“A further reason for governmental inefficiency has been touched on already: that the personnel have no incentive to be efficient. In fact, the skills they will develop will not be the economic skills of production, but political skills—how to fawn on political superiors, how demagogically to attract the electorate, how to wield force most effectively. These skills are very different from the productive ones, and therefore different people will rise to the top in the government from those who succeed in the market.”—Murray Rothbard, Power & Market
“To see what a farce this is, it is worthwhile briefly to review the timeline of how Obama officials acted to shield Bush torturers from all accountability. During his 2008 campaign for president, Obama repeatedly vowed that, while he opposed “partisan witch-hunts”, he would instruct his attorney general to “immediately review” the evidence of criminality in these torture programs because “nobody is above the law.” Yet, almost immediately after winning the 2008 election, Obama, before he was even inaugurated, made clear that he was opposed to any such investigations, citing what he called “a belief that we need to look forward as opposed to looking backwards”.”—Glenn Greenwald, on the Obama Administration granting full immunity to Bush officials who engaged in torture.
“[Mandatory minimum sentences allowed] the DEA to launch a crackdown on Deadheads [in the late 80’s and early 90’s] who frequently [sold] or consume[d] trace amounts of LSD at concerts. because the LSD may be in a sugar cube or on blotter paper, sellers routinely get ten- or twenty-year mandatory prison sentences. Deadheads receive[d] longer prison sentences for selling $1,500 worth of LSD than they would receive for selling $100,000 worth of heroin. Stanley Marshall of El Paso, Texas, was arrested in 1988 for possessing less than a gram of LSD, but since the drug was on 113 grams of paper, Marshall got a twenty-year federal prison sentence.”—James Bovard, Lost Rights, pg. 210–11(1994)
When the world becomes free it will not be by the creation of new laws, or the removal of old, or of new political leaders or any election result. It will not be because of a change in government, but because of a change in attitude toward government. It will not be because of legislation, but because of disregard for legislation.
Genuine change will come when the state is ignored, not reformed. It will come not when politicians are better, but when they are irrelevant.
When state-made law is no longer deemed necessary or important it will not be respected. When it is not respected it will not be enforced because it will not be enforceable.
“[U]nemployment relief, instead of helping to cure unemployment, as often imagined, actually subsidizes and intensifies it. We have seen that unemployment arises when laborers or unions [through the state] set a minimum wage above what they can obtain on the free market. Tax aid helps them to keep this unrealistic minimum and hence prolongs the period in which they can continue to withhold their labor from the market.”—Murray Rothbard, Power & Market
“Who will build the roads? Who will start the wars? Who will run the Gulags, detention camps, and prisons packed with pot smokers and growers? Who will tax 40% of income? Who will spy on email, monitor our cell phone conversations, arrest people for political dissent, shut down free speech, destroy the money, create the bubbles, bail out the big banks, protect the labor cartels, make education unaffordable, stop pharmaceutical development, ban pesticides to unleash bed bugs, ban real light bulbs, make medicine inaccessible, wreck indoor appliances, drive up costs for all business, and mandate and/or forbid peaceful associations?”—Jeffrey Tucker
The Maricopa County, Arizona, officials claimed Briseria Torres was an illegal alien and charged her with three counts of forgery for having falsely obtained a driver’s license. She spent four and a half months in jail and lost her house because she couldn’t make payments. She was finally freed and the charges against her dropped after her attorneys presented a judge with a birth certificateshowing that she was born in the United States. Prosecutors knew about the birth certificate but allowed a law enforcement officer to tell the grand jury that indicted her that it had been falsely created and the state had canceled it. That was not true.
SOMEBODY should go to prison for this. Just not Torres.
State poor relief is clearly a subsidization of poverty. Men are now automatically entitled to money from the State because of their poverty. Hence, the marginal disutility of income forgone from leisure diminishes, and idleness and poverty tend to increase. Thus, State subsidization of poverty tends to increase poverty, which in turn increases the amount of subsidy paid and extracted from those who are not impoverished. When, as is generally the case, the amount of subsidy depends directly on the number of children possessed by the pauper, there is a further incentive for the pauper to have more children than otherwise, since he is assured of a proportionate subsidy by the State. Consequently, the number of paupers tends to multiply still further. …
Private charity to the poor, on the other hand, does not have the same effect, for the poor would not have a compulsory and unlimited claim on the rich. Instead, charity is a voluntary and flexible act of grace on the part of the giver.
There are two and only two ways of acquiring wealth: the economic means (voluntary production and exchange) and the political means (confiscation by coercion). On the free market only the economic means can be used, and consequently everyone earns only what other individuals in society are willing to pay for his services. As long as this continues, there is no separate process called “distribution”; there are only production and exchange of goods. Let government subsidies enter the scene, however, and the situation changes. Now the political means to wealth becomes available. On the free market, wealth is only a resultant of the voluntary choices of all individuals and the extent to which men serve each other. But the possibility of government subsidy permits a change: it opens the way to an allocation of wealth in accordance with the ability of a person or group to gain control of the State apparatus.
Government subsidy creates a separate distribution process (not “redistribution,” as some would be tempted to say). For the first time, earnings are severed from production and exchange and become separately determined. To the extent that this distribution occurs, therefore, the allocation of earnings is distorted away from efficient service to consumers. Therefore, we may say that all cases of subsidy coercively penalize the efficient for the benefit of the inefficient.
Subsidies consequently prolong the life of inefficient firms at the expense of efficient ones, distort the productive system, and hamper the mobility of factors from less to more value-productive locations. They injure the market greatly and prevent the full satisfaction of consumer wants. Suppose, for example, an entrepreneur is sustaining losses in some industry, or the owner of a factor is earning a very low sum there. On the market, the factor owner would shift to a more value-productive industry, where both the owner of the factor and the consumers would be better served. If the government subsidizes him where he is, however, the life of inefficient firms is prolonged, and factors are encouraged not to enter their most value-productive uses. The greater the extent of government subsidy in the economy, therefore, the more the market is prevented from working, and the more inefficient will the market be in catering to consumer wants. Hence, the greater the government subsidy, the lower will be the standard of living of everyone, of all the consumers.
On the free market, as we have seen, there is a harmony of interests, for everyone demonstrably gains in utility from market exchange. Where government intervenes, on the other hand, caste conflict is thereby created, for one man benefits at the expense of another.
“Voting is a highly marginal activity because (a) the voter obtains no direct benefits from his act of voting, and (b) his aliquot power over the final decision is so small that his abstention from voting would make no appreciable difference to the final outcome. In short, in contrast to all other choices a man may make, in political voting he has practically no power over the outcome, and the outcome would make little direct difference to him anyway. It is no wonder that well over half the eligible American voters persistently refuse to take part in the annual November balloting. This discussion also illuminates a puzzling phenomenon in American political life—the constant exhortation by politicians of all parties for people to vote: “We don’t care how you vote, but vote!” is a standard political slogan. On its face, it makes little sense, for one would think that at least one of the parties would see advantages in a small vote. But it does make a great deal of sense when we realize the enormous desire of politicians of all parties to make it appear that the people have given them a “mandate” in the election—that all the democratic shibboleths about “representing the people,” etc., are true.”—Murray Rothbard, Power & Market
Why does anyone search for a neutral tax? Why consider neutrality an ideal? The answer is that all services, all activities, can be provided in two ways only: by freedom or by coercion. The former is the way of the market; the latter, of the State. If all services were organized on the market, the result would be a purely free-market system; if all were organized by the State, the result would be socialism (see below). Therefore, all who are not full socialists must concede some area to market activity, and, once they do so, they must justify their departures from freedom on the basis of some principle or other. In a society where most activities are organized on the market, advocates of State activity must justify departures from what they themselves concede to the market sphere. Hence, the use of neutrality is a benchmark to answer the question: Why do you want the State to step in and alter market conditions in this case? If market prices are uniform, why should tax payments be otherwise?
But if neutral taxation is, at bottom, impossible, there are two logical courses left for advocates of the neutral tax: either abandon the goal of neutrality, or abandon taxation itself.
[T]he justice of equality of treatment depends first of all on the justice of the treatment itself. Suppose, for example, that Jones, with his retinue, proposes to enslave a group of people. Are we to maintain that “justice” requires that each be enslaved equally? And suppose that someone has the good fortune to escape. Are we to condemn him for evading the equality of justice meted out to his fellows? It is obvious that equality of treatment is no canon of justice whatever. If a measure is unjust, then it is just that it have as little general effect as possible. Equality of unjust treatment can never be upheld as an ideal of justice. Therefore, he who maintains that a tax be imposed equally on all must first establish the justice of the tax itself.
Many writers denounce tax exemptions and levy their fire at the tax-exempt, particularly those instrumental in obtaining the exemptions for themselves. These writers include those advocates of the free market who treat a tax exemption as a special privilege and attack it as equivalent to a subsidy and therefore inconsistent with the free market. Yet an exemption from taxation or any other burden is not equivalent to a subsidy. There is a key difference. In the latter case a man is receiving a special grant of privilege wrested from his fellowmen; in the former he is escaping a burden imposed on other men. Whereas the one is done at the expense of his fellowmen, the other is not. For in the former case, the grantee is participating in the acquisition of loot; in the latter, he escapes payment of tribute to the looters. To blame him for escaping is equivalent to blaming the slave for fleeing his master. It is clear that if a certain burden is unjust, blame should be levied, not on the man who escapes the burden, but on the man or men who impose it in the first place. If a tax is in fact unjust, and some are exempt from it, the hue and cry should not be to extend the tax to everyone, but on the contrary to extend the exemption to everyone. The exemption itself cannot be considered unjust unless the tax or other burden is first established as just.
Thus, uniformity of treatment per se cannot be established as a canon of justice. A tax must first be proven just; if it is unjust, then uniformity is simply imposition of general injustice, and exemption is to be welcomed. Since the very fact of taxation is an interference with the free market, it is particularly incongruous and incorrect for advocates of a free market to advocate uniformity of taxation.
Savings and investments are fundamental to a healthy economy. Credit extended to some should come from the real savings of others, not created out of fiat (central bank) or fraudulent accounting (fractional reserve banking). Consumption must be restricted in order to be redirected for the creation of capital.
Therefore, there must first be savings before others may borrow. This is why the manipulation of interest rates is so dangerous. Interest rates, in a free market, are determined by the amount of funds available for lending. Interest rates are, in essence, the price of current goods in terms of future goods. Since all individuals prefer, ceteris paribus, to achieve their ends sooner than later, the interest rate serves to cater to the time preference of the individuals within a given economy.
If there’s plenty of money saved, then interest rates naturally drop to entice borrowers. If there is not much to lend, then interest rates rise to incentivize savings. It’s an organic process wherein times of plenty allow for investments in projects with longer processes of production, and times of economic difficulty encourage savings and allow for funds to be used on more immediate demands.
Economy-wide busts are mitigated by not creating an artificial boom in the first place.
The point Tom Woods was making in that post is that we must remember that banks do not currently operate in a free market. They are, instead, shieldedfrom the many regulatory protections that would emerge in a free market by government . As he explains, those proposals amount to (at best) a “second-best alternative” to “root-and-branch monetary reform.”
Last time (that I noted, anyway - there’s been more), they cited a grossly flawed “study.”
This time, gizmodo blogger Joe Brown merely rants: he explains that “[p]retty much every book, movie, or TV” show … has come to the conclusion that [time machines are] a bad idea” and guns are no different. He equivocates gun ownership to giv[ing] a 16 year-old a time machine.” He concludes that firearms “are too advanced for humans to use safely.”
Fact: Outlawing guns won’t make them disappear any more than outlawing marijuana or prostitution has made those disappear. Making such laws only ensures that those aforementioned “bad people” are *more* likely to be armed than the non-bad.
Fact: A gun does more to empower the weak than it does to strengthen the strong. In other words: if guns magically disappeared, it would be more harmful to the physically weaker and smaller among us - generally: women, the elderly, etc. - than it would to those who are already big and strong. Bad people will remain, only they will have less resistance.
Prohibition has never succeeded in eradicating that which was prohibited. The more difficult it is for peaceful, law-abiding individuals to acquire a good, the more the supply of that good falls into the hands of criminals. And someone who is willing to murder is not afraid of committing the much less grievous crime of acquiring an illegal firearm.
The way to mitigate such senseless violence is not to tip the scales in favor of criminals by disarming their victims.
I’ll be happy to give up the firearms that would protect me, my wife, and my daughters as soon as you figure out a way to eradicate the earth of rapists, muggers, and murderers.
As I said the last time I countered Gawker on the matter: “When statist impulses are used to disarm the sane and peaceful, only the insane and violent will be armed - and fewer will be safe.”
A St. Paul, Minnesota family claims in a lawsuit that police officers who conducted a wrong-door raid on their home shot their dog, and then forced their three handcuffed children to sit near the dead pet while officers ransacked the home. The lawsuit, which names Ramsey County, the Dakota County Drug Task Force, and the DEA, and asks for $30 million in civil rights violations and punitive damages after a wrong-door raid, also claims that the officers kicked the children and deprived one of them of her diabetes medication.
Sounds reasonable. That little girl’s diabetes medication could’ve been the drugs they were looking for. Another family stands protected from the ravages of drug abuse.
“There is no objection at all to discussion of ethical concepts when they are needed, provided that the economist realizes always (a) that economics can establish no ethical principles by itself—that it can only furnish existential laws to the ethicist or citizen as data; and (b) that any importation of ethics must be grounded on a consistent, coherent set of ethical principles, and not simply be slipped in ad hoc in the spirit of “well, everyone must agree to this… .” Bland assumptions of universal agreement are one of the most irritating bad habits of the economist-turned-ethicist.”—Murray Rothbard, Power & Market
For centuries before the science of economics was developed, men searched for criteria of the “just price.” Of all the innumerable, almost infinite possibilities among the myriads of prices daily determined, what pattern should be considered as “just”? Gradually it came to be realized that there is no quantitative criterion of justice that can be objectively determined. Suppose that the price of eggs is 50¢ per dozen, what is the “just price”? It is clear, even to those (like the present writer) who believe in the possibility of a rational ethics, that no possible ethical philosophy or science can yield a quantitative measure or criterion of justice. If Professor X says that the “just” price of eggs is 45¢, and Professor Y says it is 85¢, no philosophical principle can decide between them. Even the most fervent antiutilitarian will have to concede this point. The various contentions all become purely arbitrary whim.
Economics, by tracing the ordered pattern of the voluntary exchange process, has made it clear that the only possible objective criterion for the just price is the market price. For the market price is, at every moment, determined by the voluntary, mutually agreed-upon actions of all the participants in the market. It is the objective resultant of every individual’s subjective valuations and voluntary actions, and is therefore the only existent objective criterion for “quantitative justice” in pricing.
So, is this analysis right? Is Ryan’s budget plan so fiscally conservative, that it actually crosses over into “anarchist-libertarian” territory?
Hardly. The first jaw-dropping fact—in light of the commentary above—is that Ryan’s plan doesn’t even call for a balanced budget until the year 2040. Don’t believe me? Read it for yourself on page 84 of the actual proposal [.pdf]. There, the analysis proudly declares: “The CBO estimates that this budget [i.e. the Ryan proposal] will produce annual surpluses by 2040 and begin paying down the national debt after that.”
Indeed, if you look at Table S-1 (p. 88), you will see that the Ryan budget estimates that over its first ten years, it will add $3.1 trillion to the federal debt held by the public. Over that decade, the lowest the deficit gets (in absolute dollar terms) is $166 billion in Fiscal Year 2018, and at the end of the decade—i.e., in FY 2022—the Ryan Plan projects the federal budget deficit will have risen back up to $287 billion. Remember everyone, this estimate of a $287 billion federal budget deficit occurs in the tenth year after the Ryan Plan kicks in.
Only in America would the MSM describe a budget proposal that balances the budget in 27 years as “draconian.”
Jeff Jacoby offers stats that back up Bryan Caplan’s aphorism (“The wealthy but uncharitable socialist ceases to be a mystery once you understand relative prices. Voluntary charity is costly to the giver, but voting for charity … is virtually free”):
Of the 10 most generous cities in America, according to the Chronicle’s calculations, six are in Utah and Idaho. Boston’s tight-fistedness is typical too: Of the 10 stingy cities at the bottom of the list, eight are in New England — including Springfield (No. 363) and Worcester (No. 364).
The big banks do indeed receive market-distorting subsidies of various kinds, the result of which is that they grow bigger than they would otherwise be.
[But it’s more than that.] The Federal Reserve System itself is a subsidy to the banking system (what could be more obvious?), but no mainstream economist is going to say so.
Various proposals are being put forward [to reign in big banks], including raising capital requirements on the largest institutions. This would force them to rest on a sounder footing, the argument goes, and would counter the incentives to be reckless that their too-big-to-fail status encourages.
I am not sure exactly how to deal with the present condition of the banks apart from root-and-branch monetary reform, but I wouldn’t rule out a proposal like this one as a second-best alternative. No doubt some people will claim that it’s a violation of the free market to impose common-sense controls on financial institutions. But how so? These institutions enjoy various forms of government privilege, and commercial banks even have FDIC coverage. They are shielded from the free market, which means their behavior is not the behavior they would engage in on an actual free market.
To my mind, the key point involves bearing in mind the argument of Jeff Herbener…: Fiat paper money cannot be regulated by profit. The production of all other goods in society is economized and regulated by the principle of profit and loss. Fiat money, propped up by legal tender laws, cannot be regulated by profit, because it is always profitable to create more. The costs of increased production are negligible.
What follows from this is that in the case of banks (which in our system can create money out of thin air by making loans and crediting the borrower with a checking account balance created out of nothing), we cannot say that existing firm size is socially optimal. In any other industry, there is a non-arbitrary test of firm size: the profit-and-loss test encourages firms to reach a size that best satisfies consumers. But there is no profit-and-loss test in the creation of fiat money. As a result, firm size is arbitrary, and does not involve passing a market test.
Doesn’t change that it’s still second-best (at most) to “root-and-branch monetary reform.”
By subjecting all production, including that of money and banking, to the test of profit and loss, the market renders an integrated system of production that economizes the use of all resources for society at large.
The American people should reject the hype about so-called defense cuts from both side[s] of the political spectrum. When the Obama administration calls for an 18% increase in 2013 military spending, those who propose a 20% increase portray this as a reduction!
Even the supposedly draconian cuts called for in the “sequestration” budget bill would keep military spending at 2006 levels when adjusted for inflation, which is about as high in terms of GDP as during World War II. It’s also more than the top 13 foreign countries spend on defense combined. Furthermore, sequestration only cuts military spending for one year after taking effect. In future years, Congress is free to reinstate higher military spending levels — so under sequestration the most drastic case would mean spending $5.2 trillion instead of $5.7 trillion over the next decade.
Is there any amount of money that would satisfy the Pentagon hawks? Even if [the U.S.] were to slash [its] military budget in half, America easily would remain the world’s dominant military power. Our problems don’t result from a lack of spending. They result from a lack of vision and a profound misunderstanding of the single biggest threat to every American man, woman, and child: the federal debt.
When President Bush demanded bailouts of Wall Street and Detroit in late 2008, most Republicans said no. Today in the U.S. House there are only six Republicans who voted yes on the auto bailout and both bank bailout votes. One of those congressmen is Paul Ryan. …
In the Bush era, Republicans spoke of free markets and limited government, but they regularly expanded the government when Big Business asked them to. And Paul Ryan consistently took the Big Business-Big Government side.
Ryan supported the Export-Import Bank, a federal agency that exists to subsidize U.S. manufacturers with taxpayer-backed financing. The free-market rump of the GOP voted to kill the agency in 2002, but Ryan supported reauthorization on the floor.
The GOP teamed up with the health insurance and pharmaceutical industries in 2003 to expand Medicare to cover prescription drugs. Again, conservatives in the party dissented, and again, Ryan supported the corporate-welfare legislation.
The bailouts of Wall Street and Detroit were the pinnacle of Bush-era corporatism, and Bush couldn’t even bring most of his party along with him. Ryan didn’t simply back the bailout of Wall Street, he helped lead the bailout charge.
Ryan passionately pleaded on the floor for his fellow Republicans to join him. While two-thirds of his party mates voted no on the first bank bailout vote, Ryan voted with the banks — and he did so again a few days later when the House finally passed the Troubled Asset Relief Program on the strength of Democratic votes.
Come December, Ryan was one of only 32 House Republicans who voted to bail out General Motors and Chrysler.
Only 16 House Republicans voted aye on all three bailout votes in late 2008. Two of them, Ray LaHood and John McHugh, now serve in the Obama administration. Six of the 16 are now lobbyists — some with banks as clients. Six members of Team Bailout remain in the House, including Ryan.
Those numbers show Ryan wasn’t merely being a team player when he voted for corporate welfare — he was staking out his own turf: more pro-business than pro-market.
“The state’s most fundamental purpose, the activity without which it cannot even exist, is robbery. The state gains its very sustenance from robbery, which it pretties up ideologically by giving it a different name (taxation) and by striving to sanctify its intrinsic crime as permissible and socially necessary. State propaganda, statist ideologies, and long-established routine combine to convince many people that they have a legitimate obligation, even a moral duty to pay taxes to the state that rules their society.
They fall into such erroneous moral reasoning because they are told incessantly that the tribute they fork over is actually a kind of price paid for essential services received, and that in the case of certain services, such as protection from foreign and domestic aggressors against their rights to life, liberty, and property, only the government can provide the service effectively. They are not permitted to test this claim by resorting to competing suppliers of law, order, and security, however, because the government enforces a monopoly over the production and distribution of its alleged “services” and brings violence to bear against would-be competitors. In so doing, it reveals the fraud at the heart of its impudent claims and gives sufficient proof that it is not a genuine protector, but a mere protection racket.”—Robert Higgs
“So why don’t people vote out the bad guys and vote in the good guys? Well, those of us in the United States who have a bit of experience with democracy know the answer: there are no good guys. The system itself is owned by the state and rooted in evil. Change is always illusory, a fiction designed for public consumption.”—Jeffrey Tucker
The core of the problem [of crumbling buildings in Haiti] has nothing to do with a lack of regulations. The problem is the absence of wealth. It is obviously true that people prefer safer places to live, but the question is: what is the cost, and is this economically viable? The answer is that it is not viable, not in Haiti, not with this population that is barely getting by at all.
Where is the wealth? There is plenty of trade, plenty of doing, plenty of exchange and money changing hands. Why does the place remain desperately poor? If the market economists are correct that trade and commerce are the key to wealth, and there is plenty of both here, why is wealth not happening?
One can easily see how people can get confused, because the answer is not obvious until you have some economic understanding. A random visitor might easily conclude that Haiti is poor because somehow the wealth is being hogged by its northern neighbor, the United States. If we weren’t devouring so much of the world’s stock of wealth, it could be distributed more evenly and encompass Haiti too. Or another theory might be that the handful of international companies, or even aid workers, are somehow stealing all the money and denying it to the people.
These are not stupid theories. They are just theories — neither confirmed nor refuted by facts alone. They are only shown to be wrong once you realize a central insight of economics. It is this: trade and commerce are necessary conditions for the accumulation of wealth, but they are not sufficient conditions. Also necessary is that precious institution of capital.
What is capital? Capital is a thing (or service) that is produced not for consumption but for further production. The existence of capital industries implies several stages of production, or up to thousands upon thousands of steps in a long structure of production. Capital is the institution that gives rise to business-to-business trading, an extended workforce, firms, factories, ever more specialization, and generally the production of all kinds of things that by themselves cannot be useful in final consumption but rather are useful for the production of other things.
Capital is not so much defined as a particular good — most things have many varieties of uses — but rather a purpose of a good. Its purpose is extended over a long period of time with the goal of providing for final consumption. Capital is employed in a long structure of production that can last a month, a year, 10 years, or 50 years. The investment at the earliest (highest) stages has to take place long before the payoff circles around following final consumption.
In a developed economy, the vast majority of productive activities consist in participation in these capital-goods sectors and not in final-consumption-goods sectors. …
Rising wealth is always characterized by such extended orders of production. These are nearly absent in Haiti. Most all people are engaged in day-to-day commercial activities. They live for the day. They trade for the day. They plan for the day. Their time horizons are necessarily short, and their economic structures reflect that. It is for this reason that all the toil and trading and busyness in Haiti feels like peddling a stationary bicycle. You are working very hard and getting better and better at what you are doing, but you are not actually moving forward. …
Now to the question of why the absence of capital.
The answer has to do with the regime. It is a well-known fact that any accumulation of wealth in Haiti makes you a target, if not of the population in general (which has grown suspicious of wealth, and probably for good reason), then certainly of the government. The regime, no matter who is in charge, is like a voracious dog on the loose, seeking to devour any private wealth that happens to emerge.
This creates something even worse than the Higgsian problem of “regime uncertainty.” The regime is certain: it is certain to steal anything it can, whenever it can, always and forever. So why don’t people vote out the bad guys and vote in the good guys? Well, those of us in the United States who have a bit of experience with democracy know the answer: there are no good guys. The system itself is owned by the state and rooted in evil. Change is always illusory, a fiction designed for public consumption.
This is an interesting case of a peculiar way in which government is keeping prosperity at bay. It is not wrecking the country through an intense enforcement of taxation and regulation or nationalization. One gets the sense that most people never have any face time with a government official and never deal with paperwork or bureaucracy really. The state strikes only when there is something to loot. And loot it does: predictably and consistently. And that alone is enough to guarantee a permanent state of poverty.
Now, to be sure, there are plenty of Americans who are firmly convinced that we would all be better off if we grew our own food, bought only locally, kept firms small, eschewed modern conveniences like home appliances, went back to using only natural products, expropriated wealthy savers, harassed the capitalistic class until it felt itself unwelcome and vanished. This paradise has a name, and it is Haiti.
Taxation on Gratuitous Transfers: Bequests and Gifts
The receipt of gifts has often been considered simple income. It should be obvious, however, that the recipient produced nothing in exchange for the money received; in fact, it is not an income from current production at all, but a transfer of ownership of accumulated capital. Any tax on the receipt of gifts, then, is a tax on capital. This is particularly true of inheritances, where the aggregation of capital is shifted to an heir, and the gift clearly does not come from current income. An inheritance tax, therefore, is a pure tax on capital. Its impact is particularly devastating because (a) large sums will be involved, since at some point within a few generations every piece of property must pass to heirs, and (b) the prospect of an inheritance tax destroys the incentive and the power to save and build up a family competence. The inheritance tax is perhaps the most devastating example of a pure tax on capital.
A tax on gifts and bequests has the further effect of penalizing charity and the preservation of family ties. It is ironic that some of those most ardent in advocating taxation of gifts and bequests are the first to assert that there would never be “enough” charity were the free market left to its own devices.
Federal policies promoting ethanol are inefficient at any time, but they are particularly harmful to consumers in the midst of a severe drought. The EPA’s schedule of minimum targets for ethanol in the nation’s fuel mix, has caused some 40 percent of the nation’s corn harvest to be used for feeding vehicles, not people. Our analysis here is straightforward economics: Paul Krugman himself publicly called for an end to government ethanol support, over a decade ago, when the pressure on food prices wasn’t nearly as intense and we echo his call today.
A recent report from “Connecting the Dots” (an investment publication distributed by Standard Research) shows the startling impact that federal ethanol mandates and subsidies have had on the agricultural sector. We reproduce (with permission) some of the most striking charts below:
Figure 2. Percentage of U.S. Acreage Devoted to Various Crops
As Figure 2 shows, the ethanol mandates (embedded in the Energy Acts of 2005 and 2007) had a significant impact on the decisions of American farmers. Because corn (destined for ethanol) absorbed a much larger fraction of the total acreage, it “crowded out” the farmland available for other crops. Thus, the ethanol mandate contributes to price spikes in wheat, soybeans, and other crops; this isn’t simply an issue of corn.
The effects don’t stop there. Because the price of corn is higher than it otherwise would be (since the mandate gives an artificial demand for corn-based ethanol), the price of cattle feed is driven higher, too. This puts pressure on cattle ranchers, which in turn causes spikes in the price of beef. A similar process occurs for poultry and swine. In short, the massive federal intervention in the corn market ends up rippling throughout the entire food sector.
To get a sense of the size of the distortions introduced into the agricultural markets, look at the value of Illinois farmland—deep in the Corn Belt—with the introduction of the ethanol mandate:
Notice that the general collapse of the real estate market didn’t pop the apparent bubble in Illinois farmland; it merely slowed its inflation. By forcing fuel refiners to use far more of a product (corn-based ethanol) than they otherwise would, the federal government gives artificial support to corn prices which in turn bid up farm values in the Corn Belt. As usual, government interventions in one area of the economy cause a cascade of distortions.
Ryan is correct when he says “it’s the people who are politically connected, it’s the people who have access to Washington that get the breaks.”
But his faux populism obscures the main point. A much smaller government still dominated by money would continue to do the bidding of billionaires like casino mogul Sheldon Adelson, energy moguls like the Koch bothers, military contractors, and other high rollers now actively trying to put Ryan and Romney into the White House.
Of course, as long as government has a monopoly on force and thus the power to regulate industries and hand out favors, monied interests will always compete to keep themselves from being harmed by that power and, nefariously, to usurp that power for their own gain.
“It seems to be difficult if not impossible for human beings to avoid thinking of government as mystical entity with a nature and a history all its own. It constitutes for them a creature somehow interposed between themselves and the great flow of cosmic events, and they look to it to think for them and to protect them. In democratic countries it is theoretically their agent, but there seems to be a strong tendency to convert the presumably free citizen into its agent, or at all events, its client. This exalted view of its scope, character, powers and autonomy is fundamentally false.
A government at bottom is nothing more than a group of men, and as a practical matter most of them are inferior men…. Yet these nonentities, by the intellectual laziness of men in general, have come to a degree of puissance in the world that is unchallenged by that of any other group. Their fiats, however preposterous, are generally obeyed as a matter of duty, they are assumed to have a kind of wisdom that is superior to ordinary wisdom, and the lives of multitudes are willingly sacrificed in their interest.”—H.L. Mencken, Minority Report
The struggling port city of Stockton has declared bankruptcy after a spending spree where officials granted workers an absurdly generous lifetime medical care benefit, dramatically increased pensions, and floated debt to finance dubious downtown redevelopment projects.
When the city couldn’t make its pension payments in 2007, it borrowed $125 million in bonds to cover the mess it created by its pension increases. Now the city government is as upside-down as many of its homeowners and officials are blaming the foreclosure crisis, conveniently neglecting that the current reduction in property tax revenue has come after years of dramatic increases in such revenue.
Now Stockton officials want to stiff Assured Guaranty, the Bermuda-based bond insurance company, for about $103 million. The company—noting that Stockton is going under in part because it can’t make its pension payments to the California Public Employee’s Retirement System—argued in a statement, “If Stockton is disappointed with CalPERS’ investment performance, it should be taking that up with CalPERS rather than reneging on the city’s obligation to holders of the pension bonds.”
Stockton’s city manager Bob Deis accused the company of “bad faith” and “whining” even as he whined that Assured Guaranty doesn’t care about anarchy in Stockton’s streets, as the city’s crime rate soars after police cutbacks.
But it’s not the fault of lenders that city officials are so unconcerned about the safety of their residents that they continually put the demands of wealthy pensioners above the needs of local residents. Like many cities in this state, Stockton’s infrastructure is crumbling as officials serve mainly as benefit providers to those who work for the city or who are retired from city government.
Deis’s statement is the equivalent of a wastrel who spent 10 years running up debt on luxurious living, then got mad at his bank for wanting to get paid back: “Hey, you don’t care that I can’t feed my kids!”
Of course, it’s hard to top the arrogance of the scandal-plagued CalPERS, which has responded to Assured Guaranty’s complaints by insisting that “obligations owed to the public workers of the city have priority” over creditors such as Assured Guaranty. CalPERS also insists the media is “hyping” the idea that pension promises have anything to do with cities going belly up. CalPERS, which in 1999 advocated retroactive pension increases based on assumed rates of returns that essentially required the Dow Jones to reach 25,000 by 2009, is backed by taxpayers whether its projections are right or wrong.
As cities run out of money and pension obligations grow, we will increasingly see officials faced with a choice between protecting city workers or taxpayers. It’s not hard to understand why the politically powerful CalPERS is so confident that the demands of public employees always come first. …
Those of us who have viewed Chapter 9 bankruptcy as a useful option to help troubled cities get their books in order have miscalculated. Public employee unions and their allies in the courts and the retirement systems are so powerful that even during dire financial circumstances, their selfish demands trump everything else. Although bankruptcy can be a good tool, as Orange County’s 1994 bankruptcy made clear, the process is no panacea for incorrigibly wasteful, union-controlled local governments. …
If the courts side with reformers, there may be hope for rolling back pension costs and saving city services. If not, Californians better get ready for higher taxes and fewer municipal services, given that there are precious few options left. And without a reform path that touches pensions for existing workers, investors might want to rethink the long-term safety of their bond holdings, which will become an even bigger target.
Everything about this story is terrible, but only part of the terrible lies with the existence of something as nightmarish as locked-in syndrome, meaning complete paralysis except for the ability to blink (total locked-in syndrome means the eyes are paralyzed as well). The other awful part is the fact that two British men who have been suffering from this syndrome for years, since they suffered strokes, have to have their fates decided by courts. And the courts have said that the right to die is not for them to rule on at all.
Now the men —Tony Nicklinson and a man known only as “Martin” — the former of whom was joined by his wife and daughters who support his decision to die, either have to choose to live the rest of their natural lives unable to move their muscles, or they have to starve themselves to death, or put together the money and effort to go abroad to commit legal suicide in the Netherlands or Switzerland. They do not, it seems, have the right to die at home as they wish. …
Lord Justice Toulson, the decider along with two other judges, wrote that the implications for letting the men die, as well as assuring them that any helpers would be free from punishment, were too vast for the court to decide, it has to be up to Parliament.
It’s true that on occasion there are seemingly miraculous recoveries from strokes and even from locked-in syndrome, and fascinating technologies have been invented to facilitate communication for these unfortunate souls. … Nickilson, who would definitely know best, said (through his computer) in response to the verdict:
'I believe that the legal team acting on my behalf are prepared to go all the way on this but unfortunately for me it means yet another period of physical discomfort, misery and mental anguish while we find out who controls my life, me or the state.'
Unfortunately, he has learned that that it’s the state who gets veto power over life and death after all. …