Liberals hold Medicare high as the crown jewel that demonstrates how government is a good intervening force when it comes to the medical sector.  They point to numbers of how many elderly have been saved from the "cruelty" of a system that would have otherwise left them unprotected.  They claim that "government's success" in medicare demonstrates that they would be able to handle a public (government) insurance option.  They demand that the government be allowed to "compete" with private insurance agencies to essentially extend the medicare program to cover those who cannot afford the status quo insurance.  Well let us analyze the "successful" medicare system.

Where does the government get the money to support the socialized medicare program? The answer is from all of the current workers earning taxable wages.  There is no savings account that accumulates money for when you hit 65, by the time you are that old, the money that was taken out of your paychecks is long gone... spent on somebody else's medicare or social security needs.

Bernie Madoff is in prison for the rest of his life for taking the money of new investors and paying the old.  This is considered stealing, and stealing is considered immoral.  You have no argument from me here, I concede that Bernie Madoff's actions were immoral and worthy of severe punishment....

Now lets look at social security and medicare.  The government is taking from the younger working people and funneling that money to the elderly.  If you were to calculate every dollar spent on Americans over the age of 65 and compared that to all of the money spent on the youth under the age of lets say 18, the system is heavily favoring the elderly.  It isn't even close.  Now people will argue that it is a moral responsibility to take care of the elderly, it would be unjust to allow them to die because they could not afford medical services.  The government never truly addresses the variables that influence pricing in the medical sector (they unjustly blame the non-existing "free" market), and then they simply throw more welfare at the people while keeping the insurance cartels satisfied. They have succeeded in convincing the majority of people that the government is acting in their best interests, that without the government, life would be like going back to the dark ages. Survival of the fittest.

The only way that Medicare and Social Security can continue to operate is if there are enough people working and paying into the system to support the unproductive (retired) citizens. Well guess what, there is no way it can last.  Because these massive government welfare programs cost so much money (combined with all other government spending it becomes unbearable), the Fed's monetary policy has been perpetually inflationary... If the people want services, somebody has to pay for them. But... we want our cake and we want to eat it too. Well our government spends so much money that they can not make enough revenue through taxation, so they borrow and monetize debt... it is way easier politically to "solve" problems this way (they are only postponing not "solving").  This is the variable that forces manufacturing jobs over seas because the inflation makes it impossible for businesses to make a profit while at the same time being forced into paying high wages (liberals also make the mistake of defining wealth as earning high wages, and they ignore purchasing power and the cost of living)... They aren't able to compete globally because of this, and the new healthcare legislation is going to also force employers into providing benefits on top of high wages, thus guaranteeing the flight of more American jobs over seas. Smart businessmen know they can have the same factory in another country, while producing the products cheaper while at the same time paying their workers less... it is a no brainer. Liberals claim this is immoral and is an abuse of foreign laborers, but the result is cheaper consumer goods for the public. Meaning the less wealthy can afford more than they would have been able to if cut off from the market.  It is a net gain for the world, not a loss. But back to America, when the economy sheds private sector jobs, the government loses revenue for things like Social Security and Medicare... and all of a sudden we find ourselves in a situation where there are not enough people working to pay into these programs. The economy is poisoned with debt, and now the people who have become dependent on government services need it more than ever... but they can't get it.

You see the few decades that the government has been taking from the workers and paying for the elderly was theft in the same way that Bernie Madoff was found guilty.  These programs were never going to survive long enough for the people who were paying into them a generation or two later to benefit.  But we are still paying for them, and nobody likes to talk about it.  The liberals seem to have a lot of trouble with "profit" these days, but they have no problem with the recipients of these welfare benefits profiting off of those working hard just to get by in a system that will not be there for them when they need it in the future. The unfunded liabilities of social security and medicare is approaching 10's of trillions of dollars (40 as the cartoon above shows), that is more than enough to put enormous pressure on the fed to inflate and bring the dollar to its breaking point.  Is it logical to claim that Madoff's ponzi scheme was immoral but these unsustainable government programs funded in just the same ponzi scheme model are exactly the opposite? Can you honestly have the audacity to stand and claim that medicare is an example of government success?

If government stealing from one generation to the benefit of an older, while destroying the future prosperity of the nation is defined as a "success," then maybe you have a case.

my blog: Your World Unspun

What is the philosophy behind the welfare state?

The Liberal Left and the Liberal Right are up in arms fighting over where we should be spending money in Washington.  They are deciding who should be bailed out, who deserves health insurance, what kind of energy is best and how will it be subsidized, and also who we should be waging war against.  Rarely does a proponent of the welfare state suggest that we should remove or cut spending in government, therefore the debate is always a matter of "how much should we increase taxes, or how much should we raise the debt limit?"

The philosophy behind welfare is that people are in need of assistance now, and that such a wealthy nation should be able to provide for its citizens living in poverty.  They believe it is immoral to stand by and watch people of their own state struggle when they have the means to make a difference.  In return, they expect the quality of life for those on the receiving end to improve.  Some believe welfare is only justifiable on a limited basis, as a means to get by during a short period of hardship on the way back to normality (somebody is injured and needs a means to survive until they are fit to work again). The people from that camp usually look down on those who have become completely reliant on government assistance, those who are no longer trying to live on their own.  Either way the belief is that it is the role of government to take care of its citizens.  The criteria as to what conditions justify the use of welfare is pretty vague, and usually is loosely regulated (there are severe abuses of the system).

Following the financial meltdown, welfare has expanded beyond individuals and families to the point where corporations and entire industries now qualify to receive government welfare. The justification for such actions is that the recipient was determined to be "too big to fail," that the bankruptcy of that business would pose systemic risk.  Nobody really knows the exact definition of "systemic risk," but I would imagine it to mean anything that threatens the status quo economic order.  Meaning the jobs that presently exist are meant to always exist, that whatever we have now is all we ever wanted. They say they want to return to economic "growth," but in reality their actions are accomplishing just the opposite.

The main point of the argument I am about to present is that the welfare state is consuming itself, and all of the moral arguments in favor of welfare are nearsighted... meaning that in their calculations of present conditions they fail to consider the long term consequences of their actions. There is a serious dilemma that presents itself, and it is essential that every liberal comes to understand this.

I believe the fundamental error that liberals commit is in their understanding money. The perception is that America is in fact as wealthy as we say we are, and that the money supply is endless.  Now as the United States government is running  up a 2 Trillion dollar deficit for 2009 (notice how easy it is to throw around such a number now), they are making a pitch for an enormous welfare program that would be government health care.  The most conservative estimates of the costs (and nobody believes it) is proposed at 800 billion dollars.  Now we are running a 2 Trillion $ DEFICIT, so where does the money to provide this welfare service come from? Liberals are not proposing that we ourselves buy this welfare service, but rather that we borrow... It isn't the current American people that will fund this, it is the present foreigners... and ultimately the future American citizens that will have to pay for it. So essentially the logical equation looks like this:

1. If we the Americans want a medical welfare program now, then we will have to borrow money for it.
2. If we borrow the money, then we will eventually have to pay it back.

So far everything is sound.  Yes, of course we can provide this service because people are willing to lend us money now.  So the liberal says, "we can afford it, lets do it." In the short term, people are happy. The people who receive this welfare service will be inclined to re-elect their government saviors, and this line of thinking is perpetuated.  As for the liberals, this is as far as their logical process progresses... the end of the line is here.  People are happier now, we have made the world happier so therefore we are doing the right thing.  But it is far more complicated than this in reality.

What happens when we borrow more money than we could hope to repay? I threw out the number 2 Trillion dollars before, and it is time we put that in perspective. 2 Trillion dollars is more than the GDP of every single country in the word except for: The United States, Japan, China, Germany, France, U.K., and Italy.  So the United States is borrowing more money in 2009 than many could ever hope to make as a country.... and on top of that, we want to borrow MORE money to provide a service to 50 million people (a fraction of a percentage of the total world population). The justification is that it is a human right to this welfare, that it will make life better for the select few who benefit from this program...

But there is only one way we can continue to operate in this manner, and that is that the world continues to maintain insatiable demand for American dollars. If we continue to run massive deficits every single year, how is it possible that we can ever hope to repay our debts?  Throughout history governments who have operated beyond their means (deficit spending) have resorted to manipulating the currency.  Back when money was limited in supply (precious metals), governments could not turn to the printing press to just print more money, they had to dilute the weight of the metal used in each coin... So by taking a solid gold or silver coin and turning it into a copper coin with a gold plating, they have effectively managed to cheat the system.  By declaring that the new manipulated coin is of the same value of the old solid gold coin is ridiculous, it is obviously counterfeit.  Money is a commodity, and liberals have to understand this.  Today, we don't have to change how we make our money because we have gone away from a sound money such as gold or silver, and we have turned an otherwise worthless material (paper) into money. It is a lot easier to counterfeit now, they just print more money.  If we can't afford to pay back our debt with interest we have our central bank, the federal reserve, increase the money supply making it easier for us to repay our debts.  This is inflation, and it has been witnessed throughout history... But never has such a massively inflated currency been overvalued as much as the current American Dollar currently is.

Why would the world continue to lend us money?  All while knowing full well that because we are borrowing so much, we will be returning to them vastly diluted (via the printing press) dollars.  You see, because money is a commodity it is subject to the rules of supply in demand.  In other words by increasing the supply (printing the money), the value of that money correspondingly decreases with the level of inflation. The only reason we currently are able to get people to take our dollars is because at this very moment the dollar is still considered the world reserve currency... But that is about to change in the near future.

So in order to pay for these extended welfare services that our population is demanding, the government has to take on more debt, which means ultimately we will resort to more inflation of the money supply... So let us now update our logical equation:

1. If we the Americans want a medical welfare program now, then we will have to borrow money for it.
2. If we borrow the money, then we will eventually have to pay it back.
3. If we are going to pay it back, then we will have to inflate the money supply.

Now we must return to the Moral argument that liberals make, and that is that the right thing to do is to help the people in need right now... regardless of the future consequences of said welfare.  We have established that future inflation is inevitable.  If a liberal would like to make an argument that we can sustain our spending levels via taxation of the wealthy I would love to hear it... It is completely irrational to suggest so.  So now we have to point out the consequences of inflation.

Inflation is a hidden tax.  I have already discussed how the value of the money is decreased as the supply is increased.  So therefore every single individual who has saved wealth in dollars, such as a bank account, are now less wealthy.  The government and the federal reserve is robbing the people who saved dollars.  In the future, if government spending is not reined in, the inflation rate can be expected to rise sharply.  With inflation comes higher prices for necessary consumer goods such as food, clothing, energy, shelter, etc.  That is our inevitable fate... So therefore it logically follows that with inflation comes a necessary increase in the cost of living. So once again we will add a line of logic the the problem:

1. If we the Americans want a medical welfare program now, then we will have to borrow money for it.
2. If we borrow the money, then we will eventually have to pay it back.
3. If we are going to pay it back, then we will have to inflate the money supply.
4. If we are going to inflate the money supply, the cost of living will go up correspondingly with the level of inflation.

Now you are beginning to see the dilemma that is coming to fruition.  Welfare may be a short term good, but as we speculate into the future we see that valuation rapidly changing.  If the cost of living is going up, then the general wealth of the nation is evaporating.  Inflation is the worst enemy of the working impoverished and middle class.  The only beneficiaries of inflation are the select special interests who get to touch the money first... They then invest the money into assets of value like property, energy, food, etc. and they make a profit at the expense of the others.  The liberals then argue for things like a hike in the minimum wage but they don't understand that it is all relative.  To increase wages you have to increase the money supply equating to a net loss, even with the raise in wages.  If you receive a 2% raise with an inflation rate of 10% you are still being robbed... it is all a trick, an illusion.  The people feel better because they are receiving more dollars, but those dollars aren't able to purchase the same amount of goods they did before the inflation of the money supply. So in the end, the inflation leads to a lower quality of life for the citizens.  More people need welfare.  So again we go to the logic:

1. If we the Americans want a medical welfare program now, then we will have to borrow money for it.
2. If we borrow the money, then we will eventually have to pay it back.
3. If we are going to pay it back, then we will have to inflate the money supply.
4. If we are going to inflate the money supply, the cost of living will go up correspondingly with the level of inflation
5. If the cost of living will go up, then the future standard of living will decline.
6. so then: If we the Americans want a medical welfare program now, the standard of living in the future will decline.

Now to suggest that a government run healthcare program is the lone cause of the future standard of living is not accurate, it is the combination of all of the government welfare programs that will lead to this. So ultimately we should reword the lines of logic to read as such:

1. If we want a welfare state now, then we will have to borrow money to support it.
2. If we borrow the money, then we will eventually have to pay it back.
3. If we are going to pay it back, then we will have to inflate the money supply.
4. If we are going to inflate the money supply, the cost of living will go up correspondingly with the level of inflation
5. If the cost of living will go up, then the future standard of living will decline.
6. so then: If we the Americans want a welfare state now, the standard of living in the future will decline.

So the long-term prognosis of the welfare state is undeniably a negative force on society.  The argument that our economy can grow at a rate large enough to satisfy the out of control spending is essentially suggesting that the rest of the world will continue to lend us money and lose wealth in that deal.  Remember the money they lend us is more valuable than the inflated money the receive in return.  To make that argument is to argue that the rest of the world likes losing for our benefit, and our benefit alone here in America. Why would they do that?  I've written before about that status of the dollar, and you can search the internet for articles about China, Russia, Japan, OPEC, and others losing faith in the American dollar.  If the world were to reject the dollar because of the nature of government spending in Washington D.C. you can forget about any and all welfare.  There will be no means to pay for it.

So this is the dilemma I present to the proponents of the welfare state here in America.  Can you continue to support your position knowing that it will lead to a decline in the standard of living in the future?

Morally, how can you justify sacrificing the future American's well being for the benefit of a fraction of the population today? Think about it.

my blog: Your World Unspun

Michael Moore is good at what he does.  He makes movies that play off the emotions surrounding hot topic political issues, and that inevitably leads to blockbuster success... He will be the first to admit what he is and what he is not, and anyone (regardless of political affiliation) can admit that Michael Moore is a talented film maker.  With that said, he is by no means an economist, and I would go further to say he isn't even a leisure student of economic philosophy.  So I have given the man the respect he deserves for making movies that people will pay money to see, however I am going to explain why he doesn't exactly know what he is talking about.

To begin I will briefly summarize the argument Michael Moore is making:

"Capitalism" has led us to the economic meltdown we are experiencing now. Where bankers and CEOs pay themselves huge bonuses, paid for by the United States tax payers....  All while the innocent people are losing their jobs, and then their homes because of adjustable rate subprime mortgages. He believes "Capitalism" is evil, and that it is a system that feeds the rich making them richer, while taking from the poor making them poorer. He continually brings up that 95% of the wealth in this nation is controlled by the 1% of the wealthiest people in the country.  Because of that, he believes that the "free market" has failed America, and it has failed everywhere else.  He blames "Capitalism" and the "free market" for leaving people without healthcare and homes, and also for the perpetual increase of prices for healthcare products/services.

He is very critical of the bankers and banking lobby's special political connection in Washington D.C. He specifically mentions that Goldman Sachs has obtained various positions of political power: chief of staff for the executive branch, treasury secretary, etc., and those connections have led to policies that favor the bankers.  He specifically railed on the "deregulation of the banking industry" as a cause of the derivative mess that brought our financial system to its knees. The film seemingly is really aimed at the big bank executives who make hundreds of millions of dollars, I think Michael Moore equates this to "Capitalism."

He is careful not to come out and say that he is a Socialist, because I believe he understands the baggage that comes along with it.  The American public has made "socialist" to be a four letter word that nobody wants to be called.  This is why I believe he brings religion into the film- he interviews clergy members on "capitalism" and "free markets" while coming to the conclusion that "capitalism" is evil and against Christian values... He undoubtedly does this to attempt a emotional connection with the right.

He ultimately concludes that the answer to all of our economic problems is Democracy... that "capitalism is the opposite of democracy."  That 90% taxation of the wealthy is a good thing.  That 'we the people' still greatly outnumber the special interests that be in the banking industry, and our votes can set things right.  The film humorously condemns the Bush administration for our financial mess, as if they were the product of banking lobbyist.  And it was briefly portrayed that Obama was the opposite, a vote against the banking special interests.  He did this to show the capability of democracy, that if people mobilize and fight back, we can make things better... those who have nothing can take everything back from those who currently possess everything.

Now I will explain why he doesn't exactly know what he is talking about:

Michael Moore realizes there is something wrong with our current economic system, and I whole heartedly agree with this assessment.  However, his entire argument against "capitalism" is fallacious because he equates the status quo to just that, "capitalism."  This is a common error made by the left wing, one that frequently frustrates the true free market capitalism proponents from the right.  It is absolutely essential that this major problem of semantics is acknowledged and fixed before this debate that Michael Moore has undoubtedly sparked begins.

If Michael Moore were to be lectured on the philosophy of free market capitalism, he would find that his film is really aimed at the corruption that ensues when big business gets in bed with big government.  He would be shocked to find how many of his criticisms of the system would be resolved by a true free market economic model... For instance:

Nowhere in "Capitalism: A Love Story" was there any mentioning of the Federal Reserve.  The Federal Reserve is essentially the enabler of all of the banking corruption.  They are the ones that lend money to the banks so they can take tremendous risks on the derivatives market (called the casino by Moore).  Without the FDIC and Federal Reserve to turn to, how could banks possibly leverage out 30:1 for every dollar deposited?  The Federal Reserve is the setter of interest rates, the ones who encourage subprime lending when rates are set artificially low. Guess what? In a true free market capitalist system, the Federal Reserve would not exist.  The market would be the determinant of interest rates, and it would be impossible for "subprime" to even exist. Subprime by definition means not determined by a free market. Therefore the existence of this central bank, which is responsible for central planning via the setting of artificial interest rates, renders the American economic system to be non-free market... not true capitalism.

As far as the working class is concerned, one has to ask why wages are stagnant as prices rise? Let us now talk about the consequences of inflation.  As the American government/empire perpetually expands, there is an increased tax burden to bare for the citizens.  Our government requires several trillion dollars a year to operate at full capacity, and there are 3 ways that they can come up with the money to do so. The first and obvious source of government revenue is taxation.  When a government grows to the size of ours, it becomes increasingly difficult to pay in full via taxation.  A heavy tax burden is bad for businesses, and that means it is bad if full employment is an objective of your government.  So in our current fiasco we can't raise enough revenue through taxation so we turn to option #2, which is borrowing.  The United States government can turn internally to its bankers (even the FED) to purchase government debt bonds to be repaid with interest by a predetermined date.  Often, we have so much debt that we have to turn abroad for buyers.  Countries like China and Japan own hundreds of billions if not trillions of U.S. debt obligations.  However, often times (especially in very recent history) our government cannot meet its obligations by taxation and borrowing, so therefore it has to turn to the third option which is monetizing the debt: printing the money. In a true free market system, this is considered counterfeiting, and it destroys the value of the currency.  The printing of the money is what has led to most of the problems Michael Moore attacks in this film.

Michael Moore points out the disparity of wages, and how it is becoming increasingly hard to survive on a working class salary.  He is right, but he and all of the other proponents are wrong in suggesting that simply increasing wages will solve the problem of prices.  If everybody were to receive a 20% raise, well that sounds great, but you should also expect a corresponding 20% rise in the cost for consumer goods.  This does not increase the quality of living, in fact, everything would remain the same if not worse.  This is because the raise would not be possible in our system without a corresponding increase in the money supply.  In fact, if the money supply is increased at a rate higher than that of the rate of increase in wages, then the people getting a 20% raise are actually losing wealth.  This is the dilemma that the proponents of big government (socialists) are faced with.  The more we spend in Washington D.C., the further the gap between rich and poor becomes.  This is NOT a problem of free market capitalism, in fact it is the problem of everything but capitalism.

In a free market system, unsuccessful businesses fail.  This was not the case with Wall Street.  The fact that the taxpayers are on the hook for the success or failure of a privately owned business demonstrates how far from a free market capitalist system we really are.  Michael Moore is correct to direct the blame on the big guys like AIG and Goldman Sachs, but once again, it is not capitalism's fault that they were able to get away with what they did.  The biggest misunderstanding of the people for extensive government regulation is they do not understand that the government itself is connected to the crime being witnessed.  The regulatory agencies, the Federal Reserve, or even the congress are the last places the people should be looking to ensure fraud is not being committed.  Who is to say that the regulatory agencies and politicians haven't been bought, or that the Federal Reserve doesn't stand to gain from excessive deficits? The people are entrusting the crooks to police themselves!

With all of these points being made I believe it is safe to say that "Capitalism" has NOT failed America.  What we are witnessing now is what Benito Mousolini referred to as Corporatism.  Where big business combines with big government to be a self serving beast.  "Capitalism" is NOT the opposite of democracy, in fact, capitalism may just be the only economic model that can meet the demands of a FREE, democratic people.

When Michael Moore concludes that "democracy" is the solution to our economic troubles i'm not quite sure what he means... Was he saying that the people should decide what economic system is used based on their votes? Or is he simply talking nonsense? A quick lesson for Michael Moore and all of those who may be confused:

There are only 3 kinds of economic systems which have many variations branching off of them: Capitalism, Socialism, and Fascism.

Capitalism: Is a system of freedom.  People have the opportunity to choose where to spend their capital (saved money or wealth), how to make money, and how to live their lives in general.  The only job government would have is protecting against fraud and the right to private property (no stealing etc.).  Economic matters are controlled by the people.  Taxes and tariffs are not encouraged as they are detrimental to the market pricing system.  Competition drives prices lower, which leads to a higher standard of living. The reward for innovation is second to none in this system. "capital" does not come from a printing press.

Socialism: Central economic planning by the government.  The government determines what is made, how much of it is made, and to who it will sell it to. The government determines how money is best spent, and how individuals best fit their economic plan. The government controls the means of production.  The government determines how much money you will be paid. There is no competition with the government, prices are determined by the government, and there is little incentive for innovation.

Fascism (Corporatism): This is like a crony-capitalist system.  The government and big corporations work together to their own benefit with little regard for the rest of the country.  Big corporations favored by the government thrive, while others struggle to survive.  There is a large gap between the wealthy and the poor.

What other economic model does Michael Moore envision? Democracy? What does that even mean? I challenge the Michael Moore's of this country to educate themselves in the ways of free market capitalism, and then tell me it won't help solve all of the problems they see.

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