By Simon Grey, on June 9th, 2011
Kenneth Wright of Stockton, California was almost knocked down by a S.W.A.T. team breaking down his door one morning. He says they then handcuffed him and put him in the back of a police car.
Federal agents confirmed that the Department of Education was behind the raid on Wright’s house. They were in search of his estranged wife, who had defaulted on her loans.
The rich rules over the poor, and the borrower is the slave of the lender.
Quite simply, if you owe Uncle Sam money (seeing as how Uncle Sam guarantees the loans, this would essentially be the case) then this sort of thing can happen to you. As a slave, you have no rights. Your owner can do whatever he wants, and there is no recourse for you as a slave. Think carefully before you sign the dotted line.
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By Simon Grey, on April 15th, 2011
As reported by ABC News, what started out as a program to hold unclaimed property, such as the contents of safety deposit boxes owned by people who have moved away without a forwarding address, has gone wildly out of control. The program is now using the flimsiest of excuses to drill safe deposit boxes and sell the contents, often for below-market value, the proceeds going to the state’s general revenue.
In a case reminiscent of the Monty Python organ donor skit (or perhaps the movie Repo Men), a San Francisco woman’s jewelry appraised at over $80,000 was sold even though she lived a few blocks from her bank, had not moved, and was current on all of her box rental feeds. In another case, a man’s retirement savings consisting of $4 million of stock certificates were sold; and “A Sacramento family lost out on railroad land rights their ancestors had owned for generations”.
There’s a reason why some have said that giving power and money to the government is akin to giving whiskey and car keys to a teenager: It’s because the government can be counted on to do wildly irresponsible things when given more power and money. Is it guaranteed to do so? Technically no, but history demonstrates, yet again, that the answer is a resounding yes. As it stands, it is simply best to deprive the government of as much power as possible, for it is certain that the government will abuse it.
By Simon Grey, on April 14th, 2011
Students who attend Chicago’s Little Village Academy public school get nothing but nutritional tough love during their lunch period each day. The students can either eat the cafeteria food–or go hungry. Only students with allergies are allowed to bring a homemade lunch to school, the Chicago Tribune reports.
“Nutrition wise, it is better for the children to eat at the school,” principal Elsa Carmona told the paper of the years-old policy. “It’s about … the excellent quality food that they are able to serve (in the lunchroom). It’s milk versus a Coke.”
But students said they would rather bring their own lunch to school in the time-honored tradition of the brown paper bag. “They’re afraid that we’ll all bring in greasy food instead of healthy food and it won’t be as good as what they give us at school,” student Yesenia Gutierrez told the paper. “It’s really lame.”
Having eaten my share of school lunches, I can say with a high degree of certainty that there is no way that any lunch students bring from home is worse than the garbage schools pass off as food. Yes, it’s possible that parents send highly processed junk food with their children. But how is that different than the highly processed non-food that schools serve?
There is plenty of junk food available at every grocery store, so parents can still make sure that their children eat plenty of non-nutritious garbage at lunch, if they so desire. Of course, going this route is more economical than buying a school lunch, for it provides children with the same empty calories, just at lower prices. That’s probably why home lunches were banned: the school’s food supplier wanted a monopoly in order to make more money.
Of course, it’s entirely possible that some parents actually sent nutritious lunches with their children. If that’s the case, the school is actively working to destroy kids’ health.
And so we see how the government works: it creates a lose-lose situation for parents, for now parents must subject their children to higher-priced, less-nutritious lunches. All in order to ensure that someone can make a little extra money. Ain’t it grand?
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By Winton Bates, on March 18th, 2011
There can be no doubt that western democratic governments have been attempting to promote the happiness of citizens for a long time. They may not talk much about attempting to achieve the greatest happiness for the greatest number, or any similar high-sounding principle, but they have a wide range of policies intended to promote the well-being of citizens in general or of various groups. When it comes to discussion of government policy most citizens could be broadly described as utilitarians. We may feel strongly about rights, but we have come to expect policy debates to focus on the effects of proposed policy changes on particular groups of gainers and losers and on the wider community.
As I see it there is nothing inherently wrong with governments seeking to enable us to live happier lives, particularly since this is what many citizens want. It is certainly better to have people in government trying to enable us to live happier lives than for them to be trying to make themselves happier at our expense. The main problem as I see it is that the approaches that we – the people in western democracies – have been encouraging governments to adopt to help us to live happier lives have often been counter-productive.
The first problem has to do with our perceptions of the nature of happiness. I think we have been too ready to assume that the best way to enable people to live happier lives is to attempt to control their lives for them. Thus, for example, people are taxed during their working lives to provide health care or retirement incomes that they could afford to provide for themselves. Added to this we have proposals to prevent people from saving too little, working too hard, gambling too much, eating too much and so forth. We need to consider whether the humans are able to flourish if they do not have control of their own lives.
The second problem has to do with the idea that governments could promote the happiness of society if only it could be measured correctly. There has been an ongoing debate about the shortcomings of GDP as a well-being measure and various alternatives are being proposed, including some involving direct measurement of happiness. We need to consider whether it makes sense to discuss the relative merits of different indicators as though all the different factors that are important to the flourishing of any group of individuals can be captured by a single statistic.
The third problem has to do with the effects of government pursuit of happiness on individual flourishing. The more governments take over responsibility for our happiness, the more restrictions they impose on the opportunities that are available to us. For example, if governments regulate to reduce working hours in order to enable people to enjoy more leisure, this restricts the opportunities available to people who have strong personal reasons for working longer hours. We need to consider more carefully the likely effects of such government interventions.
The fourth problem has to do with the effects of government pursuit of happiness objectives on the social fabric. The opportunities available to individuals depend to a large extent on the kind of society they live in. If they live in a corrupt society in which rule of law is breaking down, their opportunities for mutually beneficial interactions with other citizens are likely to be diminished. Incentives for corruption are obviously stronger when governments intervene extensively to regulate the behaviour of citizens. We need to consider how successful different societies have been in containing corruption in the face of such incentives.
These issues are to be discussed in a book I am currently writing, with the provisional title:
We need to be
Free to Flourish
The introductory chapter of the book is available here. Comments would be appreciated. (Please do not be offended if I do not respond immediately because it may take a few days to re-surface, or come down to earth from other activities.)
By Winton Bates, on November 16th, 2010
A few months ago a guest blogger on ‘The Baseline Scenario’ blog, StatsGuy, wrote a post entitled ‘Good Government Versus Less Government’. It was described as a ‘must-read’ in a post by Tyler Cowen on ‘Marginal Revolution’ and received a great deal of attention on a range of other blogs including Scott Sumner’s (here).
StatsGuy draws attention to the fact that the size of government component of the Heritage Foundation index of economic freedom is negatively correlated with the other components of this index. He concludes that the Heritage Freedom index is really a composite of measures that get at two different things: good government, and less government. His bottom line:
‘Overall, the Good Government factors tend to dominate, and drive a lot of the correlation with good economic and quality of life outcomes. When one splits out the factors, the case for Less/Weaker Government weakens substantially, and the case for Clean/Non-Corrupt/Efficient government strengthens considerably’.
Some other researchers have similarly objected to the inclusion of size of government in economic freedom indexes. For example, Peter Lindert describes this as ‘guilt by definition’ on the grounds that it tends to make big government and the welfare state look bad merely by describing this national attribute as contributing to lower economic freedom (‘Welfare states, markets and efficiency: the free lunch puzzle continues’, 2007: 6).
At least one contributor to the discussion of StatsGuy’s post made the point that if economic freedom has two different dimensions, a lack of correlation between those dimensions does not necessarily mean that one of them is irrelevant. For example, it is possible for both size of government and quality of government to be important to economic growth.
I recently had an opportunity to test whether this is so in preparing a background paper for the 2025 Taskforce, which was established by the New Zealand government to advise how average incomes in that country could be raised to equate those in Australia by 2025. The analysis provides some support for the view that size of government is an important component of economic freedom indexes.
The analysis uses the Fraser Institute’s index of economic freedom because this provides a consistent measure of institutional quality over a longer time period than the alternatives. The data set relates to ‘advanced economies’ as defined by the IMF – this data set includes high income jurisdictions with small governments, such as Hong Kong and Singapore, as well as OECD countries. The regression, based on panel data, explains average per capita GDP growth in each decade in terms of several variables including two components of economic freedom at the beginning of each decade, the size of government index and ‘other economic freedom’. The relevant regression results are presented in Table A 2.3, p 43 (the right hand column).
The coefficients on both the size of government and ‘other’ economic freedom variables were significantly greater than zero – suggesting that smaller size of government has a positive effect on economic growth. The magnitude of the estimated coefficient on size of government is about half that on ‘other’ economic freedom, but that is about twice as large as I had expected it to be on the basis of the weight of size of government in the economic freedom index (20%).
One fairly obvious question that might be asked is that if size of government is so important, how is it that some countries with big governments, an obvious example is Sweden, have managed to maintain relatively strong economic performance. I have attempted to answer this question in the chart below which compares per capita incomes in Sweden and Australia (Penn World Tables, rgdpch with some extrapolation using IMF growth estimates). The results of the simple analysis presented in the chart suggest that if Sweden had not undertaken substantial economic reforms (including some improvement in the size of government component of economic freedom as well as other components) it would have performed poorly. The chart also suggests that Sweden’s economic growth performance could have been much better if it had a smaller government.
 This analysis doesn’t tell us that every country could become a paradise if only it had a small government, or that countries with big governments are dreadful places to live. It just suggests that big government is not a free lunch. The lack of correlation between the size of government and other aspects of economic freedom is interesting, but it doesn’t mean that size of government doesn’t matter.
By Russ Nelson, on April 8th, 2010
Apparently some Democrats object to the idea that Jamestown was run as a socialist enterprise, as Dick Armey pointed out. They say “Oh, no Jamestown was established as a capitalist venture to make a profit.” Well, that’s true, but internally (which is the only thing that matters) it was run in the same way as any socialist venture. There was no money, no market, everyone got free food and housing, and — this is key — there was no incentive to work because only the corporation made profits. Individuals who wanted to work harder than others had no incentive to do so. So naturally, the enterprise foundered, as any socialist venture does.
Before you object by pointing to Sweden, do please consider that Sweden is nothing like a socialist country. It has high taxation and generous social benefits, but it has a vibrant and free market. Socialist countries don’t have free markets. They have government-controlled markets. The idea that socialist countries can have free markets is a recent and ignorant one. Go read up on the history of socialism, and you will see that their first goal was to eliminate the marketplace, preferring instead government allocation of profits.
Okay, now you can object with Sweden, but at least now you’ll know in advance that I think you’re wrong. And crazy, but mostly wrong.
By Thomas Knapp, on March 24th, 2010
Well, they’ve gone and screwed it up — 14 state attorneys general have filed lawsuits against ObamaCare.
If the states really want to beat ObamaCare, litigation isn’t the way to go about it. Nullification/interposition is.
In litigation, the parties accept that the courts have jurisdiction over this or that issue, and walk away with whatever the courts give them. The Supreme Court of the United States, (including its “conservative” members in cases like Raich v. Gonzale) has already ruled that the Interstate Commerce Clause can mean pretty much anything Congress wants it to mean. Litigating ObamaCare is a dead-end road.
In nullification, the state governments say “we’ve determined — for ourselves, we don’t need any of you black-robed ninnies to do it for us — that this piece of legislation is unconstitutional on its face, and we’re not going to stand for it, at least within our own borders. Injunction? You can shove your injunction up your ass. If you attempt to come here to enforce it, our National Guard will do the shoving for you. Complimentary. No charge.”
It’s time for a good old-fashioned constitutional crisis. Look where avoiding such crises has gotten us.
By Thersites, on February 11th, 2010
Though I have written extensively about the Recession of 1920, it is worth revisiting it per Glenn Beck’s show last night. Beck rightly pointed out that the policies of decreased taxes and decreased government spending implemented by both Harding and Coolidge paved the way for the dramatic economic growth of the roaring 20s. What Beck didn’t mention was that prior to this period of unprecedented economic expansion, President Warren Harding had inherited one of the worst recessions in American history. This Recession of 1920-21 is another one of the dirty secrets glossed over in the Progressive history books.
By late 1919, America was facing inflation in prices as measured by CPI of 20%. Between 1920 and 1921, unemployment doubled from 5.2 to 11.7%. During this same period, from their peak in June of 1920, prices declined by 15.8% on a year-over-year basis, a 50% greater deflation in prices than during ANY 12-month period during the Great Depression. So what was Harding’s proposal to deal with this mess? To understand how to get out of recession, Harding looked towards how we got into it in the first place.
For America was coming out of World War I. Government was controlling huge swaths of the economy, as it had mobilized land, labor and capital towards war production and away from normal commerce as dictated by consumer demand. In addition to the mass of resources that needed to be reallocated according to market forces, the economy had been further distorted due to the policies of the Federal Reserve which had inflated the money supply by 71% from 1913-1919 (while the physical volume of business had only increased by 9.6%), and whose policies had led to an increase in prices of a staggering 234% between 1914 and 1920. Prices needed to readjust according to the reallocation of resources. In addition, not surprisingly, due to the costs of war, the federal budget had grown to $18.5bn.
One will note the parallels to our economic situation today. Just as war led resources to be allocated away from where an unfettered economy would have directed them, so too did the artificial boom fueled by the Federal Reserve and various government policies lead resources to be misallocated towards assets such as houses and stocks during our most recent boom and bust cycle. While unsustainable businesses and concomitant rises in prices developed in the private sector, the government too drastically increased.
Harding understood the root cause of recession. As he noted in his inaugural address:
The economic mechanism is intricate and its parts interdependent, and has suffered the shocks and jars incident to abnormal demands, credit inflations, and price upheavals. The normal balances have been impaired, the channels of distribution have been clogged, the relations of labor and management have been strained. We must seek the readjustment with care and courage…All the penalties will not be light, nor evenly distributed. There is no way of making them so. There is no instant step from disorder to order. We must face a condition of grim reality, charge off our losses and start afresh. It is the oldest lesson of civilization.
And so what was his big Keynesian stimulus plan to bring the economy back from the abyss? He argued during his Republican nomination speech:
Gross expansion of currency and credit have depreciated the dollar just as expansion and inflation have discredited the coins of the world. We inflated in haste, we must deflate in deliberation. We debased the dollar in reckless finance, we must restore in honesty. Deflation on the one hand and restoration of the 100-cent dollar on the other ought to have begun on the day after the armistice, but plans were lacking or courage failed. The unpreparedness for peace was little less costly than unpreparedness for war. We can promise no one remedy which will cure an ill of such wide proportions, but we do pledge that earnest and consistent attack which the party platform covenants. We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens, but because it will be an example to stimulate thrift and economy in private life.
And so, shockingly Harding practiced what he preached. Regarding deflation, the Federal Reserve jacked up interest rates from 4.75% in January 1920 to 7% in June 1920, and held this rate through the aforementioned major drop in prices through May of 1921. Harding slashed the federal budget from $18.5bn in 1919 to $6.4bn in 1920 all the way down to $5.1bn in 1921. Meanwhile, the government actually ran surpluses during these years, allowing them to pay down the debt by $300mm from 1920-21. The Chief Economist of Chase National Bank of the era, Benjamin Anderson summed Harding’s philosophy and his attack on the recession as follows:
The idea that a balanced budget with vast pump-priming government expenditure is a necessary means of getting out of a depression received no consideration at all. It was not regarded as the function of the government to provide money to make business activity. It was rather the business of the US Treasury to look after the solvency of the government, and the most important relief that the government felt that it could afford to business was to reduce as much as possible the amount of government expenditure, which had risen to great heights during the war; to reduce taxes—but not much; and to reduce public debt.
Nor did the government increase public employment with a view to taking up idle labor. There was a reduction in the army and navy in the course of these years, and there was a steady decline in the number of civilian employees of the federal government. This policy on the part of the government generated, of course, a great confidence in the credit of the government, and the strength of the gold dollar was taken for granted. The credit of the government and confidence in the currency are basic foundations for general business confidence. The relief to business through reduced taxes was extremely helpful.
According to Anderson, how did the recession end?
…we took our losses, we readjusted our financial structure, we endured our depression and in August 1921 we started up again. The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good. (See Benjamin Anderson’s Economics and the Public Welfare or his gratis “The Return to Normal“)
Now we can debate fiscal and economic policy all day, but across the spectrum, it should be clear to all that a government that intervened and created the conditions for economic crisis will not be able to solve it. If government’s can create prosperity when the private sector is imperiled, then why would Americans be against government central planning when all is rosy? Do the rules of economics not apply during downturns?
If we can agree that recessions are the result of resources being improperly allocated, then we can also agree that the only way to return to economic health is to allow for their reallocation according to the market. This involves allowing nonproductive business ventures to go belly-up, prices to naturally fall where they have unjustifiably risen and reduction in the size of government allowing resources to be released to entrepreneurs to reverse the ills of the artificial boom and spur growth. All measures that impede the natural cleansing of an economy will only ensure pain and suffering like that witnessed over the last few decades in Japan. Harding had things right and it would do our lawmakers good to follow his lesson: central planning and government control creates problems; innovative Americans are the only ones who can solve them.
By Thersites, on February 8th, 2010
From Albert Jay Nock’s Our Enemy, the State:
What we and our more nearly immediate descendants shall see is a steady progress in collectivism running off into military despotism of a severe type. Closer centralization; a steadily growing bureaucracy; State power and faith in State power increasing, social power and faith in social power diminishing; the State absorbing a continually larger proportion of national income; production languishing, the State in consequence taking over one “essential industry” after another, managing them with ever-increasing corruption, inefficiency and prodigality, and finally resorting to a system of forced labour. Then at some point in this progress, a collision of State interests…will result in an industrial and financial dislocation too severe for the asthenic social structure to bear; and from this the State will be left to “the rusty death of machinery,” and the casual anonymous forces of dissolution will be supreme.
 We’ve survived 75 years since this was written back in 1935 when lovers of liberty already thought we were doomed. Are we too far down the road to serfdom or can we still reclaim our nation?
By Thersites, on January 28th, 2010
Government cannot fix America’s problems. Only innovative, responsible individuals acting according to their own free will can help cure what ails us. If government could solve all our problems, then government might as well centrally plan society, but as we have seen in every instance in which this has been tried, the sole result has been poverty and mass genocide.
Of course it is naive to think that this President cares about solving our problems. The man’s sole concern is power, obtained by “fundamentally transforming the United States of America.”
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