David Cay Johnston
Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)
Portfolio Press, 2007
352 pages $25
Review by LEELA YELLESETTY
FISCAL RESPONSIBILITY and accountability have long been the buzzwords in Washington, especially since Ronald Reagan’s pledge to end wasteful government spending and promote the “free market” as the most efficient mechanism for growth. Nearly thirty years later, the results of this ideology have borne bitter fruit. While government spending has not declined, the benefits of its largesse have accrued almost entirely to a tiny minority of our society.
How this situation came about is the focus of David Cay Johnston’s new book Free Lunch. A Pulitzer Prize-–winning investigative journalist for the New York Times, Johnston is armed with meticulous research and economic analysis. He crunches the numbers and names names. What he exposes is enough to make anyone’s blood boil. Or at least those of us in the bottom 99.9 percent.
Some of the stories Johnston includes will be familiar to readers, such as Enron’s back-room deals that resulted in gouging the public’s utility bills or the machinations of the for-profit health care industry. He brings even more infuriating details to light, and his explorations destroy the argument that cases like Enron are the exceptions to the rule.
A good example is the case of CSX, the railroad company formerly managed by John Snow, who went on to become Bush’s treasury secretary. Snow was praised for saving the company $2.4 billion by cutting costs on maintenance. The results were predictably deadly. Johnston follows the story of one woman, Angelica Palank, whose husband was killed when the Amtrak train he was riding crashed due to a faulty switch that CSX was responsible for maintaining. The switch was held together with nothing but a rusty nail. After years of expensive litigation, Angelica Palank was finally able to win her case against CSX in the Supreme Court and was awarded a total of $56 million in damages. This would appear to be justice at work, but it wasn’t.
While the payout be may be huge for a single person, it is dwarfed by the amount of money the company saved by cutting corners. But what is even more outrageous is that CSX didn’t end up paying a dime. Because of an absurd federal law, Amtrak must bear all liability for claims from their passengers, even though CSX was obviously the party at fault. Since Amtrak is a publicly owned company, the damages were paid by taxpayers.
Stories like this abound in Johnston’s book, touching virtually every part of the economy. Other topics explored include stadium and big-box store rip-offs, title insurance and home alarm system scams, student loan and mortgage catastrophes, the bizarre economics of hedge funds, and how Paris Hilton’s grandfather made his fortune by stealing funds from a children’s charity.
In many cases, the fraud is perfectly legal—a product of the wealthy crafting regulations through lobbying and campaign contributions. In the event that a wronged victim, whistleblower, or intrepid reporter uncovers illegal activity, little by way of punishment is meted out.
Johnston contrasts the polite slap on the hand given to executives who earned billions by illegally manipulating stock-options with a man who is serving the rest of his life in prison for stealing $150 worth of videotapes from Kmart. The complexity of legislation and business accounting are used to mask the fact that the wealthy abide by a very different set of rules than the rest of us. This is aided by a compliant media, which treats every scandal as an aberration and idolizes the rich while never asking how they got their fortunes.
The twisted logic of this system is that socially valuable public services like parks, schools, health care, and infrastructure must be curtailed in order to give more money to corporations. “The huge gifts of money that wealthy owners of sports teams wheedle out of taxpayers are a free lunch that someone must fund. Often that burden falls on poor children and the ambitious among the poor,” writes Johnston. “Libraries imposed costs on taxpayers, but they also returned benefits as the nation’s store of knowledge grew. That is, library spending is a prime example of a subsidy adding value.”
The major weakness of the book is Johnston’s analysis of why we’re in this situation. Johnston’s theorist of choice is Adam Smith. Like Smith, Johnston supports a fair and regulated market, combined with publicly-funded services that the market cannot adequately provide. While Smith would surely find today’s “free market” a far cry from his vision, the danger of monopolies and government intervention on behalf of business was not foreign to his time either—he repeatedly warned against these practices, but to no avail. Clearly the invisible hand must have some defect.
Johnston might be better off looking for an explanation from Marx and Engels, who argued that the state, far from being socially neutral, “is but a committee for managing the common affairs of the whole bourgeoisie.” There have, of course, been times when the state has intervened on behalf of ordinary people. The New Deal is a favorite example. What Johnson glosses over is how these reforms were won—by massive struggle that threatened to topple the capitalist system altogether.
Despite these weaknesses, Free Lunch offers a useful tool for activists and a powerful indictment of a sick system in which the few profit off the many.
