May 19, 2025 • 23 mins
What role should the government play in small business owners economic life? It seems that with the Trump tariffs are at tax that the government is putting on all our lives, but should it just stay out of it?
My next guests argue that that the evidence points to that government interference and failed policies pose the most significant threat to economic freedom.
Senator Phil Gramm served six years in the U.S. House of Representatives and eighteen years in the U.S. Senate where he was Chairman of the Banking Committee. Senator Gramm is a Visiting Scholar at the American Enterprise Institute.
I also talk with Donald J. Boudreaux who is an American economist, author, professor, and co-director of the Program on the American Economy and Globalization at the Mercatus Center at George Mason University in Fairfax, Virginia.
They have a new book called “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism”.
Here is what we discussed:
The genesis myth: the industrial revolution impoverished workers
The progressive era regulation: the myth and the history
The myth that the great depression was a failure of capitalism
The myth of trade hollowing out American manufacturing
The financial crisis myth: deregulation caused the financial crisis
The myth and reality of income inequality in America
The myth that poverty is a failure of American capitalism
Become a supporter of this podcast: https://www.spreaker.com/podcast/the-small-business-radio-show--3306444/support.
My next guests argue that that the evidence points to that government interference and failed policies pose the most significant threat to economic freedom.
Senator Phil Gramm served six years in the U.S. House of Representatives and eighteen years in the U.S. Senate where he was Chairman of the Banking Committee. Senator Gramm is a Visiting Scholar at the American Enterprise Institute.
I also talk with Donald J. Boudreaux who is an American economist, author, professor, and co-director of the Program on the American Economy and Globalization at the Mercatus Center at George Mason University in Fairfax, Virginia.
They have a new book called “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism”.
Here is what we discussed:
The genesis myth: the industrial revolution impoverished workers
The progressive era regulation: the myth and the history
The myth that the great depression was a failure of capitalism
The myth of trade hollowing out American manufacturing
The financial crisis myth: deregulation caused the financial crisis
The myth and reality of income inequality in America
The myth that poverty is a failure of American capitalism
Become a supporter of this podcast: https://www.spreaker.com/podcast/the-small-business-radio-show--3306444/support.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Get ready for all the craziness of small business. It's
exactly that craziness that makes it exciting and totally unbelievable.
Small Business Radio is now on the air with your
host Barry Moultz.
Speaker 2 (00:17):
Well, thanks for joining this week's radio show. Remember this
is the final word in small business. For those keeping track,
this is show number eight hundred and thirty one.
Speaker 3 (00:28):
Well, what role should the.
Speaker 2 (00:29):
Government play in small business owner's economic life? It seems
that with the Trump tariffs, it's attacks that government is
putting on all our lives. But how involved should the
government be? My next guests argue that the evidence points
that government interference and failed policies pose the most significant
threat to economic freedom. My guests are Senator Phil Graham,
(00:49):
who serves six years in the US House Representatives in
eighteen in the US Senate, where he's Chairman of the
Banking Committee. Sarah Graham is now a visiting scholar at
the American Enterprise Institute. I also have Don Boudreau, who's
an American economist, author, professor, and co director of the
Program on American Economy and Globalization at Murcattis Center at
(01:10):
George Mason University in Fairfax. Virginia.
Speaker 3 (01:13):
They got a great new book out.
Speaker 2 (01:14):
It's called The Triumph of Economic Freedom, debunking the seven
great myths of American capitalism. Gentlemen, welcome to the show.
Speaker 4 (01:21):
Thank you, thank you for being here.
Speaker 3 (01:24):
Well, Senator Graham, first, let me go to you.
Speaker 2 (01:25):
You really spent your career thinking that the government really
should not be involved economically in businesses lives.
Speaker 3 (01:33):
What's the right balance in your mind?
Speaker 5 (01:36):
I think the right balances government needs to enforce the
rule of law and let the private sector enriched the country.
I started my career and ended my career committed to
less government and more freedom. The key to American exceptionalism,
(01:59):
the same that makes us different.
Speaker 4 (02:03):
Is economic freedom.
Speaker 5 (02:05):
It's made us the richest and most powerful country in
the world, and I think the more we let it work,
the better off we're all going to be.
Speaker 2 (02:15):
Sarah Greb, how do you define economic freedom? What's your
definition of that? Uh?
Speaker 5 (02:21):
Economic freedom is where people had the right to use
their God given ability to try to advance themselves and
their family within the rule of law and producing goods
and services. It's a system where people succeed by producing
(02:41):
something that somebody else is willing to pay for. Only
government and criminals get something for nothing.
Speaker 4 (02:49):
Right.
Speaker 2 (02:51):
So don you know, in your new book, The Triumph
Economic Freedom, you talk about the seven great myths of
American capitalism, and I want to go through each of them.
The first one is called the genesis myth that the
Industrial Revolution impoverished workers.
Speaker 3 (03:03):
Talk about that myth.
Speaker 4 (03:06):
So it's a standard textbook fallacy that we had this.
No one doubts.
Speaker 6 (03:14):
So we had enormous and unprecedented economic growth starting in
England and later in the US in the late eighteenth
and early nineteen starting in their late eighteenth and early
nineteenth century, no one doubts that.
Speaker 4 (03:23):
It can't be denied. But a standard story is.
Speaker 6 (03:27):
That, well, this economic growth came at the expense of
the majority of people, the working class, the peasants. They
were reasonably happy before in a long companies, capitalists with
their factories, and they crushed the workers beneath the boot
of the capitalist heel. And only by doing that was
(03:48):
great wealth allowed to be produced.
Speaker 7 (03:51):
This is a story that Frederick Ingeles, for example, tells
the co author with or the comrade of Karl Mark,
And it's just not true.
Speaker 4 (04:02):
If you look at the data.
Speaker 6 (04:05):
Ordinary people in industrial Revolution in England and then later
ordinary people in America. They grew wealthier at the time,
their work conditions improved, their living conditions improved, their health improved,
their life expectancies grew.
Speaker 4 (04:22):
By our standards.
Speaker 6 (04:23):
When we look back from the year twenty twenty five
to say, the year eighteen twenty five, ordinary people then,
while it looks to us to be really, really poor,
but by the standards of history, those ordinary people two
hundred years ago in England and America were much better
off than were their grandparents, great grandparents and great great
(04:45):
great great grandparents. Unfortunately, we have continued to improve our
living standards ever since.
Speaker 2 (04:51):
My understanding about that time was, as you said, Don,
that there were different standards. There are different rules around
working conditions and kids work and things like that, so
that seemed to me did help the people.
Speaker 4 (05:04):
So interesting.
Speaker 6 (05:06):
Interestingly, so your comment implies one thing, and it's correct.
From time immemorial children worked, they worked on farms, which
was much worse, much more grueling, and frankly, much less productive.
The actual output from these young workers was much less
than came later. There were children working in factories in
(05:30):
early Industrial Revolution England at the time that didn't seem
unusual because these children, if they weren't working there, they
would have been working on farms. It's only because society
grew wealthier that it could afford not to have its
children work as much as they had historically. And so
as we grew wealthier, we said we stood back and said,
(05:52):
wait a minute, maybe we shouldn't have these kids working.
It was ironically the wealth produced by capitalism itself that
inspired people to take notice of children working, and then
to give them the incentive to take steps to prevent
children from working. It really the legislation was more a
reflection of already changing social norms. The legislation didn't create
(06:16):
those social norms, and.
Speaker 2 (06:18):
That's probably the best way to do At centergram your
myth number three says that the Great Depression was a
failure of capitalism.
Speaker 3 (06:25):
Why wasn't it talk about that?
Speaker 5 (06:28):
Well, the Great Depression was a failure of government. First,
in monetary policy. The new Federal Reserve Bank, which had
been established to provide liquidity during financial crises, set by
and watched one third of all the banks in the
country go broke. It allowed liquidity crisis to turn into
(06:55):
a deep recession. The smooth Haly tariff adopted by Congress
turned that help turn that recession into a worldwide depression.
And Franklin Roosevelt, as much as my grandmother and mother
adored him and his policy as policies by creating massive
(07:19):
political uncertainty, killed off private investment and extended the depression
for a decade, Whereas if you look at League of
Nations data or every other major country in the world
got out of the depression much quicker than we did,
(07:39):
except France, and they're the only country that had policies
similar to us. In fact, we didn't fully escape the
depression until the nineteen fifties when Eisenhower was president. Not
until then did the stock market roots the values it
(08:03):
had had in nineteen twenty nine. Not until the nineteen
fifties that households had the purchasing power in real goods
and services that they had had prior to the depression.
Speaker 2 (08:17):
Senator gram, A lot of people think that World War
Two helped us escape the depression?
Speaker 3 (08:21):
Is that true or you don't believe that?
Speaker 5 (08:24):
Well, no, if you mean by escape the depression, go
to work. When you put fourteen million of men in uniform,
you're going to have a big impact on an unemployment,
but unemployment is only one measure of the depression.
Speaker 4 (08:45):
The most important measure is.
Speaker 5 (08:48):
A decline in the quantity of goods and services that
are available to.
Speaker 4 (08:56):
American households.
Speaker 5 (08:58):
And we didn't re attain that level until we were
in the nineteen fifties and until policy had changed dramatically.
In fact, after the war, economists were convince unless government
created these massive public works projects in spent billions of dollars,
(09:26):
that we were going to go back into the depression.
But we didn't go back into the depression because government
policy changed.
Speaker 2 (09:35):
You know, Senatagram, you bring up the last time there
were tariffs, and don I want to talk about myth
number four, which is that trade is following out American manufacturing.
And from my view, I think that's really what President
Trump's justification for tariff says, is that he thinks that's happening.
But you think that's a myth.
Speaker 4 (09:54):
It is a myth. I do agree.
Speaker 6 (09:56):
I think that's the core justification that's fueling President Trump's protection.
But if you look at the data, and data that
are not difficult to find. By the way, these are
data that are uncontroversial among reserve government data.
Speaker 4 (10:09):
The government data. Yeah, yeah, you.
Speaker 6 (10:12):
American industrial output today is that an all time high.
America's industrial capacity is that an all time high. Manufacturing
value added per worker in America is not only at
an all time high, we are by far the leading
the world's leading country on that front. People will say, oh, well,
(10:33):
China has surpassed US as a manufacturing nation. Well, China
has about three times so close to four times maybe
the population of America. So if you look on a
per capita basis, America produces far more than does China.
American manufacturing is thriving. American industry is booming well, at
(10:55):
least until some of the recent tariffs, which is ironically enough,
because over sixty percent, sixty zero percent of American imports
today are inputs used in America by American producers. These
are capital goods, these are raw materials, these are comedian inputs.
And when you tarish these things, that raises the cost
(11:17):
of American producers of operating, and so that actually diminishes,
it puts down in pressure on America's manufacturing ability. So
far from helping American manufacturing, these tariffs are the main
thing that's now harming it.
Speaker 2 (11:34):
So Cynogram First of all, thank you for your service
and government. You've been in government for a long time.
What would you say if the data shows that tariffs
are not initially good for American manufacturing.
Speaker 3 (11:44):
What's the motivation here?
Speaker 5 (11:47):
Well, look, the motivation for tariffs has always been the
ability to benefit the feud at the expense of the
meaning we have, for example, a quota on imported sugar
(12:08):
in America where we pay twice the world market and
forty three hundred sugar producers are enriched by the program.
And why is the wages and services are higher than
(12:29):
in manufacturing. People are consuming fewer manufactured goods than services
and their spread growth every day. Why are the we
so focused on jobs in manufacturing facilities. We're focused on
it because industrial workers are the swing voters in the
(12:53):
states that elect presidents.
Speaker 4 (12:56):
This is political.
Speaker 3 (12:58):
No, I agree with you.
Speaker 2 (12:59):
I want to move on to number five, Don because
I think this is a really big myth that everyone
believes that deregulation caused the financial crisis.
Speaker 6 (13:08):
Tell us about that, Well, there was very little deregulation
of much of what was called deregulation. Let Sata or
Graham talk about this from him, because he's the great
expert right, of course, Graham Leash Bliley. This is often said, oh,
this repealed Glass Stiegel, and it did. It did no
(13:31):
such thing. It changed some of the parameters. What caused
the Great Recession was government efforts to artificially stimulate private
home ownership. And the government did that through many different avenues,
but one important one was by hook a crook leading
(13:51):
government organization or government backed organizations like Fannie May and
Freddie Mack to lower the standards that they use in
order to back mortgage lending. And so when that happened,
banks were more than that. They were eager then to
lend more to people who had less a credible credit.
(14:15):
And so this cascade of reducing the standards of mortgage
lending king went through the system, and it was a
house of cards. In the house of cards crashed in
late two thousand, in two thousand and seven, But I
think I should we should turn it over to.
Speaker 4 (14:29):
My my.
Speaker 3 (14:32):
Whose names whose names on?
Speaker 5 (14:35):
Well, the Graham Leach's Blali didn't deregulate anything. In fact,
the same regulators had the same powers that they had before.
What Graham Leach Blally did was recognized what the country,
what was happening in the country, and that is very
(14:58):
large financial less tents that were well capitalized were involved
in the securities business and the insurance business and the
banking business, as they were in every other developed country
in the world except Japan, which we imposed our system moment.
(15:18):
And so what Greenley's folly did is simply had those
businesses had to be operated independently with their own separate books,
but they were regulated in exactly the same way as before.
The problem was, by the time the wheels came off,
(15:40):
fifty percent of the new mortgages that were being made
were subprimes where people did not generally had the ability
to pay the mortgage payment, and so when housing costs
stopped going.
Speaker 4 (15:59):
Up, they couldn't get second leans they started defaulting. The government, trying.
Speaker 5 (16:06):
To get a market created for these mortgage backed securities,
had let banks count them on their balance sheet the
same as government bonds, and so banks held huge items
of these mortgage backed securities, and so when their price
(16:27):
went down, it collapsed the financial base of financial institutions
all over the world. It was a then a crisis
created not by deregulation. In fact, for thirty years regulations
(16:47):
had grown The problem was government had a policy and
forced Freddie and Fanning to meet goals in subprime lending.
The regulators were charged with enforcing those goals through what's
called the Community Reinvestment Act, where banks were pleasured to
(17:11):
make subprimeans. So the regulator had to choose between enforcing
the safety and soundness rules or enforcing the new Community
Reinvestment rules. And there's no evidence that if we'd had
more regulation or more regulators than anything would have been different.
(17:33):
They went with the new rules and we all paid
for it.
Speaker 2 (17:39):
You know, there's a lot of the complaints about coming
out of that eraror is that no one was really
held response for that. The financial folks weren't. What's your
view on that Centergram.
Speaker 5 (17:48):
Well, I think government was responsible. And it's interesting because
by blaming the regulation, the new Obama administration was able
to expand government power over banking, but it didn't reform
Freddie and.
Speaker 4 (18:06):
Fanny and its whole housing pology.
Speaker 5 (18:10):
It's sort of a taste of whoever wins the election
rights the history of the.
Speaker 3 (18:14):
Period we're living that now, aren't we? I have one more?
Speaker 4 (18:18):
I just want one more? Myth?
Speaker 2 (18:19):
Because that's exactly what's going on now. John Number seven
is the myth that poverty is the failure of American capitalism.
Speaker 6 (18:27):
Talk about that, well, even poor Americans are among the
richest people in the world today, and certainly by historical standards,
they they're.
Speaker 4 (18:37):
Unbelievably materially prosperous.
Speaker 6 (18:40):
The data, if you look at the a lot of
this issue, both as regards poverty and inequality, comes from
measurement failures that are are are come from itself themselves,
from the Census Bureau. The incomes of the rich of
highigh Incomeerners are not discounted by the enormous numbers of
(19:04):
taxes that they pay, and the incomes of lower income
earning Americans are not do not account for the government
transfers that they receive. When you account for the taxes
that the high income owners pay and for the transfers
received by the lower incomers, what you find is that
(19:26):
the lower income earning people are, even when measured in
monetary terms, are nowhere nearly as poor as the raw
data seem to show that they are. And the rich
lose have a lot of their wealth taken away from them.
So the differences between the rich and the poor dramatically
shrink in monetary terms once, as it should be done,
(19:50):
these taxes and transfers are accounted for.
Speaker 4 (19:54):
You know, Americans, it's.
Speaker 6 (19:59):
Still the case today in America that if you want
to get it's not super rich like Elon Musk, but
if you want to do well, you work, be thrifty,
you live a reasonably responsible life, and you can prosper
in America. That's what the vast majority of Americans have
(20:20):
done throughout history, and that's what they can continue to
do today.
Speaker 2 (20:24):
Synagram, I want to ask you and don one to
each last question, what do you hope people get out
of after they read your book The Triumph of Economic
Freedom Debunking the Seven Great Myths of American Capitalism.
Speaker 5 (20:35):
Well, I think, unfortunately, Berry, the myth that we are
debunking in each of these seven cases is conventional wisdom.
It's what basically is being taught in high schools and
colleges across the country. And what we're trying to do
is get the fact straight. You know, the Bible says
(20:58):
you shall know the truth, and the truth make you're free,
but it doesn't tell you how to find the truth.
Speaker 2 (21:03):
Well, you can find any truth you want on the internet,
right any truth?
Speaker 4 (21:07):
Sure, yeah.
Speaker 5 (21:08):
So what we're trying to do is set the facts straight,
and you can agree or disagree with what we've done.
But I think if people read our book that they
will see that freedom has flims in America and that
the more we have of freedom within the rule of law,
(21:33):
the better off we're going to be in the future,
and they'll think more of their country than they do
now if they read this book.
Speaker 2 (21:43):
Don So, don What about you, you're an economist and professor.
What do you hope people get out of it?
Speaker 4 (21:49):
I think Senator Brand said it very well.
Speaker 6 (21:52):
We in the book, we look at the facts industry
forward way, and we get references. By the way you
can people can go and find where we got these
facts just pulling them out of the air or pulling
them off to some Twitter account.
Speaker 4 (22:03):
These are almost all government data.
Speaker 6 (22:06):
And whether you ultimately sendentagram says whether you ultimately come
away from the book agreeing or disagreeing, at least you
will see that.
Speaker 4 (22:13):
There is a credible, fact based.
Speaker 6 (22:18):
Alternative narrative to what is commonly taught in many high
school and college courses today. Economic freedom has worked for America.
It will continue to work for America. We think not
just abstract economic theory, but just the facts on the
ground overwhelmingly tell that story.
Speaker 2 (22:40):
Well, Senator Graham and Don Boudeau, thank you so much
for joining us, and tell the book is the Triumph
of Economic Freedom, debunking the seven great myths of American capitalism.
Speaker 4 (22:48):
Thanks again, Thank you, Barry.
Speaker 3 (22:50):
All right, have a good day, goodbye.
Speaker 4 (22:54):
Well.
Speaker 2 (22:54):
I want to thank everyone for joining this week's radio show.
Especially I want to thank our great staff, our booking
producer Sarah Schaffern or sound there Ethan Moltz. If you
are serious about me more successful in twenty twenty five,
you gotta give me a call I sap our private
line seven seven three eight three seven eight two five zero,
or email me at Barry at Molts dot com.
Speaker 3 (23:12):
Remember, love everyone, trust a few, and pali your own canoe.
Have a profitable and passionate week.
Speaker 1 (23:19):
If you can find Barrymoltz on the web at Barrymolts
dot com or more episodes of Small Business Radio at
small Business radioshow dot com.
Get ready for all the craziness of small business. It's
exactly that craziness that makes it exciting and totally unbelievable.
Small Business Radio is now on the air with your
host Barry Moultz.
Speaker 2 (00:17):
Well, thanks for joining this week's radio show. Remember this
is the final word in small business. For those keeping track,
this is show number eight hundred and thirty one.
Speaker 3 (00:28):
Well, what role should the.
Speaker 2 (00:29):
Government play in small business owner's economic life? It seems
that with the Trump tariffs, it's attacks that government is
putting on all our lives. But how involved should the
government be? My next guests argue that the evidence points
that government interference and failed policies pose the most significant
threat to economic freedom. My guests are Senator Phil Graham,
(00:49):
who serves six years in the US House Representatives in
eighteen in the US Senate, where he's Chairman of the
Banking Committee. Sarah Graham is now a visiting scholar at
the American Enterprise Institute. I also have Don Boudreau, who's
an American economist, author, professor, and co director of the
Program on American Economy and Globalization at Murcattis Center at
(01:10):
George Mason University in Fairfax. Virginia.
Speaker 3 (01:13):
They got a great new book out.
Speaker 2 (01:14):
It's called The Triumph of Economic Freedom, debunking the seven
great myths of American capitalism. Gentlemen, welcome to the show.
Speaker 4 (01:21):
Thank you, thank you for being here.
Speaker 3 (01:24):
Well, Senator Graham, first, let me go to you.
Speaker 2 (01:25):
You really spent your career thinking that the government really
should not be involved economically in businesses lives.
Speaker 3 (01:33):
What's the right balance in your mind?
Speaker 5 (01:36):
I think the right balances government needs to enforce the
rule of law and let the private sector enriched the country.
I started my career and ended my career committed to
less government and more freedom. The key to American exceptionalism,
(01:59):
the same that makes us different.
Speaker 4 (02:03):
Is economic freedom.
Speaker 5 (02:05):
It's made us the richest and most powerful country in
the world, and I think the more we let it work,
the better off we're all going to be.
Speaker 2 (02:15):
Sarah Greb, how do you define economic freedom? What's your
definition of that? Uh?
Speaker 5 (02:21):
Economic freedom is where people had the right to use
their God given ability to try to advance themselves and
their family within the rule of law and producing goods
and services. It's a system where people succeed by producing
(02:41):
something that somebody else is willing to pay for. Only
government and criminals get something for nothing.
Speaker 4 (02:49):
Right.
Speaker 2 (02:51):
So don you know, in your new book, The Triumph
Economic Freedom, you talk about the seven great myths of
American capitalism, and I want to go through each of them.
The first one is called the genesis myth that the
Industrial Revolution impoverished workers.
Speaker 3 (03:03):
Talk about that myth.
Speaker 4 (03:06):
So it's a standard textbook fallacy that we had this.
No one doubts.
Speaker 6 (03:14):
So we had enormous and unprecedented economic growth starting in
England and later in the US in the late eighteenth
and early nineteen starting in their late eighteenth and early
nineteenth century, no one doubts that.
Speaker 4 (03:23):
It can't be denied. But a standard story is.
Speaker 6 (03:27):
That, well, this economic growth came at the expense of
the majority of people, the working class, the peasants. They
were reasonably happy before in a long companies, capitalists with
their factories, and they crushed the workers beneath the boot
of the capitalist heel. And only by doing that was
(03:48):
great wealth allowed to be produced.
Speaker 7 (03:51):
This is a story that Frederick Ingeles, for example, tells
the co author with or the comrade of Karl Mark,
And it's just not true.
Speaker 4 (04:02):
If you look at the data.
Speaker 6 (04:05):
Ordinary people in industrial Revolution in England and then later
ordinary people in America. They grew wealthier at the time,
their work conditions improved, their living conditions improved, their health improved,
their life expectancies grew.
Speaker 4 (04:22):
By our standards.
Speaker 6 (04:23):
When we look back from the year twenty twenty five
to say, the year eighteen twenty five, ordinary people then,
while it looks to us to be really, really poor,
but by the standards of history, those ordinary people two
hundred years ago in England and America were much better
off than were their grandparents, great grandparents and great great
(04:45):
great great grandparents. Unfortunately, we have continued to improve our
living standards ever since.
Speaker 2 (04:51):
My understanding about that time was, as you said, Don,
that there were different standards. There are different rules around
working conditions and kids work and things like that, so
that seemed to me did help the people.
Speaker 4 (05:04):
So interesting.
Speaker 6 (05:06):
Interestingly, so your comment implies one thing, and it's correct.
From time immemorial children worked, they worked on farms, which
was much worse, much more grueling, and frankly, much less productive.
The actual output from these young workers was much less
than came later. There were children working in factories in
(05:30):
early Industrial Revolution England at the time that didn't seem
unusual because these children, if they weren't working there, they
would have been working on farms. It's only because society
grew wealthier that it could afford not to have its
children work as much as they had historically. And so
as we grew wealthier, we said we stood back and said,
(05:52):
wait a minute, maybe we shouldn't have these kids working.
It was ironically the wealth produced by capitalism itself that
inspired people to take notice of children working, and then
to give them the incentive to take steps to prevent
children from working. It really the legislation was more a
reflection of already changing social norms. The legislation didn't create
(06:16):
those social norms, and.
Speaker 2 (06:18):
That's probably the best way to do At centergram your
myth number three says that the Great Depression was a
failure of capitalism.
Speaker 3 (06:25):
Why wasn't it talk about that?
Speaker 5 (06:28):
Well, the Great Depression was a failure of government. First,
in monetary policy. The new Federal Reserve Bank, which had
been established to provide liquidity during financial crises, set by
and watched one third of all the banks in the
country go broke. It allowed liquidity crisis to turn into
(06:55):
a deep recession. The smooth Haly tariff adopted by Congress
turned that help turn that recession into a worldwide depression.
And Franklin Roosevelt, as much as my grandmother and mother
adored him and his policy as policies by creating massive
(07:19):
political uncertainty, killed off private investment and extended the depression
for a decade, Whereas if you look at League of
Nations data or every other major country in the world
got out of the depression much quicker than we did,
(07:39):
except France, and they're the only country that had policies
similar to us. In fact, we didn't fully escape the
depression until the nineteen fifties when Eisenhower was president. Not
until then did the stock market roots the values it
(08:03):
had had in nineteen twenty nine. Not until the nineteen
fifties that households had the purchasing power in real goods
and services that they had had prior to the depression.
Speaker 2 (08:17):
Senator gram, A lot of people think that World War
Two helped us escape the depression?
Speaker 3 (08:21):
Is that true or you don't believe that?
Speaker 5 (08:24):
Well, no, if you mean by escape the depression, go
to work. When you put fourteen million of men in uniform,
you're going to have a big impact on an unemployment,
but unemployment is only one measure of the depression.
Speaker 4 (08:45):
The most important measure is.
Speaker 5 (08:48):
A decline in the quantity of goods and services that
are available to.
Speaker 4 (08:56):
American households.
Speaker 5 (08:58):
And we didn't re attain that level until we were
in the nineteen fifties and until policy had changed dramatically.
In fact, after the war, economists were convince unless government
created these massive public works projects in spent billions of dollars,
(09:26):
that we were going to go back into the depression.
But we didn't go back into the depression because government
policy changed.
Speaker 2 (09:35):
You know, Senatagram, you bring up the last time there
were tariffs, and don I want to talk about myth
number four, which is that trade is following out American manufacturing.
And from my view, I think that's really what President
Trump's justification for tariff says, is that he thinks that's happening.
But you think that's a myth.
Speaker 4 (09:54):
It is a myth. I do agree.
Speaker 6 (09:56):
I think that's the core justification that's fueling President Trump's protection.
But if you look at the data, and data that
are not difficult to find. By the way, these are
data that are uncontroversial among reserve government data.
Speaker 4 (10:09):
The government data. Yeah, yeah, you.
Speaker 6 (10:12):
American industrial output today is that an all time high.
America's industrial capacity is that an all time high. Manufacturing
value added per worker in America is not only at
an all time high, we are by far the leading
the world's leading country on that front. People will say, oh, well,
(10:33):
China has surpassed US as a manufacturing nation. Well, China
has about three times so close to four times maybe
the population of America. So if you look on a
per capita basis, America produces far more than does China.
American manufacturing is thriving. American industry is booming well, at
(10:55):
least until some of the recent tariffs, which is ironically enough,
because over sixty percent, sixty zero percent of American imports
today are inputs used in America by American producers. These
are capital goods, these are raw materials, these are comedian inputs.
And when you tarish these things, that raises the cost
(11:17):
of American producers of operating, and so that actually diminishes,
it puts down in pressure on America's manufacturing ability. So
far from helping American manufacturing, these tariffs are the main
thing that's now harming it.
Speaker 2 (11:34):
So Cynogram First of all, thank you for your service
and government. You've been in government for a long time.
What would you say if the data shows that tariffs
are not initially good for American manufacturing.
Speaker 3 (11:44):
What's the motivation here?
Speaker 5 (11:47):
Well, look, the motivation for tariffs has always been the
ability to benefit the feud at the expense of the
meaning we have, for example, a quota on imported sugar
(12:08):
in America where we pay twice the world market and
forty three hundred sugar producers are enriched by the program.
And why is the wages and services are higher than
(12:29):
in manufacturing. People are consuming fewer manufactured goods than services
and their spread growth every day. Why are the we
so focused on jobs in manufacturing facilities. We're focused on
it because industrial workers are the swing voters in the
(12:53):
states that elect presidents.
Speaker 4 (12:56):
This is political.
Speaker 3 (12:58):
No, I agree with you.
Speaker 2 (12:59):
I want to move on to number five, Don because
I think this is a really big myth that everyone
believes that deregulation caused the financial crisis.
Speaker 6 (13:08):
Tell us about that, Well, there was very little deregulation
of much of what was called deregulation. Let Sata or
Graham talk about this from him, because he's the great
expert right, of course, Graham Leash Bliley. This is often said, oh,
this repealed Glass Stiegel, and it did. It did no
(13:31):
such thing. It changed some of the parameters. What caused
the Great Recession was government efforts to artificially stimulate private
home ownership. And the government did that through many different avenues,
but one important one was by hook a crook leading
(13:51):
government organization or government backed organizations like Fannie May and
Freddie Mack to lower the standards that they use in
order to back mortgage lending. And so when that happened,
banks were more than that. They were eager then to
lend more to people who had less a credible credit.
(14:15):
And so this cascade of reducing the standards of mortgage
lending king went through the system, and it was a
house of cards. In the house of cards crashed in
late two thousand, in two thousand and seven, But I
think I should we should turn it over to.
Speaker 4 (14:29):
My my.
Speaker 3 (14:32):
Whose names whose names on?
Speaker 5 (14:35):
Well, the Graham Leach's Blali didn't deregulate anything. In fact,
the same regulators had the same powers that they had before.
What Graham Leach Blally did was recognized what the country,
what was happening in the country, and that is very
(14:58):
large financial less tents that were well capitalized were involved
in the securities business and the insurance business and the
banking business, as they were in every other developed country
in the world except Japan, which we imposed our system moment.
(15:18):
And so what Greenley's folly did is simply had those
businesses had to be operated independently with their own separate books,
but they were regulated in exactly the same way as before.
The problem was, by the time the wheels came off,
(15:40):
fifty percent of the new mortgages that were being made
were subprimes where people did not generally had the ability
to pay the mortgage payment, and so when housing costs
stopped going.
Speaker 4 (15:59):
Up, they couldn't get second leans they started defaulting. The government, trying.
Speaker 5 (16:06):
To get a market created for these mortgage backed securities,
had let banks count them on their balance sheet the
same as government bonds, and so banks held huge items
of these mortgage backed securities, and so when their price
(16:27):
went down, it collapsed the financial base of financial institutions
all over the world. It was a then a crisis
created not by deregulation. In fact, for thirty years regulations
(16:47):
had grown The problem was government had a policy and
forced Freddie and Fanning to meet goals in subprime lending.
The regulators were charged with enforcing those goals through what's
called the Community Reinvestment Act, where banks were pleasured to
(17:11):
make subprimeans. So the regulator had to choose between enforcing
the safety and soundness rules or enforcing the new Community
Reinvestment rules. And there's no evidence that if we'd had
more regulation or more regulators than anything would have been different.
(17:33):
They went with the new rules and we all paid
for it.
Speaker 2 (17:39):
You know, there's a lot of the complaints about coming
out of that eraror is that no one was really
held response for that. The financial folks weren't. What's your
view on that Centergram.
Speaker 5 (17:48):
Well, I think government was responsible. And it's interesting because
by blaming the regulation, the new Obama administration was able
to expand government power over banking, but it didn't reform
Freddie and.
Speaker 4 (18:06):
Fanny and its whole housing pology.
Speaker 5 (18:10):
It's sort of a taste of whoever wins the election
rights the history of the.
Speaker 3 (18:14):
Period we're living that now, aren't we? I have one more?
Speaker 4 (18:18):
I just want one more? Myth?
Speaker 2 (18:19):
Because that's exactly what's going on now. John Number seven
is the myth that poverty is the failure of American capitalism.
Speaker 6 (18:27):
Talk about that, well, even poor Americans are among the
richest people in the world today, and certainly by historical standards,
they they're.
Speaker 4 (18:37):
Unbelievably materially prosperous.
Speaker 6 (18:40):
The data, if you look at the a lot of
this issue, both as regards poverty and inequality, comes from
measurement failures that are are are come from itself themselves,
from the Census Bureau. The incomes of the rich of
highigh Incomeerners are not discounted by the enormous numbers of
(19:04):
taxes that they pay, and the incomes of lower income
earning Americans are not do not account for the government
transfers that they receive. When you account for the taxes
that the high income owners pay and for the transfers
received by the lower incomers, what you find is that
(19:26):
the lower income earning people are, even when measured in
monetary terms, are nowhere nearly as poor as the raw
data seem to show that they are. And the rich
lose have a lot of their wealth taken away from them.
So the differences between the rich and the poor dramatically
shrink in monetary terms once, as it should be done,
(19:50):
these taxes and transfers are accounted for.
Speaker 4 (19:54):
You know, Americans, it's.
Speaker 6 (19:59):
Still the case today in America that if you want
to get it's not super rich like Elon Musk, but
if you want to do well, you work, be thrifty,
you live a reasonably responsible life, and you can prosper
in America. That's what the vast majority of Americans have
(20:20):
done throughout history, and that's what they can continue to
do today.
Speaker 2 (20:24):
Synagram, I want to ask you and don one to
each last question, what do you hope people get out
of after they read your book The Triumph of Economic
Freedom Debunking the Seven Great Myths of American Capitalism.
Speaker 5 (20:35):
Well, I think, unfortunately, Berry, the myth that we are
debunking in each of these seven cases is conventional wisdom.
It's what basically is being taught in high schools and
colleges across the country. And what we're trying to do
is get the fact straight. You know, the Bible says
(20:58):
you shall know the truth, and the truth make you're free,
but it doesn't tell you how to find the truth.
Speaker 2 (21:03):
Well, you can find any truth you want on the internet,
right any truth?
Speaker 4 (21:07):
Sure, yeah.
Speaker 5 (21:08):
So what we're trying to do is set the facts straight,
and you can agree or disagree with what we've done.
But I think if people read our book that they
will see that freedom has flims in America and that
the more we have of freedom within the rule of law,
(21:33):
the better off we're going to be in the future,
and they'll think more of their country than they do
now if they read this book.
Speaker 2 (21:43):
Don So, don What about you, you're an economist and professor.
What do you hope people get out of it?
Speaker 4 (21:49):
I think Senator Brand said it very well.
Speaker 6 (21:52):
We in the book, we look at the facts industry
forward way, and we get references. By the way you
can people can go and find where we got these
facts just pulling them out of the air or pulling
them off to some Twitter account.
Speaker 4 (22:03):
These are almost all government data.
Speaker 6 (22:06):
And whether you ultimately sendentagram says whether you ultimately come
away from the book agreeing or disagreeing, at least you
will see that.
Speaker 4 (22:13):
There is a credible, fact based.
Speaker 6 (22:18):
Alternative narrative to what is commonly taught in many high
school and college courses today. Economic freedom has worked for America.
It will continue to work for America. We think not
just abstract economic theory, but just the facts on the
ground overwhelmingly tell that story.
Speaker 2 (22:40):
Well, Senator Graham and Don Boudeau, thank you so much
for joining us, and tell the book is the Triumph
of Economic Freedom, debunking the seven great myths of American capitalism.
Speaker 4 (22:48):
Thanks again, Thank you, Barry.
Speaker 3 (22:50):
All right, have a good day, goodbye.
Speaker 4 (22:54):
Well.
Speaker 2 (22:54):
I want to thank everyone for joining this week's radio show.
Especially I want to thank our great staff, our booking
producer Sarah Schaffern or sound there Ethan Moltz. If you
are serious about me more successful in twenty twenty five,
you gotta give me a call I sap our private
line seven seven three eight three seven eight two five zero,
or email me at Barry at Molts dot com.
Speaker 3 (23:12):
Remember, love everyone, trust a few, and pali your own canoe.
Have a profitable and passionate week.
Speaker 1 (23:19):
If you can find Barrymoltz on the web at Barrymolts
dot com or more episodes of Small Business Radio at
small Business radioshow dot com.
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