A chat with American Enterprise Institute President Arthur C. Brooks, who's giving voice to the Tea Party movement in speeches, op-eds, and a new book
You say the next culture war will be over European-style government vs. the free enterprise system. What's the evidence?
No matter how you slice and dice the [polling] data, about 70 percent of Americans say the free enterprise system is best for the U.S. They see it as a pillar of American culture; it's central to who we are. So when a minority starts to impose a cultural change on a majority, you get a great big backlash. Tea Partiers are an example.
What's wrong with European social democracies?
What brings greater sense of fairness and happiness to people is the belief they have earned their success. If government redistributes money, you will get more income equality but you won't get more happiness. It's a statistical fact.
Some argue that free enterprise failed miserably and that Washington must now correct the excesses.
Free enterprise is not the same as being a shill for big business. Big business has a Faustian tendency to crawl into bed with government. The engine of growth in this country is entrepreneurs. The free enterprise system didn't fail us in the financial crisis. The root of the problem was government housing policy.
Are you opposed to regulation per se?
No, I'm in favor of smart regulation. What I'm against are bailouts that shield people from accountability and don't let companies like GM and Chrysler go bankrupt in an orderly fashion; social engineering like Fannie Mae (FNM) and Freddie Mac (FRE), which gives people incentives to take out mortgages they don't deserve and can't afford because [the government] feels everyone should own a home; and pork-barrel spending like cash for clunkers because the government's now in the car business.
Should Obama have let banks and auto companies fail?
If I could wind back time, I would say never do bailouts. But by the time we were doing bank bailouts, the die was cast. We didn't understand very well what the danger was, so the pragmatic policy, particularly by the [Federal Reserve], was probably the way to go. In the case of the car companies, that was indefensible.
It's not important to have a domestic auto industry?
That's how creative destruction works. I would have preferred the auto companies not to have made bad management and labor errors.
You say public sector unions are bankrupting the country. Are you prepared to go to war with the labor movement?
All you have to do is look at the unfunded pension liabilities and the disparity of benefits that accrue to public sector employees compared to the private sector. The disparity is so large and so unfair, a day of reckoning is coming.