The Battle
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This document summarizes the key points from the book "The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America's Future" by Arthur C. Brooks. It discusses how 70% of Americans support free enterprise while 30% support more government intervention. It also outlines arguments that free market policies lead to greater happiness and prosperity compared to redistribution programs. The summary emphasizes that free enterprise stimulates true prosperity, stands for equality of opportunity, and that moral principles matter more than political power.
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The Battle
- 1. The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America's Future by Arthur C. Brooks David L. Johnson, Ph.D. For more content, visit LessonsforUS.com Video Book Report
- 2. About the Author Arthur C. Brooks is the president of American Enterprise Institute (http://www.aei.org). He was a professor of business and government policy at Syracuse University and has written eight books and many articles. Video Book Report
- 3. Table of Contents 1. The 70-30 Nation 2. A Bill of Goods: The 30 Percent Coalition’s Story of the Financial Crisis 3. Free Enterprise and the Pursuit of Happiness 4. The Moral Case for Free Enterprise Video Book Report
- 4. 1. The 70-30 Nation 70% of Americans support the free enterprise system and are unsupportive of big government. Free enterprise Respects private property, Encourages industry, Celebrates liberty, Limits government, and Creates individual opportunity. 20%-30% oppose free enterprise and prefer government solutions to our problems. Video Book Report
- 5. 1a. The 70% Support Free-Enterprise Video Book Report
- 6. 1b. The 70% Support Business Video Book Report
- 7. 1c. The 70% Support Job Growth not Redistribution Video Book Report
- 8. 1d. The 30% Support Socialism Video Book Report
- 9. 1e. The 30% is the Intellectual Upper Class Top 5% of the population in income Graduate degrees Work in intellectual industries: Law, Education, Journalism, and Entertainment Video Book Report
- 10. 1f. The Top 30% Source:http://www.nytimes.com/imagepages/2010/01/18/arts/18liberal-2.html Video Book Report
- 11. 1g. What do the 70% Feel about Taxes? 56% 33% Source: http://www.taxfoundation.org/files/sr166.pdf Video Book Report
- 12. 1h. Who Pays the Taxes? Video Book Report
- 13. 2. A Bill of Goods: The 30 Percent Coalition’s Story of the Financial Crisis Video Book Report
- 14. 2a. The Housing Crisis Source: http://spectator.org/archives/2009/02/06/the-true-origins-of-this-finan Video Book Report
- 15. 2b. The Stimulus What Stimulus Actually Achieved 640,329 jobs created or saved by the last quarter of 2009. $275 billion spent to create those jobs $429,000 cost per new job ($275,000,000,000/ 640,329 = $429,467) What Stimulus Should Have Achieved $50,000 median wage for full-time job ($37,115 per Census Bureau) $275 billion spent to create jobs 5.5 million jobs should have been created ($275,000,000,000/$50,000 = 5,500,000) Video Book Report
- 16. 2c. What Works; What Doesn’t Spending versus tax reductions Tax reductions work; spending doesn’t Spending (pork barrel or social engineering) $400 million to global warming research $1.5 billion to carbon capture demonstration projects. $50 million to National Endowment for the Arts $25 million to Smithsonian Institute $886,000 for an environmentally and financially sustainable frisbee golf course in Austin, Texas. Video Book Report
- 17. 3. Free Enterprise and the Pursuit of Happiness M Video Book Report
- 18. 3a. Earned Success “The big problem is not that unhappy people have less money than others. It is that they have less earned success.”-Joseph Shumpeter Earned success: Ability to create value in our lives or in the lives of others. What parents feel when their children do wonderful things What social innovators feel when they change lives What artists feel when they create something of beauty Video Book Report
- 19. 3b. Money Does Not Buy Happiness. Video Book Report
- 20. 3c. Earned Success Buys Happiness Optimism Poor conservatives are more optimistic than wealthy liberals Meaning US, with free markets, feels work is more meaningful Control over lives Business owners most satisfied; union members least satisfied Video Book Report
- 21. 4. The Moral Case for Free Enterprise Here are five principles which are at the very center of free enterprise. a) The purpose of free enterprise is human flourishing, not materialism. b) We stand for equality of opportunity, not equality of income. c) We seek to stimulate true prosperity, and not treat poverty. d) America can and should be a gift to the world. e) What truly matters is principle, not political power. Video Book Report
- 22. 4a. We stand for equality of opportunity, not equality of income. Video Book Report
- 23. 4b. Stimulate Prosperity, Don’t Treat Poverty. Video Book Report
- 24. 4c. America can and should be a gift to the world. Video Book Report
- 25. 4d. What truly matters is principle, not political power. Video Book Report
- 26. To Learn More Click on Video Book Report
Editor's Notes
- Arthur C. Brooks is the president of American Enterprise Institute, a community of scholars and supporters committed to expanding liberty, increasing individual opportunity, and strengthening free enterprise. http://www.aei.org. You can click the link to go to the American Enterprise Institute. He was a professor of business and government policy at Syracuse University and is the author of eight books and many articles.
- The book contains the following chapters, which we will discuss: 1. The 70-30 Nation 2. A Bill of Goods: The 30 Percent Coalition’s Story of the Financial Crisis 3. Free Enterprise and the Pursuit of Happiness 4. The Moral Case for Free Enterprise
- According to Brooks, the data show a clear and consistent pattern: 70% of Americans support the free enterprise system and do not support big government, Free enterprise is the system of values and laws that respects private property, encourages industry, celebrates liberty, limits government, and creates individual opportunity. Under free enterprise, people can pursue their own ends and reap the rewards and consequences, either positive or negative. In contrast, between 20 and 30% of the adult population oppose free enterprise and prefer government solutions to our problems. This is what the author calls the 70-30 nation.
- In a 2009 Pew Research Center poll, almost 70% of respondents agreed that they were better off in a free-market economy even with severe ups and downs. Less than 30% disagreed. You can click the link below to access this poll. Pew Research Center: http://people-press.org/http://people-press.org/files/legacy-pdf/498.pdf
- Another 2009 Pew Value survey found that 76% of Americans believe that the strength of this country is mostly based on the success of American business. That percentage has remained consistent over a decade. You can click the link below to access this poll. Pew Research Center: http://people-press.org/files/legacy-questionnaires/517.pdf
- A 2009 survey by polling firm Ayers-McHenry found that 63% of Americans felt that government policy should promote opportunity by fostering job growth, encouraging entrepreneurs, and allowing people to keep more of what they earn. 31% thought that government policy should promote fairness by narrowing the gap between rich and poor, spreading the wealth, and making sure the economic outcomes are more equal. You can click the link below to access this poll. http://www.resurgentrepublic.com/system/assets/7/original/RR_April_09_Toplines.pdf
- A 2010 Gallup poll surveyed people about their views on capitalism and socialism. It found that 36% of all Americans hold a positive view of socialism and a corresponding negative view of capitalism. Those 36% are mostly liberals, the red slice of the pie. 61% of Liberals view socialism positively and only 20% of Conservatives view socialism positively. In contrast, 75% of conservatives view socialism negatively, equivalent to the view that most Americans have of socialism, with 58% responding with a negative image of socialism. You can click the link below to access this poll. http://www.gallup.com/poll/125645/Socialism-Viewed-Positively-Americans.aspx
- Who is this 30% coalition? According to Brooks, the 30% coalition is led by opinion makers who entertain us, inform us, and teach our kids in college. In other words, they are the intellectual upper class: They earn the top 5% of income in the population, They possess graduate degrees and They work in intellectual industries such as law, education, journalism, and entertainment.
- The intellectual upper classes are far more left-leaning than the average American and are getting more so. The General Social Survey data from 1996-2008 ranked professors as the most liberal of occupations with authors and journalists at number two and creative artists at number three. 43% of professors are liberal compared with only 9% that are conservative, which means they are nearly 5 times more liberal than conservative 37% of authors and journalists are liberal compared with 11% that are conservative, which means they are 3 times more liberal than conservative And 33% of creative artists are liberal and only 13% are conservative, which means they are over 2 times more liberal than conservative As an example of a liberal creative artist, Michael Moore at the end of his documentary Capitalism, A Love Story, said “Capitalism is an evil, and you cannot regulate evil. You have to eliminate it and replace it with something that is good for all people and that something is democracy.” In the 2008 election 78% of entertainment industry political donations went to Democrats and only 22% to Republicans. You can click the link below to access this poll. http://www.nytimes.com/imagepages/2010/01/18/arts/18liberal-2.html
- By a large margin, Americans feel overtaxed. An April 2009 poll by the Tax Foundation found that 56% of US adults believe their federal income taxes are too high. One third believe that taxes are about right and just 2% say their taxes are too low. http://www.taxfoundation.org/files/sr166.pdf
- In 1986, the top 10% of income earners paid 55% of the income taxes and the bottom 90% paid 45%. By 2006 the top 10% were paying about 71% of the taxes, while the bottom 90% were paying 29%. In early 2009 38% of Americans paid zero taxes, and this could rise to 47% with the current administration’s changes.
- America is a 70-30 nation in favor of free enterprise. Yet, the 30% coalition is firmly in charge. How did that happen? The real answer is, the economic crisis of 2008 – 2009. Between 2008 and 2009 the unemployment rate climbed from 5.8% to 9.3%, as you can see on the graph. The economic crisis represented more than a chance to win an election; it was a once-in-a-lifetime chance to transform American culture. The economic crisis presented a golden opportunity for the 30% coalition to remake America in its own image.
- The economic crisis was caused in large part by the government itself by using Fannie Mae and Freddie Mac as tools of social engineering. Fannie Mae was chartered by Congress to provide liquidity, stability and affordability to the U.S. housing and mortgage markets. Freddie Mac chartered by Congress to keep money flowing to mortgage lenders in support of homeownership and rental housing and is one of the biggest buyers of home mortgages They were supposed to expand home ownership by lending more money to low income home buyers. Congress and the White House pushed Fannie and Freddie in the 1990s to buy up more loans made to riskier borrowers. People who push for this always think that private markets hurt the vulnerable and help the powerful and that the government must always fix the problem. From the blue bars in the graph above, you can see that from 2001 to 2006 subprime loans rose from 7% to nearly 19% of all new mortgages, using the Y-axis to the left. Back in 1997 Fannie Mae was buying subprime loans secured with nothing more than a 3% down payment. In 2001 it was buying mortgages with no down payment at all. The government required Fannie and Freddie to increase their low and moderate income loans to at least 55% of their mortgage purchases. Between 2005 and 2007 Fannie and Freddie added about $1 trillion of subprime mortgages. When housing prices stopped rising and mortgage payments had to be made, people began to default. Those holding subprime mortgages defaulted at 10 times the rate of those who held prime mortgages. http://spectator.org/archives/2009/02/06/the-true-origins-of-this-finan
- In response, the Obama administration claimed that the stimulus spending created or saved 640,329 jobs by the last quarter of 2009. $275 billion was spent to create those jobs. So, every new job cost the American taxpayer $429,000. ($275,000,000,000/ 640,329 = $429,467) According to the Census Bureau in 2008, the median wage for full-time jobs was $37,115. With benefits, let's round it $50,000. If the stimulus money were being spent as efficiently as private sector money, the stimulus should have created nearly 5.5 million jobs. ($275,000,000,000/$50,000 = 5,500,000)
- A September 2009 study published by the National Bureau of Economic Research argued that federal spending is not as effective as tax reductions. Research shows that lowering taxes does spur the economy by increasing disposable income, consumer demand, and incentives and rewards for work, and thereby raises real Gross Domestic Product (GDP). What does spending do? I goes for pork-barrel and social engineering projects? For example in the stimulus program are the following pork barrel or social engineering projects: $400 million has gone to global warming research $1.5 billion for carbon capture demonstration projects. $50 million has been allocated to the National Endowment for the Arts $25 million to the Smithsonian Institute. Plus, there was also $886,000 for an environmentally and financially sustainable frisbee golf course in Austin, Texas
- This is a battle about nothing less than our ability to pursue happiness. The 30% coalition believes America will be a happier place if there is less economic inequality. The 70% majority believes that the secret to human flourishing is not money but earned success in life. People flourish when they earn their own success. It's not just the most efficient system it's the most fair and the most just. The 2005 Maxwell Poll on Civic Engagement and Inequality asked if people agreed with the following statement, ”While people may begin with different opportunities, hard work and perseverance can usually overcome those disadvantages. 80% of Americans agree. 92% of conservatives agree, but 35% of liberals disagree. The 30% coalition believe that government must redistribute wealth through taxation.
- The economist Joseph Shumpeter often called the godfather of modern entrepreneurship said, “The big problem is not that unhappy people have less money than others. It is that they have less earned success.” In other words, what motivates entrepreneurs is not financial reward but earned success. The 30% coalition is incorrect when they assume that inequality makes people unhappy. Inequality is not what makes people unhappy. Earned success, not equality, makes people happy. We first must understand the concept of earned success. Earned success does not mean making more money. Earned success means the ability to create value in our lives or in the lives of others. It could be what parents experience when their children do wonderful things or what social innovators feel when they change lives, or what artists feel when they create something of beauty. People who believe they have earned success are happy. A 2001 study found that people who said they were responsible for their own success spent 25% less time feeling sad than those who said they were not responsible for their own success. Furthermore people who earn success and noneconomic pursuits-- from fatherhood to volunteerism-- can feel the same bliss as a billionaire entrepreneur. This explains why wealthy entrepreneurs continue to work so hard. They already have enough money to meet every need they could ever have but they still crave earned success.
- Money does not buy happiness. America has gotten much richer during the past several decades, but happiness levels have not risen accordingly. In 1972 American enjoyed about $25,000 (in today's dollars) of our nation’s total income (on the left Y-axis) and 30% of Americans said they were very happy (on the right Y-axis). By 2004, the share of national income skyrocketed to $38,000, a 50% increase but the percentage of very happy people stayed virtually unchanged at 31%. While it is true that nations in abject poverty do become happier when suffering is alleviated through increased wealth and income; it is also true that countries above the level of survival, do not become happier when the average income rises. Take lottery winners. Winning the lottery does not make you happier. In 1978 researchers at the University of Michigan tracked down and interviewed a group of major lottery winners. They found that although the newly rich experienced an immediate boost to their happiness, their mood darkened within months to levels around where they began. There's worse news. The initial high that came from winning actually reduced the impact of simple pleasures, like talking with a friend, getting a compliment, or buying clothes. In addition, winning diminished the happiness derived from all the new pleasures made possible by the sudden increase in wealth. They found little happiness in buying a new car or house. In short, the glow from getting rich wears off quickly. Old pleasures in life become less enjoyable, and spending the money isn't that great. According to the University Michigan's 2001 Panel Study of Income Dynamics going on welfare increases by 16% the likelihood that a person will feel inconsolably sad. Studies show that welfare recipients are far unhappier than equally poor people who do not get welfare checks. Benjamin Franklin, who was a rich man for his time, said, “money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.” If money without earned success does not bring happiness, then redistributing money won't make for a happier America. The goal of our political system should be to give all Americans the greatest opportunities possible to succeed based on their hard work and merit. And that's exactly what the free enterprise system does-- makes earned success possible for the most people. This is the liberty our founders wrote about, the liberty that enables the true pursuit of happiness.
- There are three reasons why earned success delivers happiness: 1) optimism, 2) meaning, and 3) control over our lives. Regarding optimism, one of the great gifts of the American free enterprise system is the opportunity for people to reinvent themselves. In 2004 the General Social Survey asked, “The way things are in America, people like me and my family have a good chance of improving our standard of living.” Those who agreed were 44% more likely than those who disagreed to say they were very happy in life. In America, there is a distinct optimism gap between the left and the right. Conservatives are by and large more optimistic than liberals. Even poor conservatives are more optimistic than rich liberals. The 2005 Maxwell Poll on Civic Engagement asked, “How much upward mobility-- children doing better than the family they came from--do you think there is in America” a lot, some, or not much?” Although 48% of below average income conservatives say a lot, but only 26% of upper income liberals gave this answer. The liberal-conservative differences persist even if we control for income, education, sex, family situation, religion, and race. Conservatives are much happier than Liberals in America. According to the 2004 General Social Survey, 44% of respondents who call themselves “conservative” say they are “very happy.” This compares with just 25% of people who call themselves “liberal”. This happiness gap between conservatives and liberals has persisted for at least 30 years. Regarding meaning, a General Social Survey showed that to 84% of respondents rated the importance of deriving meaning from the job as high or very high. Free enterprise enables us to find meaningful work through free markets that match our skills and passions. These free markets largely do not exist in Europe, with their mandated paid vacation, cradle-to-grave systems of job security, and generous unemployment benefits. The 2002 International Social Survey Programme showed that Americans are 42% likelier than the British to say they are “completely satisfied” with their jobs. Similarly, Americans are 46% likelier than the French, 52% likelier than Germans, and about 190% likelier than the Spanish to experience complete job satisfaction. People are surprisingly satisfied with their jobs in America. And despite the populist stories of blue-collar discontent, satisfaction is not limited to white collar workers. According to 2002 General Social Survey, 89% of working Americans say they are very satisfied or somewhat satisfied with their jobs. Precisely the same share of those with incomes above and below the average are satisfied: 89%. Similarly, 88% of people without a college education are satisfied, as well as 87% of people were refer to themselves as “working class.” Meaning at work comes from feeling productive. People who feel they are productive in their jobs, regardless of pay, are about five times likelier to be satisfied with their jobs than people who don't feel this way. Feeling productive does not mean being protected from competition. It does not come from a collective bargaining agreement and the threat to strike, but from a job well done. And it certainly doesn't come from a welfare check. In France about 25% of young adults are jobless; in Spain more than 40%. If you know, that finding a new position will be difficult or impossible, you will hold on to the job you have even if you don’t like it. Regarding, control, Gallup has found that business owners score the highest in overall well-being and job satisfaction of any occupational group in America. By contrast, low control, union jobs in manufacturing score worst in well-being. Matching economic freedom data with happiness indexes, we clearly find that freer people are happier people. A1-point increase in economic freedom is associated with a two point rise in the percentage of the population saying they are completely happy or very happy.
- Here are five principles which are at the very center of free enterprise. The purpose of free enterprise is human flourishing, not materialism. We stand for equality of opportunity, not equality of income. We seek to stimulate true prosperity, and not treat poverty. America can and should be a gift to the world. What truly matters is principle, not political power
- The fundamental difference in worldview between the 30% coalition and the 70% majority is a major disagreement about the role of government. The majority believes government should protect the returns for hard work and merit. The 30% coalition effectively wants the government to penalize success. In 2009, 63% of Americans agreed that “Government policies should promote opportunity by fostering job growth, encouraging entrepreneurs, and allowing people to keep more of what they earn.” But 31% disagreed. Of those, 65% agree that, “Government policies should promote fairness by narrowing the gap between rich and poor, spreading the wealth, and making sure that economic outcomes are more equal.” This is America's culture war in a nutshell. In America, the top 5% of earners bring in 37% of the income but pay 60% of the taxes. The bottom 50% earn 12% of the income but pay 3% of the taxes. The idea that the rich do not pay their fair share in this system simply does not stand up to any normal understanding of fairness. At some point, the rich as defined by the 30% will pay all the income taxes in America. The 30% coalition would have you believe that income inequality is equivalent to equality in other areas. Americans certainly believe in equality before a court of law. They also believe in political equality one-man, one-vote. With our strong Judeo-Christian principles, many Americans believe in the equality of individuals before God. But equality of income is a fundamentally different kind of equality. Fairness is a system that rewards hard work, merit, and excellence.
- We seek to stimulate true prosperity, not treat poverty. Take microloans for example. They have helped millions of people escape poverty simply by allowing them keep the fruits of their own enterprise. Scholars of international development today know that when entrepreneurs enrich themselves, they also lift up whole communities around them. A huge body of research clearly shows that merely sending foreign aid, the international equivalent of domestic welfare, simply does not work. Welfare programs rely on the idea that poverty is simply a problem of a lack of money. But giving the poor money does not alleviate poverty in the long run (or often even the short run). Instead it masks cultural conditions by treating the symptoms. The problem is that many entry-level employees have terrible work habits. They have a cultural barrier to work and enterprise. This barrier is made worse by income redistribution, which divorces money from earned success. As you can see by examining the top graph that the poverty rate (the lower line) decreased substantially from 23% to 12% during the period 1959 to 1969, but stayed between 11 and 15% through 2008 despite the massive welfare payments depicted in the bottom graph. Redistributive government welfare programs rob the poor of their chance for earned success and their unalienable right to the pursuit of happiness. Policies that stimulate entrepreneurship and jobs are the answer. This does not mean make-work jobs from the government. And the best thing policy makers can do is allow these entrepreneurs to keep more of the money they earn, invest in their businesses, and expand their operations. This is the conclusion of volumes of research, which the endnotes of the book provide.
- The breakdown of Americans support of America's actions, pro and con, is no surprise-- approximately 70% and 30%, respectively. A 2006 survey asked which statement people agreed with more (a) America's power is generally a force for good in the world or (b) power generally does more harm than good when we act abroad. 64% chose (a), whereas 32% (b). This minority culture believes that we exploit other countries economically, use too much of the world's resources, infect noble lands with capitalism, and use our military to impose our will abroad. Our world would be a poorer and less secure place today but for the influence of the United States. According to the World Bank, China alone, in part by trading with America, has accounted for more than 75% of poverty reduction in the entire developing world over the past two decades.
- Today, the general public believes that politicians can’t be trusted. Confidence in politicians in America is now as low as it was in the era of Watergate. Unprincipled behavior and the pursuit of political power has destroyed the public trust. There is a real threat that the 30% coalition will transform out great nation forever. Our only hope is that we elect leaders with our principles at heart.