Posted by danielbier8 on 10/05/09
Last updated 10/05/09

Op-Ed - Paul Krugman Needs to Retake Basic Economics

Daniel Bier

Paul Krugman, the Nobel Prize-winning economist and writer for the New York Times, has lost his grip on the basics of his field. Krugman is a Keynesian economist, and he naturally has a lot of faith in governments' ability to manage the world economy, but this faith in government, justified or not, does not allow him to simply ignore reality and the laws of economics. John Maynard Keynes was an early 20th Century economist who advised significant government intervention in the economy, via central bank inflation of the money supply, the fixing of interest rates, business regulation, and government "stimulus." Keynes believed that governments could correct mistakes in the private sector through deficit spending, monetary inflation, and the taxing and redistributing of capital. Whether or not these beliefs are justified is an important question, as they fly in the face of the fundamental assumptions of free market economics (that is, that the self-interested private sector can allocate scarce resources more productively than the government). Unfortunately, Krugman has chosen to defy the very foundation of his science: the reality of scarcity and the opportunity cost of choice. Krugman denies that there is a cost to be paid by society for getting more of one thing (government spending) and less of another thing (private investment).

For example, in his September 29 column for NYTimes.com, Krugman claims, "I'm coming more and more to the conclusion that the public debate over fiscal stimulus, which views it as an agonizing tradeoff between possible benefits now and certain costs later, is wildly off base.... [F]iscal expansion does not crowd out private investment - on the contrary, there's crowding in, because a stronger economy leads to more investment. So fiscal expansion increases future potential, rather than reducing it.... Crowding in raises future GDP - which raises future tax revenues. And the rise in revenues relative to what they would have been otherwise offsets at least some of the burden of debt service."[i]

Cutting through the jargon and the awe inspired by his Nobel Prize, what Paul Krugman is essentially claiming is that there is no tradeoff or opportunity cost for governments when choosing to spend large amounts of money on fiscal "stimulus," because there is no capital scarcity. The root of the problem is the way Krugman views the government as an entity outside of the economy, with vast resources at its disposal, which it can from time to time "inject" into the economy. This is pure nonsense. The government has no resources of its own. All government expenditures must first be taken from somewhere else in the economy, and all wealth must first be produced before it can be spent. Therefore, to claim, as Krugman does, that government spending and private spending are not mutually exclusive endeavourers is fantasy. If the government spends a dollar, then that dollar is not available for private sector investment. Every dollar that comes out of the Treasury must first be taken and put into the Treasury.

There are three ways to put that dollar into the Treasury: the government can tax it, borrow it, or print it- Krugman recommends doing all three. But none of this can alter the fact that the amount of total wealth in the economy is unchanged. If it taxes, that is a drag on producers, thus driving up prices and hurting growth. If it borrows, it must compete with private investors for an unchanged supply of capital, thus increasing demand and driving up interest rates. If it prints, the new dollars dilute the value of the currency, thus incrementally taking value from every other dollar in circulation, raising prices, diminishing savings, and driving up interest rates. In every case, there is an opportunity cost imposed by the government: every dollar it takes through taxes, borrowing, and inflation is a dollar denied to the private sector.

To say, then, that government "stimulus" does not crowd out private investment is false. A dollar borrowed from China or Japan for government projects and wars is a dollar that is not being invested productively in American or Chinese businesses. Therefore, to make government borrowing, taxing, inflating, and spending worthwhile one must assume that the government can allocate those resources in a such a way as to increase production better than the market- a shaky supposition given the collapse of command economies- but such is the theory. The government can reshuffle resources from industry A to industry B, but it cannot create wealth out of thin air, cannot simply give wealth to both industries- if it could, no one would ever have to work again. Economic growth depends on production, so for an economy to grow it must find a way to allocate capital towards the most productive ventures. However, unlike private investment, the government has no stake in the outcome of its projects, no profit and loss mechanism. Instead, government allocates resources based on what novelist Ayn Rand once called the "aristocracy of pull." Whoever has the best connections with the bureaucrats in charge gets the resources, and this rarely results in resources being given to productive enterprises, because if they were productive investments, the private sector would already have provided the resources. The Post Office, GM, Chrysler, Goldman-Sachs, and AIG are perfect examples of where wealth is deliberately awarded, not because of success and productivity, as in the private sector, but because of loss and failure, as in the "aristocracy of pull."

In addition to the opportunity cost imposed by government diverting resources from market projects to government projects, there is the actual cost of borrowing itself- all debt must be paid back, with interest, at a later date. Thus, taking on debt is an implicit promise to a nation's creditors to raise taxes and impose further direct costs on the economy in the future. But Krugman goes on to say, "[F]iscal expansion is good for future growth. Still, it does burden the government with higher debt, requiring higher taxes or some other sacrifice in the future. Or does it?" Krugman says, no, not really: "Here's why: in the short run fiscal expansion leads to higher GDP, which leads to higher revenues, which offset a significant fraction of the initial outlay."

His theory is that government is so good at picking investments (despite claiming,[ii] like Keynes,[iii] that paying people to bury jars of money in the ground was acceptable "stimulus") that it will lead to higher productivity than the very best of private investments and improve future growth. But in addition to this, Krugman thinks that fiscal stimulus actually increases the overall GDP, rather than simply shuffling resources around. Thus, he thinks that the magic of government deficit financing can temporarily increase the amount and speed of circulating income and spending, and provide the government with more tax revenues to pay off the debt it just incurred, offsetting some 40% of the cost of borrowing. That the government would essentially be taxing back the money it just put in to pay off its debt, Krugman ignores. Further, he depends heavily on the assumption that the government's "stimulus" investments will lead to major future economic growth, without which his debt cannot be financed.

Krugman's fallacies and unfounded assumptions are unbecoming of a Nobel Prize winner. He denies the opportunity cost of government spending by ignoring the source of government financing, which allows him to implicitly deny and ignore the reality of scarce resources with alternative uses. Because money is not a physical good, which must physically move from one industry to another, it is easier to obscure the reality of the limited resource problem and the simple transfer of wealth caused by government spending. A dollar can only be employed doing one thing or another- not both. Krugman thinks the government has a secret reservoir of wealth that it can just "inject" whenever the economy slumps, and this is simply untrue. In denying the opportunity cost of government spending, he denies the idea of capital scarcity altogether. To pile on top of this hill of fallacious assumptions, he then claims that there is very little direct cost to borrowing and spending because of the inherent benefits of deficit financing: a magically increased GDP, without the bother of actually increasing production. Therefore, he claims that $1 billion of borrowing really only incurs $600 million of debt, because the miracle of deficit financing can immediately provide $400 million worth of additional taxable wealth. He goes on to assert that the rest of the government's investments will work out so well that the economy, despite being burdened with all of the debt, can be turned shipshape before the bills for all of that government spending come due. One can argue the merits of "stimulus" and government intervention all day, but the inevitable costs must be weighed against the perceived benefits. Krugman tries to deny that there are any costs, direct or indirect. And that, not "penny-pinching on stimulus," to quote Krugman, "is deeply, destructively foolish."[i]

[i] Krugman, Paul. "The true fiscal cost of stimulus." http://krugman.blogs.nytimes.com/2009/09/29/the-true-fiscal-cost-of-stimulus/ September 29, 2009, 9:36 am

[ii] Krugman, Paul. "Time for bottles in coal mines." http://krugman.blogs.nytimes.com/2009/04/14/time-for-bottles-in-coal-mines/ April 14, 2009, 10:15 am

[iii] Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Houghton Mifflin Harcourt, 1964. (Page 129)

Posted by danielbier8 on 03/26/09
Last updated 06/09/09

“No matter how noble the motivations of political leaders are, when they achieve positions of power the power itself inevitably becomes their driving force.  Government officials too often yield to the temptations and corrupting influences of power. There are many others who are not bashful about using government power to do ‘good.’  They truly believe they can make the economy fair through a redistributive tax and spending system; make the people moral by regulating personal behavior and choices; and remake the world in our image using armies.  They argue that the use of force to achieve good is legitimate and proper for government-- always speaking of the noble goals while ignoring the inevitable failures and evils caused by coercion. Not only do they justify government force, they believe they have a moral obligation to do so.”

-Rep. Ron Paul, June 29, 2006

“Law never made men a whit more just; and, by means of their respect for it, even the well-disposed are daily made the agents of injustice.”

-Henry David Thoreau, Civil Disobedience

“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

-C.S. Lewis

“Setting an example is not the main means of influencing others, it is the only means.”

-Albert Einstein

“Do not repay anyone evil for evil. Be careful to do what is right in the eyes of everyone. If it is possible, as far as it depends on you, live at peace with everyone… Do not be overcome by evil, but overcome evil with good.”

-Romans 12

“When evil fights evil, it doesn’t really matter who wins.”

A note on terms: I use the term “church” loosely, as I do “morality.” The point here is not that the Christian church, per se, is the source of all government evil, but rather that moralists of all stripes and creeds, whether atheist, Catholic, Mormon, Protestant, or Muslim, have attempted to use the government to force people to behave in whatever way they see fit. The “church,” the “pastor,” and the “faithful” really can have nothing to do with religion or deity, but as long as they are trying promote some standard of morality on society, it doesn’t matter whether it’s Oral Roberts or Christopher Hitchens (bloody neo-cons both!) They do so because they truly believe all people, except themselves, to be wholly evil and incurable, and thus must be forced by law to act “morally” or “responsibly.” It is a catastrophic mistake to believe that one can supplant violence for reason as the method of achieving social change without affecting the morality one is trying to promote. It is no wonder then that those who try to cure poverty with theft, sexual immorality with slavery, and drug addiction with murder always end with the same problems they started with, plus the added sins of their government solutions, and their consequences. The one cannot pursue morality immorally. It is impossible.

A severely disturbing relationship has been formed between morality and government, one that must be fixed as soon as possible. The unholy alliance of the state and the church, so feared by theologians and American Founders, has spawned a monstrous creation that feeds off its own inertia: the all-powerful Leviathan, the omnipotent government. Those in the state who would seek to use “morality” as a justification for expanding its power have teamed up with those in the church who would seek to use the powers of the state to coerce obedient “moral” behavior out of the people. In doing so, both the church and the state have become hopelessly corrupted, to the lasting detriment of the people. This coalition has simultaneously tasked the state with creating a “moral” society and exempted the state from obeying any moral laws itself in its pursuit of this goal. This is illogical on its face.

Members of the government ought to obey every moral law (of course, if they really took them to their logical conclusion, they wouldn't work for the government). Many people have believed that government bureaucrats need to “take their morality to work” with them, and force people to follow the moral codes they live by. However, our form of government was not established to and is not capable of enforcing a particular morality. Furthermore, true Christian morality is the antithesis of government action, or, at very least, government's aggressive, non-defensive actions. The state simply cannot make people behave morally in the Christian sense, because the tools of government and the nature of Christianity are entirely incompatible. The wall between church and state was set up as much to protect the church from government’s corrupting influence, as it was to protect the people from the church’s undue influence on government- they’re two sides of the same coin. What makes an action moral, or a person moral, is the voluntary decision to act morally. Coercing someone to make certain personal choices is not only immoral in and of itself but also makes moral action impossible. In terms of non-personal behavior, the person who does not murder merely because he is afraid of prison is not more moral than the murderer, as Christ made abundantly clear in his hate-murder analogy. It is not the “fear of God” but the fear of man that keeps him in line, and that’s okay, because the government’s job is not to reform the murderer, but merely to dissuade him from killing or to prevent him from murdering again. Of course, it would be much better for society to have someone who didn’t want to murder at all, but that is the church’s job, and one that can only be done successfully through reason and persuasion. The distinction between an immoral person and a moral person who act in the same way is choice, a positive moral choice. The government should only be involved insofar as a person’s negative moral choices hurt other people.

Government cannot force people to behave morally, and our system was not set up with that goal in mind. The purpose of government was a much more modest goal- to protect the people’s freedom to live their own lives as they see fit, as long as they are lived peacefully. The confusion comes from the fact that government is opposed to actions that are all patently immoral, such as murder and theft. This leads people to believe that government is there to promote morality, but this only appears true to the extent that immoral actions directly harm other people. Government is only there to promote justice by discouraging and punishing violations of the people’s rights, not to make people act morally in their personal lives. Morality cannot be forced upon a person, it must be chosen voluntarily, and thus, though government is there to discourage immoral actions like force and fraud, it is not because they are immoral choices, as such, it is because they also hurt other people. The cart has been put before the horse, so to speak. The only justifiable reason for the government to regulate non-violent personal behavior is the belief that it is what people do, not what they choose, that makes them moral, and thus that it is beneficial to them to have morality forced upon them, in the same sense that it is beneficial to have their life protected from murderers. This pernicious idea is fundamentally flawed, and if it is not addressed will have (and has had) disastrous consequences. The major flaws in this argument is that morality can come from fear of violent repercussion, not only from voluntary personal choice, and that it is proper to turn the purpose of government on its head, not only by not failing to protect the people’s rights, but by protecting and promoting violent actions against non-violent people. Furthermore, the idea that something as personal and relatively subjective as “morality” can be determined by majority vote and then forced on people is terrifying in its authoritarian implications. This confusion has done great harm to the state, the church, and the people.

First, the state’s purpose is taken away from its previously limited scope and moved to a much broader and more nebulous aim of creating a “moral” society; “moral” being defined however the politicians like. This creates the potential for unlimited and arbitrary abuse of government power in all areas of life in the name of “morality.” The questions of whose morality and whether that morality is even compatible with the state are never asked. (Because we live in a democracy, the moral ground chosen is one with broad based support, which usually means the majority oppressing a minority.) Who could possibly argue against trying to do “good?” Suddenly, anyone who opposes government bans on drinking, smoking tobacco, smoking marijuana, smoking crack cocaine, guns, suicide, trans fats, fast food, prostitution, and homosexuality is seen as a defender of “immoral” and destructive behavior. Those who would oppose government welfare, “free” medical care, education, and housing, food stamps, Social Security, and unemployment likewise becomes targets of the moral crusaders hell-bent on creating a utopian (or distopian) society by force. Because the state’s goals have been changed from the defense of personal liberty to the “defense” of “morality,” slogans about “freedom and justice for all” ultimately tend to mean nothing more than “the freedom to do whatever we tell you.” What is liberty if it is not the ability to choose immorality? “For rulers hold no terror for those who do right, but for those who do wrong.”

Its effect on the church is equally bad. The church is a social institution whose goal actually is to promote morality. Through outreach and missions work, the church seeks to turn the hearts and minds of society’s members towards conscious moral behavior. This serves a much more important function than that of government, because a moral heart is a much more powerful force for good than the fear of the state. A moral person will neither murder nor steal, and he will not do so whether or not he thinks he can get away with it, and he is a peaceful influence on others. The moral person does not need policing, and the more moral people there are in a society, the smaller the government will need to be because there will be fewer crimes. Self-control is always preferable to external control. Should the church become politicized, however, rather than taking the peaceful reformation of society upon themselves, they shrug the responsibility onto government. They see force as a shortcut to reformation, and thus, the peaceful methods and goals of Christianity are subverted by a lazy and selfish desire to achieve its ends, by any means necessary. The church merely becomes another lobbying association, guided by personal avarice and ambition for the powers of the state. So while the power of government explodes under the impossible and open-ended mission of moralizing the people, the very organization set up for that purpose abandons its pursuit. The church, which ought to be harshly criticizing the massive increase in aggressive state-sponsored violence as immoral, becomes a tool and promoter of more and more government power. As the futility of trying to control the people’s personal behavior becomes ever clearer, the moralists only become more convinced that the only way to reform a society gone so far wrong is with even more overwhelming government force. Their faith is no longer in peace, reason, God, or even themselves, it is in an omnipotent government. The eyes of the nation look increasingly to the government to solve every perceived social and personal problem. The totally naïve church population assumes that even while ceding their responsibilities and freedoms to government, that they will continue to decide what morality really is. They idiotically assume that their particular view on that issue is sacrosanct, and when other people eventually co-opt the term for their ends they are shocked that anything but “traditional” morality should be given the force of law. The people who originally rendered unto Caesar what is God’s will live to regret it, because sooner or later, the people who turned the sword of the state on their enemies will have it turned back on them.

The effect of this toxic ideology on the people is the end result of corrupting the two major historical institutions that were designed to protect them. The general recognition that people are flawed lead to the rise of two organizations, the church and the state. In recognition of the fact that there are violent people in society, the state was created to promote justice by protecting the people’s rights from being infringed on by violent criminals who would seek to steal, enslave, and murder. Conversely, the church grew to promote morality through persuasion and reason, and thus to slowly erode the need for government by promoting inner morality amongst the people. But this vile idea that one can combine the goals of the church with the methods of the state corrupted both institutions. The state now seeks to steal property that it considers immoral, to enslave all people to its dictates, and to kill anyone who attempts to defend their property, liberty, or life with force, a task formerly done in concert with the state. A war is declared by the moralists against their own people. Meanwhile the church in large part abandons its efforts at peaceful conversion, and pastors instead direct their flocks to “vote their morals.” At the same time, lessons on peace become fewer and the lessons on silent obedience to the state multiply. The people are assailed by one and abandoned by the other. The government now has the primary power to decide what is “moral,” and it will do whatever it pleases with any tactics it pleases with the smug assurance that it is all done in the name of “morality.” Inevitably, even dissent with government policies will become considered immoral, because such criticism will be seen as a promotion of immorality and divisive to the “national will.” Even those who would seek to defend their liberty and the liberty of others, and indeed all who merely wish to be left alone and decide for themselves what is and isn’t moral, become criminals. The vast state machinery that was created by free people to centralize the defense of their rights is used instead to constrict the rights of the very people who created it. Those who would mount a violent defense of their rights become threats to a much more powerful state apparatus and are attacked without mercy or pity. This barely noticed civil war between the people and the government corrupts the morality of government agents and of those who just want to be left alone. As the conflict escalates, both the resisters and the state will resort to more and more violent tactics, and inexorably, more and more immoral people on both sides will receive more resources and power than they ever could have otherwise. As greater amounts of resources from taxpayers and criminals are poured into the conflict, collateral damage will mount. Resistance that results in further violence and bloodshed will be held up by the state as evidence that those who resist the oppressive power of the state are in fact just purely immoral and must be stopped at any cost. Their immoral activity, the state will claim, inevitably leads to this violence and destruction, and a more powerful war machine is needed. They ignore the fact that it is the existence of the war that creates the resistance that leads to the violence. The enemy is the war itself. The issue at stake will polarize society as innocents are caught in the crossfire. If, however, the state can disassociated cause and effect, the conflict becomes a self-sustaining cycle of violence. It will be a society perpetually at war with itself.

Because dissident citizens are not enemies in the traditional sense, in that they did not initiate a conflict and attempt to defeat and subjugate the society, they cannot be defeated in the traditional sense. This is instead a war on human desires, a physical war being waged against a metaphysical target. In this war, the state is the aggressor and the enemy is the people, not because the people seek to overthrow the state, but merely to be left alone by it. That struggle can never be won, nor is meant to be. The more desperate and dangerous the situation becomes, the more power the people are willing to cede to the government to protect them from the evildoers. The story told by the government is repeated so many times that it becomes embedded in the consciousness of the people. The world is just a dangerous place. We’re from the government, and we’re here to help you. The state will do everything in its power to prevent specific forensic questions regarding the origins of the conflict from being asked. They are just immoral, evil people who seek to do violence, we are told. They fabricate a line between the “immoral” activity that the state originally targeted them for and the violence they engage in later. They claim that it is the original immoral activity that causes the violence, and thus to prevent more violence, we must even more aggressively control their immoral behavior. The state attempts to confuse the people as the origins of death and destruction they experience because if the people knew the truth they would realize that it is the state’s war that created the violence in the first place. They seek to rewrite history and characterize the immoralists as the aggressors. Orwell could have written this philosophy himself.

“It's not a matter of whether the war is not real, or if it is, victory is not possible. The war is not meant to be won, it is meant to be continuous. Hierarchical society is only possible on the basis of poverty and ignorance…

“This new version is the past and no different past can ever have existed. In principle, the war effort is always planned to keep society on the brink of starvation.

“The war is waged by the ruling group against its own subjects, and its object is not the victory over either Eurasia or East Asia but to keep the very structure of society intact.”

It is time set the record straight. It is time to reflect, reexamine, and reset. It is time to return the government and the church to their proper functions. Though they both have collaborated to oppress and control, let us never forget that we the people are sovereign. Ultimately, the people have the power, and should an intellectual revolution occur, there is nothing that any state or any church on earth could do to stop it. It happened in 1776. The American Founders threw off a government and a church that were destructive to the ends of liberty and morality, and established for themselves and their children the freest society that the world had ever seen. Today, it could happen again, not in war, but in peace. As Thomas Paine famously declared, "We have it in our power to begin the world over again." Let us begin.

Posted by danielbier8 on 01/21/09
Last updated 01/22/09

Change

For Better, for Worse: Good Ideas vs. Good Rhetoric

Why Pennsylvania Avenue isn’t as smart as Main Street.

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The main difference, it could be fairly said, between the population of Capitol Hill and the population of the United States is that the former gets to spend virtually unlimited amounts of the latter’s money, and not vice versa. People tend to be a lot more careful when they are spending their own hard earned money than when they are spending someone else’s. If someone gave you a billion dollars, which you couldn’t actually keep any of, and told you to invest 1,000 millions in separate ventures, chances are you would be a lot less careful about judging which ones are sound and which are dangerous, because, hey, at the end of the day, it’s not your money anyway. You are totally protected from negative consequences either way, and thus, rigorous investigation is not desirable. Any yahoo with a slick business chart and a charming personality could wind up with a million dollars that no person would ever think of lending him if it were their own. Anyone who could convince you that you would somehow benefit from getting the money could end up with funding for an unprofitable experiment. The point is that people making choices with their own money tend to make better ones than those who face no consequences for making a mistake. As obvious as this seems, it was mysteriously absent from public discourse during the last election, while all the political players tried to convince the American people that DC could spend their money much better they could themselves. Taking a step back, let’s look at how the government promoted by our current and former Presidents differs from the laissez-faire government established by our Founding Fathers.

In an economy run by political elites, changes are made only when those in power can be convinced to make them. The fear of failure and special interest backlash are powerful motivations in political circles against changing the status quo. When those in office must be convinced first, this means that any changes in economic policy must come from those who can persuade the politicians. They may be persuaded by bribes, political support, or simply by glib and convincing lobbyists. In a state run economy, the friends and special interest groups of officials are the most powerful influences crafting policy, meaning that it is usually the politically powerful, not necessarily the economically beneficial, who receive funds and backing. Of course, there is no reason to believe that the best situated and most persuasive persons have the best ideas.

On the contrary, in a free market, it is irrelevant to the success or failure of a venture whether or not those launching it are friends with the political-economic leaders of the day. No doubt, as seen by the high business failure rate, many businessmen have bad ideas, although their ideas certainly appeared viable on the surface to those involved. But those with good business plans, better inventions, and more efficient processes, and thus lower prices, are chosen by consumers because their products are more affordable and/or better made than the competitors’, regardless of how well-connected or personally charismatic the entrepreneurs are. As far as the economy is concerned, unless you can make a product better, cheaper, or faster, eloquence will only help you get more change panhandling on street corners. The market automatically selects the most efficient processes to succeed, while automatically penalizing bad ideas, and thus limiting the scope of business losses and failures to those who were responsible for them. Without any one person making the decision that Sears provided better services than Wards, the market, made up of millions of individual purchasing decisions, moved capital towards the more productive enterprise. When Wal-Mart opened to compete with Sears, no could have expected the upstart to replace the entrenched giant as king of retailers, but the market once again chose the more productive business to succeed, while penalizing the other for inefficiency and failure to innovate. No matter which business replaces which, the key point is that in every instance, the economy benefited from the transition and the standard of living improved. But if economic success were determined by politicians, whose knowledge is much more limited than the collective wisdom of millions of consumers, it would inevitably occur that many bad ideas would receive capital and that many good ideas would die stillborn for lack of influence. The losses from the bad ventures would wind up being paid for by everyone except the people responsible. No politician is as smart as free people acting in their own best interest. While a free market allows the best to rise to the top, regardless of where they start, politicized economies inflate special interests and sink their competitors. Thomas Sowell remarked in Basic Economics,

In a market economy, [J.C.] Penney did not have to convince anybody of anything. All he had to do was deliver the merchandise to the consumers at a lower price. His success, and the millions of dollars in losses suffered by Sears and Montgomery Ward as a result, left these corporate giants no choice but to imitate this upstart, in order to become profitable again and regain their leadership of the retail merchandise industry. Although J.C. Penney grew up in worse poverty than most people who are on welfare today, his ideas and insights prevailed against some of the richest men of his time, who eventually realized that they would not have remained rich for long if Penney and others had kept taking away their customers, leaving their companies with millions in losses each year.

President Obama has made many remarks, in his magnanimous and eloquent way, about his willingness and desire to “reach across the aisle” and listen to everyone’s ideas about how best to “fix the economy.” Unfortunately for Mr. Obama, and the country, the problem with our economy is not reliance on a single party’s dogma, and hearing all suggestions about what the Chief Executive should do about it is not the solution. The problem with our economy is that the White House expected to fix it, and results from a belief that DC politicians know best how to run the economy. No President, no Fed Chairman, no matter how enlightened, is smarter than the 300 million Americans he rules. He doesn’t know which crops should be grown, what fuel should be made, what the price of medical care should be, or which businesses should fail. In fact, when businesses fail it is proof that the businesses are poorly run and cannot survive in their current forms without political shenanigans resulting in tax payers’ money going to corporations whose products they refused to buy willingly. Businesses that fail should fail. Fuel that people want should be created. There is no objective way for any single person, with limited knowledge, to know which crops, fuels, and banks “should” succeed in absence of a free market to send the signals. It is the millions of consumers’ decisions that decide who should fail and who should succeed, not the government. Allowing businesses to stay open with government money allows them to continue bad policies without any incentive to innovate or compete.  It distorts normal economic incentives. It locks up capital in unproductive sectors of the economy, to the detriment of others where it could be spent better. It diverts resources from what we do best to what we do worst, based merely on political connections.

Apparently President Obama is willing to listen to everyone except the people who elected him. The President claimed, “The question we ask today is not whether our government is too big or too small, but whether it works - whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.” The reality is that the government never works better than the free market, and so it is a matter of whether our government does too much. The question we should ask is, shouldn't the government stick to doing what it's supposed to do; protecting the people’s economic choices instead of substituting its own? As Ludwig von Mises said, “The issue is always the same: the government or the market. There is no third solution.” Millions of free people making free decisions with their income will fix our economy quickly by rooting out bad ideas and substituting better ones. A group of bureaucrats will destroy it by giving Other People’s Money to the most persuasive people, instead of the best people.

Obama promised to bring change, but it’s not so much whether changes are made, but rather it’s who's making them. Change is best left to We the People.

Posted by danielbier8 on 11/25/08
Last updated 03/27/09

Originally written and issued Sunday, October 19, 2008:

I used a lot of footnotes, not only because I like making it hard to read, but also because I wanted to show references to the things that have influenced my thinking, so you know where I'm coming from, and that I felt would unduly interrupt the flow of my ranting. Also, I wanted to let you know about a lot of good sources to look at it if you really care about what is going on and want to learn. I also disliked John McCain, in case that was insufficiently clear.

The American Dream

What is the American Dream? Politicians, agents of the media, and schmoes who think they know politics love to say the phrase "the American Dream." But no one is really sure what that is anymore. What Americans used to dream about, and what the people today dream about could be very different things, so it's highly disingenuous to use a phrase that idealized the classical liberal American spirit of the 18th and 19th centuries to give an aura of untouchable holiness to a person or ideology of the 20th and 21st centuries. Not that the first two centuries were so squeaky clean- executions, cruel and unusual punishments, the horrifying institution of slavery, and a civil war all occurred during the rise (and decline) of the American Republic. But it is true that the republicans[1] had principles and ideologies that are very foreign to Americans today, even if they didn't follow them as well as they should have. So whenever I hear a politician oiling up the public by using clichéd phrases of a bygone era, I smile, though the smile is a touch cynical.

So what is the American Dream? Senator (and now President-Elect*) Barack Obama claims that for him, the American Dream began in a state-run school classroom.[2] He doesn't explain this, but consider what is going on here. Sen. Obama appears to be referring to every first-grade teacher's obligation to tell their students that any of them can grow up to be president. And this was his dream which is asking for your help to fulfill. But is this really the "American Dream?" To be president?! To be the militant maestro directing the economy, the taker and spender of other people's money,[3] the moralist enforcing "decency" on the public, the emperor who controls the world with bullets and handouts? Such are the duties of the modern presidency. He is no longer a humble citizen who is reluctant to take office,[4] uncertain of whether his own death is a good thing,[5] asks for the forgiveness of the people at the end of his term, and prays to God to mitigate his shortcomings of which there must be many.[6] Whereas today's executives are marked by a surplus of surety, the Founders, though far wiser, and perhaps because of that, we not always so confident in their decisions. It was Judge Learned Hand who said it thus: "The spirit of liberty is the spirit which is not too sure that it is right."[7] Today, the seal of the president is the symbol of power throughout the world. Never in the entire sordid history of that office has there been a more powerful executive. Is the thing to which young American boys and girls aspire to be? Sadly, I think the Senator may be correct. A failed, state-run education system and unabashedly socialist higher education institutions have convinced the educated to believe that the government is there to actively do "good," not merely to preserve life, liberty, and the pursuit of happiness. Media run by these Anointed ones have convinced the general public of the same. A desire for power is the new American Dream. Of course, power corrupts, and those who seek the right to control other people do not and can not have everyone's best interest at heart, and, regardless, they cannot secure the happiness of the people through force. But that is what the people believe, and on such a belief the state is founded and maintained.

But what used to be the American Dream? A speech by President John Quincy Adams gives us a clue: "[America's] glory is not dominion, but liberty. Her march is the march of the mind. She has a spear and a shield: but the motto upon her shield is, Freedom, Independence, Peace."[8] How far we have fallen from such ideals. Our glory came from the fact that we did not decide for the people what to do and how to live, either at home or abroad. The glory of the American Spirit came from the fact that we respected the individual's rights, their right to live freely, collect property, and dispose of it as they wished. Our grandeur as a nation was that we were different from the rest of the world, in that we took pride in the accomplishments of the individual and of free association, not in vain desires to act as a group towards "common ends," for people have many separate ends that they must be allowed to explore, nor in endless conquest and domination of foreign nations. We spread our beliefs by setting an example for the world to follow,[9] to see how the myriad of private citizens working together peacefully could raise the common person farther than any scheme or collective action.

The American Dream was a personal dream, a dream of being successful, of providing for our families and raising our standard of living. It was not a dream to be taken care of from cradle to grave, it was one of making choices and reaping the consequences of them, good or bad. It was our dream to be free to choose our destinies, not the destinies of others, and not to take from others to make up for our failures. The American Republic did not promise happiness, but it did promise the equal freedom to achieve it in whatever way you saw fit. It was a dream that depended on people minding their own business and being left alone by the state. Such a system promotes wisdom, prudence, and responsibility, because the consequences of your actions were born by you and you alone.

The people are better than the state, the Founders said, but we long ago forsook that path because we cannot see the invisible hand[10] and we can see the hand of a government official opening a shiny new department. We can't see all the stores that didn't open and the jobs that were never born because of the money spent on that department. [11] We have drifted so far and so radically off course from the way that our ancestors hoped for us. We are a nation that celebrates war, not peace, intervention, not freedom, the state, not the individual. The system we live in is a disaster waiting to happen, and every day marks a new low for freedom of this country and of future generations as we plunge headlong into debt and bankruptcy. The Republic is in remnant status. Everyone expects the government to save them from their bad choices, which of course means they expect someone else to reap what they sow, because they government has no money of its own. It must take before it can give. Whether it takes through taxes, through inflation of the money supply, or through borrowing that someone must eventually pay off, someone has to pay the bills that an irresponsible people and government incur. At best we are just shuffling money around. Taxes on the rich to give to the poor. Inflation of the dollar for Wall Street borne by Main Street. Bailouts of homeowners paid for by corporations. Bailouts of banks paid for by future generations through deficit financing. At worst we are corrupting our economic system, diverting resources from productive ends to destructive ends, and wasting our money on idiotic, counterproductive schemes. Such is the state.

This system has brought down on us one particular scourge we suffer at least every two years. The American people are the victims of a concerted, two-pronged assault costing hundreds of billions of dollars. The weapons used are small advertisements via television, radio, and yard signs by which the American people are supposed to decide who will run the American empire, economy, and their private lives. But it is a false choice. It is a question of who, and not of what. We must place our faith in a person to manage the Leviathan as best they can. Of course, power corrupts everyone, even if they aren't untrustworthy to begin with and if the act of seeking an office of such immense power does not in and of itself make them suspicious. The point is that we are not voting for principles or ironclad rules that can be applied to any situation at any time and receive a predictable response. What we are voting for is a man to rule arbitrarily, and such a system simply cannot be justly run. The fact that he may be well-intentioned or that he will do the best he can is no justification at all because we are voting for an oligarchy, which is bound by no laws or principles, nor even by reality. The act of voting for anyone to run such an organization is an endorsement of the corruption and injustice that flows naturally from it. It must be arbitrary, and the people are just left to hope that it won't do too much damage.[12] No shift in the figurehead of such a government will produce change, only a shift in the way we view the role of government will.

As things in our curiously bastardized mixed-economy start unraveling in earnest, we will have some hard to choices to make. There is no stable mixture of freedom and totalitarianism, and we will have to decide which side of the fence we are going to fall on. No longer can we sit back and talk about liberty and the American way of life and allow them to be destroyed by default as the government grows exponentially. With each new Deal proposed by Congress, with every new dollar spent, and with every new employee hired by the state, freedom decreases. Government is a zero-sum game, people. When the state grows, freedom shrinks because government is a force-based system, and freedom depends on peace. Economist Ludwig von Mises famously declared that government is essentially the negation of liberty, and that "The issue is always the same: the government or the market. There is no third solution."[13]

"Capitalism and socialism are two distinct patterns of social organization. Private control of the means of production and public control are contradictory notions and not merely contrary notions. There is no such thing as a mixed economy, a system that would stand midway between capitalism and socialism." [14]

Let us not give in to the shortsighted and uninformed desire to have it all, for we cannot. We must decide whether we want to provide for ourselves and our families and the poor, or whether we want to cede our rights and responsibilities over to the government. But remember, they are not equally viable systems. It can be rationally and scientifically demonstrated that one produces more than the other. Nor are they even two different versions of the same thing. One is based in peaceful cooperation between free men and the other on arbitrary, institutionalized violence. It is tempting to go over to the socialists because they promise grand schemes and huge edifices dedicated to doing things that billions of private individual actions used to decide because we can see the one and not the other. Said Mises:

"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings."[15]

We have already given over our responsibilities to care for poor people to government, to the huge detriment of both the poor and our souls.

Representative Ron Paul warns, "We have bought into the soul-killing logic of the welfare state: somebody else is doing it for me. I don't need to give of myself, since a few scribbles on a tax form fulfill my duty to my fellow man. Do our responsibilities as human beings really extend no farther than this?"[16]

We are falling headfirst from our previous semi-socialist arrangement into the same trap in the economy, where the Treasury and the Fed are going to run our economy directly from now on- and they're going to create many new poor people that the government will be entrusted to take care off. There are those who are planning to complete that step in our already socialistic healthcare arrangement. Around the world we are dolling out money and bombs based on who we like and who we don't, with little or not logical considerations being made as to who falls into what category (predictably.) All around us we are hurtling towards socialism, and the further we go, we literally condemn those who come after us to lifetimes of poverty followed by an ugly death.

So I plead with you, consider the logical implications of what is going around you, consider what you want, and consider the facts. Do so calmly, do not let yourselves be swayed by 30 second TV commercials or pseudo-debates. Ignore the politicians and their superficial differences. Learn about how the world really works. Consider what you believe very slowly and thoroughly. One needs to be slow to form convictions, but once formed they must be defended against the heaviest odds, as Gandhi said. Remember that, "Liberalism and capitalism address themselves to the cool, well-balanced mind. They proceed by strict logic, eliminating any appeal to the emotions. Socialism, on the contrary, works on the emotions, tries to violate logical considerations by rousing a sense of personal interest and to stifle the voice of reason by awakening primitive instincts."[17] Personal responsibility and the belief that we must mind our business, writ large or writ small, are what is lacking in today's political discourse and society. And our personal responsibilities, as I see them, include a cheerful desire to take care of those who can't take care of themselves- the old, the poor, the sick. We need to take back our freedom the hand that took it before it closes into an iron fist, withering our prosperity and our humanity.



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Posted by danielbier8 on 01/27/09
Last updated 02/29/12

Obama assumes that simply by virtue of being Not Bush he can solve our various crises:

• He assumes that his messy and dangerous foreign interventions will work out better than Bush's messy and dangerous foreign interventions.
• He assumes that his massive welfare program will work out better than Bush's.
• He assumes that his and Pelosi's massive and unaffordable Keynesian "stimulus" will work out better than the ones he and Bush endorsed.
• He assumes that his government sponsored institution to back bad loans will work out better than the ones he and Bush endorsed that failed miserably.
• He assumes that unprecedented government spending will help the economy, even though Bush practically doubled federal spending.
• He assumes that his ill-advised tax cuts while increasing spending will help the economy, while Bush's were irresponsible.
• He assumes that his huge deficits will be good, while Bush's huge deficits were bad.
• He assumes that his bailouts of failed, outdated corporate dinosaurs will save the US economy, even though Bush already tried that.
• He assumes that his huge new education programs will revive American schools, even though Bush doubled the size of Department of Education.
• He assumes his huge increase in foreign aid will somehow be different than Bush's.

In general, he thinks he can save the government, the economy, the environment, American industry, public schools, the poor, and the world by doing exactly the same things Bush has been doing for 8 years. Simply put, he thinks that his signature has the magical ability to create good outcomes from bad policies. Change you can believe in, right? We now have a new iron fist crushing the life out of our free country! Can you feel your leg tingling yet, Chris Matthews? It's hope! Change! Maybe there was a time before the election when the American people could have been forgiven for "believing" in change, but I happen to believe that seeing is believe, and change we have not seen. With respect to the writers of the Dark Knight, I suspect that Obama isn't the kind of change that we need, but he probably is the kind of change we deserve.