Here’s What Joe Kernen Still Doesn’t Get

Written by John Lounsbury

In an interview of Andrew F. Puzder, CEO of CKE Restaurants, who wrote an excellent Op Ed last week on what the Obama administration is doing wrong (and failing to do at all) to enable business to grow in the U.S.,  CNBC co-anchor Joe Kiernen went off the rails.  The title of Puzder’s piece is Here’s what Obama still doesn’t get; from that comes the title for this brief rant with the president’s name replaced by Kiernen’s.

Joe Kiernen (left) and Andrew F. Puzder

In his Op Ed Puzder criticized the president for saying that his administration had “managed the economy pretty well …” and Puzder went on to add that the president’s blind spot was that he (the president) did not recognize that “politicians in Washington don’t create jobs or economic growth“.  One can disagree with how Puzder develops his conclusions but his discussion of the employment issues the U.S. faces are generally based on facts.  A discussion of how he reached his conclusions is a worthwhile topic but that is not our purpose here.

In the interview (see video below) Joe Kiernen tries to integrate his own “facts” and opinions with those of Mr. Puxder.  Kiernen makes the following statements :

“Employment generated in the private sector, the payrolls that come from those employees, its those taxes that go to pay for government employees and paying for everything that government does, right?“

“… that the government makes the infrastructure and gives them the opportunity to succeed here, that’s not the way it works.”

“The private sector allows for the government’s existence.”

Watch the video to hear the excerpts above in context:

Joe Kiernen is stating his opinions as if they were fact.  True, they are basic assumptions of a particular ideology.  But the problem with ideology, Kiernen’s or anybody else’s, is that assumptions, once originated, often become facts in the minds of the believers.

Let me me offer some facts that are not opinions for each of Kiernen’s statements:

Government spending is not limited by the taxes collected and on the few occasions in U.S. history when sufficient taxes have been collected to cover all government expenditures severe economic dislocations have followed within a few years.  Coincidence?  Perhaps although a number of economic theorists have argued cause and effect.

Facts of our history indicate that government expenditures for transportation and information infrastructure have preceded major economic advances.  Some examples:

(1) The Erie Canal opened the Midwest to settlement and commerce with the previously established east coast was funded by the State of New York after President James Madison vetoed a bill that would have built it with Federal funding;

(2) Planning for and some of the construction of the Atlantic and Gulf Inter-coastal Waterways was done by the Federal government;

(3) The development of the western rail system, including the transcontinental railroad, was in part funded by federal land grants and the transcontinental railroad builders were granted cash payments for each mile they completed;

(4) Construction and maintenance of the Mississippi, Missouri and Ohio River navigation channels was and is a Federal project (as are many other waterway channels throughout the country);

(5) The interstate highway system was a government project to create a mostly free transportation network;

(6) The national system of airports was started by the Federal government in World War II and received substantial federal support thought the 1970s, less since; and

(7) The internet was started as a Department of Defense project which planned and built the communication protocol that was implemented by Xerox, Apple and others, first as possible commercial prototypes in the 1970s and then as the beginning of what was to become the commercial internet in the 1980s and an information technology revolution in the 1990s.

No private sector entity other than the citizen electorate has ever “allowed the existence” of any government within the the U.S., including the federal government.  On the other hand, every corporation is chartered by a government and exists only as long as the government agrees it is in the public interest.  And that is another fact, Mr. Kiernen.  Of course, some of us are concerned that there has been too much corporate capture of government function, limiting or excluding the influence of the citizen electorate.  Would that be a factor of any concern to Joe Kiernen?

Fortunately Mr. Puzder did not take the Kiernen bait and talked past the interjections which were so far off base.

To summarize what Joe Kiernen apparently still doesn’t get:

• There has been throughout our history a role for government in various economic planning and execution roles.  Examples of some of those have been provided above.

• There is a valid role of government to protect the public interest and to intercede to prevent abuse of government granted charters that would exploit the citizenry.

• Corporations exist at the will of the government, not the other way around.

• In capitalism corporations exist for the benefit of society; the reverse situation would be called feudalism.

Andrew Puzder presented his arguments without crossing any of the lines transgressed by Kiernen.  Puzder argued that government should avoid taking actions that diminish the potential for individual achievement but never argued that the government does not have a meaningful role in maintenance of a competitive market system.

Perhaps Joe Kiernen’s biggest problem is less that he doesn’t understand but more that he spoke very imprecisely.  I doubt that he is completely in the dark regarding the facts I have raised.  He may have suffered from a common disease of talking heads in that he tried to lead the conversation and provide prompts from which his guest could continue with very informal generalizations.  Perhaps he would have been more successful and avoided such interpretations as occurred to me if he had simply kept asking questions rather than trying to casually frame the discussion?

I hope the latter thought is the case.  Joe Kiernen has, over the years, been involved in some very enlightening (for me) discussions about finance and investing.  Most of them were far better than what came down last Friday.