Obama insists that the United States can’t afford to maintain corporate tax cuts. As with all modern liberals, when he says the U.S. can’t afford it, he means the government can’t afford it without cutting spending. With nearly four trillion dollars of expenditures a year, I suppose it’s very understandable that the president, as most of his ideological ilk, view tax cuts—signifying where the government is refraining from taking privately owned money in the first place—as a reasonable “cost” to “society,” that ought to be phased out, long before the empire, police state, and trillions of dollars in domestic goodies are trimmed back more than a nominal amount.

It is not only liberals. Some conservatives also spread this myth that tax cuts are the same as subsidies—an area of government spending, rather than an area where the government is seizing less than it potentially could—as we saw a few months ago, when a dozen conservative lobbying groups signed on to a petition demanding the end of tax credits for certain energy interests. This is an unfortunate and retrogressive retreat from the early American conception of taxation, an ideal that animated a revolution over 230 years ago and that is ostensibly being celebrated this very weekend. Taxation, after all, is the government using force and the threat of force to exact revenue from the private sector. It is warmed over tribute, a practice embraced by the ruling classes going back at least to ancient Egypt. The American colonists resented tax rates that were miniscule by today’s standards. And at their best, they saw taxation as an instrument of tyranny, rather than something to ensure was never lifted because society could not “afford” it.

Some will argue, validly, that corporate interests do in fact benefit from state intervention—various monopoly privileges, direct subsidies, regulatory advantages, preferential treatment, government contracts, protections from common law liability, and so on and so forth. But then the answer should be to eliminate these advantages, not counter them with tax increases. Indeed, if Obama thinks corporations have it too easy, and also wants honestly to deal with the deficit problem, he should work to eliminate or prevent, now and in the future, the vast agricultural subsidies that distort the market and mostly end up in the hands of rich corporate farming interests, the cushy contracts doled out via the military-industrial complex, the enormous bailouts and moral hazard pervading the financial sector, the stimulus spending that goes to favored businesses, the energy subsidies, the auto bailouts, the grossly over-zealous federal enforcement of patents, and the hundreds of other ways that the federal government actively redistributes money from the poor and middle class to the politically connected rich. Some of the left would even join him in much of this endeavor.

It is a riot seeing Obama call on an extended payroll tax holiday and the celebrated fiscal conservative Paul Ryan reject it as an economic “sugar high.” Liberals have never been consistent in opposing regressive taxes, of course, but conservatives have likewise been weak on the question of payroll taxes. I recall Rush Limbaugh once telling a caller that it would be a mistake to cut the tax. And we should remember that it was raised under Ronald Reagan.

Some will argue that cutting the tax while keeping spending up will lead to even greater deficits, which is a valid enough point, but it never before stopped Republicans from advocating tax cuts while failing to have the guts to cut spending enough to make up for them. Another supposed problem, articulated by liberals, is that it will weaken the solvency of Social Security and thus undermine their beloved program’s credibility. Hear, hear!

Indeed, there is a strong argument for eliminating the payroll tax altogether, regardless of what else transpires: It is more fiscally honest. See, Social Security is not truly an investment or insurance plan of any sort. Rather, the federal government forcibly extorts workers of a percentage of their income, squanders it on current retirees as well as other programs, and then papers over the scam by promising to do the same to the next generation of workers. It is in fact a welfare program, and a most insidious one at that. Those currently receiving benefits have doubtless been ripped off (although perhaps not as much as they are receiving in benefits), but the loot for which they were fleeced was spent long ago. The only way to continue paying them, short of selling off federal assets (which I think may be a legitimate enough compromise, although it is certainly not completely clean), is to continue stealing from younger workers. Furthermore, while retirees are certainly victims of decades of confiscation, Uncle Sam has many other victims who could justifiably stand in line, demanding reparations: Those unjustly imprisoned for years and those robbed of large percentages of their rightful wealth through income taxes, to say nothing of the millions of people maimed, injured, or forced to see their loved ones die overseas in U.S. wars of aggression. The property destruction unleashed upon Iraq and Afghanistan is but a recent stark example of where the U.S. government has victimized people who have at least as much claim to federal assets as do retirees.

But no one can legitimately have a claim to continue taxing workers for their retirement. Two wrongs don’t make a right. It is time that Social Security be recognized as a welfare program and phased out, the quicker the better, perhaps with means testing and tax immunity for the elderly to make it more equitable and smooth. There is not, however, any excuse to continue seizing money from workers under the guise that it is going to their own retirement, when it is fact not. Abolish the payroll tax entirely, institute honest accounting for the Social Security and Medicare welfare programs, and nip these terrible Bismarck-FDR-LBJ programs in the bud. Allow young Americans the dignity of knowing Social Security will not be there for them when they retire, end the intergenerational cycle of plunder, and watch the economy truly improve in a way we haven’t seen in generations. This would be no “sugar high,” Mr. Ryan. It would be good nourishment for the future of America.

Greece is reportedly putting into practice Independent Institute Senior Fellow William Shughart’s recommended course of action to insolvent governments: sell off government-held assets, pay off your debts, and get your fiscal house in order for the future.

And Greek’s government owns vast swathes of highly desirable property:

An umbrella company for most of Greece’s government real estate counts some 70,000 properties. They include beaches, commercial sites in Athens, farmland, government buildings and railroad rights-of-way. A few years ago, the socialist think tank estimated the value of the portfolio at about €300 billion.

Unfortunately, Greece’s National Tag Sale is unlikely to produce anything like the revenues it needs to cover its debts, and for a very simple reason: actual property rights are not being offered. First, any given property’s title is often disputed. Passing that hurdle, the would-be property developer then faces “bewildering” zoning rules, administered by myriad government agencies. Although Greece is proposing a “fast track” for new owners to get their plans approved, as one government official admits “the fast track cannot undo laws.”

And the laws are numerous, conflicting, and easily exploited by almost anyone wishing to block development of almost any property. A retired Olympic Airlines flight attendant has been blocking the development of shoreline near her for 7 years, with no resolution in sight, while the mayor of a suburb on which another prime piece of property sits has successfully fought its development for 10 years.

Caveat emptor, indeed, and it is hardly conceivable that Greece will be able to sell itself out of its fiscal difficulties.

But other governments can, and should. Municipalities, counties, and states across the U.S., as well as the federal government itself, own billions of dollars of property, as for example the State of California’s ownership of 1 million acres of real estate in 15 high-land-cost counties. Such ailing governments would do well to sell while they can negotiate the terms of trade rather than wait for fire-sale conditions such as Europe now faces.

Someone must have imagined that my hopes for improved economic understanding might be excessively optimistic today and thus needed to be curbed to restore my normal emotional balance, because that person undertook to smash any such hopes to dust by e-mailing me a link to a Huffington Post article by Paul Abrams, “Economically, World War II Was Stimulus on Steroids.” This screed turns out to be an ostensible macroeconomics lesson composed in equal measure of economic foolishness, historical ignorance, and ideological tendentiousness — the veritable epitome of a worse-than-worthless contribution to public enlightenment.

The opening paragraphs indicate the direction of Abrams’s argument:

The next time someone argues that the New Deal failed, and only the Second World War ended the Depression, as ‘proof’ that government spending does not work, one can respond with the details of economic growth and unemployment reduction up to 1940, or one can ignore the claim and thank them for making your case for massive government spending in a deep, broad recession.

Right wing politicians are loathe to credit the New Deal with any success in hoisting the United States out of the Great Depression, but credit World War II for that achievement, believing that that somehow disproves Keynesian economic theory.

That claim, however, undermines their entire premise.

Abrams concludes that “massive government spending at a time of severe economic downturn and dislocation can indeed get an economy humming again,” as World War II shows; the New Deal was merely too timid. He seems unaware that his argument merely restates the fallacy-ridden hodge-podge of conventional wisdom about how World War II “got the economy out of the Depression” that has dominated the thinking of economists, historians, and the public ever since the war itself.

The provision of justice and security has long been linked in most people’s minds to the state. But are the state’s monopolies on lawmaking and law enforcement really necessary? Those who say “yes” typically assume that any alternative arrangement for law and order would favor the rich at the expense of the poor—or would unleash a war of all against all. Not all scholars agree, however. Independent Institute Senior Fellow Bruce L. Benson challenges the conventional wisdom in his 1990 book, The Enterprise of Law: Justice Without the State, a treatise that has just been reissued by the Independent Institute.

The Enterprise of Law represents a dazzling integration of historical and economic analysis. Non-state institutions have fought crime, resolved disputes, and administered justice more effectively than has the state, Benson argues, because in the absence of government obstacles they have had stronger incentives to provide those services. Skeptics would rightly wonder whether non-state institutions have in fact provided justice—properly construed—as opposed to mere law and order. Benson anticipates this challenge. He notes that private property and restitution for injured parties were characteristics shared by the customary legal traditions of the Kapauku Paupuans of Western New Guinea; the Anglo-Saxons before the Norman conquest; medieval Iceland and Ireland; the Law Merchant (a private institution that governed international trade since medieval times); and the western frontier of the United States during the 1800s.

Benson concludes with a look at the promises, pitfalls, and prospects of privatization today (or rather tomorrow, since vested interests would surely defeat political efforts to implement full privatization in the near-term). He notes, for example, that privatization must be designed and implemented in ways that would prevent special interests from winning undue “sweetheart” deals as a result of privatization. He also makes the case that a fully privatized system of law and justice would be strongly biased toward individual liberty and private property. Strong incentives, he argues, would make it likely that such a system would feature full restitution for injured parties; a variety of insurance-like arrangements and “treaties” between competing protection organizations; private courts and judges that would be rewarded for their impartiality and clarity; the use of social ostracism and economic boycotts to help incentivize convicted lawbreakers to pay their debts; and prisons that would treat inmates well in order to enhance prisoner productivity and hasten the rate of debt repayment. “Many questions might remain, of course,” Benson writes, “even for those who find the arguments for privatization to be compelling.”

Purchase The Enterprise of Law: Justice Without the State, by Bruce L. Benson.

Read a detailed book summary.

[The above first appeared in the June 28, 2011, issue of The Lighthouse. For a free subscription to this weekly newsletter of the Independent Institute, enter your email address here.]

If want to add your name to this distinguished list, which includes many people well known to libertarians (see below for the names), you have until Wednesday (5:00 PM Pacific, 8:00 PM Eastern). Just send an email to Kevin Zeese at KBZeese@gmail.com and provide a brief descriptor of what you would like next to your name.

Please also free to post on blogs and circulate on any lists.

Dear President Obama and Members of Congress:

The wars in which the United States is currently engaged–in Afghanistan, Pakistan, Iraq and Libya–are harming U.S. national and economic security, degrading the standing of the United States in the world community, fueling hatred abroad for Americans and undermining the rule of law. These unconstitutional wars have been justified on false premises, and most recently in the case of Libya there was not even the pretense of a congressional declaration of war, making it an impeachable offense. We urge you to end the current illegal wars and start a national dialogue about shifting U.S. foreign policy away from dominance through military might, and toward being a member of the community of nations.

It is time to end all of these wars. It is time to initiate a fundamental shift in U.S. foreign policy away from domination of others through military strength and damaging sanctions. As a first step we urge a major withdrawal of soldiers from Afghanistan–as candidate Obama promised in 2008. This withdrawal should be at least as large as the 50,000 troop escalation the President put in place early in his presidency. This withdrawal should be defined as a clear first step to a complete withdrawal of all soldiers and private contractors from Afghanistan by the end of 2011. It is time to return to our Founders’ declared conception of the United States as a democratic Republic and not an Empire.

In further support of Sen. Rand Paul’s challenge to TSA head John Pistole that the TSA is “clueless,” TSA agents have recently added humiliating a 29-year-old “special needs” adult (pictured at right) and a 95-year-old cancer patient to their less-than-stellar record of profiling.

Yesterday, the TSA defended its patdown of 95-year-old cancer patient forced to remove her adult diaper as part of its enhanced search of what surely must have appeared a serious suspect to someone with no mother. The leukemia patient on her way to an assisted living facility not only had her adult diaper taken away, but as she had no spare, had to continue her journey wearing no underwear.

In Detroit, the 29-year-old son of a family on their way to Disney World for a vacation was selected for a special pat-down and had his plastic hammer, a favorite toy for over 20 years, taken away by TSA agents. The boys’ father, Dr. David Mandy, tried to explain to agents that his son has the mental capacity of a two-year-old and thus did not understand their instructions, to which they replied, “Please, sir, we know what we’re doing.” Dr. Mandy says:

I honestly felt that those two agents did not know what they were doing.

Clueless as well as heartless. So why does any of us owe them compliance?

The Supreme Court has just overturned a California ban on violent video game sales to minors in a decision penned by conservative Justice Antonin Scalia. Justice Clarence Thomas dissented, saying the First Amendment was never meant to apply absolutely to distribution of ideas to children.

I have a big problem with his reasoning. Certainly, if the First Amendment was meant to exempt situations concerning commercial dealings and children, it would say something like, “Congress shall make no law. . . abridging the freedom of speech, except where children are concerned.”

Similarly, any conservative arguments that the First Amendment is not meant to apply to pornography, or liberal arguments that it is not meant to cover political contributions, bother me.

Yet one thing we do know is that the First Amendment was originally not meant to apply to state governments. The Bill of Rights bound the federal governments, not the states, until after the Civil War. A decision in 1833, Barron v. Baltimore, upheld this very distinction.

In the new hit album by pop-singer “Weird Al” Yankovic, Alpocalypse, he includes the song, “Party in the C.I.A.”, which is a parody of the hit song by Miley Cyrus, “Party in the U.S.A.”

As more and more people have taken an interest in monetary affairs — especially in the Fed and its various operations — in recent years, many people have joined the discussions related to these matters, especially on the World Wide Web. In reading these posts over the years, in particular in reading the comments on a post I placed recently at The Beacon, I have been struck by the frequency with which the writers reveal that they do not understand a basic conceptual matter in regard to money, monetary policy, and the Fed. That matter is the difference between the monetary base and the money stock.

In the data compiled by the Fed and used by analysts in various ways, the monetary base (sometimes called “high-powered money” or “base money”) consists of currency — that is, Federal Reserve notes, the legally authorized, circulating paper money denominated in U.S. dollars issued by one of the Federal Reserve System’s regional banks — plus deposits that commercial banks and other “depository institutions” hold as reserves in accounts at the Fed. This sum is known as the monetary base because it forms the foundation on which commercial banks may extend loans to customers and make investments by means of establishing checking accounts (checkable deposit accounts) for those customers or security sellers.

In a fractional-reserve banking system, such as that in the United States and most other countries, banks are legally required to hold a certain percentage of their deposit liabilities (including those they create as just described) as reserves at the Fed. If they hold more reserves with the Fed than their current accounts require, those reserves are denominated “excess reserves.” These may be used, of course, to extend additional loans and make additional investments in securities until the bank has reached a condition in which it has used up all of its legally “excess” reserves.