Interview with FEE President Larry Reed

Daily Bell: What are the "lofty standards of liberty"?

Lawrence Reed: I'll list some of the big ones here but this is by no means a complete roster: Respect for the lives, property, choices and contracts of your fellow citizens. A healthy recognition that as much as you think you know, there's a world of knowledge out there that you don't know. Self-improvement should be a life-long commitment. If you want to reform the world, you must reform yourself first and then be a good example that others will seek to emulate. Refrain from the initiation of force, which is something that should be used only in defense of individual rights. Central planning requires an arrogant, condescending, know-it-all attitude that a person of solid character should shun. Take responsibility for yourself and your loved ones; no one owes you a living just because you breathe. When you see someone who needs and deserves help, remember that the Good Samaritan wasn't good because he told the man in the gutter to call his congressman; he pitched in and got the job done himself at probably half the cost and twice the effectiveness that any politician could. Don't assume that liberty is automatic or guaranteed just because you or your grandparents had it; if good people who believe in it don't work for it, teach it, insist on it and support it, it can be easily lost. Have patience, be courageous, stand on principle, sacrifice if necessary for what you know to be right. Live for the future, not merely for the here-and-now. Be optimistic because pessimism is a self-fulfilling prophecy; you can change yourself if necessary and you can change the world but not if you think either cause is lost before you even get started. Keep your character up because freedom requires it, and you'll never regret it.

Daily Bell: Your point is that it is more difficult to live up to liberty than down to socialism?

Lawrence Reed: That's exactly right. Socialism requires little more than obedience to authority: pay your crushing taxes, keep quiet and let somebody else run your life for you, even when they order you to give it up for a stupid cause like dictating how another country should live. Living to socialism's standards means living down to some pretty ugly things: dependency and disrespect for the rights and property of others being chief among them. Liberty is a lofty objective. It requires us to live up to very high standards. It's tempting to take what's not yours or hire a politician to do that for you, but doing so is incompatible with liberty and puts a permanent stain on your personal character. We should each be asking ourselves every day, "Am I good enough for liberty?" If the honest answer is NO, then the next logical step is to muster the courage and integrity to clean up your act.

Daily Bell: Of course, the world is in lousy shape these days. The drive toward global consolidation by elites continues. Are they winning? They seem to be becoming more brutal.

Lawrence Reed: What is becoming increasingly known as "crony capitalism" is very strong but it's also under both intellectual and popular attack like never before in our lifetimes. I think the term, "crony capitalism," is unfortunate because I believe if it's cronyism (that is, dependent on the dispensing of political favors), it's not capitalism. It really ought to be called "crony socialism" but that's actually redundant. Socialism, or even the half-way house of interventionism, always reduces to cronyism. The politically well-connected always favor their friends and the corrupt will always seek to use political power. For the moment, at least by the measure of government activities and growth, it would appear they are winning. But I think the growing numbers of those who believe in liberty and free markets are eating away at the foundations of the welfare-warfare state the cronies have erected. I remain optimistic as to the long term, even if short-term trends aren't all in the right direction.  

Daily Bell: What is so hard to understand about markets or the advantages of competition versus laws and regulation? Can politics ever take the place of market discipline?

Lawrence Reed: Laws and regulation provide the appearance of a quick fix. Pass a law! Impose a rule! Problem solved, or at least we can retire with the satisfaction that we've done something. Talk about competition and other market forces and to many people it all sounds nebulous, as if no one in particular is "in charge." Our government schools have done a pretty good job of convincing people that good intentions plus a little "democratic" force imposed by people we elect will get the task done. It's our job as economists to explain that laws and regulations pose their own costs and dilemmas: The lawmakers and the bureaucrats have motives of their own and seldom consider all the side effects of whatever they do, laws and regulations often prevent better solutions and stymie innovation and rules can often be circumvented while they lull people into complacency and a false sense of security. We also have to explain how the seemingly nebulous forces of the market are, if the market is in fact free, more powerful and productive than we usually assume. So those of us who believe in free markets often have a tougher sell than the socialist con artist has. All he has to do is make promises that sound good in and of themselves; we're left to explain the wreckage as well as the alternative. I've often said that coming to understand things like market forces, individual rights, entrepreneurship, personal responsibility, etc., is part of the growing-up process. Some people just don't grow up. Babies are all socialists in the sense that they can think only of the short term. They want whatever they want and they want it now. They don't much care where it comes from or who pays for it. They make a lot of noise and mess if they don't get it and even if they do, they still shit their pants. Becoming an adult means learning patience. It means doing things for yourself, taking responsibility for your life, avoiding the superficial, quick fixes. It means getting what you want through persuasion, not force or tantrums. Socialists, in effect, are babies with guns.

 read the entire interview here

Pilgrims, Socialism, and Thanksgiving

Is Capitalism Cruel?

Tibor Machan writes:

Now these issues must always be dealt with comparatively – is capitalism cruel, harsh, heartless compared to what?

Some folks I know have maintained that compared to socialism, capitalism is indeed all these things but I just cannot buy it. Partly it's because I have lived under at least one kind of socialism, the Soviet version, which, as only someone who has been living in a cave for a hundred years would deny, is brutal, never mind cruel, harsh, and heartless...

A fully free market, capitalist system in which everyone must live without resorting to extorting their support from others, without getting bailed out by the government with other people's resources when they have mismanaged their financial affairs – is such a system more cruel than, say, democratic socialism?

Not really, not by a long shot. Any kind of socialism subjects the citizenry to coercive wealth redistribution and makes it impossible to accumulate wealth for oneself, one's family, one's enterprise thus impeding investment, savings and economic development. Instead people in socialist systems have to contend with being slowly bled to economic destitution unless they are savvy enough to circumvent all the damaging socialist practices (think here of George Soros). And, yes, there are quite a few people in socialist societies, even the harshest version of them, who manage to game the system. They may not openly attack their fellow citizens but because they game the system at the expense of these fellow citizens, those others are in fact – although sometimes not visibly – being seriously harmed...

Because so many people have found free market capitalism too harsh, too cruel, or too mean, the system has never been allowed to function as it had been meant to by those who considered it best for a society's economic well being, the likes of Adam Smith, Herbert Spencer, Ludwig von Mises, F. A. Hayek, Milton Friedman and Ayn Rand, among others. (Spencer, especially, got no end of grief because of sentiments like the following: "Sympathy with one in suffering suppresses, for the time being, remembrance of his transgressions. ... Those whose hardships are set forth in pamphlets and proclamations in sermons and speeches which echo throughout society, are assumed to be all worthy souls, grievously wronged; and none of them are thought of as bearing the penalties of their own misdeeds." [Man versus the State, p.22].) Instead they followed the lead of John Maynard Keynes and insisted that people who mismanage their economic affairs are entitled to endless bailouts from the government.

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Cartoon: Castro, Obama, and Socialism

John Maynard Keynes, Defunct Economist

John Maynard Keynes, who rose to prominence in the 1930s, wrote, “The ideas of economists and political philosophers ... are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men ... are usually the slaves of some defunct economist. Madmen in authority ... are usually distilling their frenzy from some academic scribbler of a few years back.”

When Keynes burst on the scene, most economists were against government economic interventionism. Still, there was a growing influence of Marxist ideas, evidenced by the inroads of welfarism in Europe, especially in Great Britain and Germany. And favorable reports of “success” in Mussolini’s Italy and Stalin’s Russia influenced the political direction of the United States...

Keynes was a revolutionary who provided a rationale for intellectual and political leaders who were increasingly enamored with Marxist political objectives but somewhat constrained by conventional economic wisdom...

Keynes’s theories provided intellectual support for the economic policies of Franklin Roosevelt, which were welcomed by a public desperate for change in the dire circumstances following the crash in 1929. They provided cover for massive government spending, abandoning the gold standard, and political control of market functions — all contrary to the economic wisdom that had taken two centuries to develop and had led to unparalleled prosperity in the United States.

The great economists of the 20th century, Ludwig von Mises, Friedrich Hayek, Milton Friedman, Henry Hazlitt, and Murray Rothbard, all clearly and thoroughly discredited Keynes. Hayek and Friedman both won Nobel Prizes in economics. In 1931 Hayek challenged Keynes in a famous series of debates, which focused on Keynes’s Treatise on Money. In the decades since, history has proven the correctness of Hayek’s views. Roosevelt’s New Deal was a failure and prolonged the Depression by about six years, as various research studies have shown. And though popular for several decades, Keynes eventually fell out of favor. Until now, when he is the “defunct economist” who provides the intellectual cover for Obama, just as he did for Roosevelt...

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RUMINATIONS AND OBSERVATIONS

RUMINATIONS AND OBSERVATIONS
A Periodic Overview

The inherent vice of capitalism is the unequal sharing of blessings: the inherent virtue of socialism is the equal sharing of miseries.—Sir Winston Churchill

There has been much discussion in recent months as to whether or not the United States is moving toward becoming a socialist state. News flash: The U.S. is a socialist state, and it has been since at least the Great Depression. No, we do not have the type of central economic planning based on government ownership of the means of production and allocation of resources, but there are many other institutions and programs in the U.S. that comprise public ownership and social and economic intervention by the state far beyond that which existed before the New Deal.

Socialism of a broad, encompassing nature would entail complete nationalization of the means of production, distribution, and commercial exchange, the avowed purpose of which is to benefit the citizenry though the allocation of resources. A lesser form of socialism would call for the control of capital within the framework of a “market economy.” Modern, democratic socialism calls for selective nationalization of key industries, with private ownership and regulated, “free” markets, buttressed with tax-funded welfare programs and transfer payments.

Socialism which emerged as communism in the Soviet Union and China in the twentieth century called for state ownership of the means of production combined with central planning for the production of goods, providing services, and the establishment of prices. The human and economic results of both nations were abysmal, and operated only under an umbrella of totalitarianism.

A more benign history of socialism evolved in Western Europe following World War II. Post-war social democratic governments introduced broad measures of social reform and wealth redistribution through state welfare and taxation. Many key industries became state owned. Toward the end of the century, Europe embraced more market-oriented policies that included privatization, deregulation, and the lessening of class warfare. Yet the funding of state controlled services and taxation aimed at redistributing wealth not only remained, but also continued to grow.

At the root of all socialism is the objective of equal results as opposed to equal opportunity. British author, Cecil Palmer, pinpointed a truism of socialism in its most utopian form, “Socialism is workable only in heaven where it isn’t needed, and in hell where they’ve got it.” The end result of socialism is a culture of dependence that has both economic and moral costs. Alexis de Tocqueville opined that, “Democracy and socialism have nothing in common but one word, equality. But notice the difference; while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.” The gradual erosion of economic liberty by the granting to or usurpation by the state of individual liberty and property for the “greater good” will lead to a condition of state subjugation.

. . .

The history of the modern welfare state in the U.S. in the wake of the Great Society is one of increased government promises and benefits, and thus greater government spending and ever higher taxes, interrupted only in brief periods by tax reductions and temporary “reform.” As government has grown, interest groups dependent on government largesse have become increasingly powerful, and in turn have loaned their support to politicians who cater to their interests. The process has led to a culture of corruption as well as dependence. It is exceedingly difficult for a career politician to say no. With each new “crisis,” demand for more services and powers leads to an expansion of the state at the expense of the liberty and resources of the individual, especially through taxation.

As admirable as many of the objectives of liberalism and socialism may be, they have met with the realities of economics. Most economists would acknowledge that businesses do not in the final analysis pay the true cost of taxes. Businesses serve as conduits to collect taxes from the end consumer who ultimately pays the cost of taxes embedded in the cost of a service or good. If businesses did not pass on their cost of taxes, they would cease to earn a rate of return that would be considered acceptable to profitably survive. To believe otherwise is naïve.

Thus, the true cost of government is borne by the individual. As long as individuals are able and willing to pay the cost, the economy can continue to function, and the government can continue meeting the obligations that it has promised. But governments are hurtling toward an economic brick wall. The culture of dependence and government extravagance has reached dangerous levels.

The number of people dependent on the state in most of Europe exceeded 50% long ago. In the “land of the free, and the home of the brave,” 47% of wage earners will pay no federal income tax for 2009. Today, 20% of Americans receive 75% of their income from the federal government, and another 20% get 45% from Uncle Sam. More frightening is the fact that 60% receive more benefits in dollar value from the federal government than they pay in taxes. Projected increases in the current federal budget may move that figure to 70%. U.S. Representative Paul Ryan points out the risks to the United States: “Once that budget is fully put in place, three out of ten families in America are either supplying or supplementing the incomes of seven other families in this country. That is economically destructive. It’s politically inequitable, and unsustainable.” Ryan maintains that the President’s budget calls for $2 trillion in higher taxes, doubles the debt in five years, triples the debt in ten years.”

One can argue about the nuts and bolts of a budget and the intricacies of government accounting, but there is no refuting the fact that the U.S. government for years has been spending far more than it collects in the form of tax revenues. According to Fiscal 2011 federal budget documents, taxes paid to federal, state, and local governments totaled 25% of GDP in 2009. Total government spending equaled 36% of GDP. The political class would just say tax the rich, they can afford it. Yet the top 10% of taxpayers already pay 73% of federal taxes. And the tax burden of the top 1% of taxpayers exceeds that paid by the bottom 95%! As former British Prime Minister Margaret Thatcher observed, “Socialist governments traditionally do make a financial mess. They always run out of other people’s money.”

No doubt, taxes will be going higher, and not just exclusively for the “rich.” All wage earners will be hit with higher taxes for Social Security and Medicare. Projected taxes on “unearned” income from dividends, interest, and rents will be headed higher as well. (As an aside, the term “unearned income” is a government canard. A retiree receiving pitifully low interest on a CD or someone collecting rent on a small home would not consider the income as “unearned.”) More deductions and exemptions will be phased out as well. In states like California, New York, New Jersey, and others, when taking into account property taxes, sales taxes, state income taxes, and federal income taxes, the marginal tax rate will reach or exceed 70%.

. . .

At the heart of socialist ideology is the underlying premise that socialism is morally superior to capitalism; all men are equal and thus should fare equally as well. In reality, the pure socialist solution for the state to own the means of production and to decide the rewards and distribution of labor is a utopian illusion. Most individuals engage in economic activity in order to obtain benefit from the fruits of their labor and property. Individuals are not equal in terms of ability, skills, or intellect. The fruits of their labor will be uneven. If individuals are compelled to devote their economic gain to the state there is a point beyond which they will produce less in inverse proportion to the demands made on their production and income.

Since modern day, liberal socialists in Europe and the U.S. cannot yet install their vision of moral superiority through nationalization and the state ownership of property, they have appropriated property through taxation. The stepchild of socialism, the liberal welfare state, has extended its tentacles through other means, namely regulation and taxation. The state thus takes the fruits of capitalism from the producing, tax-paying class and distributes them legislatively through entitlements. The citizenry becomes ever more dependent on being entitled to many economic “rights” and obligated for very few. Unfortunately, the goals of state welfarism are incompatible with the preservation of a free society. When there are more people who have no “skin in the game” except to take from the producers, the result is a state that will descend into an organ for the punitive enforcement of the collection of wealth by any means considered “just.” In the extreme, it will give rise to totalitarianism.

There are no lines of would-be immigrants rushing to enter Venezuela or Cuba. Both countries are abject, socialist states. The U.S. is at the other end of the spectrum in terms of the existence of economic and political liberty, but it is far from the bastion of economic liberty it was in previous decades. The damage inflicted upon individual liberty and the private economy by attacks on capitalism and the growth of socialism become evident only in degrees and over time.

Chief Justice John Marshall, in McCulloch v. Maryland, 1819, warned, “An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation.” The U.S. tax code is a mind-boggling 17,000 pages. It is, without question, an encyclopedia replete with methods of legal confiscation and the awarding of entitlements to special interests. It seems that every two or three generations, the benefits of a market economy (as opposed to a completely laissez-faire one) have to be relearned. The past several quarters, and indeed the past several years, have brought the U.S. and other sovereign states closer to a day of reckoning with the folly of tax and spend, spend and tax.

In the land beyond the Beltway, Americans are awakening to the dangers of the seemingly well intentioned, but ultimately enslaving nature of the tax and spend welfare state. In New Jersey, a state long known for a culture of government corruption, voters elected Chris Christie as their Governor last fall. In his budget address, he voiced a call for action that resonates far beyond the state capital of Trenton:

The day of reckoning has arrived. The attitude has always been the same—continue to spend, continue to borrow, and drop the catastrophic sum of all these poor choices into the lap of the next guy. Well, time has run out. The bill has come due . . . . I was not sent here to approve tax increases. I was sent here to veto them . . . . It is time for the tax madness to end.

Christie called raising taxes, “insane.” “If you are unemployed and support tax increases, be ready to stay unemployed . . . . We have the worst unemployment in the region and the highest taxes in America, and that’s no coincidence.”

In Virgil’s Aeneid, Laocoön warns his fellow citizens of Troy, “Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even bearing gifts.” Today, we should be grateful to Greece for the message she is sending to the U.S. and the world. Greece is the quintessential socialist state. In 2009, its budget deficit was 13.6 % of its GDP, and its debt, the accumulation of past deficits, was 115% of GDP. The riots in Greece have unmasked the riddled structure of socialism and the modern welfare state. The ideological bankruptcy of socialism and its concrete failure is becoming increasingly apparent as its standard bearers in Europe flag under the weight of sovereign debt and government insolvency. Over 150 years ago, French economist, Frederic Bastiat, captured the essence of the socialist state, “The State is that great fiction by which everyone tries to live at the expense of everyone else.”

In the U.S., tensions are rising. Washington and state capitals across the nation cannot help but note the travails of Greece and much of Europe. Too, a growing number of Americans are taking heed of the threat posed by the growth of socialism with its accompanying demands on the economy and property and its threats to individual liberty. The seeds of resistance are taking root. There is growing evidence that the country appears ready to order a shift in the direction of national and state government.

If the U.S. is to regain its economic vitality and resurrect an environment of greater economic opportunity and individual liberty, the growth of government spending and taxation must be restrained and eventually reduced. The pendulum must swing away from the march toward socialism. Fiscal discipline is being imposed on governments through the markets. A citizenry that is girding for the battle of the nation’s economic future will fortify it. We believe there are signs that, while the struggle will be difficult, the road ahead will lead to a shift away from the culture of dependence. In recent months, there has been a growing groundswell of support for a market economy and a rising level of concern about the growth of taxes and national debt. A recent Rasmussen poll found that 60% of U.S. adults say that capitalism is better than socialism. A Pew Research Center survey finds that Americans’ distrust of government has grown significantly.

The conflict over the socialist inroads made through the arms of government over the last several decades are not properly framed as a case of Republicans versus Democrats. This is a struggle between those who hold individual liberty, economic freedom, and property rights as paramount in a free society, versus socialist statists who seek to impose their idealized but flawed vision of equal results upon the citizenry they feel they must oversee.

We have confidence in the unique nature of American constitutional government to right itself and avoid a robotic march down The Road to Serfdom, as Friedrich A. Hayek’s classic called the inevitable path of collectivism and especially socialism. Prophetically, he warned of the dangers of the collectivists’ vilifying attacks on the negative aspects of capitalism. “It is essential that we should re-learn frankly to face the fact that freedom can be had only at a price and that as individuals we must be prepared to make severe material sacrifices to preserve our liberty.” As the issue of taxes and individual liberty rise in the hearts of Americans, the flame of revolutionary fervor is growing brighter. It is a healthy sign indeed for the Republic.

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The Economic Debate

The domestic debate, which I and many other libertarians have addressed several times in the past, involves the question of what has caused America’s economic woes.

One side — the statist side — claims that the problem lies in freedom and free enterprise.
The other side — the libertarian side — contends that our nation’s economic woes lies in the failure of the welfare-state, regulated-economy way of life that America has embraced since at least the 1930s.

The different diagnoses lead to two completely different solutions.

The statists say that since the problem is rooted in too much economic freedom and not enough regulation, the solution is to establish more government control over economic activity.

The libertarians say that since the problem is rooted in socialism and interventionism, the solution is to dismantle the welfare-state and regulatory programs (and the taxation funding them) and let genuine economic liberty reign...

What is that motivates U.S. statists to blame America’s economic woes on “freedom and free enterprise” rather than on America’s 70-year experiment with welfare-statism and regulation.

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Jacob Hornberger: Capitalism Has Not Failed

Suppose you were to give a one-question test in public schools across the country and, for that matter, to all graduates of U.S. public high schools: “True or False: The Great Depression was caused by the failure of America’s free-enterprise system.”

There can really be no doubt about what the answer would be. The vast majority of respondents would answer: True.

Yet, the correct answer is False. As Milton Friedman, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, and others have documented so well, the Great Depression was caused by the Federal Reserve, America’s central bank, a federal institution that is antithetical to free enterprise...

Alas, the deception and delusion are not limited to the Great Depression.

Today, we might well be witnessing the death throes of America’s welfare state and warfare state. Everywhere you look, the entire statist system is in crisis or chaos.

Social Security, Medicare, Medicaid, Fannie Mae, Freddie Mac, FDIC, the drug war, Iraq, Afghanistan, the dollar, federal spending, the national debt, stimulus plans, foreign aid, nationalizations, corporate and banking bailouts, and on and on.

The whole welfare-warfare system is busted, broke, bankrupt. With each passing day, it gets worse and worse, as federal officials continue to double down their bets in the hopes that somehow the system is going to come out fine.

But notice what the statists are saying: That it’s not socialism or imperialism that have failed, it’s free enterprise!

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Cartoon: Our New Economic Model

Health Care Solution: Do Nothing

The second-best solution for the health-care crisis? Do nothing.

Of course, that drives the interventionists crazy. “Do nothing?” they cry! “Don’t you realize that we’re in a crisis? We can’t afford to do nothing!”

What they fail to realize is a fundamental principle about interventionism: It produces more crises. Therefore, any new health-care intervention, whether termed “reform” or “modification” or “improvement” is only going to make things worse than they already are. New interventions will produce new and bigger crises, thereby producing calls for more “reform” in the future.

What ultimately happens is that as the crises and interventions grow in number and intensity, people get so frustrated that they end up supporting a complete government takeover of that particular segment of society. In fact, that’s already happening in the health-care debate...

That, of course, leads us to an opposing diagnosis — that it’s not freedom and free enterprise that have caused America’s health-care crisis but instead the socialism and interventionism that have infected every aspect of the health-care field...

Thus, the prescription is obvious: radical surgery by removing all of this cancerous material from the body politic. No reform. Simply an immediately repeal of Medicare, Medicaid, health-care and insurance regulations, and medical licensure. End all government involvement in health care. Given the positive power of the free market and the enormous resiliency of human beings, the body politic will immediately begin recovering.

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Cartoon: Socialized Medicine

My thoughts: This is the problem of the slippery slope. There is no logical stopping point once you accept government intervention in an industry or the economy. Proponents of the health care plan like to claim opposition is to the plan is hypocrisy. In some cases it is. However many who oppose government health care also oppose Medicare, Social Security, and all other government intervention in the economy. Then there is the practical reality of the federal budget. It is Medicare and Medicaid that are currently projected to be the programs that bankrupt the government. An additional government health care program will likely accelerate the process. This issue should be aaddressed by the proponents of the health care plan.

Four Arguments Against Socialism

The first argument against any socialist program, however, is the moral one — that it’s wrong to take what doesn’t belong to you. Moreover, the immorality of an act cannot be converted into something good or moral simply because the state is doing it on your behalf...

A second argument against any socialist program is that it just doesn’t work. Let me repeat that for emphasis: Socialism doesn’t work, not even when American politicians and bureaucrats are running it. It inevitably produces crises, which are then used as the excuse for more government intervention. Moreover, it is inordinately expensive, as Americans have discovered with Medicare, much to their dismay.

A third argument against any socialist program is that it destroys the independence, fortitude, strength, and moral fiber of the people. How can a people be strong and independent when they have become frightened, dependent wards of the government?...

A fourth argument against socialism is that it turns into a war in which everyone is doing his best to get into everyone else’s pocketbook, while doing everything he can to protect his own pocketbook from being plundered. As Frédéric Bastiat put it so well, under socialism the government becomes a great fiction by which everyone is trying to live at the expense of everyone else. How can a society survive when everyone is warring against everyone else?

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Socialism is Not Free

Socialists who proudly proclaim the great success of the socialistic welfare state, including Social Security and Medicare, block out of their minds the fact that socialist programs are not free. The federal government is not an independent fountain of wealth or even an independent business operating alongside private businesses in the marketplace. Instead, the government is an entity that gets its money by taxing the private sector.

In effect, there are two segments of society — the private sector and the public (or government) sector.

In order to accumulate wealth, people in the private sector must produce a good or service that other people are willing to pay for...

However, unlike the private sector the government doesn’t depend on the voluntary decisions of consumers for its money. It forces the private sector to pay for its goods and services by simply confiscating (taxing) the income or wealth of people in the private sector.

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Essay: Faith of Entrepreneurs

There was no German miracle after World War II, he used to say; the glorious recovery was a result of economic logic working itself out through market forces. Once we understand the relationship between property rights, market prices, the time structure of production, and the division of labor, the mystery evaporates and we observe the science of human action making great things happen...

"What distinguishes the successful entrepreneur and promoter from other people," writes Mises, "is precisely the fact that he does not let himself be guided by what was and is, but arranges his affairs on the ground of his opinion about the future. He sees the past and the present as other people do; but he judges the future in a different way."

It is for this reason that entrepreneurial habit of mind cannot be implanted through training or education. It is something possessed and cultivated by an individual. There are no entrepreneurial committees, much less entrepreneurial planning boards.

The inability of governments to engage in the entrepreneurial act of faith is one of many reasons why socialism cannot work. Even if a bureaucrat can look at history and claim that his agency could have made a car, dry wall, or a microchip, that same person is at a loss to figure out how innovations in the future can take place. His only guide is technology: he can speculate about what might work better than what is presently available. But that is not the economic issue: the real issue concerns what is the best means given all the alternative uses of resources to satisfy the most urgent wants of consumers in light of an infinity of possible wants.

This is impossible for governments to do.

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My thoughts: When you look at history and current events, it is difficult to understand why people still think the government can be more innovation and productive than the market economy.

Current Crisis and the Future

During our current crisis we are not yet moving in a full blown socialist direction as traditionally understood. Instead, we are moving toward some sort of mixed ownership form, where resources are retained in some private hands, but also the public hand is deep in control. Such is the fate of our banking industry. ..

We are in trouble but it is a crisis of ideas that is most troubling. We are marching toward corporatist system as fast as the votes will take us. Who will say NO to this?...

Slippery slopes, unintended consequences, regime uncertainty, etc., these are the concepts you need to understand in order to make sense of our current economic problems. Bad economic ideas have produced bad economic policies which in turn has resulted in bad economic consequences. The "solution" is not to be found in more bad ideas and bad public policies even if promoted by an eloquent and charismatic political leader.

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Peter Schiff v. Obama's Stimulus Plan

Schiff:

We are not going to be able to spend ourselves into prosperity.

Socialism doesn’t work. Central government planning doesn’t work.

You can’t turn these market related functions over to government planning.

Our economy is going to be weakened dramatically as we move more and more away from free markets and capitalism towards socialism, toward centrally planned economy.

If the government tries to interfere some more, they going to re-create the Great Depression only this time it is going to a inflationary depression this time; it is going to be a lot worse.

Socialism is Evil

Walter Williams on Socialism

It employs evil means, coercion or taking the property of one person, to accomplish good ends, helping one's fellow man. Helping one's fellow man in need, by reaching into one's own pockets, is a laudable and praiseworthy goal. Doing the same through coercion and reaching into another's pockets has no redeeming features and is worthy of condemnation...

I don't believe any moral case can be made for the forcible use of one person to serve the purposes of another. But that conclusion is not nearly as important as the fact that so many of my fellow Americans give wide support to using people. I would like to think it is because they haven't considered that more than $2 trillion of the over $3 trillion federal budget represents Americans using one another. Of course, they might consider it compensatory justice. For example, one American might think, "Farmers get Congress to use me to serve the needs of some farmers. I'm going to get Congress to use someone else to serve my needs by subsidizing my child's college education."

The bottom line is that we've become a nation of thieves, a value rejected by our founders. James Madison, the father of our Constitution, was horrified when Congress appropriated $15,000 to help French refugees. He said, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." Tragically, today's Americans would run Madison out of town on a rail.

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Cartoon: Socialism Explained

Elimination of 401k Tax Breaks?

Under Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.

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Is Capitalism Dead?