Delusion in the Desert

LAS VEGAS -- I'm here at Planet Hollywood as the token liberal to participate in two debates -- one on what is killing the American Dream; the other a mock trial of the Federal Reserve. Paul Krugman is also here, debating the cause and cure of inequality. We're outnumbered about a thousand to one.

The annual FreedomFest convention of some 2,000 libertarian conservatives is doubly surreal. What better setting for libertarian dreams than fantastical Las Vegas -- the free market as casino, made flesh.

Like casino operators, these libertarians live on fantasies. They inhabit an imagined universe where markets never do anything wrong and government never does anything right. This is comforting because it is true by definition and thus resists any evidence to the contrary. Mostly they are very nice, idealistic people, if sweetly delusional about economics.

I like libertarians because they tend to be principled, incurring the ire of ordinary conservatives by resisting government snooping and supporting gay rights. They are best understood as a cult -- true believers who are too far-fetched for the American mainstream but with a creepy degree of influence on the Republican Party.

Yaron Brook, who heads the Ayn Rand Institute, is my foil in the Dream debate.

Brook takes the premise of government as the source of all evils to an instructive extreme. Thus the financial collapse of 2008, weirdly, was not the result of Wall Street financial engineering but of government regulation (don't ask).

Rising inequality is somehow the fault of government, too. The best thing we could do for poor people would be to abolish the minimum wage (the steady erosion in its real value and coverage hasn't reduced poverty, but never mind).

Not only should public schools be abolished, but government should stop collecting taxes to support education altogether, even vouchers. The poor would somehow come up with the money to send their kids to private schools, and markets would stimulate innovation that would make schooling cheaper. In libertarian circles, this man is considered a serious person, even a celebrity.

Yaron Brook is an Israeli immigrant. He attended the Technion in Haifa and then the University of Texas, both public institutions. But he thinks public universities should be abolished, too. Didn't our great state universities, going back to Lincoln, help working class kids to realize the American Dream and provide generations of research breakthroughs? No, they are statist parasites on the market.

The increased inequality (that Brook half-concedes) is legitimate, he says, because billion dollar hedge fund paydays and CEO bonuses are market verdicts and thus efficient. I can't resist pointing out that we are having this debate in a union hotel, where room cleaners, desk clerks, and bellmen are paid middle class wages -- and realizing a version of the American Dream.

Las Vegas resorts, thanks to decades of struggle, are mostly union.

This doesn't seem to be doing Planet Hollywood any damage. If there were no union, these employees would be paid around minimum wage, as they are in cities with weak unions, and more of the hotel revenue would simply go to the owners. Would that be more efficient? Brook does not bite on this one.

The trial of the Fed is even more bizarre. I am cast as counsel for the defense. In my opening statement, I explain that there is plenty to criticize in the Fed's actions, but that we are better off with a central bank than without one. Steve Forbes, as a witness for the prosecution, insists that every financial crisis has either been precipitated by the Fed or worsened by the Fed.

Former Cato Institute president and banker John Allison, another prosecution witness and big donor to Ayn Rand causes, contends that the collapse of 2008 would have sorted itself out just fine with no intervention by either the Fed or the Treasury; and that the Fed somehow created the all the financial engineering. (Allison's bank, BB&T, despite his libertarian convictions, took $3.1 billion in TARP money. So it goes.)

The Fed's failure to regulate indeed allowed these excesses, but these guys say the opposite; they blame monetary policy. There is the usual conservative obsession with inflation, though nobody can quite explain why the inflation long predicted by the right as the consequence of the Bernanke-Yellen program of bond purchases keeps failing to break out (could it be the soft, post-crash economy combined with fiscal tightening and stagnant wages, perhaps?).

A jury of libertarians is produced, and they of course vote to convict. I manage to win over two out of 12. These libertarians are for a free marketplace of ideas; but just to be sure, they rig the rules. They paid for the microphone, after all.

There is no room for nuance here. Plenty is wrong with the Fed -- it tends to get captured by Wall Street; it propped up rather than cleaned out the big banks that caused the collapse. However, a return the 19th century era of the gold standard and periodic credit panics and depressions would be insane.

Technology doesn't make money markets more self-regulating. On the contrary, it increases the ability of insiders to invent deceptive vehicles with infinite leverage. That requires more regulation, not less. Try explaining that to 2,000 libertarians.

The truly out-of-body experience comes at the dinner for speakers and other conservative luminaries. Presiding over the after-dinner discussion is Fox's John Stossel, his usual gracious self. ("Robert Kuttner is here from the American Prospect. My nephew, Scott, used to work there. What a terrible magazine.")

The topic of this discussion is "Why libertarians are winning on the social issues and losing on the economic ones." Say what? This is more like a premise that I hear at gatherings of lefties. But the panelists have in mind the progress on same-sex marriage (they are libertarians after all), the embarrassments to the national security state, as well as the utter defeat of gun control -- freedom to pack heat being a libertarian cause, too.

But hold on, isn't the right gaining on economic issues? Not in libertarian-land, where ObamaCare is a socialist takeover of markets, public policy alarmingly considers climate change a cataclysmic case of market failure (which can't exist), and Social Security is not dead yet.

It falls to the right's shrewdest strategist, Grover Norquist, to point out that Obama played into the right's hands on the budget sequester and that new government spending is blocked. Norquist confidently forecasts a Republican will be elected in 2016 or 2020 and that the Paul Ryan budget will become law, further slashing government's role in the economy.

Grover, a savvy realist, is dismissed as too optimistic by this crowd, which thinks that the left has the economy by the throat. Three decades after Reagan, the right still manages to think of itself as an oppressed minority even when it is winning; and conceives of the centrist, Wall Street-affiliated Barack Obama as a Bolshevik.

How will all of this affect presidential politics? The pre-dinner speaker is Marco Rubio. And he's just terrific: smart, witty, self-deprecating, charismatic, speaking in compelling whole sentences without notes. "If you cranked my life story into a computer," he deadpans, "it would spit out: Blubbering Liberal." But no, the American Dream is deeply conservative, reliant on individual grit.

Rubio is the sort of politician of whom the uninitiated swing voter would say, "What a fine young man, I could vote for him." He's a generation younger than Hillary Clinton, and that contrast would be vivid. His self-made immigrant's son story is the opposite of hers. Rubio runs rings around such recent nominees as Mitt Romney, George W. Bush, or Bob Dole, and the rest of the current GOP field.

More than anyone since Reagan, Rubio has the capacity to cloak a hard right message as nothing but common sense. His speech is big on life story and American values, and very light on policy details. In other speeches and in his voting record, though, Rubio's restoration of the Dream hinges on more of the measures that have destroyed it; slashing taxes and social benefits; gutting regulation; busting unions. But he's very deft at camouflaging all that in favor of smooth generalization.

You have to hope that the GOP, ideologically besotted by purism, nominates someone other than Rubio. In the polls, he is now in 10th place in the Republican field, well behind Chris Christie, Mike Huckaby, even Ben Carson and Ted Cruz.

Rand Paul is the darling here, but Randian libertarianism (his or Ayn's) is too goofy for a majority of Americans. Hillary Clinton is a reprise of That Nineties Show, but then so is Jeb Bush. Jebbie would neutralize her many liabilities. Pray for Rand or Jeb, or maybe a vengeful Donald Trump running as an independent.

A year ago, the script for 2016 was sealed -- Clinton II versus Bush III: advantage Clinton. But Jeb Bush's nomination is far from certain and Bernie Sanders is giving Clinton a run for her money. Indeed, her money is more liability than asset.

If Rubio can win over the Republican base, he'd likely be the most trouble for Democrats. In a matchup with Hillary Clinton, Rubio could carry some of those swing states that Democrats color light blue in their presumed lock on the electoral college. The libertarians sort of like him, but aren't sure he's one of theirs. Leave it to Republicans not to nominate someone who can win.

As I'm leaving, Trump is entering -- another big crowd pleaser here.

Let's hope what happens in Vegas doesn't stay in Vegas -- that the Republican National Convention reprises FreedomFest. I'm rooting for the crackpots to take over the GOP.