Charles Krauthammer reveals on the “O’Reilly Factor” on Fox News that President Barack Obama’s “spending freeze” is a complete fraud, in which Obama is not just excluding all major areas of federal government spending (i.e., discretionary, Social Security, military, stimulus, etc.), but is locking in the already gigantic increases in federal department spending levels that were ratcheted up during Fiscal Years 2009 and 2010 by an average of 20%. Clearly, Obama is concerned about the enormous loss of support from independents in the recent elections in New Jersey, Virginia, and Massachusetts, and he believes that a rhetorical trick will be enough to fool people into supporting him after all. As Krauthammer notes:

So what the freeze is doing essentially is the opposite of what it looks like. Instead of reducing the spending, it’s locking in these huge increases that were instituted last year.

Here is a splendid and insightful, new rap video pitting the ideas of Nobel Laureate, Austrian School economist Friedrich A. Hayek against those of Lord John Maynard Keynes. As Hayek has shown, economic crises of boom and bust are created by governments that expand credit through central banks, creating unsustainable bubbles that ultimately crash. Unfortunately, based on Keynes’s theories, governments have foolishly then further intervened with bailouts and “stimulus” spending measures of pork and war that only prolong the recovery (e.g., Great Depression as well as the current economic malaise). Our Senior Fellow Robert Higgs has shown the folly of Keynesian policies since 1930 in his acclaimed book, Depression, War, and Cold War. The choice is clear, Hayek’s free markets vs. Keynes’s corporatism.

In the wake of the Supreme Court’s ruling in Citizens United v. Federal Election Commission, we are witnessing an outpouring of wailing and gnashing of teeth. Progressives emphatically deny that a corporation consists of nothing more than a voluntary aggregation of natural persons and that therefore it has all the rights of speech that its individual members have. Leftists have long maintained, and continue to maintain, that a corporation is something apart from, and more menacing than, the aggregate of its shareholders. They hold that corporations as such have no rights at all, but only privileges, which the state may revise or revoke as it deems desirable.

The progressive position is not obvious nonsense. Highly intelligent people have argued, and continue to argue, for it. Whether these arguments are valid as a whole or in part does not concern me here. I am struck, however, by a manifest inconsistency between the progressive position on the corporation and the progressive position on the government.

When aggrieved persons complain about the state’s actions and speak as if it were nothing more than an alien aggressor against an individual’s rights—and an impudently highhanded one at that—progressives have long replied that “we are the government.” In this instance, they steadfastly maintain that the whole is identical with the sum of its parts. Thus, no person has a firm ground on which to complain about the government because, after all, he is (a part of) the government.

This reply is so manifestly silly and transparently false that libertarians seldom pause to consider it except to mock it and to denounce the seeming foolishness or arrogance of anyone audacious enough to advance it. And rightly so, I think. I did not buy shares in the U.S. government; I simply happened to be born in a place known as Oklahoma, and by virtue of this happenstance, the gang of armed bandits who style themselves the U.S. government has claimed the right to rob and bully me at its pleasure from the day of my birth till today. Nor do they have any plans to lighten this oppression,  however unwelcome I may consider it to be. I cannot escape from it by “selling my shares” or by declining to deal with it.

That I bear any responsibility whatsoever for the manifold crimes of this gang strikes me as too preposterous to deserve debate. The fact that I have spent the preponderance of my life in the land of my birth and rearing, rather than emigrating to another place where I would also be robbed and bullied (because similarly overbearing governments operate virtually everywhere), in no way validates the government’s treatment of me. In short, I am not the government, not even an iota of it. It is as alien to me as the Martians who land their flying saucers in the Arizona desert and undertake to probe the local hysterics.

That progressives and other collectivists can maintain with a straight face that “we are the government” while simultaneously maintaining that “a corporation is separate and apart from its owners” stands of one of the most glaring inconsistencies in their ideologies. If they hate private property and individual liberty, so be it. But such hatred does not exempt them from an obligation to comply with the rules of logic and to respect the evidence of plain facts.

Although I am reputed to be a cynic, a pessimist, and a bah-humbugger, I am not given to doomsaying in the same way that a growing number of others are. Although I tend to expect, as Thomas Jefferson did, that the natural progress of things will be for liberty to yield and government to gain ground, and for me this will be an unwelcome course of events, I am not much inclined to predict that, especially in the near term, the economy, society, or government will suddenly “break down,” “collapse,” or experience some comparably terrible and complete calamity.

I will admit, however, that some of my friends seem mightily inclined toward such doomsaying. It’s almost as if they can’t wait for the catastrophe to arrive – perhaps because it will demonstrate beyond cavil that the existing order is too corrupt, irrational, and evil to maintain itself. Some people who write or speak along such lines, though, clearly have a vested interest: they are selling something — often precious metals, investment advice, “survival” goods, or “bearish” publications — that they expect to sell more readily to consumers who have acquired a heightened fear of impending economic doom.

Other doomsayers, especially those in the Austro-libertarian camp, may have absorbed their dire expectation from an expression Ludwig von Mises used, “the crack-up boom.” By this term, Mises refers to the penultimate stage of hyperinflation, when each acceleration of the money supply only drives the velocity of expenditure higher as people try to exchange any money they hold for real goods as quickly as possible. The culmination occurs when, as Mises writes in Human Action (p. 427), “The monetary system breaks down; all transactions in the money concerned cease; a panic makes its purchasing power vanish altogether.” Mises was not simply imagining or theorizing about this sort of development, however; he had seen it with his own eyes in Austria and Germany after World War I. And similar crack-ups have occurred in many other places at various times, including the Confederate States of America during the final year or so of the War Between the States.

Austro-libertarians should note, however, that Mises did not argue that a crack-up boom destroys all economic life. Instead, as he immediately explained, “People return either to barter or to the use of another kind of money.” Indeed. Austria, Germany, and the U.S. South did not disappear as a result of their currency’s ruin. Although their people suffered grievously from the destructive effects of hyperinflation, most people found a way to survive, and life went on. Eventually, economic life resumed on a new basis after the adoption of a “reformed” or foreign medium of exchange not subject to such rapid increases in supply. Indeed, some people survived even the recent hyperinflation in Zimbabwe, notwithstanding the Mugabe government’s best efforts to starve most of them.

Not every forecast of economic catastrophe involves hyperinflation, of course. Some breakdowns are expected to grow out of runaway government spending, growing taxation, oppressive regulation, food shortages, fuel shortages, or natural disasters, such as deadly pandemics or lethal changes in the world’s climate. I have yet to encounter a claim that we are all doomed because of an impending beer shortage, but I am a patient man, and I am confident that sooner or later such a scenario will be bruited about.

One aspect that virtually all tales of impending mega-woe have in common is that they end with the catastrophe itself. Bam, crunch, rip, smash, crash: the day of reckoning finally arrives, the dreaded event occurs, and the story ends. Alles ist kaput. Maybe somewhere out there in the woods a few cruelly smirking survivalists remain alive, clutching their beloved firearms and muttering, “I told you so.” If life continues at all, however, it does so only under conditions that leave the survivors solitary, poor, nasty, brutish, and short of all decent goods and services.

I’m not saying that this sort of thing is impossible. We are talking about human beings and their social interrelations, and from such screwball raw materials, virtually any outcome might conceivably be produced. But such scenarios are dreadfully far-fetched. After all, during the time of the Black Death in the fourteenth century, 30-60 percent of the entire population of Europe died, and hundreds of towns simply disappeared after their inhabitants perished or abandoned them in a futile flight from the incomprehensible killer (inadvertently spreading the disease everywhere they went). Yet Europeans did not die out, and indeed European civilization continued to make slow progress over the long haul, even though the disease became endemic (and episodically epidemic) for centuries.

So, supposing that I accept a horrifying forecast as a point of departure for discussion, my general question for the doomsayers of whatever stripe is:  Then what? Do they really believe that when the government can’t pay all the pensions and medical bills that it has promised to pay, life will come to an end? Do they believe that when the government defaults on its debt, the economy will cease to function? Do they believe that when the U.S. dollar loses all of its purchasing power, people will not find a new and better medium of exchange for their transactions? And so forth.

One needs to have – and in saying so I feel almost as if I’m having an out-of-body experience – a modicum of faith in people’s common sense, creativity, and will to survive and prosper, even in the face of great difficulties and obstacles. If people could keep society running in the aftermath of the Black Death, they surely can keep it running after the U.S. government defaults on its debt. I am not saying that no suffering will occur. Vast socio-economic adjustments are painful even in the best of circumstances. But people will find a way, life will go on, and eventually some progress will be attained – before governments once again strangle freedom so severely that another calamity occurs. (After all, I cannot imagine that the people who are building the latest Tower of Babel will ever succeed in reaching heaven.)

Years ago, when I lived in Seattle, I sometimes encountered people who seemed terribly worried that because the Northwest’s old-growth trees were being cut, the so-called Northern Spotted Owl (a bird genetically indistinguishable from the abundant spotted owls in the Rockies, yet somehow imbued with a sacred status) was sure to perish. Try as I might, I could not resist the urge to say to them. “Look, suppose you were a Northern Spotted Owl, and the loggers came along and cut down the tree you were occupying. Would you fall down and die, or would you simply fly to the nearest not-so-old-growth tree and go on living as usual?”

I would be pleased if today’s doomsayers felt an obligation to answer a similar question in regard to their own forecasts.

From the Wall Street Journal:

http://online.wsj.com/article/SB10001424052748704509704575018990188917592.html

In my Race and Liberty in America: The Essential Reader, there are many entries on immigration that make clear that this nation, particularly business, has benefitted from the low-to-high skilled labor of immigrants. Business knows this essential fact and supported open immigration policies since this nation began industrializing. By contrast, unions demanded immigration restriction, violently attacked those who made it to our shores, and generally resisted any one who might apply for the same job. They were “entitled” as “native-born Americans” (even if many were the sons of immigrants).

The USA is the only industrialized nation that doesn’t face the demographic time bomb of “one child” (China), no sex/no children (Japan), or tax-away-children policies (Europe). I have said for years that the next several decades will highlight how Europe (Old and New), along with Japan, will shrink geopolitically and also face a huge safety net funding problem.The only solution would be even higher taxes, thus forcing the best-and-brightest to where? The USA. I know Japan doesn’t accept immigrants willingly, and the Chinese aren’t attractive to non-Chinese for a number of reasons (language, government).That may change, of course, but there are dangers in “guest worker” programs that don’t offer the promise of citizenship (the American model).

The only wild card: Malthusians who think people are a bad thing: the fewer, the better. Mother Earth is more important. The EPA just labeled an essential component of life (carbon) a “dangerous pollutant” but, so far, they have not yet labeled PEOPLE a pollutant. After all, what is the expected “carbon footprint” of each baby that is born in the USA? Surely more than the carbon footprint left by a pair of Birkenstock sandals.

“More sandals, fewer people?!”

Beer also has a very low carbon footprint. But who will wear the sandals and drink the beer?

Avatars?

In a post a few months ago I lamented that state government officials, who have much to lose in the proposed federal healthcare reforms, have not spoken out much in opposition to the costs the reforms would foist on them.  There have been a few cases, and here is another.

Florida Attorney General Bill McCollum (who is running for governor) says he will sue to stop it, should a healthcare bill pass.  “A citizen’s choice not to buy health insurance cannot rationally be construed as economic activity, or even ‘activity,’ to subject that inactivity to regulation under the Commerce Clause,” a review by McCollum’s office concluded.

Scott Brown’s election to Ted Kennedy’s old Senate seat in Massachusetts presents an additional challenge to the passage of Obamacare, but with bills already having passed in both Houses of Congress, some type of healthcare legislation will surely come up for a vote.

Here’s where vocal opposition from state officials could make a difference.  McCollum says he’s talked with attorneys general in other states who will join him in the lawsuit, but he declined to name them.  If they are really opposed to it, speaking out now, before legislation is voted on at the federal level, could have a big effect.  Are they too afraid to publicly state their opposition?

Perhaps state-level opponents just don’t get much press, but I am still surprised that more state officials haven’t spoken up in opposition, as McCollum has.

Secretary of State Hillary Clinton revealed fascinating priorities in the immediate aftermath of the Haitian earthquake in saying that a chief effort of the U.S. effort was to “assert authority” and to “reinstate the government.”

On-the-ground private disaster relief organizations such as The Salvation Army understand that Job 1 is to alleviate human suffering. Perhaps the job after that will be to question if reinstating the very governments that have overseen Haitians’ remaining mired in desperate poverty is truly the proper role of a U.S. effort. Having provided $9 billion in aid over the past few years, and with Haiti more reliant than ever on food aid, is the U.S.’s provision of such government aid truly the solution? If so, can anyone point to one example of success achieved by it?

For alternative long-term solutions to development problems, see the Independent Institute’s Center on Global Prosperity, and book, Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development

The budget crisis many state governments are facing has received lots of publicity, and also produced lots of federal bailout money.  Meanwhile, over the longer run state governments are facing a potentially more serious problem because of unfunded liabilities in their pension systems.  This report is one of many that have pointed out the problem.

The cause of the problem is easy to see.  Governments can pay workers less today in exchange for promising them earlier retirements and more generous retirement benefits in the future.  Today’s cost of government is put off into the future, when the elected officials who take credit for today’s programs will likely be retired.  Spend now, but pass the cost on to someone else.  When the bill comes due, the result will be higher taxes, lower government services, reductions in promised pension benefits, or perhaps some combination of all three.

One elected official who wants to tackle this problem is Florida’s State Senator Mike Fasano.  He has introduced a bill (SB 660) in Florida’s legislature to require all future state pensions to be defined contribution plans rather than defined benefit plans.  Over a period of decades, as those with defined benefit pensions passed on, the unfunded pension liability problem would shrink and eventually disappear.

The pension problem is caused by defined benefit pensions, which promise a retiree a certain pension benefit at retirement.  The state must then come up with the money, and if the pension plan is underfunded, as is the case in most states, the difference has to be made up out of current revenues.  Defined contribution plans, in contrast, contribute now to the worker’s pension fund, and at retirement the retiree gets the return only from what has already been contributed.  There is no unfunded liability.

It’s refreshing to find a state legislator who is interested in tackling the issue, and I will be interested to see how Senator Fasano’s bill fares this legislative session.  Florida has a fiscally-conservative legislature dominated by Republicans, so my conjecture is that there are few states that would be as receptive to such a proposal as Florida.

Still, I’m sure this bill faces an uphill battle.  There’s not that much reward for politicians to fight for a bill that may cost them political capital now in exchange for benefits that won’t fully materialize for decades.  One reason Senator Fasano might be willing to take this on now is that he will be term limited out of office this year, so he’s more free to spend his political capital.

This audio of an entire America First Committee rally from June 1941 is a real treat. The sound quality is crisp and clear:

The all-star line-up includes John T. Flynn (about 4:30 minutes into the audio), probably the most important activist in the “Old Right” during the 1940s and the 1950s.

Speaking after Flynn is John Cudahy, a former ambassador to Ireland, Belgium, and Poland and a Democrat. To enthusiastic applause, Cudahy not only condemns Roosevelt’s foreign policy but calls for reestablishment of the gold standard!

My old friend and associate at the Institute for Humane Studies, John E. Moser, has written the first, full-length biography of Flynn:

Right Turn: John T. Flynn and the Transformation of American Liberalism

According to this article, small businesses are reluctant to hire because of the very real prospect of additional tax and regulatory burdens they will have to bear.  The possibility that Obamacare will make them responsible for their employees’ health insurance expenses is but one example of the tax and regulatory burdens that may be on the horizon.

Part of this is the regime uncertainty that Robert Higgs has emphasized over the years, but partly it is just the realistic expectation that government plans to increase tax and regulatory burdens are in the works, at the federal, state, and local levels.

One reason we are in for a slow recovery is that the government’s recovery efforts are hindering the recovery, not helping.  As the economy turns around, any resources going toward government are coming out of the private sector, and the additional tax and regulatory burdens are slowing job growth.  Less than a year ago congress passed a $787 billion stimulus package to try to turn the flailing economy around, but the bulk of that money went to government.

It appears that government’s economic recovery strategy is to minimize the impact of the recession on government, while placing additional burdens on the private sector.  Our elected officials must be thinking that the voters won’t notice this, or if they notice, they won’t be able to do anything about it.  But with elections coming up in November, I’m expecting (or maybe just hoping for) a backlash.