http://www.forbes.com/sites/markhendrickson/2012/05/31/president-obamas-wealth-destroying-goal-taking-the-curley-effect-nationwide/President Obama's Wealth Destroying Goal: Taking The 'Curley Effect' Nationwide
Mark Hendrickson , CONTRIBUTOR
I write about economics, politics, and human-interest stories.
Opinions expressed by Forbes Contributors are their own.
Detroit
It’s hard to think of anything more perverse in American politics than the Curley effect. The Curley effect historically has been an urban phenomenon, but President Obama seems bent on taking the entire country down this wretched path.
As defined by Harvard scholars Edward L. Glaeser and Andrei Shleifer in a famous 2002 article, the Curley effect (named after its prototype, James Michael Curley, a four-time mayor of Boston in the first half of the 20th century) is a political strategy of “increasing the relative size of one’s political base through distortionary, wealth-reducing policies.” Translation: A politician or a political party can achieve long-term dominance by tipping the balance of votes in their direction through the implementation of policies that strangle and stifle economic growth. Counterintuitively, making a city poorer leads to political success for the engineers of that impoverishment.
Here’s an example of how the Curley effect works: Let’s say a mayor advocates and adopts policies that redistribute wealth from the prosperous to the not-so-prosperous by bestowing generous tax-financed favors on unions, the public sector in general, and select corporations. These beneficiaries become economically dependent on their political patrons, so they give them their undivided electoral support—e.g., votes, campaign contributions, and get-out-the-vote drives.
Meanwhile, the anti-rich rhetoric of these clever demagogues, combined with higher taxes to fund the political favors, triggers a flight of tax refugees from the cities to the suburbs. This reduces the number of political opponents on the city’s voter registration rolls, thereby consolidating an electoral majority for the anti-wealth party. It also shrinks the tax base of the city, even as the city’s budget swells. The inevitable bankruptcy that results from expanding expenditures while diminishing revenues can be postponed for decades with the help of state and federal subsidies (“stimulus” in the Obama vernacular) and creative financing, but eventually you end up with cities like Detroit—called by Glaeser and Shleifer “the first major Third World city in the United States.”
The Curley effect is extensive. Perhaps you have seen the chain e-mail listing the ten poorest U.S. cities with a population of at least 250,000: Detroit, Buffalo, Cincinnati, Cleveland, Miami, St. Louis, El Paso, Milwaukee, Philadelphia, and Newark. Besides all having poverty rates between 24 percent and 32 percent, these cities share a common political factor: Only two have had a Republican mayor since 1961, and those two (Cincinnati and Cleveland) haven’t had one since the 1980s. Democratic mayors have had a lock on City Hall despite these once-great and prosperous cities stagnating on their watch. This is the Curley effect in action.
Let me comment on the city on that list that I know the best—Detroit. (I grew up a few miles from its city limits.) In the 1920s, Detroit was arguably the richest city in the world. Today it is broke—a shadow of its former self after 51 years of Democratic hegemony and a Curley-like agenda.
I’m going to say something provocative that leftists will surely quote out of context, but it needs to be said: Detroit was a lot better off in the 1950s, when the city funded one of the best zoos in the country but had not yet built today’s gravy train for favored segments of the human population. Detroit’s decline has paralleled a shift toward funding far fewer zoo animals and far more human beings.
Critics may take this to mean that I value animals more than people. On the contrary, it is because I value humans more than animals that I find the policy shift to be morally offensive in addition to being so obviously destructive economically. It is bad enough to see a trapped lion carrying 80 pounds of flab that a lion in the wild would never have, but why would you reduce human beings to a similarly pathetic dependency? The bars that ensnare humans behind the economic and psychological cages of the government dole may not be physical, but it is pathetic to see people reduced to lives of unproductive idleness and despair, all in the name of “compassion” and, of course, for the sake of cementing Democratic mayors in office.
What is most troublesome about the Curley effect is that it is spreading beyond its historical setting of cities. Entire states—most notably our most populous, California—are manifesting all the symptoms of the Curley effect: Democrats enjoying electoral hegemony; businesses and middle-class individuals, more Republican than Democratic, emigrating to states with less oppressive tax regimes; reduced job opportunities; a budget careening toward bankruptcy
The ultimate political prize for the Democrats, of course, would be to control the national government. (Note: Yes, I know that technically we have a “federal” government, but if Big Government Democrats find a way to forge a permanent majority, you can kiss the last vestiges of federalism goodbye.)
Everything Obama has done has been designed to strengthen Democratic constituencies (e.g., stimulus spending steered predominantly toward unions and strategically allied state and municipal entities; waivers from Obamacare for unions; a hefty 23 percent increase in the Index of Dependence on Government during Obama’s first two years) and to weaken Republican constituencies (e.g., making small business formation more difficult by impeding venture capitalists; refusing to amend Sarbanes-Oxley; using Dodd-Frank regulations to discourage loans; fewer waivers from Obamacare; proposing lower tax rates for large corporations, but not on the “S” corporations that are the preferred choice of small business owners; constant efforts to raise taxes on the “rich”—which means, as we’ve seen in Detroit, California, and other Curley effect victims, higher taxes on the middle class).
Obama’s smash-mouth, Curley-like politics is all about choosing winners and losers. Reread his State of the Union address from January, and you see a parade of proposals to take from A to give to B, to encourage businesses to do C and discourage them from doing D. Indeed, Obama seems incapable of suggesting a single economic policy that does not redistribute wealth from his political opponents to his political allies. The message is clear: He wants Americans to be dependent on the government; consequently, he is hostile to the private sector, because a vibrant private sector enhances economic independence and self-reliance.
If Obama and his fellow progressives succeed in applying the Curley strategy on the national level, Americans will no longer be able to move to a new city or state to escape the withering economic impact of Curley-effect policies; their only option would be to leave the country. However, it appears that Obama has anticipated that response. To close the escape hatch from an Obama-Curley America, the president signed the Foreign Account Tax Compliance Act that mandates closer monitoring of Americans’ offshore accounts. apparently approves of policies to impose financial penalties on anyone desiring to give up U.S. citizenship, and periodically calls for “global minimum taxes.”
The Curley effect already has inflicted great economic damage on important American cities and states. It now presents an existential threat to our entire country. That one of our major political parties has based its own success on such a ruthlessly cynical strategy is disgusting, if not diabolical. How we get off this suicidal path is one of the most urgent challenges facing us today.
Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.
