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Scotsman could come back today, he might smite the plutocrats setting the government’s bill of fare and
cast out the rule-changers. No doubt he would remind us of his eighteenth-century insight that subsidy economics are inherently
inefficient and wasteful, often costing several dollars to give away one.
    Back in 1964 Ronald
Reagan started telling a story he repeated many times on the long road to the White House. It was about how the masses ruin
democracy by sucking dry the nation. Reagan attributed his tale to an eighteenth-century British historian whose name he
consistently mangled, Lord Woodhouselee, Alexander Fraser Tytler. Professor Tytler never wrote the words attributed to him, but
they have become central to the argument used by those who came to power with Mr. Reagan, and those who followed, to justify
their policies. In one tape-recorded speech in 1965, Reagan said:
    A democracy cannot exist as a permanent form of government. It can only exist until the voters
discover they can vote themselves largesse out of the public treasury. From that moment on the majority…always vote[s] for the
candidate promising the most benefits from the treasury with the result that democracy always collapses over a loose fiscal policy,
always to be followed by a dictatorship.
    Whoever wrote those words got it partly right.
But just as Karl Marx never envisioned commercial sports as the opiate of the masses, neither did most of those who agreed with
Mr. Reagan consider the prospect that the elites would be the ones to vote themselves the public’s treasure.
    Let’s begin by examining two free lunches. The first case examines the moral hazard in a government policy
that rewards reckless corporate behavior. The second explores the reasons so many jobs are headed offshore, and who
benefits.

Chapter 3
TRUST AND
CONSEQUENCES
    H ALF AN
HOUR BEFORE DAYBREAK ABOARD THE AMTRAK SILVER Star heading to New
York from Florida, the South Carolina skies were fair. The thermometer hovered comfortably in the low seventies. It was the start of
the glorious final day of July 1991.
    The clickety-clack rhythm of the rails rocked the 407
passengers as they dozed. Among them was Paul Palank, a Miami police sergeant on his way to meet his wife and children for a
family reunion near the nation’s capital. Palank loved trains as much as he feared flying.
    At a
minute past five, the train approached the town of Lugoff, a farming community that the DuPont Company transformed into an
industrial center when it built a chemical plant there in 1948. The same tracks that supported Palank and his fellow passengers on
their journey north often carried CSX railroad hopper cars filled with chemicals to make Orlon, a synthetic “miracle fiber” that came
out of World War II research. On a siding parallel to the Silver Star stood a string of empty hopper cars waiting for a CSX train to
haul them away to be refilled. Freight traffic was so much more important, and more common, than passenger trains that railroad
companies didn’t name the switch Lugoff after the town, or even after the DuPont factory. Railroad engineers called the train switch
the Orlon Crossing.
    The Amtrak train was traveling two miles an hour below the posted speed
limit when the twin locomotives and the first twelve cars passed over the Orlon Crossing. Then the switch broke.
    Six passenger cars hurtled off the tracks. The impact flipped over the first hopper car, whose hardened steel
wheels cut like a knife through the metal skin of the passenger cars. By the time everything came to a halt, 77 people were injured
and 8 were dead, including Sergeant Palank. He was 35 years old.
    More than eight hours later,
Angelica Palank arrived at the train station in Alexandria, Virginia, to greet her husband. Eager to see him, Angelica pushed her
youngest son Taylor’s stroller just as fast as five-year-old Josef could move his little legs to keep