The term “free-market economy” is a misnomer. The name is intended to refer to the fact that if someone wishes to do something to make money, that they have the freedom to pursue that opportunity without impediments. However, what is ignored is the fact that there are inherent costs in everything as well as restrictions put in place for the well being of society. There are reasons that paint is no longer sold with lead, companies are no longer able to dump whatever leftover toxic materials from production into the water supply and why cars are required to meet safety guidelines. This term is bandied about way too often by Republicans and Libertarians when describing their ideal economy without understanding the basics ideas behind the theory. And yes it is a theory because it's virtually impossible to prove a macroeconomic concept.
I think these are two biggest and most annoying misconceptions about a free-market economy.
First, if Republicans wanted to express their ideology more correctly, they would say “a freer market economy.” The alteration of the one word makes a huge difference. Understanding that we live in a market economy means accepting that restrictions and regulations on business will need to be put in place. There is nothing wrong with wanting less restrictions when they make sense, but reacting as if America would be put on the path to Socialism (read: Communism) each time any sort of new regulation suggested shows true ignorance. It is the prices of goods and services which are determined by the basics of supply and demand. If more people want something of limited supply, they will invariably pay more to get that something. Conversely if there is too much of something, people will be able to look to many places and bargain one seller against another to get the best price. That is the basis of a market economy. It all sounds so simple, and on the person-to-person level it really is, but in a true macroeconomic sense, it really isn't.
Second, it is often made to sound as if one is against a free-market economy, then you are against freedom, and therefore must hate America. I wish that was an exaggeration, but to cite Dennis Prager:
“The answer is that the American left hates the America that believes in American exceptionalism, is prepared to use force to fight what it deems as dangerous evil, affirms the Judeo-Christian value system, believes in the death penalty, supports male-female marriage, rejects big government, wants lower taxes, prefers free market to governmental solutions, etc. The American left, like the rest of the world's left, loathes that America.”
It is a nice little trick Prager pulls to create two different America's, all while stating that one America is better than the other. Sure, that is one voice, but one that has a syndicated radio program. He also had an issue with Minnesota Congressman Keith Ellison about using a Koran during his swearing in ceremony. The irony of course is in the US Constitution there no stated religious text that is required to be used when swearing in a representative of the government. The lesson here is: Freedom in the economy? Great. Freedom of religion? Not so much. Also, only the second choice is actually guaranteed by the US Constitution.
There are many, many, many more points that could be made about the fallacy of a “free-market economy,” but recently a situation arose that is relatable. Congress was nearing the end of it's session and Republicans were threatening to stall every other bill until the “Bush” tax cuts, which were scheduled to expire at the end of 2010, were extended. Democrats were pushing to let only the tax cuts for the wealthiest expire, while the rest were extended. Cries from the right erupted that doing so was an affront to the free market, which again doesn't actually exist, and that it was class warfare against those who worked hard to earn those large incomes. These same people ignored the fact there is decrease in the inheritance tax, which is really only applicable to those with a large amount of wealth to pass on to their heirs who did nothing to earn that wealth except be born into the right family. You would also hear people say that if these tax cuts were allowed to expire, that capital that would be used to create jobs would disappear and cause the unemployment rate to go higher. There are so many things wrong with that statement, it will need to be left for another day to fully examine.
Wondering about my opinion? I think that the congress was right to extend all of the tax cuts temporarily. So, even though I would consider myself a liberal, I am in favor of something that Republicans were willing to essentially shut down congress unless it was passed? Yes. Even though I absolutely believe that tax rates are too low, especially for the highest income brackets and that any sort of trickle-down economic theory is a complete joke, there is something to be said about not reducing the amount of money in all of the people's pockets, and how much they were expecting to be putting in their pockets when it is unknown if the global economy is actually recovering.
There was also a key word in that previous statement. Temporarily. There were Republicans who wished to make these tax cuts permanent, but when they knew they didn't have the votes, they didn't put up much of a fight. That, in itself shows that for many this is mainly a political trumpet to toot and be heard. So, this issue will be revisited in two years. We know what the make-up of this next congress will be, but we don't yet know how it will behave in two years. We don't know how much power, if any, President Obama will be able to exert during an election year, or even if he will still be president the following year, in 2013. If the economy begins to show real progress and unemployment drops, I think a more reasonable debate will be able to be conducted.
Republicans threatened and some might say that Democrats folded, but there are couple of points with which I would like to conclude. After this bill passed, Don't Ask, Don't Tell was repealed, the nuclear treaty with Russia was approved, and the bill for 9/11 responders were approved as well. Would these have happened without this compromise? Also, by demanding that the tax cuts for the richest Americans continue, Republicans have ignored all of their rhetoric that was spewed about the national debt and fiscal responsibility and that it needed to be addressed immediately, for the sake of the children. This bill will increase the debt by almost a trillion dollars, and apparently those on the right were A-OK with that. They pleased their constituents (read: large campaign contributors), but many will now have to hope that their vote isn't mentioned the next time they criticize a spending bill only because it is not fully paid for by cutting spending on something else. Republicans will also have to admit to themselves that they helped President Obama end the year with three large political victories.