This State is on the Brink of Fiscal Meltdown by Daniel J. Mitchell

Illinois is a mess. Taxes and spending already are too high, and huge unfunded liabilities point to an even darker future.

Simply stated, politicians and government employee unions have created an unholy alliance to extract as much money as possible from the state’s beleaguered private sector.

That’s not a surprise. Indeed, it’s easily explained by the “stationary bandit” theory of government.

But while the bandit of government may be stationary, the victims are not. At least not in a nation with 50 different states.

Leaving Illinois

Indeed, Illinois Policy reports that a growing number of geese with golden eggs decided to fly away after a big tax hike in 2011.

Politicians enacted Illinois’ 2011 income-tax hike during a late-night legislative session in January 2011 and raised the state’s personal income-tax rate to 5 percent from 3 percent. This 67 percent income-tax hike lasted for four years, during which time Illinois experienced record wealth flight.

…The short-term increase in tax revenue gained from higher tax rates is offset by the long-term loss of substantial portions of Illinois’ tax base. The average income of taxpayers leaving Illinois rose to $77,000 per year in 2014, according to new income migration data released by the IRS. Meanwhile, the average income of people entering Illinois was only $57,000.

…During the four years of the full income-tax hike, prior to its partial sunset in 2015, Illinois lost $14 billion in annual adjusted gross income, or AGI, to other states, on net.

Illinois has always had an unfavorable ratio when comparing the incomes of immigrants and emigrants. But you can see from this chart that there was a radically unfavorable shift after the tax hike.

The Biggest Loser

Here’s a table from the article showing the 10-worst states.

Illinois leads this list of losers by a comfortable margin. Connecticut, meanwhile, has a strong hold on second place (which shouldn’t be a surprise).

The IP report observes that the states benefiting from internal migration have much better fiscal policy. In particular, most of them are on the admirable list of states that don’t impose income taxes.

…the top five states with favorable income differentials were Florida, Wyoming, Nevada, South Carolina and Texas. Notably, 4 of 5 of these states have no income tax, and none of them have a death tax.

It’s worth noting that the high-tax approach is not producing good results.

Instead, as reported by Bloomberg, the Land of Lincoln is the land of red ink.

Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. stateIllinois’s underfunded pensions and the record backlog of bills… are equivalent to about 40 percent of its operating budget… investors have demanded higher premiums for the risk of owning its debt. Moody’s called Illinois “an outlier among states” after suffering eight downgrades in as many years… like other states, has no ability to resort to bankruptcy to escape from its debts. A downgrade to junk, though, would add further financial pressure by increasing its borrowing costs.

Double Down

Amazing, in spite of this ongoing meltdown, the Democrats who control the state legislature are pushing hard to once again increase the income tax.

Heck, they want to increase all sorts of taxes. Including higher burdens on the financial industry.

Kristina Rasumussen, the President of Illinois Policy, warned in the Wall Street Journal that this was not a good recipe.

Proponents here call it the “privilege tax”… The Illinois bill would put a 20% levy on fees earned by investment advisers. It passed the state Senate in a 32-24 vote Tuesday, and backers are hoping to get it through the House before the legislative session ends May 31. The new tax is pitched as a way to squeeze more revenue – as much as $1.7 billion a year – from hedge funds and private-equity firms…

An earlier version of the Illinois proposal included a provision so that the 20% tax would take effect only if and when New York, New Jersey and Connecticut enacted similar measures. But the bill as written now would impose the tax regardless, and lawmakers will simply have to hope other states follow suit. Yet who says financiers can’t do their jobs just as well in Palm Beach, Fla. – or London, Zurich or Hong Kong? The progressives peddling this idea don’t understand that Chicago competes for these businesses not only with New York and Greenwich, Conn., but with anywhere that can offer cellphone service and an internet connection.

…Railing against supposed “fat cats” might satisfy progressive groups, but lawmakers shouldn’t be in the business of hounding the people who help connect capital with new opportunities for growth… Rather than focus on how to make everyone miserable together, policy makers should work to increase their states’ competitiveness. A start would be to rally against this proposed privilege tax and instead fix the spiraling pension costs and outdated labor rules that are dragging Illinois and other blue states down.

Let’s hope the governor continues to reject any and all tax increases.

If he does hold firm, he’ll have allies.

Including the Chicago Tribune, which recently editorialized about the state’s dire position,

Illinois legislators fumble repeated attempts to send a balanced budget to Gov. Bruce Rauner; while the stack of Illinois’ unpaid bills climbs by the minute; while our leaders prioritize politics over policy… Employers and other taxpayers are hopping over Illinois’ borders with alarming regularity.

…What an embarrassment. What a dereliction of duty… Illinois, boasting the lowest credit rating and the highest population loss of any state in the country, has doubled down. State government is in a full-blown crisis. Again. Since January, Democrats have discussed plans to raise income taxes and borrow money to pay down bills. They approved bills that would make Illinois a less attractive place to do business; under one proposal, Illinois would have the highest minimum wage of all its neighboring states.

This is some very sensible analysis from a newspaper that endorsed Obama in both 2008 and 2012.

Hope for the Future

Even more important, the state’s taxpayers are mostly on the correct side.

Illinoisans feel the strain of the state’s two-year budget impasse, but they are emphatic that tax hikes should not be part of any budget deal. These are the findings of a new poll of likely Illinois voters… Only 31 percent of survey respondents support raising the state income tax to end the budget impasse. An increase in the state sales tax is even more unpopular, with 76 percent of survey respondents opposed. Another key takeaway from the poll: A plurality (49 percent) of respondents who are directly affected by the state budget impasse prefer a cuts-only, no-tax-hike budget.

…Survey respondents were also asked what they think of political candidates who support raising taxes to end the budget impasse. The poll found that likely Illinois voters will be unforgiving of candidates for governor or the General Assembly who raise the state income tax or sales tax.

I suspect taxpayers realize that higher taxes will simply lead to more spending.

Indeed, a leftist in the state inadvertently admitted that the purpose of tax hikes is to enable more spending.

If there is to be any hope for the future in Illinois, Governor Rauner needs to hold firm. So long as Republicans in the state legislature hold firm, he can use his veto power to stop any tax hikes.

Or he can be Charlie Brown.

P.S. Illinois is invariably near the bottom in comparisons of state fiscal policy. The one saving grace is that the state has a flat tax. If the statists ever succeed in replacing that system with a so-called progressive tax, it will just be a matter of time before the state passes New York and California in the real race to the bottom.

Reprinted from International Liberty.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

The G-7’s Outrageous Hypocrisy by John Tamny

An article in Saturday’s Wall Street Journal about the European leg of President Trump’s first foreign trip came with the headline: “Leaders Confront US on Russia, Climate.” In particular, non-US G-7 leaders are all strongly in favor of the 2015 Paris climate agreement that would require participating countries to limit carbon emissions, among other restraints on economic activity.

Trump disagrees, thus the confrontation, owing to his correct belief that the climate deal would prove a barrier to economic growth.That Trump was in opposition to the other G-7 members apparently led to some tense discussion about the US’s desire to exit commitments made during the presidency of Barack Obama. German Chancellor Angela Merkel confirmed that opinions expressed about the withering climate accord “were exchanged very intensively.”

You Obey, We Ignore

Merkel and other G-7 leaders disappointed in the 45th president have no leg to stand on, and certainly aren’t in the position to confront any US president. Trump should make this plain without an ounce of regret. The latter would be true even if the Paris accord were a credible answer to the theory that says economic progress is a major threat to our existence.

Indeed, the Europeans talk a big game about the importance of commitments, and of how the alleged fight to save the earth “has to be a collective effort,” but they’ve shown no remorse about their own persistent failure to honor their NATO spending pledges.

Translated, these nations expect the United States to weaken its economy based on an unproven, but rather expensive theory about the effects of climate change. But when it comes to living up to a longstanding agreement among NATO members to share the costs of a mutual defense shield, they’ll let the US foot the bill.

More interesting here is that in their desperation to keep the US in the Paris fold, Merkel and others are implicitly saying that any agreement made among leading western European countries without the US isn’t worth the paper it’s printed on. With good reason.

So Much for Commitment

Consider non-NATO treaties like Maastricht, in which EU nations agreed to limit their deficit spending so that their debt/GDP ratios would always stay below 60%. Woops. As of 2015, Germany (74.4%), France (89.6%), and Italy (122.3%) were all well above what the G-7 countries committed to when they signed the treaty that led to the euro. As for their commitment to requiring euro member states to individually handle their debts, it too went out the window given the fear among EU members about what debt default would do to certain large banks.

Back to NATO, the European leaders so eager to guilt Trump into a climate commitment not his own have once again shown no commensurate guilt about their own safety being a function of US taxpayers and legislators regularly living up to commitments that they haven’t lived up to.

Mutual Defense

This is particularly galling when we remember that NATO’s mutual defense shield arguably has very little to do with US safety. Lest we forget, the US already has the strongest military in the world, and it’s also quite far from the world’s trouble spots. In short, the US has long stuck to an agreement that weakens it economically, and that has little to nothing to do with its ongoing existence.

Would Americans feel any less secure absent this pricey post-WWII arrangement? At the same time, could NATO survive and would Europeans still feel secure sans American support that gives NATO global relevance?The answer to the previous question explains why the Paris agreement will lose all meaning and relevance if the US backs out. We know this given the historical truth that non-US G-7 nations speak with a forked tongue.

They talk grandly about honoring commitments, but their actions invariably belie their lofty rhetoric. Just as they’ve done with NATO, or with their own inter-European treaties, they want the US to abide the Paris agreement so that they don’t have to.

In that case, President Trump would be very unwise to lend US credibility to an agreement that history says G-7 members will eventually trample on. While the Paris accord surely can’t survive without Trump’s support, neither can his commitment to 3 percent growth survive more government meddling meant to placate shaky G-7 members, all based on a theory. Trump has an easy answer; his rejection of the Paris agreement one that checks the political, economic and rationality boxes.

Trump has an easy answer; his rejection of the Paris agreement one that checks the political, economic and rationality boxes.

John Tamny

John Tamny is a Forbes contributor, editor of RealClearMarkets, a senior fellow in economics at Reason, and a senior economic adviser to Toreador Research & Trading. He’s the author of the 2016 book Who Needs the Fed? (Encounter), along with Popular Economics (Regnery Publishing, 2015).

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The Deficit Problem Is a Spending Problem by John Tamny

After 2008, the US economy has experienced relative stagnation. The  common refrain from the Left was that federal budget deficits weren’t big enough. Of the belief that government spending is what lifts economies out of slow-growth ruts, Paul Krugman, Lawrence Summers and other neo-Keynesians called for federal borrowing beyond what Treasury took in as a way of allegedly boosting the economy.

Who cares that excessive spending failed so impressively in the U.S. back in the 1930s, and who cares that massive increases in Japanese debt have failed to awaken its economy from its “lost decades?” The Keynesians most associated with America’s Left (they populate the Right too, but most who think this way don’t admit it, or know it) pointed to increased deficits as the certain source of our economic salvation.

This is interesting mainly because with the election of Donald Trump in 2016 in concert with promises of big tax cuts, the same left that cheered deficits as the path to recovery suddenly claimed they would hold the economy down. This requires mention as a reminder that budget deficits and national debt are political props, first and foremost.As for their economic implications, governments can only spend insofar as they tax or borrow from the private sector. Period. As such, and in a very real sense, all government spending is deficit spending; the deficits and national debt a bit of a distraction.

Spending Is What Matters

The level of government spending is what matters the most because the wealth we produce in the private sector is precious. The spending consumes capital that otherwise might reach innovators. Government spending is the worst kind of tax mainly because its horrors are mostly unseen.

Taxes we see and feel in each paycheck, devaluation of the dollars we earn (a tax like any other) we suffer through reduced work opportunity and spending power, but government spending represents the unseen; as in what would intrepid, innovative minds do with the expropriated capital if government weren’t consuming it?

How many Apple, Amazon and Microsoft equivalents haven’t, and will never emerge from start-up infancy thanks to government’s consumption of crucial resources, how long ago would cancer and heart disease have been cured; only for bright minds to train their genius on the erasure of other life-ending maladies, or the fulfillment of other market needs?

The Salsman View

All of the above at least partially explains why I approached Duke political economy professor Richard M. Salsman’s new book, The Political Economy of Public Debt: Three Centuries of Theory and Evidence, with some reservation.

Salsman’s genius and broad knowledge have long been evident, but e-mail exchanges over the years between author and reviewer revealed a friendly difference of opinion about budget deficits. Though no deficit “hawk,” Salsman views them as a problem in their present state, while I view government spending as the real problem. If given the choice between a balanced budget of $4 trillion, and annual deficits of $1.4 trillion on $1.5 trillion in spending, I would take the latter. In a heartbeat. It represents less government waste of precious capital to the tune of $2.5 trillion.

So while my views on what Salsman refers to as “public debt” haven’t changed much, Salsman’s book forced a very healthy rethink of the debt question, though for reasons different from the traditional critiques of deficit spending. And while this review will reveal some ongoing areas of disagreement with the author, none of the differences should be construed as a non-endorsement of what I’ll refer to going forward as “Public Debt.”Salsman has written something beyond special, a book dense with information and history that I’ll be referencing for years to come. It’s perhaps commonly thought that Carmen Reinhart and Kenneth Rogoff’s This Time Is Different is the definitive history of government debt, but Salsman’s Public Debt trumps their book by many miles. It’s quite simply spectacular, and informative in a way that few academic economics books (or, for that matter, any economics books) are.

To give readers a sense of how the book is constructed, it “examines three centuries of the most prominent political-economic theories of public debt.” Salsman addresses the debt through the eyes of some of the grandest names in economics, along with others who similarly deserve stature, but who have in a sense been forgotten. One of Salsman’s many triumphs is the staggering amount of research he conducted in order to explain to readers the myriad ways economists of different persuasions viewed government debt in the past, and how some do in the present.

Salsman divides up the economists of varying Schools into three groups. “Public debt pessimists” typically “argue that government provides no truly productive services,” that the “taxing and borrowing detract from the private economy, while unfairly burdening future generations,” plus they generally believe that government debts are “unsustainable and will likely bring national insolvency and perpetual economic stagnation.” David Hume, Adam Smith and Nobel Laureate James Buchanan were three public debt pessimists, and then the list today is endless: Niall Ferguson, Laurence Kotlikoff, David Stockman, etc. etc. To the debt pessimists, the world is seemingly always about to end.

“Public debt optimists” think “government provides not only productive services, such as infrastructure and social services,” but they also think deficit spending can lift economies out of “savings gluts, economic depressions, inflation, and secular stagnation.” Interesting about the optimists is that while they’re convinced of the wonders of deficits, they almost universally despise the creditors (the “rentier class”) who make deficits possible. Those who lend to governments in return for an income stream are almost invariably immoral financiers in the eyes of the optimists, and so the optimists fully support defaulting on those who provide government with the funds to waste.

Alvin Hansen and Abba Lerner are prominent in Public Debt as some of the old-style optimists, but the list of neo-optimists in today’s commentariat is similarly endless; think once again, Krugman, Summers, Alan Blinder, Christina Romer, etc. At book’s end, Salsman correctly points out that the “pessimists and optimists have more in common than is commonly realized – and each perpetuate long-established falsehoods.” Salsman was being kind….

The Realists

And then there are the “public debt realists.” They “contend that government can and should provide certain productive services,” but within strict limits. Realists neither whine all the time about world-ending government debts, nor do they claim that they can be essential sources of economic sustenance as the equally confused optimists believe.

Realists who favor “constitutionally limited government” don’t think public debt is “inevitably harmful” mainly because when government is limited, so will borrowing be. Alexander Hamilton was the most famous public debt realist. Of the moderns in our midst, Steve Forbes is a realist, so is George Gilder, and so of course is Salsman. More on your reviewer’s stance later.

Up front, public debt isn’t some recent concept reflecting the supposed immorality of the modern world whereby governments borrow today only to heartlessly pass the debt on to future generations. Salsman notes early on that public borrowing by governments such that the citizens were “ultimately responsible for servicing the debt” came about in the “late seventeenth century” through the issuance of “tangible securities traded in secondary, liquid markets with prices and yields visible on public exchanges.”People have long wanted a way to securely store wealth today in favor of future consumption tomorrow, governments have long looked for ways to borrow existing wealth, and financiers brought the two together. This isn’t to defend the public borrowing as much as it’s to say that it’s not something that arose in the 20th century.

The Founding

Going back to the U.S.’s founding, Salsman writes that “Alexander Hamilton and Thomas Jefferson differed pointedly over whether government should borrow at all, whether it should fully pay its debts (even when trading at a discount), whether the currency in which debts were to be repaid should be gold backed and of uniform consistency nationally or instead be cancelled, and whether private banking was legitimate. On all such questions Hamilton answered in the affirmative, Jefferson in the negative.” Based on Salsman’s analysis, Jefferson would be grouped with the pessimists, and Hamilton as mentioned with the realists.

Hamilton felt a national debt would be very additive to the U.S.’s early fortunes as a sign of the new country’s strength. Issuance of debt would “show the world the United States could and would pay its debts.” This was a particularly important signal to send to creditors analyzing what was again, a new country. Salsman is very clear that Hamilton wasn’t a “proto-Keynesian optimist” as much as the world was then, as it is now, uncertain. If the U.S. was seen as creditworthy, borrowing for national defense (defense spending a legitimate function of government in the eyes of realists) during times of war would be easier.

David Hume

At the same time the great philosopher David Hume said “sovereign borrowing breeds ‘poverty,’ national ‘impotence,’ and ‘subjection to foreign powers.'” Salsman classifies David Ricardo as a debt pessimist too, but acknowledges the differences within the group. Ricardo felt, like your reviewer, that “public spending itself constitutes the real economic burden, regardless of how funded, because it deprives private actors of the saving, capital accumulation, and productivity gains necessary for long-term prosperity.”  Absolutely. Government spending brings instantaneous injury to the economy for it depriving the productive of resources that would otherwise be put to higher use.

On the optimist side Robert Malthus believed in the impossible whereby supply could exceed demand, so he viewed deficit spending “as a ‘cure’ for gluts.” Interesting there is that Malthus apparently knew, like Ricardo, that the spending dissolved wealth, but still felt it was necessary “to dissipate ‘excess’ aggregate supply.” A.C. Pigou was more sanguine about British borrowing since so much of the debt was owed within Britain itself.And to show how much Pigou influences public debt optimists today, Salsman adds that he cheered deficit spending that would redistribute the wealth of the rich to the middle class and poor “because they save less.” As Pigou put it, “The bulk of this money is pretty sure to be expended on the purchase of consumption goods, and so indirectly in creating money income for producers of those goods.”

Ok, per Pigou, the rich should be fleeced, then paid back a percentage of what was taken from them through consumption. Naturally Pigou’s analysis ignored that his scenario included no production, and worse, no investment in future production; investment that would have been more likely had the rich been able to hold onto their wealth in the first place. Fear not, it gets worse.

Secular Stagnation

Lawrence Summers’ hero Alvin Hansen, he of “secular stagnation” fame, felt “prodigality may be the appropriate social virtue in a society in equilibrium at underemployment.” Forget that savings never sit idle, and also forget that no economy can progress without the savings that fund innovation, to Hansen government issuance of debt with an eye on spending was a “means of providing adequate liquidity in a growing economy.”

Abba Lerner felt debt was ok since “we owe it to ourselves,” plus the debt wasn’t burdensome in a broad sense because debt payments are “received by the citizens and government bondholders.” This is perhaps what helped inform Keynes’s line about the “fools” in the economics profession who were allegedly carrying the banner for his views. For an economist to presume no present burden when government is extracting capital from the private economy is the height of foolishness. Fear not, however, it gets even stupider.

Thomas Piketty loves wealth redistribution while bemoaning debt because “it usually has to be repaid.” Piketty would prefer to “tax the wealthy rather than borrow from them.” To this endlessly naïve economist, when governments sell debt to the rich, the rich grow wealthier through ownership of bonds and their income streams. You can’t make this up, except that you don’t need to. Never forget that Piketty isn’t a fan of private investment either because in the process of capitalizing companies (on the way to voluminous opportunity creation for individuals), investors are getting rich in the process if their courageous investments bear fruit. When they succeed, it’s the rich getting richer.

Misesian Fresh Air

On the other hand, Ludwig von Mises was a breath of fresh air. Mises all-too-correctly pointed out that “Keynesian economics and the political process are almost entirely focused on short-run demand-side concerns while largely ignoring the long-run importance of economic productivity.” Precisely. Along these lines, a few years ago Alan Blinder penned an op-ed for the Wall Street Journal in which he talked up the allegedly positive demand implications that would spring from increased government spending. What he missed is that demand is always and everywhere the result of production first, and production is more abundant the more that savings and investment power enhancements that boost individual productivity.

Yes, Keynesianism is all about short-term demand, all at the expense of much greater production (and much greater subsequent demand) in the long-term given the truth that savings author progress. Demand is the easy part, and it’s not something economists or politicians should spend any time worrying about. Much thanks go to Salsman for compiling countless opinions on the subject of spending and debt. There are more to come, but this review will only scratch the surface.

Back to government spending in a broad sense, Salsman adds that government borrowing was relatively cheap in the 18th and 19th century (“typically 3-6 percent”) because “most sovereigns were fiscally prudent.” Other than issuing larger sums of debt during war, Salsman indicates that they “otherwise eschewed chronic budget deficits.” Of greater importance is that governments used “various pre-commitment devices – sinking funds, annuities, and the gold standard – to assure creditors of timely repayment in money that would hold its value over time.”

There’s no real mystery here behind the government debt surge. Governments could borrow because investors trusted the quality of the debt securities paying out income streams in currencies backed by gold, but most important was that good money correlated with surging investment, and subsequent economic growth.

Debt doesn’t power growth as much countries with growing economies can issue lots of debt. Add to all that a theme that Salsman returns to throughout Public Debt: “Only a state can legally compel tax paying, which is crucial to its capacity for debt servicing.” Governments can borrow fairly easily precisely because they can ultimately use force to extract payment on their debt from others. Debt servicing is logically much easier if the people are flush. The latter is important with the book’s future direction in mind.

Credit Worthy

Indeed, rich countries can borrow with ease. Poorer ones struggle to borrow, if at all. If readers doubt this, they need only pull up lists of the nations with the most debt versus the ones with very little. The big debtor nations are predictably the richest countries, while the ones with little debt are almost invariably the poorest. It’s worth repeating that this isn’t to say that deficits and debt power economies forward. Of course they don’t.

Government spending amounts to politicians misallocating precious resources that would otherwise be directed to their highest use by the profit motivated. Government spending is a huge tax on progress.

At the same time, politicians exist to spend. And if we don’t provide them with enough of our earnings, they’re happy to borrow against our future earnings. It’s much easier for them to borrow if investors feel the future earnings of the citizenry will be abundant, and easily taxable. Just as rich individuals and companies can borrow with ease, so can politicians who rule countries populated by the rich.The above truth brings us to one of many myths slayed by Salsman in his excellent book. Reinhart and Rogoff’s alleged insight that countries tip toward decline once their debt to GDP ratios move beyond 90 percent is accepted wisdom within the commentariat. Except that it’s not true. As Salsman reveals throughout Public Debt, England’s debt/GDP ratio reached the 261 percent mark in 1819, but far from it foretelling the country’s long decline, England was on the verge of a century of staggering growth. Considering the U.S., its debt/GDP ratio blew past 120 percent during World War II, only for the U.S. to experience pretty impressive post-war prosperity.

What To Do?

What all of this speaks to is that while debt isn’t on its own the source of country decline, socialistic responses to heavy debt loads are. High levels of taxation are what cause stagnation, and so do efforts by politicians to reduce their debt burdens sans payment. In pressing the previous point with great regularity, Salsman began to soften my broad dismissal of deficits. To me, they still don’t matter in a normal sense simply because the spending is the problem.

Bolstering the previous point for this reviewer, Salsman brings countless economic names from the past back from obscurity, including Italian aristocrat De Viti De Marco who asserted crucially that “the purchase of a public bond is voluntary, hence open to a self-interested, utility-maximizing calculus, while the payment of a tax is compulsory.” De Marco’s observation is one I’ve often made; as in it’s better if governments pay for the right to waste money than it is for them to take it from the productive without compensation. Again, deficits don’t matter. It’s the spending that does. That’s the tax, how the money is raised immaterial.

At the same time, Salsman’s exhaustive discussion of debt once again forced a rethink, and caused me to partially change my mind. No doubt spending is the real tax, but the problem with deficits is that while the borrowing is an act of government expropriating precious capital in order to waste it, we don’t feel it right then. No doubt we do soon enough, no doubt the waste leads to reduced innovation and lower pay, but it’s not seen as quickly and intimately as a direct tax. In that case, wouldn’t taxation meant to pay for all government spending free of borrowing force more prudence on politicians whose spending would fleece voters with tangible immediacy?

Along the same lines, the way in which public debt optimists have long dismissed the creditors, and worse, called for default on creditors (see Piketty), was a reminder of another horror of deficits; as in how politicians dispose of them.

Enter Keynes

Indeed, as one can imagine in a book about government debt, Salsman writes about how politicians go about shrinking it; albeit on the sly. This brings us to John Maynard Keynes. Though Salsman is very critical of the British economist, he indicates that “arguments for perpetual deficit spending and public debt accumulation come not from Keynes but Keynesians.” Those “fools” once again. While Keynes was in no way a public debt pessimist, “he never counseled unmitigated deficit spending.” More notable about Keynes is that while he had no problem with debt per se, he loathed creditors and sought “the euthanasia of the rentier” class.

Most important about Keynes from a public debt perspective is that in describing ways for governments to shrink their debt, he invariably offered up false solutions the harm of which would extend well beyond the supposedly “immoral” creditors.

Explaining Keynes’s suggested ways to default on debt, Salsman said governments could do so “explicitly (by a repudiation, or deliberate non-payment), implicitly (by inflation), and by a taking (levy on rentiers).” Governments have regularly employed the first two, and did so long before Keynes was prominent. Yet here’s the problem with deficits and debt: while government debt is an effect of the wealth produced by the citizenry, governments often respond the wrong way, thus adding insult to the wasteful borrowing/spending injury.

First up is repudiation or deliberate non-payment. To show just how delusional and contradictory are Keynesian debt optimists, they love the extra government spending that debt enables, but loathe the creditors who make the debt possible. Their position is impossible.

At the same time, I’ve long liked the idea of debt “haircuts” or repudiation not out of dislike for the creditors as much as maybe one or the other will cause creditors to skip buying government debt altogether. Arguably the latter would be more prevalent today if institutions like the IMF weren’t so ready to bail out governments, which has long been a way for governments to bail out banks and other creditors with high exposure to government debt.

Devaluation

Of course the much more problematic form of debt default or repudiation is devaluation of the income streams that debt securities pay out. Amazingly, Keynes well understood the horrid implications of devaluation, yet his dislike of creditors trumped the pain experienced by everyone thanks to devaluation. As Keynes so correctly put it, devaluation “is the form of taxation which the public find hardest to evade.”

While there are myriad ways for the citizenry to get around excessive headline rates of taxation, when governments repudiate debt through currency devaluation, everyone suffers. People earn dollars, pounds, euros, yen, and all manner of other currencies, which means devaluations meant to reduce government debt mean everyone suffers a shrinking paycheck. Much worse, the devaluation is a repellent to the very investors and savers whose capital commitments author economic progress to begin with.The point of all this is that deficits in isolation trump direct taxation as a way for governments to raise funds simply because they’re paying for the right to consume precious capital, as opposed to expropriating it without compensation for those fleeced. The problem is that deficits don’t occur in isolation. Or they don’t always. Precisely because governments want to borrow and spend sans the long-term implications of doing just that, we all frequently suffer the cruel tax that is devaluation so that wasteful governments can shrink what they owe.

To those who think the U.S. has never defaulted, think again. Even Reinhart and Rogoff described FDR’s 1933 decision to devalue the dollar from 1/20th of an ounce of gold to 1/35th as a debt default, and looked at in terms of the dollar since then, it’s apparent that the U.S. Treasury has been rampantly defaulting ever since. As of this writing a dollar buys 1/1200th of a gold ounce. America’s creditors have long suffered defaults, and the American people have had to accept the slower growth that is the tautological result of “implicit,” or “stealth” default. The seen is that despite Treasury’s horrid oversight of the dollar the U.S. remains the richest, most dynamic country in the world. But imagine the unseen. Imagine where the U.S. economy would be today absent the serial dollar devaluations that have needlessly shrunk investment that would have otherwise been directed to mass experimentation ahead of stunning advance.

Why Deficits are Bad

So, at risk of being repetitive, Salsman has me convinced of the horrors of deficits, but not for the reasons that compel most. Spending remains the problem. The problem with deficits is once again the socialistic responses of governments whereby they make everyone pay the massive, economy-sapping tax that is devaluation as a way of shrinking what they owe.

All of this speaks to another area of disagreement with Salsman ahead of the ones that will conclude this review. He correctly notes that the Keynesian “demand-side model was so discredited in the 1970s” in concert with vindication for supply-side economics, which “delivered such positive financial-economic results in the 1980s and 1990s.”

There’s no dispute that supply side won precisely because the latter is a tautology: when the tax, regulatory, tariff, and debased money barriers to production are shrunk, booming economic growth is the result. Supply side makes perfect sense, but it’s arguable that supply-siders have become ridiculous to the point that their policies have become self-suffocating. Indeed, supply siders, in their worship of the rising revenue implications of tax cuts, have forgotten that government spending is the biggest tax of all.

And in ignoring rising government spending, they’ve allowed the genius of their tax cut, deregulation, free trade, good money policy mix to be neutered. Figure that the posthumous John F. Kennedy tax cuts were great for economic growth, and as a result, gifted Treasury with a revenue surge in 1965. The latter gave Congress the means to for instance introduce Medicare; a program that was initially funded with $3 billion. The problem modernly is that a program which once cost $3 billion is projected to cost $1 trillion by 2025. Taking nothing away from the good of supply side policies, if not met with spending cuts, they’re not nearly as effective as they otherwise would be.

The Supply Side Problem

The problem with supply siders isn’t their belief that deficits don’t matter, but it’s a major problem their belief that government spending doesn’t matter. This reviewer wishes Salsman had spent more time on this point. As a deficit realist, Salsman plainly doesn’t like government expanding beyond strict constitutional limits. Ok, but rising federal revenues have enabled just that, not to mention that it’s much easier for governments to issue new debt if incoming tax revenues are abundant.Moving on from this quibble, Public Debt is wildly informative, and once again a magisterial myth slayer. Salsman spends a lot of time on Nobel Laureate James Buchanan’s contributions to the debt story, contributions that were important. He showed the “public choice” side of this whereby politicians act in what they deem their self-interest which is to spend with abandon.

At the same time, the public debt pessimist in Buchanan presumed to know a number, or a “critical threshold” after which government debt would cause economic decline. Buchanan offered a “moral case” for repudiation that supports Salsman’s wondrous contention previously mentioned that the pessimists and optimists are more alike than they know. Both sides endorse clipping the creditors who make all the waste possible.

As to magisterial myths slayed, through England and the U.S. Salsman as previously mentioned shows that if governments don’t respond to major debt with excessive socialism, it’s not an economy killer as Reinhart and Rogoff contend, and as did Buchanan. While England once again had a debt that was 261 percent of GDP as of 1819, by 1914, amid booming economic growth, the number had declined to roughly 35 percent.

The U.S. ratio as previously mentioned grew beyond 120 percent during World War II, but it shank to 35 percent by 1982. Japan presently has a debt/GDP ratio of over 225 percent. That it does exposes the absurdity of Krugman’s contention that deficit spending boosts growth, but at the same time it exposes as faulty the Reinhart/Rogoff magic number. Though not booming as it once did, Japan remains a very rich country. Rich countries can easily borrow. The problem is, as always, the spending. Imagine how much more advanced Japan’s economy would be today had its political class not responded to the country’s early 1990s recession with so much waste.

Deficits and Interest

Regarding the wildly popular view that deficit spending drives up interest rates, Salsman makes a mockery of what’s plainly absurd. Tracking the deficit spending of G-7 nations, Salsman finds that amid average debt/GDP ratios of 37.7 percent in 1980, the average interest rate on 10-year government bonds paid by those countries was 11.9 percent. Fast forward to 2000 when the debt/GDP ratio for those same countries was 74.5 percent, the average rate was 5 percent. In 2015, with the debt/GDP ratio having surged to 116 percent, the average 10-year government bond coupon was 1.3 percent. Though it’s common to say that rising deficits correlate with rising rates to service those deficits, there’s no evidence that the latter is true. Salsman’s book is beyond valuable, yet at the same time his statistics unearth another quibble.

On the same page that he provides the above numbers, Salsman contends that central banks “now also act as lenders of last resort to profligate governments,” and that the “reach of central banking expands virtually without limit.” Salsman’s explicit contention is that politicians created central banks to enable their borrowing given his oft-stated view that there’s “no effective limit on central banks’ power and willingness to create fiat money.”

This is not compelling. Sure enough, in communications with Salsman he’s acknowledged that most vastly overstate the power of the Fed, and central banks in general. How then could that which interacts with increasingly neutered banks have so much economic influence, let alone enable broad debt issuance by governments? My view here is that Salsman reverses causation. Central banks that buy a lot of government debt are a certain effect of an otherwise powerful economy, as opposed to an enabler of government debt issuance.

My evidence is Salsman’s very own mention of England’s adoption of a gold standard after the Glorious Revolution. Once a desperately poor country, the issuance of good money authored an economic surge that enabled borrowing that subsequently enabled England’s wars, and its colonization of one quarter of the world’s land mass.

In Salsman’s case, he cites the establishment of Britain’s Bank of England in 1694 as the facilitator of Britain’s “financing yet another war with France.” Ok, but if all it took for France to fight toe to toe with England was a central bank, then it could have mimicked Britain’s establishment of one. In truth, what enabled England’s warring was economic growth that gifted its politicians with abundant revenues, not a supposed lender of last resort to governments. Salsman himself references central bank independence as “a mere shibboleth,” which reminds us that any purchasing of debt amounts to one government entity buying from another.

Reducing all of this to the absurd, if central banks could truly enable reckless spending, the central banks of Nigeria and Bahamas could theoretically monetize massive government growth, as could the creation of a central bank in Haiti. But nothing like the latter would materialize simply because central banks can’t alter economic reality. If a government is “desperate for funds,” why the need for a central bank in the first place? What could a central bank do?

Going back to his assertion that there’s “no effective limit on central banks’ power to and willingness to create fiat money,” Salsman is making somewhat of a Keynesian statement himself (in fairness, members of the Austrian School regularly commit the same error) in presuming that central banks, for being central banks, can fix the alleged problem of credit scarcity. But they can’t. Individuals, businesses and governments seek access to “central bank notes” not to stare at the money, but instead do so because of what “money” can be exchanged for.

Credit is always and everywhere created in the private sector; money just a measure that facilitates its exchange and its direction toward future wealth creation. In short, the limit on central banks is that governments, like individuals and businesses, want to exchange money for real things. None of this means that government always does a good job with money, but it does mean central banks are a sideshow contra Salsman and other central bank critics. Much as central bank critics might wish otherwise, and much as the very existence of central banks is an offense to common sense, governments themselves ultimately decide whether to issue good or bad money, not central banks as is so commonly assumed.

Democracy and Deficit

Salsman is not a friend of democracy, and with good reason. Like most reasonable thinkers, he prefers a constitutionally limited federal republic that has very little power; spending or otherwise. Unrestrained democracy is unquestionably bad simply because it empowers the mob to theoretically vote all manner of benefits to itself on the backs of others. Where we part ways somewhat is in his assertion that democracy is the source of excessive spending.

Politicians who exist to spend. If the money’s there, they’ll spend it. India is a democracy, but the size of its debt isn’t very notable. What ultimately powers spending and borrowing is the wealth of the citizenry that sadly gifts politicians with surging revenue streams that enable endless spending and borrowing. Rich countries can borrow, and they do. The fix is constitutionally limited government. Always.

Lastly, Salsman asserts that “political elites’ electoral incentive is to maximize spending, minimize taxation, and borrow or print money to plug the gap, while treating wealth minority groups and future generations as fiscal commons worth exploiting.” This doesn’t ring true.

Indeed, to separate direct taxation from borrowing and spending is to make a distinction without a difference. Either way, the damage done by government is immediate since government spending (even that which is constitutional) amounts to instantaneous mis-allocation of precious resources. As for the popular notion that deficits burden future generations, it’s accepted wisdom that is also utter nonsense. The burden isn’t debt that can easily be grown out of if government is limited.

More realistically, we all suffer government spending in the here and now thanks to greatly reduced progress wrought by government consuming the resources necessary for advance. As for future generations, the true burden of spending in the here and now is that experimentation and advance that would have otherwise taken place in the past, only to set the stage for greater advance in the future, hasn’t happened.

The burden we leave for those in the future is a world that is much less advanced than it otherwise would be. The spending burdens future generations with work and experimentation that would have otherwise already been completed, and that will detract from much more productive toil had government not previously wasted resources. Something tells me Salsman knows this, but the idea of debt as “someone else’s” burden is very much ingrained.

Still, the minor quibbles should in no way be taken as a reason for readers to not purchase The Political Economy of Public Debt. Richard Salsman has written an endlessly excellent book that expertly tells the story of debt and its implications. Readers will come away exponentially more knowledgeable, and with minds that have been changed at the very least a little, but most likely a lot.

Readers will come away exponentially more knowledgeable, and with minds that have been changed at the very least a little, but most likely a lot.

John Tamny

John Tamny is a Forbes contributor, editor of RealClearMarkets, a senior fellow in economics at Reason, and a senior economic adviser to Toreador Research & Trading. He’s the author of the 2016 book Who Needs the Fed? (Encounter), along with Popular Economics (Regnery Publishing, 2015).

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Dr. Carson Compassionately Spoke the Truth About Black Poverty

Dr. Ben Carson being under fire for saying “poverty is a state of mind” during an interview is a prime reason why black Americans should end their insane loyalty to Democrats. 

In essence, Dr. Carson compassionately gave his fellow blacks a crucial key to personal success and overcoming poverty. And yet, Democrat and Leftist self-proclaimed advocates for black empowerment rushed to silence him; beating the crap out of him in the media. As a black man, I am so frustrated.

Up until around age 9, I was raised in the Baltimore projects. My mom, dad, four younger siblings and I were so excited moving from our leaky roof ghetto into a brand new 11 story government high-rise.

In a very short time, the new building became a huge ghetto; elevators out-of-order much of the time due to vandalism. The stairwells smelled of urine and were dark due to busted light bulbs, perfect for muggings. After school walking up to our 6B apartment, the sound of me walking on broken wine bottles echoed off the concrete walls. A few residents kept their apartment nice. The majority had no pride in keeping their no-skin-in-the-game free housing nice.

At a very young age, I realized taking the poor out of the ghetto was not enough when their ghetto mindset was alive and well.

Despite free housing, food and health-care, the vibe of the projects was angry and violent. Thank God in 1952, my dad broke the color barrier to become a Baltimore City firefighter. Our family moved out of the projects into a black suburban community in Pumphrey, MD. Sadly, my cousins who lived in fatherless households stayed in the projects, enslaved to government. Government is a poor substitute for real daddies. And yes, I felt my cousin’s daddy envy. Their tragic lives were filled with drug and alcohol abuse, out-of-wedlock births, more poverty and AIDS.

Incredibly, most of my cousins died extremely young; never experiencing the joy of personal achievement or pursuing a dream. Insidiously, government provided just enough to get by and keep them voting for Democrats.

In major cites controlled by Democrats like Chicago, Baltimore and Washington DC, I see the same cycle of government dependency and poverty I witnessed while growing up, but far worse.

Meanwhile, Democrats and Leftists are doing the same thing to Dr Carson that they do to anyone who dares to compassionately offer real solutions to ending black poverty. Democrats and Leftists seek to silence and destroy this extraordinary black role model and advocate of real black empowerment.

Democrats and Leftists despise blacks who have achieved extraordinary success the old fashion way by earning it; businessman extraordinaire Herman Cain, Supreme Court Justice Clarence Thomas, world renowned retired neurosurgeon Dr Ben Carson and former secretary of State Condoleezza Rice to name a few.

These successful blacks expose the Democrats’ and Leftist’s lying narrative that America will always be a hellhole of racism for blacks in which blacks’ only hope is to continuously vote for Democrats to keep evil white racist Republicans and conservatives at bay. The Democrats’ and Leftist’s scheme is extremely destructive and evil.

Please, please, please Dr. Carson, continue telling the truth.

Yes, it is a Virtue to Reject Charity by Jeffrey A. Tucker

There is a moment I found a bit startling in the new Anne of Green Gables series on Netflix. The farm is in trouble and the bank is talking foreclosure. The family starts to panic. Anne suggests that many people will chip in and help the family through these hard times.

The mother reacts with firmness and conviction: “Absolutely not. We do not accept charity.”How old fashioned! The statement alone reveals we are talking about the past here. I vaguely recall people in my own extended family – at family reunions in West Texas, sitting around shelling peas – saying something similar. It was a matter of pride, even morality.

When was the last time you have heard that assertion? I personally can’t remember hearing that in many years.

Maybe it is time to bring back that ethos and ethic.

What we have here is a principle at work, a matter of character. Don’t live at other’s expense. Make your own way in this world. Keep your independence and retain your dignity.

Is there any virtue here? I would suggest so. It is a forgotten virtue, to be sure, but a virtue nonetheless.

Charity with Dignity

The family in the story truly needed help. Rather than beg, they gathered up many of their possessions and took them to town to sell them. Merchants had heard about the family’s need, so some actually overpaid as a way of helping without letting the family know what was going on.

This is a great way to be charitable without letting the person know about it, which is yet another expression of virtue. The Bible tells people to give unto others without letting the left hand know what the right hand is doing – which is to say, don’t congratulate yourself and likewise expect others to praise you for your generosity. This is what the neighbors did.

By the same token, the shame associated with begging is ever-present in the Bible. In the parable of the unrighteous steward, the guy complains that he is been released from his master, but he is too weak to dig and “too ashamed to beg.”

Ashamed! Can you imagine? Social welfare professionals have been trying to remove the stigma of welfare for a century. But let’s face: it will never entirely go away. That might even be a good thing.

Don’t Be a Beggar

The story of Anne is set in Canada, but the attitude behind it feels quintessentially American. It is fundamentally a character trait forged in a setting of freedom. You encounter this often in the Little House books too, this attitude that it represents something of a humiliation to accept charity from others.

Even when the opportunity is there, there once seemed to be a cultural commitment against dependency, against living off others. Think of the old term hobo. The hobo ethic was never to beg – that’s what bums do – but rather to completely avoid all forms of dependency, even the need for a comfortable bed and nice clothes, and to travel and work small jobs to get enough to live and then move on. The hobos believed that this was the only way to stay free.In the American spirit, the hobo was making a dignified choice. The bum? Never.

Even when the redistributionist state came along, the American spirit of individualism rebelled.

Rose Wilder Lane, the daughter of the author of those books, writing at the height of the New Deal, put it like this:

The spirit of individualism is still here. The number of us who have been out of work and facing actual hunger is not known; the largest estimate has been twelve million. Of this number, barely a third appeared on the reported relief rolls. Somewhere those millions in need of help, who were not helped, are still fighting through this depression on their own. Millions of farmers are still lords on their own land; they are not receiving checks from the public funds to which they contribute their increasing taxes.

Millions of men and women have quietly been paying debts from which they asked no release; millions have cut expenses to the barest necessities, spending every dime in fear that soon they will have nothing, and somehow being cheerful in the daytime and finding God knows what strength or weakness in themselves during the black nights.

Americans are still paying the price of individual liberty, which is individual responsibility and insecurity.

This view is of course routinely lampooned in the progressive press, overtly by socialists like Elizabeth Warren but implicitly in venues like the New York Times and National Public Radio. Their voices drip with disdain for what they say is the myth of “rugged individualism,” a phrase popularized at the end of the 19th century. It is the supposedly cruel and unrealistic idea that people should get by on their own wherewithal.

The idea behind this phrase is to celebrate individual achievement and to suggest that it is a compromise of your potential as a human being to expect others to care for you if it is not necessary.Too often the idea has been caricatured, at least since the New Deal sought to break down the social stigma of dependency on government. For example, maybe people associate this with selfishness. It’s not true. There is a paradox that the more independent you are, the more you are willing to step up and help others. As Lane says: “We are the kindest people on earth; kind every day to one another and sympathetically responsive to every rumor of distress. It is only in America that a passing car will stop to lend a stranded stranger a tire-tool.”

This is not living off others. This is benefitting from the kindness of others when it is necessary and helpful. You accept it because you would certainly do the same for them. And you don’t expect it from others. And you certainly don’t craft your life around the idea that everyone or anyone is morally obligated to help you when you encounter misfortune.

Help Yes, Dependency No

It’s not complicated: you accept help when necessary but don’t make a habit of it. My own mother, who comes from the stock and heritage that celebrated self-reliance, used to say to me, very simply: “never be beholden.” If you owe others, you have given up that most precious thing, your independence, which means giving up some of your freedom.

That includes owing debt. CNN reports: “Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York.” Meanwhile, 44% of Americans don’t have $400 cash that they can throw at an emergency expense.

Private creditors are bad enough. It is surely worse to be beholden to government. Right now 43 million Americans are on food stamps. That is not a mark of national pride. And this is true even in times when groceries are absurdly cheap and available by any historical standard.

Once you accept the largesse, you have a political investment in continuing it. Your loyalties gradually change.

People justify this based on observing how much they are paying into the system. It pillages them with every paycheck, so they might as well get something back. No matter how much welfare they pay in, they can never take enough out to make the bargain work out equally. For most people, this is surely true.Once you accept the largesse, you have a political investment in continuing it. Your loyalties gradually change. The state becomes your benefactor. Your sense of self reliance is compromised.

Do you see the vicious cycle? You are forced to pay in, so you have no moral resistance about taking out when the time arises. Pretty soon you find yourself part of the Bastiatian calculus: the state becomes the great fiction by which everyone tries to live at everyone else’s expense.

In service of people’s dignity, programs like food stamps ought to be abolished, as much as that would upset the corporate agricultural interests that are forever lobbying for this racket to continue.

It seems that government does everything possible to rope people into the role of dependent these days. Whether it is student loans, Obamacare, or just guilt tripping us all to love the highways and glorious national defense we get for our tax dollars, we are supposed to feel forever on the hook, forever beholden. Forever indentured.

This is not the attitude of a free people.

A Word for Individualism

To hear about “rugged individualism” is a bit strange for us today. We have a vague sense that people used to believe this. We feel mischievous even to sense that there might be a grain of truth in it. The attitude built the world’s most prosperous economy. It gave us new inventions. It created the most dynamic, thriving, progressing society in history, and this became a model for the world.

To be sure, there is often a confusion over the phrase self-reliance. It does not mean to grow your own food, make your own furniture, and walk instead of drive. It has nothing to do with the technology you use, and there is a sense in which the market and the division of labor it creates makes us all deeply dependent on each other. That is a beautiful thing.

The point is that market dependency is rooted in exchange and mutual benefit. We go into every exchange with the freedom to change our minds, and we benefit from exchange as much as the other party. We aren’t doing favors for each other. We cooperate together in our own interest.Self-reliance really means something else. It means not being on the hook for a favor someone else did you or being expected to live in a constant state of owing others for some act of benevolence on their part. It certainly rejects forcing others through the state to be productive so that you can get a free ride.

Pay Your Debts

My mother is right. It’s not good to be beholden to others. This idea was once baked into our institutions. Government had no charity to offer anyone. Your debts had to be paid. Americans didn’t rush to create the cradle-to-grave welfare state. The thing existed in Europe long before it came to our shores. Even when we created the institutions, people were reluctant to use them.

And it’s not just about the compromise of your individualism that you make when you accept welfare. It is also about the annoyance others feel when forced to pay for it. Both sides are degraded in this forced wealth transfer.

For our ancestors, it was a matter of personal character.

This is the underlying thinking behind the quote that Ayn Rand’s Atlas Shrugged worked to forge into a life doctrine: “I swear, by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine.”It’s best to think of that line, not as a hard religious doctrine but just very solid life advice, a good bedrock practice for how to think of yourself in relation to others. With that idea in place, all the rest of the virtues fall into place.

What Can We Do About It

The idea of rejecting charity means that you should take charge of your own life, regardless of pressures around you to do otherwise. This is possible even today. It’s true that you are forced to pay into the system. But no one is forcing anyone to take food stamps, to live on handouts, to be dependent on government programs. It’s not so easy to refuse them anymore. The struggle is real. Still, this is something you can control – unlike national politics.For our ancestors, it was a matter of personal character. It is always easier to take the more temporarily lucrative path and the safer route. Maybe you feel like a chump for turning down government money when it is so easily available. But if you relent, what are you giving up in the exchange?

We don’t need to bring back the shame that comes with living off others. Anyone who does that when it is not absolutely necessary knows in his or her heart that there is a better way. If we can choose the better path, we should.

If everyone did this, the welfare state would be de facto abolished overnight.

Jeffrey A. Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

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President Trump’s ‘Taxpayer First’ Budget

President Trump’s first proposed budget shows respect for the people who pay the bills. The administration’s proposal reverses the damaging trends from previous administrations by putting our nation’s budget back into balance and reducing our debt through fiscally conservative principles, all the while delivering on President Trump’s campaign promise not to cut Social Security retirement or Medicare. The budget’s combination of regulatory, tax, and welfare reforms will provide opportunities for economic growth and creation. Get the facts about President Trump’s budget.

BALANCE & CUTTING SPENDING

Unlike any budget proposed by the previous administration, the Fiscal Year 2018 Budget achieves balance within the 10-year budget window and begins to reduce the national debt within that same window.

The policies in this Budget will drive down spending and grow the economy. By 2027, when the budget reaches balance, publicly held debt will be reduced to less than 60 percent of GDP, the lowest level since 2010.

NO CUTS TO MEDICARE & SOCIAL SECURITY

The President’s Budget does not cut core Social Security benefits. And the President is fulfilling his presidential campaign promise not to cut Medicare benefits.

SAVING TAXPAYERS MONEY

President Trump’s budget saves the American people billions of dollars through welfare, tax, and regulatory reform.

SUPPORTING OUR MILITARY

The President is requesting $54 billion, or 10 percent, more than the defense level President Obama signed into law for both the 2017 CR and the 2018 budget cap. This increase balances the need to rebuild the military with the need for disciplined, strategy-driven, executable growth.

KEEPING AMERICANS SAFE

The Budget includes over $2.6 billion in new infrastructure and technology investments in 2018 to give CBP frontline law enforcement officers the tools and technologies they need to deter, deny, identify, track, and resolve illegal activity along the border.

PUTTING AMERICAN FAMILIES FIRST

President Trump’s budget provides national paid family leave for the first time in the history of this country.

Find out more information about President Trump’s Taxpayer First Budget at WhiteHouse.gov/taxpayers-first.

Here are the 66 programs eliminated in President Trump’s budget:

Agriculture Department — $855 million

  • McGovern-Dole International Food for Education
  • Rural Business-Cooperative Service
  • Rural Water and Waste Disposal Program Account
  • Single Family Housing Direct Loans

Commerce Department — $633 million

  • Economic Development Administration
  • Manufacturing Extension Partnership
  • Minority Business Development Agency
  • National Oceanic and Atmospheric Administration Grants and Education

Education Department — $4.976 billion

  • 21st Century Community Learning Centers
  • Comprehensive Literacy Development Grants
  • Federal Supplemental Educational Opportunity Grants
  • Impact Aid Payments for Federal Property
  • International Education
  • Strengthening Institutions
  • Student Support and Academic Enrichment Grants
  • Supporting Effective Instruction State Grants
  • Teacher Quality Partnership

Energy Department — $398 million

  • Advanced Research Projects Agency—Energy
  • Advanced Technology Vehicle Manufacturing Loan Program and Title 17 Innovative Technology Loan Guarantee Program
  • Mixed Oxide Fuel Fabrication Facility

Health and Human Services — $4.834 billion

  • Agency for Healthcare Research and Quality
  • Community Services Block Grant
  • Health Professions and Nursing Training Programs
  • Low Income Home Energy Assistance Program

Homeland Security — $235 million

  • Flood Hazard Mapping and Risk Analysis Program
  • Transportation Security Administration Law Enforcement Grants

Housing and Urban Development — $4.123 billion

  • Choice Neighborhoods
  • Community Development Block
  • HOME Investment Partnerships Program
  • Self-Help and Assisted Homeownership Opportunity Program Account

Interior Department — $122 million

  • Abandoned Mine Land Grants
  • Heritage Partnership Program
  • National Wildlife Refuge Fund

Justice Department — $210 million

  • State Criminal Alien Assistance Program

Labor Department — $527 million

  • Migrant and Seasonal Farmworker Training
  • OSHA Training Grants
  • Senior Community Service Employment Program

State Department and USAID — $4.256 billion

  • Development Assistance

Earmarked Appropriations for Non-Profit Organizations

  • The Asia Foundation
  • East-West Center
  • P.L. 480 Title II Food Aid

State Department, USAID, and Treasury Department — $1.59 billion

  • Green Climate Fund and Global Climate Change Initiative

Transportation Department — $499 million

  • National Infrastructure Investments (TIGER)

Treasury Department — $43 million

  • Global Agriculture and Food Security Program

Environmental Protection Agency — $493 million

  • Energy Star and Voluntary Climate Programs
  • Geographic Programs

National Aeronautics and Space Administration — $269 million

  • Five Earth Science Missions
  • Office of Education

Other Independent Agencies — $2.683 billion

  • Chemical Safety Board
  • Corporation for National and Community Service
  • Corporation for Public Broadcasting
  • Institute of Museum and Library Services

International Development Foundations

  • African Development Foundation
  • Inter-American Foundation
  • Legal Services Corporation
  • National Endowment for the Arts
  • National Endowment for the Humanities
  • Neighborhood Reinvestment Corporation
  • Overseas Private Investment Corporation

Regional Commissions

  • Appalachian Regional Commission
  • Delta Regional Authority
  • Denali Commission
  • Northern Border Regional Commission
  • U.S. Institute of Peace
  • U.S. Trade and Development Agency
  • Woodrow Wilson International Center for Scholars

RELATED ARTICLES: 

Why Washington Hates Trump’s Budget

Finally, a Budget That Slashes Funding at Education Department

5 Things Congress Can Do to Get a Budget That Controls Spending

9 Key Takeaways From Trump’s First Budget

RELATED VIDEO: Romina Boccia joins CNBC’s “Closing Bell” to talk President Trump’s budget.

Globalism: Persuading the Individual to Stop Being an Individual

If society understood the reality of collectivism instead of the promise of collectivism then their support for collectivism would vanish.

The elite globalist leaders selling collectivism know this to be true and so they have had to rebrand collectivism as Globalism. Songs are written about globalism – John Lennon’s classic song “Imagine” is the globalist anthem. The successful marketing of collectivism requires the names to change from already rejected Communism and faltering Socialism (think Venezuela) to the promise of a New World Order renamed GLOBALISM that disingenuously pledges social justice and income equality.

Globalism is the new word for the old lie about collectivism – that surrendering individual rights and national sovereignty will deliver social justice and income equality.  

Philosopher Ayn Rand understood the sinister nature of collectivism and and wrote extensively about socialism/communism and how it persuades the individual to stop being an individual:

“Socialism is the doctrine that man has no right to exist for his own sake, that his life and his work do not belong to him, but belong to society, that the only justification of his existence is his service to society, and that society may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good.” 

The Islamization of Europe and the West demonstrates how mass social indoctrination toward collectivism leads to cultural suicide and the death of the individual.

Ayn Rand writes:

“When you consider socialism, do not fool yourself about its nature. Remember that there is no such dichotomy as “human rights” versus “property rights.” No human rights can exist without property rights. Since material goods are produced by the mind and effort of individual men, and are needed to sustain their lives, if the producer does not own the result of his effort, he does not own his life. To deny property rights means to turn men into property owned by the state. Whoever claims the “right” to “redistribute” the wealth produced by others is claiming the “right” to treat human beings as chattel.”

Europe’s surrender of its national sovereignty began after WWII with the 1957 Treaty of Rome that created the European Economic Committee (EEC) which eventually became the European Union(EU) of today. Internationalizing Europe’s sovereign nation states into the EU left the United States as the single greatest obstacle to one-world government.

Macron’s victory in France is a victory for collectivism at the expense of French sovereignty and French individualism represented by Marine Le Pen. It is a surrender to postmodern moral relativism, and historical revisionism designed to destroy democracy and its incomparable individual rights and freedoms. The question is WHO benefits from Macron’s victory?? The globalist elite of course. Socialism (total government control) is the death of democracy and is the prerequisite for internationalizing nation states and the imposition of one-world government Globalism. The greatest single obstacle to one-world government is the nation state. National sovereignty is to a country what individual sovereignty is to a human being.

The left-wing liberal agenda seeks to destroy the socio-political capitalist infrastructure of America and transform it into a dependent European-style socialist state with cradle to grave control by the government. Their strategy is to destroy American democracy by dismantling the supporting American institutions of family, religion, and education that promote independence, adulthood, individualism, and ego strength – the same qualities that made America great.

Ayn Rand warns us:

“Socialism is not a movement of the people. It is a movement of the intellectuals, originated, led and controlled by the intellectuals, carried by them out of their stuffy ivory towers into those bloody fields of practice where they unite with their allies and executors: the thugs.” 

American education, our elementary schools, middle schools, high schools, and universities, are a specific target and field of practice. The anarchists, socialists, and hippies of the 60s have become the teachers and professors now indoctrinating their students toward collectivism. The problem, of course, is that these narcissistic intellectuals have never lived under collectivist tyranny – they are armchair pundits living in subjective reality. Anyone interested in the objective reality of collectivism should be listening to those who have escaped from its tyrannical rule.

The entire narrative of the Left is designed to induce regression through educational indoctrination and the media – as Hillary Clinton famously remarked they need “an unaware compliant public.” Unaware and compliant are the hallmarks of childhood. The pitch might sound good to a childish mind who is seduced by candy from a stranger but the adult mind understands the sinister end-game. Once the public is entirely dependent on the government they lose all individual rights and national sovereignty as the socialized state becomes part of the internationalized one-world government. The doors of the car lock and there is no escape – only exploitation and enslavement.

One-world government is the big lie of the 21st century. It promises redistribution of wealth and social justice. What it delivers is unapologetically described in chilling detail by globalist elite English aristocrat Lord Bertrand Russell in his 1952 book The Impact of Science on Society.

The left-wing liberal lemmings are the useful idiots who are too arrogant to understand that they are participating in their own destruction. They have been indoctrinated to believe they are fighting for “social justice” when in fact they are helping to establish the dystopian nightmare of one-world government where there is no middle class, no upward mobility, no national sovereignty, and no individual freedoms. There is only the ruling elite and the enslaved population who service them.

The left-wing liberal lemmings in Europe and in America should take a break from marching and “resisting” and start reading Bertrand Russell’s The Impact of Science on Society written in 1952. They will learn that their script was written 65 years ago by the globalist elites who dreamed of one-world government – a binary socio-political system of masters and slaves.

The globalist elite’s New World Order was their self-serving answer to the Malthusian problem of the earth not having enough resources to sustain the population growth. Tavistock Institute was exported to America with the purpose of indoctrinating Americans via education and the media – particularly television – the greatest vehicle for mass social engineering ever invented. The Hollywood glitterati and the protesting hoards should take a pause and understand there is no place for them in the New World Order – they are simply useful idiots who will be destroyed.

The aristocratic Lord Bertrand Russell and the late David Rockefeller had no moral problem with eliminating the useless eaters any more than Hitler with exterminating Jews, Islamists with exterminating infidels, or the Chinese Emperors with burying their concubines alive to service them in the afterlife. The point is elitism is supremacist – there is no egalitarian respect for human life only the pretense of humanitarian considerations. The Left and the Islamists have common cause in trying to destroy America from within – but it is the globalist elites who finance and disingenuously facilitate both groups because the social chaos they each engender is a prerequisite for imposing globalist one-world government. For the globalist elite whether in Europe or in America, the Left and the Islamists are BOTH useful idiots.

Socialism will never provide social justice – it will only provide the pathway to one-world government where no individual rights or self-determination exist. Socialism strips the individual of his selfness and transforms that individual into property of the state. The individual who willingly forfeits his selfness for socialism has been successfully persuaded to stop being an individual. Socialism is not a free ride it is slavery.

You Can’t Deny that Venezuela Is a Socialist Calamity by Steven Horwitz

As Venezuela descends into a nightmare of starvation and violence, the long-standing debate over the feasibility of socialism takes on new relevance. Years of explicitly socialist policies from the Chavez and Maduro regimes have taken their toll, as nationalization and a variety of other attempts to abolish or subvert market processes have destroyed what was once one of South America’s richest countries.

Even with the wealth of their oil reserves, redistribution and price controls have brought production, and therefore consumption, to a halt. Once they exported grain to the rest of the world, now they can’t even feed their own people.

Who Is at Fault?

This humanitarian disaster has raised the question of who or what to blame. That question puts self-proclaimed socialists and their progressive sympathizers in a difficult spot. After all, one can easily find lots of examples (from Michael Moore to Bernie Sanders) of people on the left praising or endorsing Chavez’s economic policies. So what can people who took that position say in the face of this disaster? And what can the defenders of free enterprise say as well?

Many on the left will start by denying that socialism is at fault. Sometimes they’ll deny that the Chavez-Maduro policies were “real” socialism. In other cases, they’ll argue that while their intentions might have been good, corruption and poor implementation doomed good policies to failure.

Both of these arguments have real problems.

If those policies were not “real” socialism, then why did so many sympathetic to socialism express so much support for them and argue that they would be transformative in ways socialists value? Chavez himself made such claims.

Do all of them not understand what socialism is? The variety of attempts Chavez made to prevent markets and prices from working and to substitute some form of economic planning in the name of the people have been broadly consistent with socialism since Marx. If that’s not socialism, what exactly is meant by that word anymore?

Real Socialism

For many on the left, the answer to the last question is “the Scandinavian countries.” The problem, however, is that the Scandinavian countries have, by some measures, freer markets than the US, which the left sees as the archetype of capitalism. At the very least, they are not significantly different from the US in their degree of economic freedom.

Historically, socialism has broadly been defined as the elimination of the private ownership of the means of production and the substitution of common or public ownership and economic planning for what Marx called the “anarchy of production” of the market.

Doing away with private ownership, exchange, prices, and profits would, in Marx’s view, end the alienation, exploitation, and crises that characterized capitalism. In addition, rationalizing production through planning, rather than leaving matters to the trial and error method of the market, would eliminate waste and bring on a burst of productivity that would enrich us all.

Abolishing markets does not describe the Scandinavian countries, though it does capture a lot of what was going on in Venezuela. Socialism, at least historically, did not simply mean “a large welfare state” as we see in Scandinavia. In fact, the only way countries can afford larger welfare states is to have economies productive enough to produce the wealth that can be taxed away to support such programs. This is why the Scandinavian countries deregulated (and lowered tax rates) so much in the last decade or two: only through freer markets could they afford their transfer programs.

If you love the Scandinavian model, you don’t love socialism. You love market capitalism, because that’s what makes that model possible. (Whether large welfare states are necessary or desirable is a matter for another column.)

What of the argument that well-intentioned policies were frustrated by corruption and poor implementation? The problem here is that this seems to happen every time socialism has been tried. The Bolsheviks began to implement Marxian socialism within a year of taking power and a decade later they had Stalinism. Cuba quickly turned to a dictatorship. China. North Korea. The list goes on. At what point are these not all coincidences?

Every. Single. Time.

Economists have long understood the dynamic at work here. Marx and other socialists thought that those in charge of the planning process, and for Marx that was the whole community, could rationally determine what to produce and how best to produce it in the absence of markets, exchange, and prices. Since Mises’s famous essay in 1920, however, we have known that doing so is not possible.

Genuine market prices are necessary for people be able to make determinations of value in anything larger than a household. Without prices, there is no way to know, not just what people value but (more importantly) how to make what they value using the least valuable resources possible.

In other words, rational production decisions are impossible without market prices, and market prices can’t exist without exchange and therefore there has to be private ownership, especially of the means of production.

Markets are like weeds in that they will grow in the cracks left by the failures of planning.

But what happens when those given the power to make such decisions realize they cannot achieve their perhaps well-intentioned goals? The power does not go away. More often than not, the first reaction is precisely what we’ve seen in Venezuela: crack down harder on producers for not living up to impossible demands and ration goods to punish consumers for “hoarding.” And when that doesn’t work, go to more draconian authoritarianism, and do whatever it takes to hold on to power.

After a while, these exercises of brute power have consequences. They attract those with a comparative advantage in exercising such power (and perhaps those who have a high consumption value for doing so) into positions of power. Marxism is not Stalinism, but the inability of Marxian socialism to live up to its promises creates the conditions that make Stalinism possible and likely. In other words, Stalinism is an unintended consequence of Marxian socialism.

In addition, as state control becomes more clearly ineffective, people start to work around it by establishing distorted forms of market exchange. Bribery of politicians and bureaucrats, threats to producers, cronyism, and nepotism all become the ways of getting things done. Scarce resources have to be allocated somehow, and markets are like weeds in that they will grow in the cracks left by the failures of planning.

Intellectual Negligence

To the outside world, corruption and poor implementation caused socialism to fail. But that gets matters completely backward: corruption and ineffective political actors are not the cause of socialism’s failure, but a result of that failure. When you make real markets illegal and when your attempts at planning inevitably fail, what you get is the bribery and corruption of black markets. Once again, these are not what Marxism intends, but they are an inevitable unintended consequence.

So what does this say about those who supported the policies of Chavez and Maduro? It’s easy to say that they are evil for wishing starvation and destruction on the Venezuelan people, but I think that’s too easy. I do believe that many who supported those policies genuinely believed they would have good results. In that sense, they did not act immorally.

However, they are guilty of a severe intellectual error that has real moral consequences. Though they may not have intended the humanitarian disaster that we now see, they do bear responsibility for not being aware of the long-standing criticisms of socialism that have given us reasons to expect such a disaster.

Our friends on the left who supported Chavez’s policies are by and large not guilty of the intentional evil we broadly call “vice.” What they are guilty of is something more like intellectual “negligence.” They didn’t mean “that” in the case of Venezuela, but there’s no doubt that they should have known better.

Those of us who understand the power of markets to improve the lives of all of us won’t be very effective in persuading others of that truth if we write off those sympathetic to socialism as evil-doers. It’s better to engage them gently and intellectually, and offer them an alternative narrative, than to write them off as irredeemable.

Moral condemnation ends productive dialogue – offering an alternative narrative can start it. The human cost of socialism is too high to not engage those sympathetic to it in the most effective ways possible.

Steven Horwitz

Steven Horwitz is the Schnatter Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he also is a Fellow at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise. He is the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions and is a Distinguished Fellow at FEE and a member of the FEE Faculty Network.

Gay Effort to Reintroduce Slavery in the South Fails

Blaine Adamson

Blaine Adamson is the owner of a T-shirt shop in Frankfort, Kentucky, Hands On Originals. He is also a sincerely devoted follower of Jesus Christ. So naturally when he was approached in 2012 by a local homosexual activist group to print a shirt promoting The Lexington “Pride” Festival, he politely declined, and courteously referred them to a nearby shop who would be happy to provide the service.

In fact, a quick look at the Frankfort area Yellow Pages lists no less than 21 different businesses which cater to the T-shirt printing crowd, so there was simply no need for Adamson to be forced under the threat of fines and worse to do a job which would have caused him to violate his conscience. Plus, the gay activists wound up getting their shirts for free from another vendor.

But for politely exercising his First Amendment right to the free exercise of religion, Adamson was promptly sued. His case finally made it to the Court of Appeals in Kentucky.  (The Court of Appeals is one step below the state supreme court). In a surprising move, given the almost total obeisance of judges to the bullies and bigots of the homosexual lobby, the court actually ruled in favor of religious liberty and freedom of speech.

The opinion, written by Chief Judge Joy Kramer, pointed out that Adamson had not been guilty of discrimination at all. There is no evidence, she wrote, that Hands On Originals had “refused any individual the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations it offered to everyone else because the individual in question had a specific sexual orientation or gender identity” (emphasis in original). In fact, Adamson has routinely done business with members of the LGBT community and even employs them.

The issue, in other words, was not about sexual orientation at all but about speech. It was about whether an American can be compelled by government force to communicate a message which violates his conscience and deeply held religious belief.

Section 5 of the Kentucky constitution is quite clear, unambiguous, and emphatic on the issue (emphasis mine):

“[T]he civil rights, privileges or capacities of no person shall be taken away, or in anywise diminished or enlarged, on account of his belief or disbelief of any religious tenet, dogma or teaching. No human authority shall, in any case whatever, control or interfere with the rights of conscience.”

As further proof that the issue for Adamson is one of conscience and religious scruple, and not an expression of some kind of hate-filled homophobia, he has also declined to print T-Shirts that use the word “b**ches” or that featured Jesus dressed as a pirate.

What should not be missed here is that there are two larger issues involved, as lesbian writer Tammy Bruce pointed out some time ago. For the government to force someone to do work that violates his conscience is nothing less than tyranny. And for a man to be compelled under threat of punishment to perform work against his will is slavery.

The reality is that the LGBT lobby is the reincarnation of some of the worst elements of the mindless prejudice of the Old South in its irrational venom toward people (Christians) who are not like them. The rainbow flag is the new Confederate flag. It is as much a symbol of bigotry as that flag ever was in the minds of the left.

Bottom line: in Frankfort, Kentucky, homosexual activists tried to reintroduce slavery to the Deep South. They failed in the attempt. And the Constitution’s protections for religious liberty and freedom of speech were upheld. Let’s pray that this court will be just the first of many to protect our first freedom against the tyranny of the left.

Poland Continues Its Rise from the Ashes of Communism by Daniel J. Mitchell

Earlier today, I gave a speech about populism and capitalism at the Free Market Road Show in Thessaloniki, Greece.

But I’m not writing about my speech (read this and this if you want to get an idea of what I said about American policy under Trump). Instead, I want to share some remarkable data from a presentation by Ewa Balcerowicz of Poland’s Center for Social and Economic Research.

She talked about “The Post Socialist Transition in Poland in a Comparative Perspective” and showed that Poland and Spain had similar living standards after World War II. But over the next 40 years, thanks to the brutal communist system imposed by the Soviet Union, Poland fell far behind.

But look what has happened over the past 25 years.

Per-capita GDP has skyrocketed in Poland and the gap between the two nations has dramatically narrowed.

So why is Poland now rising relative to Spain?

For the simple reason that public policy has moved in the right direction. Here’s the data from Economic Freedom of the World, comparing Poland’s score in 1990 and today. Poland has jumped from 3.54 to 7.42, and the nation has jumped from a dismal ranking of #104 to a respectable ranking of #40.

By the way, Spain’s score also has increased, but by a much smaller amount. And because the world has become more free, Spain’s ranking has dropped. Indeed, Spain now ranks below Poland.

Which means that we shouldn’t be surprised if per-capita GDP in Poland soon jumps to about Spanish levels.

Just as Poland has out-paced Ukraine because it has better policy.

Here are additional examples showing the long-run benefits of pro-market policy.

And here’s a must-watch video on the relationship between good policy and better economics performance.

All of which helps to explain why I’m so disappointed in both Bush and Obama. Their statist policies have caused a drop in America’s score and relative ranking.

Reprinted from International Liberty.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

EDITORS NOTE: Get trained for success by leading entrepreneurs.  Learn more at FEEcon.org

EXPLAINED: The Spectacular Failure of Socialism

“The problem with socialism is that you eventually run out of other people’s money.” – Margaret Thatcher

In full deference to the Iron Lady, that’s not the only problem. That is a functional reality that dooms socialism in action. But at its core, socialism is a violation of elemental human nature that desires to build, innovate, expand and improve life — the same nature that drives parents to be always working towards a better future for their children.

Socialism denies that elemental nature and so not only dooms itself to eventual self-destruction, but creates enormous misery enroute. This has been demonstrated in every country where it has been substantially put in place, from the Soviet Union to Cuba to Vietnam to Venezuela.

Yet for many — from college campuses to Reddit to a recent major presidential candidate — socialism still holds a dreamy-eyed allure. They passionately to angrily believe the world would be dramatically better if socialism supplanted capitalism. This defies not only human nature, but also all historical experience. And yet it persists at amazing levels.

So let’s start with defining socialism, no small task really.

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.” — Winston Churchill

Socialist ideology defined

Wikipedia has a fair if somewhat dry definition of socialism, summarized as being a range of economic and social systems characterised by social ownership and control of every aspect of production. Social ownership includes public, collective, or cooperative ownership.

Means of production is the key. The means of production is essentially anything that is not human that is part of an economy. In socialism, the means of producing everything are in the hands of the “everyone.” There are no individual property rights, there is no individual ownership. Everything is owned by the collective, the hive, an economic Star Trek Borg 100 percent antithetical to the founders and the Constitution.

Socialism grew out of pre-Marxist ideologies that saw the inherent problems with feudalism. But it’s popularity exploded with Karl Marx and others as the industrial revolution took hold in the 1800s and abuses of the low-end labor pool grew exponentially at the same time wealth did. Socialism was a response to that by upending the entire system.

People power. But not person power.

Merriam-Webster defines socialism as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.” Google defines socialism as “a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.”

“Democracy and socialism have nothing in common but one word, equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.” Alexis de Tocqueville

What it looks like in reality

The Russian Revolution of 1917 led to the largest experiment in socialism. The doey-eyed utopianism of Trotsky led to the authoritarianism of Lenin which led to the brutal tyranny of Stalin and the soul-crushing Communist Soviet Union.

That story is pretty well known but also a well-worn path for every socialist experiment, albeit it was on maybe the largest scale.

Cuba was the people’s revolution heralding in a communistic state that was ruled with an iron fist by Fidel Castro, just as Stalin, Khrushchev and the rest did in the Soviet Union. That was a thriving little island economically, but it was not hugely free and it was not a democracy. The income disparities and relative poverty in large swaths fueled Castro’s form of socialism and people followed him.

Venezuela is the most recent example. Due to its oil wealth, Venezuela had the highest per capita GDP in South America in 2005. It had not been well run and was fairly corrupt and incompetent at the government level. But it was still the best and richest in South America — a continent known for corruption and incompetence in government.

In 2005, President Hugo Chavez took the country in a deep socialist direction. He began nationalizing industries such as oil companies and the media — natural steps for socialism — and started transferring large sums to the poor. The results are truly epic. Venezuela now has a totally collapsed economy with starvation and the lack of basic infrastructure becoming more common. A failure on an amazing level.

In an explanation of Venezuela’s collapse, Bloomberg noted:

“The last years of Chavez — he died of cancer in 2013 — and the first under his handpicked successor Nicolas Maduro have been a time of unparalleled fiscal profligacy.”

But that is always the case in socialism. Massive government debt driven by a declining economy — a common side effect of socialism — and huge welfare spending generated hyper-inflation has made the country the poorest in South America. In eight years it went from the richest to the poorest by pivoting sharply to socialism.

“Socialism only works in two places: Heaven where they don’t need it and hell where they already have it.” Ronald Reagan

Capitalism’s inequality “problem”

Capitalism is duty-bound to create inequality in wealth. Some people are just great at making money. Some are great at making things. Some are clever and some are lucky. Those generally do very well in capitalism. Many others are simply hard workers and they often do well, though in more of a middle class sort of way.

Other people are bad at making money and worse at money management. Others are not clever and some are unlucky. Some are just lazy. These all do relatively poorly in capitalism.

Relatively.

The question is whether inequalities are bad if all or most boats are being lifted, just some lifted higher than others. In the United States, the poorest 10 percent of people are better off than the richest 10 percent in any third world or developing nation. But Forbes points out an Economist chart that shows that America’s poor are better off than most of Europe’s poor, including better off than in far more socialist countries such as Germany, France, Great Britain and Italy.

This is worth noting because those are considered social democratic nations, where they have heavy socialist programs but retained some capitalistic free markets, too. They are often heralded as examples for America to follow. Seems like the trade-off of inequality is worth it for the poor — unless envy trumps quality of life.

China is the largest socialist/communist country and struggled with universal poverty for decades after its revolution. But as it instituted capitalism’s free market reforms beginning in the 1980s — while retaining its authoritarianism, and socialist structure in name anyway — China’s economy began booming and is now second only to the United States. Capitalism did that. But it also created the inevitable inequalities.

Vietnam became socialist/communist after the Vietnam War. The country was already a disaster from the long war, but socialism provided no means for pulling it out. In recent years, the leadership has instituted more capitalist-based market reforms, a la China. That has begun creating more wealth for the country, but it is mostly flowing into a few hands — starting with those most connected to government leadership.

So capitalism works everywhere to generate more wealth. But it will always be unequal. Socialism equalizes, but does so by making everyone but those in charge poorer.

“Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.” Thomas Sowell

What it might look like in America

Long food lines in Venezuela.

What happened in Venezuela is instructive, because it is similar to Cuba and even the Soviet Union, although every situation will have its unique dynamics.

In a hint of what socialism would look like in the United States, Democratic presidential candidate Sen. Bernie Sanders, undoubtedly the most well-known American socialist, laid out his initial steps for making America more socialist. During the 2016 campaign, Sanders promised $15 trillion to pay for a Single-Payer Healthcare program, expand Social Security and make tuition free at all public universities.

To pay for it — and this is where Thatcher is just so right — Sanders would dramatically increase taxes by trillions of dollars. In fact, he expected tax increases to pay for all of the nationalized healthcare plan. That’s just taking other people’s money on a more massive scale.

Sanders’ proposals were only a small step toward full-blown utopian socialism. A totally predictable outcome would be that the high taxes would start slowing the economy, necessitating more tax increases, which would further slow the economy. You see the spiral.

The tax increases would never keep up with the expenses being run up in national healthcare, free college, expanded Social Security and the host of further steps that would ultimately be taken. The United States would not be immune to the immutable laws of economics and human nature. Eventually, we would succumb as has every other nation.

Socialism is a siren song to the idealistic, the frustrated and the naive. But it is a fool’s errand.

Socialism’s end is the proverbial pack of wolves and a sheep deciding what’s for dinner. There is a new sheep member each dinner until there are no more sheep, and the wolves starve.

And you have Venezuela. Or Cuba. Or Vietnam. Or the Soviet Union.

EDITORS NOTE: This column originally appeared in The Revolutionary Act.

The High Cost of Not Owning Your Healthcare by Rachel Mills

You either pay in dollars or control. And loss of autonomy in your own healthcare decisions can be much more expensive.

For example, I have excellent teeth, thanks to my dad and his excellent teeth genes. However, even though I have no particularly bad dentist stories to tell, I am terrified of the dentist. I can only attribute this to the ‘fear of the unknown’ factor. I have no better explanation.During my “Year of Adulting” last year I had my first checkup in about 8 years and two small cavities were found. I had them filled last week and was very afraid. Facebook assured me beforehand that the survival rate for these procedures is pretty high. Afterwards, I proudly proclaimed on Facebook that I had voluntarily gone to the dentist to have a procedure done.

Voluntarily?

Someone inquired. What other way is there to go?

Ohhhhh, dear sir! Involuntarily, as per when I was a child. Our mother took us kids dutifully for checkups on the regular! Every second of that was involuntary, I assure you. My mother had my best interests at heart, but she was calling the shots and paying the bills and cries to CPS about forced dental visits fell on deaf ears, so I said “ahhhhh” and went to my happy place and hoped nothing horrible would happen to me.

It almost did.

At 16, I still had a stubborn baby tooth that hadn’t dislodged itself yet and the dentist proclaimed braces and head gear were in order to bring the adult tooth down. Mom opted for a more conservative approach as she saw large tears coursing down my angsty teenage face (and, being a frugal woman, wondering what all that could possibly cost) and viola! In a few months, after a mere extraction, the adult tooth made its appearance, no embarrassing, expensive headgear required.Bullet dodged, thanks to my mother listening to either/both the concerns of weeping teenage daughter and/or her own pocketbook.

Walk Away

But it was kind of a relief to remind myself in the chair last week that I could leave the dentist office at any time. I can walk right out of there untreated at basically any point. Or I could go through with it. I could even opt for tooth whitening if I am having a particularly nice time.

The bill comes to me. I call the shots. I am in control.

I could get treatment. Or not. It felt reassuring. And that’s the point. He who pays the piper calls the tune. When my mother was in charge, that was one thing. She was truly concerned with my long term well-being.

Government Loves You Not

When you ask or force some other entity that doesn’t love you to pay for your healthcare (or education for that matter) for how long will you suffer under the illusion that you also retain control or that decisions made for you are truly in your best interest?

Put a large layer of bureaucracy between you and your doctor and what do you imagine you might get?

I promise you it won’t be more control.

Health insurance companies routinely deny this or that course of treatment, for whatever reason and they largely get their way. They are paying the piper.

He who pays the bills will always preeminently care about smaller bills. I just don’t know how you get around that. Only you’re slathering on an additional thick, thick layer of bureaucrats into the mix who need specialized knowledge of how to deny claims and fight court battles and they don’t come cheap. Instead of paying medical bills, you’ll be paying them.

If what you want is healthcare, be the one paying the doctor, as directly as possible. If what you want is denial of treatment, give as much of the money that should go to your doctors as possible to entities that deny treatments. It is basically as simple as that, in the long run.

Do you have a right to healthcare?

Does the doctor have a right to work and make a living at a wage commensurate with the time and money spent on the necessary education?

Here is what you have a right to:

You have a right to see the doctor. But the doctor is also not your slave. Neither is he/she your slave by proxy.

When you argue that everyone else should shoulder your healthcare costs and/or for doctors to be forced to serve you, think about what you are advocating.

You are advocating for people charged with controlling costs (denying healthcare) to be in charge of healthcare.

You are advocating for an unsustainable system in which the financial burden of years of expensive medical training can never be recovered. In other words: You are arguing for a doctor shortage. And long waits instead of large bills. You pay one way or the other.You are arguing for the stable and lucrative employment of faceless bureaucrats whose measure of success will very probably not be how healthy you are but how much they saved the system in payouts. (You can see how there might be a conflict there.)

In short, you are not advocating for your own health.

We need other solutions. The “health insurance” model as a whole is failing.

A Real Market

Here’s an idea: How about payment plans? You can negotiate these with the hospital already and often for very reduced rates. If healthcare is so exorbitantly expensive, how about saving money on all these middle men, and only using insurance for major medical events like accidents and cancer? Anything under 6 figures, you could just pay directly to the doctor/hospital in installments?

But that is currently illegal as of the ACA. That model was actually insurance. What we call health insurance now is nothing of the sort. It is some kind of paperwork producing bureaucratic jobs program that makes the “health insurance” industry about 10 times bigger than it needs to be.

I don’t know about you, but as a grown adult myself, I take comfort in owning my own healthcare decisions as much as I can. And if I could legally own even more of them in the form of a cheaper major medical insurance plan instead of what has been forced down our throats by Obama, and now his successor, I would.

Rachel Mills

racial millsRachel served as Ron Paul’s communications director on Capitol Hill for 5 years. She is now a freelance-from-home wife and mom who writes extensively about gold and financial markets and occasionally consults on political campaigns, most recently for Sean Haugh for US Senate.

EDITORS NOTE: Get trained for success by leading entrepreneurs. Learn more at FEEcon.org

Temporary refugees taking jobs from Americans sent $1.3 billion back to Haiti in 2015

Steve Forester

Steve Forester

At first I didn’t think they were going to get to the crux of the matter when Tucker Carlson last night grilled Steve Forester, an attorney for the Institute for Justice and Democracy in Haiti, about the upcoming Trump decision about whether to extend Temporary Protected Status (TPS) for Haiti (we mentioned it here the other day).

At first they beat around the bush on whether there were any criminals in the Haitian population living legally (temporarily!) in the US, but with continued questioning Forester finally mentioned the ‘R-word’—remittances!

The 50,000 or so Haitians who got in to the US (mostly illegally) prior to the earthquake of 2010 were given a temporary amnesty to stay and work in America and according to Forester in 2015 alone sent $1.3 billion American dollars back to their home country.  That money is propping up Haiti and Forester says the country will be destabilized if those ‘temporary’ legal workers are returned to Haiti!

However, the question I have is: so what about the fact that that money is now lost to the US economy? And are those Haitian workers taking jobs Americans can do (or legal refugees might do).

You know I mostly write about the UN/US Refugee Admissions Program where of course refugees are also sending billions ‘home,’ but it’s important for you to know about the many other programs for legal immigration, like TPS and the ‘Diversity Visa Lottery’ I told you about here the other day.

Disney wants the Haitian workers!

Forester told Tucker there were 50,000 Haitians here enjoying temporary protected status and have been here 7-15 years. I think Forester completely lost the audience (and Tucker) when he got to his final argument—Disney would lose 500 workers if TPS is not extended—instead of continuing his ‘humanitarian’ shtick.

Tucker commented that maybe Disney would have to pay higher wages to hire new (American) workers!

Watch the whole interview starting at 22:49 and ending at around 28:43.  You might want to watch the segment prior to the Haiti piece about how Mexicans aren’t too happy with all the Central Americans parked in their country who are no longer headed to the US border!

I have a category on Haiti here, with 56 previous posts!

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On this Europe Day, Let’s Oppose the EU for the Right Reasons by Bill Wirtz

The 9th of May is supposed to mark a celebratory day for the European Union, congratulating itself for peace and unity in Europe. On May 9th 1950, Robert Schuman, then Foreign minister of France, set out his so-called Schuman Plan, which suggested that Germany and France should ease the sharing of strategic resources like coal in order to make a war between the two countries virtually impossible. This policy led to the European Community on Coal and Steel: a forerunner in the creation of what would become the European Union in the early 1990’s.

While the EU might celebrate the legacy of Robert Schuman’s free trade advocacy, its political structure has degenerated into something far more invasive than the mere easement of political dialogue. It actively combats the free market. For instance, the EU constantly considers tax harmonisation and over-regulates people’s personal habits (the EU recently introduced heavy regulation regarding e-cigarettes).

While trade barriers inside the EU have been abolished, the EU acts like a protectionist block when it comes to non-EU members: it subsidises European farmers, sets very high food standards (which keep African goods off the market) and imposes import taxes.

Anglo-Saxon Euroscepticism

“Only a fourth of all Brexit voters support UKIP”, said the conservative Member of the European Parliament (MEP) Daniel Hannan in a speech in Strasbourg last July. And indeed, while public perception of the European continent classifies many Brexit fans as anti-immigration and, all too often, as racists and bigots, there is a genuine Anglo-Saxon euroscepticism out there, which relies on the following principles:

  • Localism (the belief that the policymakers should be as close to citizens as possible, so that many important decisions should actually be taken on the local level),
  • Small government (a palpable scepticism towards big government and its tendency to constantly grow), and
  • Free markets (the opposition to government interfering in prices and interactions on the labour market).

These principles, while sometimes forgotten by certain governments, have been engrained in the Anglo-Saxon spirit for a long time and they have driven the Brexit spirit. Without the British small-government opposition to the EU, Brexit never would have happened. In fact, by illustrating that the union has lost its free trade roots (and become a poster child for social democracy), Brexiteers should be an inspiration to the political personnel in Brussels.

Don’t Be that Populist

Meanwhile, the eurosceptic movement, including that inside the liberty movement, has been infested with a different kind of opposition to the Brussels bureaucracy. These members of the new political right are not allies to the liberty movement, as they reject the EU for the one reason: they believe that the immigration that the EU allows for is to the detriment of the European culture.

We could point out that the European Union’s immigration policy guides movement inside of its own borders, while immigration from outside is left up to its member states, but, more important than setting the facts straight, we need to address one important point: The enemies of our enemies aren’t our friends.

When we shout ‘power to the people’ we defend individualism, the power of the people to govern themselves, not the power of the people to bully their neighbours, even if they have different reasons than those who are already in charge. We may agree with advocates of different political agendas, but let us not forget what their motivations are.

Europe Day is a day when we should remind officials in Brussels that the EU was a project of mutual cooperation, not that of crushing regulation, instead of burning the EU flag in an attempt to gain attention.

If the European Union does fail in the end, it will need advocates of small government and free markets to replace the void with liberty, not nationalists who wish to replace the EU with another brand of big government.

Lovers of liberty, in the United Kingdom or abroad, need to understand that we don’t oppose the European Union because we are contrarians, or because we enjoy the rush of being the negating viewpoint, but because our belief in small government is sincere. International organisations should not have the vast power to interfere in the life of individuals.

And neither should anyone else.

Bill Wirtz

Bill Wirtz

Bill Wirtz

Bill Wirtz studies French Law at the University of Lorraine in Nancy, France.

Useful Idiots: American Workers Protesting Trump’s Immigration Policies

The first day of May is also known as “May Day” a day that brings out demonstrators around the world to ostensibly support workers around the world.

On May 1, 2017 supposedly pro-labor demonstrations were carried out around the United States purportedly to defend workers’ rights, wages and working conditions.  In some instances the May Day demonstrations became “Mayhem” demonstrations with participants rioting and destroying property.

Incredibly, in addition to demanding better wages and working conditions, these same demonstrators and rioters demanded an end to the Trump administration’s immigration policies and efforts to effectively and fairly enforce our immigration laws.

In point of fact, President Trump’s immigration policies are pro-labor and pro-American.

The demonstrators apparently don’t understand the principle of “Supply and Demand” and that flooding the labor pool with millions of foreign workers suppresses wages and working conditions and also results in American and lawful immigrant workers being displaced by foreign workers.

cair seiu logosToday all too many Americans have fallen victim to the massive fraud campaign that has been foisted on Americans by politicians and a laundry list of special interest groups including the U.S. Chamber of Commerce and labor unions such as the SEIU (Service Employees International Union). that are literally and figuratively “making out like bandits” by exploiting the immigration system.

These unions are betraying America and their members, seeking to flood America with foreign workers whom they seek to enroll as dues paying members.  More members provides unions with more political leverage and more money in the form of dues.

As for the notion that “immigrants” need protection from federal immigration law enforcement personnel is utterly fatuous and is part and parcel of the Orwellian Newspeak tactic of the open-borders / immigration anarchists begun when President Jimmy Carter insisted that illegal aliens be referred to as “undocumented immigrants.”

Demanding protection for immigrants is not unlike the rhetoric of President George W. Bush who attempted to create a Guest Worker Amnesty program for illegal aliens to provide them with lawful status.  Back then I said that Bush’s offer to make immigrants legal was as absurd as offering to make water wet.

Water is already wet and immigrants are already legal.

Simply stated, Bush wanted to legalize illegal aliens through an amnesty program even though he knew that the Reagan amnesty that was an integral part of the Immigration Reform and Control Act of 1986 was a disaster that ultimately led to the greatest influx of illegal aliens in the history of the United States.

Today President Trump’s immigration policies which stand out in stark contrast to the policies of Both Presidents George W. Bush and Barack Obama, employers are whining that they have to “resort” to hiring Americans.

Under our immigration laws Americans are supposed to get first crack at jobs and not be the employees of last resort.

By now most Americans have heard about the H-1B Visa Program that enables highly skilled nonimmigrant workers to be employed in the United States.  Another category of temporary work visa is the H-2B visa for Temporary Non-Agricultural Workers.

These visas are issued to aliens to work at non-agricultural jobs such as cooks, waiters/waitresses and hotel workers provided that these foreign workers don’t displace American workers or harm the wages and working conditions of Americans who are similarly employed.

On April 28, 2017 the Bangor Daily News reported, Amid foreign worker shortage, Bar Harbor businesses turn to local labor.

Consider this excerpt from the article:

“There are people who have come here year after year after year and worked in the same restaurants as cooks, as waiters, as whatever is needed, and they’re like family. And now for the first time, it’s uncertain that they’ll be able to come back,” says Bar Harbor Chamber of Commerce Executive Director Martha says that’s why the chamber is holding a job fair Saturday, hoping to attract significant numbers of workers from the area and the region to fill a long list of openings.

The article went on to note:

“The best thing that can happen right now is for the administration to do an audit of how many of these visas are actually being used, because the indications are that the visas are taken out early in this sort of deadline process and a lot of them never get used,” he says. “So if we can determine — and the administration can do this very quickly — which ones haven’t been used, that would open up an allocation that would be available to our businesses for this summer.”

Until then, Bar Harbor area employers are enticing workers in other ways. Higher wages are part of the solution. Searchfield says some businesses are also weighing new schedules that might appeal to older workers in the region, interested in working only a day or two each week.

It is important to focus on the statement that “Higher wages are part of the solution.”

According to requirements of the H-2B visa program, as posted on the official USCIS website, an element of this program requires that:

  • There are not enough U.S. workers who are able, willing, qualified, and available to do the temporary work.
  • Employing H-2B workers will not adversely affect the wages and working conditions of similarly employed U.S. workers.
  • Its need for the prospective worker’s services or labor is temporary, regardless of whether the underlying job can be described as temporary.

It it would appear that American workers are available since employers are now seeking to hire Americans and would likely have to raise wages in order to do so.

Clearly these employers have been gaming the H-2B visa program which requires that visas should only be issued when American workers are not available to do the work.  Furthermore, it is obvious that unscrupulous employers have also used the H-2B visa to suppress wages inasmuch as the article noted that in order to hire Americans wages would have to be increased.

To put it succinctly, the immigration policies of the Trump administration are actually meeting the demands of the protestors, freeing up jobs for Americans and, at the same time, increasing wages.

Yet the May Day “Mayhem” protestors who profess that they are fighting for better wages and working conditions even as they protest President Trump’s effective and beneficial immigration policies.

Of course not all of the demonstrators are motivated by the same factors.  Some, particularly those who went on a rampage are likely anarchists who are looking for opportunities to justify their aggressive actions.

There are, however, undoubtedly some naive folks who have been caught up in the rhetoric about how the Trump immigration policies are “Anti-Immigrant” when, in reality, the only aliens who have to fear arrest are those who are present in the United States in violation of our laws.

I recently wrote, an extensive article, “Immigration Fraud: Lies That Kill – 9/11 Commission identified immigration fraud as a key embedding tactic of terrorists,” in which I not only explored the two traditional forms of immigration fraud- fraudulent documents and fraud schemes such as marriage fraud, visa fraud and political asylum fraud, but also looked at the fraud perpetrated upon Americans by politicians, pollsters and special interest groups.

It is likely that a significant percentage of the protestors have been snookered by these open borders fraudsters.

These protestors should consider that the exhortations of the SEIU and other unions parallel the open borders demands of the United States Chamber of Commerce, one of the most anti-American and anti-labor special groups in the United States today

It is, for example, the U.S. Chamber of Commerce that has been responsible for the continual increase in the number of Visa Waiver Countries since the terror attacks of September 11, 2001 even though the Visa Waiver Program violates the findings and recommendations of the 9/11 Commission.

My article, Immigration Failure By Design– Immigration Failure By Design– Doing the bidding of the Open Borders anarchists, lays out the way that the U.S. Chamber of Commerce, motivated by blind and unbridled greed has applied extreme pressure upon our government to endanger national security and public safety by expanding this dangerous program.

One of the key goals of the globalist U.S. Chamber of Commerce is to flood America with a limitless supply of cheap exploitable labor by opening our borders to foreign workers.

This precisely parallels the cries for open borders and Sanctuary Cities by the leaders of the SEIU and other such unions.

Apparently, as the memorable saying in the film, “Cool Hand Luke” starring Paul Newman goes, “What we have here is a failure to communicate.”

If only the mainstream media would tell the truth, perhaps the protestors wouldn’t have bothered to demonstrate, except, perhaps to demonstrate on behalf of President Trump’s immigration policies.

RELATED ARTICLE: San Francisco Chronicle Admits: Some Anti-Trump Protesters are Paid – Breitbart