administration, but the enabling legislation dates back to 1962, during the Kennedy administration. From the beginning, it was advertised as a means to end or prevent dependence of federal-government welfare programs. The emphasis was on “prevention and rehabilitation,” not on recruiting more recipients for the dole. And a by-product of success would be reduction in federal spending on welfare programs. “Make taxpayers out of tax eaters” and “give a hand, not a handout” were two of the many slogans that flavored War propaganda.

As time went on, the War accumulated subsidiary themes like barnacles adhering to the hull of an aging ship. One such theme was the preemption of urban violence through alleviation of poverty. The racial disorder and riots of the late 1960s provided a convenient setting for “civil rights leaders” to demand more government programs to ward off a “long, hot summer” of violence.

A minority of right-wing critics, the most visible and insistent being Sen. Barry Goldwater, predicted that the War would be a losing venture. It would promote dependence on government and encourage violence by rewarding it. It would divide Americans into those benefitting from government subsidy and those paying the subsidies; e.g., net recipients and net payees. And veteran observers of government noted that since the cost of government only rose, never declined, the War was almost certain to produce higher, not lower, welfare expenditures.

In retrospect, Sowell pointed out, the most eye-opening analytical aspect of this debate was the complete omission to carefully check the actual state of poverty and its historical trend. As of Lyndon Johnson’s ascension to the Presidency in 1965, the number of people living in poverty had been declining since 1960. This was a residue of the end of the 1958 recession. From 1950 to 1965, the officially poor declined by approximately one-third – without taking into account any benefits they received from government.

Oops. So much for the crisis of poverty. How about the War itself? Did it succeed or fail in reducing poverty? What about the aim of reducing dependency on government?

The War picked up momentum with the addition of reinforcements in the form of a growing roster of federal programs. Even though the federal Office of Economic Opportunity, the War’s official HQ, disbanded in 1974, the War did not end. The number of people on public assistance doubled between 1960 and 1977. Expenditures on public housing increased by a factor of five; food-stamp expenditures increased by a factor of ten. In-kind government benefits increased by a factor of twenty. As a percentage of Gross National (now Domestic) Product, federal social-welfare spending rose from 8% to 16%.

The Nixon administration changed the approach by officially declaring victory in the War on Poverty and demobilizing by disbanding OEO in 1974. In fact, they simply adopted a new approach – federalism and block grants given to states. One salutary effect of the change was a decline in urban violence, which stopped completely in the Reagan administration.

By 1992, there were more people officially in poverty than there had been at the War’s start.

Today, of course, over forty million people receive food stamps. Over half of American households receive federal benefits of some kind. Dependency on government is at an all-time high.

This summary of results runs diametrically opposite to the predictions of the anointed and roughly consistent with the predictions of critics. Yet the vision itself remained “hermetically sealed off from the contaminating influence of facts,” in Sowell’s words. Rather than acknowledge this failure, proponents of the War shifted the terms of the debate by citing the number of those who receive (and continue to receive) benefits as the criterion of success. “The goal was redefined as reducing poverty by redistributing resources.” Present-day defenders of the War, like Shelton Danziger of the Institute for Research on Poverty, claim that “I think we’d have poverty rates over 25%” if not for the agglomeration of federal anti-poverty programs.

“In short, no matter what happens, the vision of the anointed always succeeds, if not by the original criteria, then by criteria extemporized later,” Sowell ruefully concludes.

Sex Education

Another product of the crusade-happy decade of the 1960s was sex education. Because the founding intentions of this reform were so completely at odds with its results – and with its current intentions – it is necessary to revisit the origins of this staple of public education.

A 1968 article in Education Digest declared that “contraception education and counseling is now urgently needed to help prevent pregnancy and illegitimacy in high-school girls.” This reinforced prior Congressional testimony by the head of Planned Parenthood that the purpose of sex education was to “assist our young people in reducing the incidence of out-of-wedlock births and early marriage necessitated by pregnancy.” Reduction of venereal disease was another commonly cited rationale for sex education.

How would sex education accomplish these goals? From today’s perspective, the answers seem astonishingly vague. Boys “will find decreased need for casual, irresponsible and self-centered experimentation with sex,” was the prediction of one academic, a so-called “Professor of Family Life (!). It was frequently reiterated that girls became pregnant through ignorance, panic and meek submission; these would be counteracted by sex education. Exactly how this would happen, though, remains mostly a mystery to this day. It is apparent that the stated intentions of the anointed were accepted as sufficient collateral to warranty the results of their proposed solutions – the same attitude that prevails today.

Critics feared for the moral health of the nation. They predicted that sex education divorced from moral instruction would produce effects opposite to those desired and predicted by proponents; that is, more pregnancy, illegitimacy and venereal disease. And for their pains, they were stigmatized and demonized as sexually phobic religious fundamentalists and fanatics – and worse.

Once again, apparently nobody thought to actually investigate the factual extent of this “crisis” before enlisting the federal government to alleviate it. As of 1968, the fertility rate of teenage girls had been declining for over a decade, since 1957. The rates of both syphilis and gonorrhea – the two main venereal diseases in those days – fell throughout the decade of the 1950s.

Yet once again, the solution to the non-existent crisis was massive federal-government spending and interference with the private sector and the federal system. This took two main forms: federal aid to public schools to fund sex-education curricula and federal aid to “family-planning” clinics. Even as early as 1968, sex education programs were found in almost half of all public schools. The concept grew like Topsy until it became omnipresent. Family-planning clinics grew in tandem.

The results of this anointed vision have been unqualified, unshirted disaster – perhaps the most ghastly of all the visionary fiascos foisted on the American public. Pregnancy rates among young girls rose by close to 30% in each of the first two decades after 1968 – despite a doubling of abortions during the same time period. Indeed, abortions soon outpaced live births among young girls. Surveys found a higher percentage of (unmarried) girls between 15 and 19 engaging in sex in 1976 than had been true when the big push for sex-ed began.

Sargent Shriver was a high priest of the anointed – head of the OEO until 1974 and a leading sex-ed supporter. In an unusual mea culpa, he testified before Congress in 1978 that “just as venereal disease has skyrocketed 350% in the last 15 years when we had more clinics, more pills, and more sex education than ever in history, teenage pregnancy has risen.” Ensuing decades saw the implications of these trends worsen with the emergence of new sexually transmitted diseases like HIV and HPV.

Illegitimacy became epidemic. Rates that – in the 1960s – had driven Daniel Patrick Moynihan to fear for the health of the black population were now far exceeded among blacks, Latinos and whites alike as the new millennium dawned. Illegitimacy rates exceeding 70% for blacks, 50% for Hispanics and 25% for whites would have been considered unimaginable at the dawn of the “crisis.”

As if this weren’t scandalous enough, the response of the anointed rivals the results in its breathtaking horror. The rise in pregnancy, illegitimacy, abortions and venereal disease were broadly ignored. If mentioned at all, they were treated as prima facie evidence of the need for more spending and more programs. Opponents were demonized even more strongly as opponents of democracy.

But when speaking to themselves, away from the glare of publicity, the anointed have shifted sex-ed’s focus away from controlling social pathologies and towards encouraging “healthy attitudes about sex and sexuality.” Of course, the definition of “healthy” is the exclusive province of the anointed. Thus, The Journal of School Health rephrases the goal of sex education as “an exciting opportunity to develop new norms.” Sowell correctly deduces that the only purpose behind beginning sex education in kindergarten must be to accomplish the longer, more tenuous goal of indoctrination rather than the more basic program of biological instruction.

Sowell provides an example of this indoctrination at work: a “popular sex instructional program for junior high-school students, aged 13 and 14,” which “shows film strips of four naked couples, two homosexual and two heterosexual, performing a variety of sexually explicit acts.” Not surprisingly, the accompanying teaching materials warn teachers not to show these films to parents or friends so as not to “evoke misunderstanding and difficulties.” What other curriculum prescribes a course of study for students that is not supposed to be available for review by parents? Yet parents who objected to these materials were demonized as “fundamentalists” and “right-wing extremists.” Sowell is quick to remind his readers that this episode, though not typical, is also not rare; similar ones have popped up throughout the U.S.

The response of the anointed is that the typical parent is “either uninformed or too bashful to share useful sexual information with his child.” The direction of these efforts is all too clear: the anointed wish to establish the State in loco parentis, as bearing primary child-rearing responsibility.

The Rights of Criminals and Criminal Suspects

The 1960s also saw a revolution in criminal justice. It is best characterized as an attitude toward crime and punishment. Sowell dissects this attitude with surgical skill, dubbing it the “therapeutic approach.” Several highly placed figures in the judicial system, among them Supreme Court Chief Justice Earl Warren, Attorney General Ramsey Clark and Chief Judge of the D.C. Circuit Court of Appeals David Bazelon, believed that crime was primarily the fault of the law-abiding population rather than criminals. The criminal is “like us, only somewhat weaker;” we imprison criminals out of a “highly irrational… need to punish,” which is a “primitive urge” motivated by “childish fear” (Bazelon).

Alas, the “dehumanizing process” of imprisonment only produces “social branding” and “social failure.” Instead, we need to “[turn] all jails …into hospitals or rehabilitation centers,” which employ “psychiatric treatment” using “new, more sophisticated techniques (Bazelon).” Long prison sentences “will not reduce crime” (Clark).

These men sought to solve this crisis through constitutional interpretation. In particular, they broadened the application of the Bill of Rights from federal law to state and local law and broadened its meaning from a charter of liberties or freedoms to a list of powers or immunities.

In Mapp vs. Ohio (1961), the U.S. Constitution’s 4th Amendment provision barring “unreasonable search and seizure” was broadened to apply to state law as well as federal law. It was interpreted to exclude evidence illegally obtained at trial – thus, the shorthand term “exclusionary rule,” which came to describe its defining point of law. After Mapp, ironclad evidence of guilt was ignored if it was (say) obtained via a warrantless search of a suspect’s premises.

In Gideon vs. Wainwright (1963), a criminal defendant’s right to representation at trial was made absolute, so that indigent defendants were guaranteed a right to state-appointed and compensated counsel.

Escobedo vs. Illinois (1964) invoked the 6th Amendment to broaden this right to apply during a suspect’s interrogation by the police. Thus, confessions obtained during a custodial interrogation (that is, when a suspect was held prior to indictment) were invalid if the suspect was not allowed to confer with his attorney.

Miranda vs. Arizona (1966) essentially superseded Escobedo by invoking the 5th Amendment provision against self-incrimination in place of the 6th Amendment to require that suspects be informed of their right to an attorney, the right to confer with the attorney and their right to avoid self-incrimination prior to interrogation; e.g., immediately upon arrest and detention. In order to confess to a crime, a suspect must first waive their Miranda rights. Any confession not complying with these stipulations was invalidated and inadmissible at trial.

Dissenters in each of these opinions, who comprised the first line of critics to this revolutionary approach to criminal justice, included distinguished jurists like Potter Stewart and Byron White. Apart from the various points of constitutional law, which centered on the departure of these decisions from the original intent of the Framers, the dissents stressed the highly adverse effects the decisions would have on the incidence of crime and violence and the administration of criminal justice.

The results in ensuing years amply bore out those fears. To quote Sowell: “Crime rates skyrocketed. Murder rates shot up until the murder rate in 1974 was more than twice as high as in 1961. Between 1960 and 1976, a citizen’s chances of becoming a victim of a major violent crime tripled. The number of policemen murdered also tripled during the decade of the 1960s. Young criminals, who had been especially favored by the new solicitude, became especially violent. The arrest rate of juveniles for murder more than tripled between 1965 and 1990, even allowing for changes in population size.”

One point not raised by Sowell that deserves mention was the virtual abolition of capital punishment by the Warren Court in the early 1970s. Economists have studied capital punishment for decades and firmly disagree with the conventional thinking that it does not deter murder. The increase in murders in this time period closely followed the judicial moratorium on capital punishment.

The response of the anointed followed two lines. The first was to stress confounding factors like education. The second was to accuse critics of using a call for “law and order” as code language for racism; e.g., suppression of constitutional rights for blacks. The “thinking” behind this accusation was that blacks were disproportionately perpetrators of crime; therefore they would be disproportionately affected by procedures making it harder for criminals to escape punishment for their crimes.

Sowell found one response particularly worthy of notice. Chief Justice Warren found complaints about rising crime to be “self-righteous indignation” based on “oversimplification.” Rather than attribute the surge in crime to the new criminal-justice policies, Warren claimed that “all of us must assume a share of the responsibility” since “for decades we have swept under the rug” the environmental conditions that bred crime – slums, poverty, and the like.

The problem with this theory of crime causation, as Sowell pointed out, is that the U.S. murder rate fell steadily after 1934 (that is, after the repeal of Prohibition), throughout the remainder of the 1930s, the 40s and the 50s. In 1960, the murder rate was less than half of what it had been in 1934. Yet according to Warren, this was precisely the time period in which Americans were sweeping the ostensible behavioral causes of crime under the rug. Crime rates should have been exploding – if Warren’s hypothesis was correct.

Sowell was content with validating the Pattern’s effects on criminal justice. We should carry the analysis further to understand why the Warren Court went wrong.

The left-wing judiciary viewed themselves as anointed spokesmen for freedom. Like the Left’s founding philosopher, John Dewey, they confused freedom with power. A valid right can be exercised without depriving someone else of their rights; power implies the ability to compel obedience or control real resources. Freedom or liberty is the absence of external constraint, not the power to command obedience or control over real resources. The Declaration of Independence and Constitution (including the Bill of Rights) are charters of liberty, not enumerations of powers. They limit the powers of government as a way to secure our freedom; they do not list our freedoms.

By conferring powers on criminals and suspects, the Warren Court judicial reforms perverted the Bill of Rights by reducing the powers of law-abiding citizens. By increasing the real incomes of criminal suspects via guaranteed representation, they reduced our real incomes and happiness. Instead of treating criminal justice as a process for determining guilt or innocence, they treated it as a game in which criminals and innocent suspects deserved the same chance of “winning;” e.g., escaping unscathed. The presumption of innocence in a criminal-justice sense was subtly altered to a presumption of innocence in a moral sense. The real income transferred to criminals inevitable came at the expense of law-abiding citizens; it could not be otherwise because that real income had to come from somewhere.

Other Examples of the Pattern

Thomas Sowell claimed that the Pattern of the Anointed was ubiquitous; examples were “abundant.” Without straining unduly, we can call others to mind.

In earlier works, Sowell himself marshaled evidence for the Pattern. He cited the landmark civil-rights case Brown vs. Topeka Board of Education, whichreversed the longstanding presumption in favor of racial segregation in public schooling. Brown overturned the “separate but equal” doctrine that had previously ruled, making the argument that “separate is inherently unequal.” It has long been assumed that progress toward equality between blacks and whites dated from this decision. Subsequent federal programs like as “affirmative action” escalated the goals of federal policy from promoting equality to conferring special privileges on blacks.

Any discussion of equality should distinguish between ex ante equality (equality of opportunity) and ex post equality (equality of result). Indeed, early federal policy was oriented toward opportunity, emanating from bodies such as the Equal Employment Opportunity Commission (EEOC). But one of the most interesting outcomes of Sowell’s early research was the realization that free markets could produce equalizing results even if equal opportunity was formally lacking.

“As far back as the First World War,” Sowell discovered, “black soldiers from New York, Pennsylvania, Illinois and Ohio scored higher on mental tests than white soldiers from Georgia, Arkansas, Kentucky and Mississippi.” This was not a temporary aberration. “During the 1940s, black students in Harlem schools had test scores very similar to those of white working-class students on the lower east side of New York.” While segregation often produced black public schools that were grossly inferior to their white counterparts, other black schools like Dunbar High School in Washington, D.C., were among the country’s finest secondary schools. “As far back as 1899, [Dunbar] had higher test scores than any of the white schools in Washington, and its average IQ was eleven points above the national average in 1939 – fifteen years before the Supreme Court declared such things impossible.” The common factor behind all these results was that economic incentives and freedom of migration allowed blacks to migrate out of the American South and into the Northeast, thereby allowing them to profit from better schools and economic opportunities there.

Sowell showed that the trend toward equality between white and black incomes began well before Brown, let alone later civil rights legislation and affirmative-action legislation. Indeed, the rate of black advance slowed during the later civil-rights era, rather than speeding up. Once again, free markets rather than government proved to be the effective agent for beneficial social change and economic growth. Once again, we learned in retrospect that the alleged crisis justifying massive government intervention was, in reality, an improving situation before the government intervention – but it became worse afterward.

Coming Soon – The Pattern of the Anointed Strikes Again

With practice, we can learn to anticipate the Pattern. The next EconBrief will reveal the Pattern of the Anointed underway again today.