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Posts Tagged ‘welfare’

Why the Free Market Is Hard to Defend

Posted by M. C. on August 29, 2024

The free market exists because of something no one likes to be reminded of: scarcity.

As Hayek showed, government control over the means to human flourishing leads inevitably to government control over the ends of human flourishing.

Nathan W. Schlueter

Under steady pressure from post-liberal and populist voices, Republican party leadership seems to have taken a surprising turn against the free market and towards interventionist policies—protectionism, industrial policy, regulations, welfare, and labor unions—more traditionally associated with the Left than the Right.

The truth is that the free market is not easy to defend. That is not to say it is indefensible. To the contrary, there are many strong arguments in favor of it, including the scope it gives to human freedom and creativity; the innovation and wealth it generates; and the incompetence, injustice, and dangers of undue government interference and control.

But most people find it difficult to understand and appreciate these arguments when faced with the immediate advantages of government intervention. The problem is not logical, it is psychological. Instead of an explicit rejection of the free market, we have witnessed the steady growth of well-intentioned anti-market attitudes and policies, which cause real but hidden harm while nudging us along what F. A. Hayek famously called The Road to Serfdom.

We can see why the defense of the free market is so difficult and yet so important by juxtaposing it with other domains of human action. The common good of a healthy political association is not simple. It includes at least three spheres that exist in a dynamic and uneasy tension with one another: civil society, the free market, and government.

This seemingly clear division can be very misleading, since all of these spheres, and their corresponding activities and habits, overlap and intersect in ways that are difficult to distinguish. Each sphere has its own distinctive purpose, activity, and “logic” or mode of practical reasoning. And one consequence of this complex reality is that human beings must learn, and learn to apply, different standards of evaluation and behavior to different domains in their lives.

Put most simply, civil society is the sphere where persons pursue the “intrinsic” goods—goods we have reason to want for their own sake—that constitute happiness and flourishing. Civil society is the space of genuine leisure; not merely entertainment, but worship, marriage, family, friendship, and culture. It operates by a “logic” of generosity, commitment, caregiving, and charity.

The free market is the sphere of “instrumental goods”—goods such as money that we only have reason to pursue for the sake of other goods—where persons acquire the means for their flourishing by exchanging their time, labor, resources, and other instrumental goods. It operates by a “logic” of negotiation, calculation, and thrift.

Finally, government is the sphere that provides the overall framework within which the other two spheres can operate well. Government also helps prevent encroachments by the other spheres and provides goods that are difficult or impossible for the other spheres to provide. Government operates by a “logic” of common deliberation and collective action on behalf of the common good, backed by coercive power. 

Each of these spheres provides something distinctive that cannot be provided by the others. Left alone and in isolation from the others, each is prone to expand beyond its due limits, harming people and the common good. The challenge is to make all three work together and correct one another in the way that best promotes human flourishing. The constant ideological temptation is to reduce them to one. Totalitarian ideologies such as communism and fascism attempt to absorb civil society and the market into government. Libertarianism tends to reduce government and civil society to the logic of the market. More subtly, theocracy seeks to subordinate both government and the market to a unified vision of civil society determined by religious authority and doctrine. 

Of these three spheres, the free market is the most difficult to defend. And that difficulty is not simply the result of market excesses or externalities, like manipulative advertising, a surplus of cheap, ugly products, or pollution. The difficulty is intrinsic to even a healthy market. The reasons have to do with scarcity, utility, impersonality, self-interest, and complexity. These words typically cause a negative emotional reaction. Yet each word expresses a reality we rely upon every day, and which we must humbly acknowledge and accept in order to flourish.

First, the free market exists because of something no one likes to be reminded of: Scarcity. Human beings are very needy. Nature does not spontaneously provide food, clothing, and shelter, much less the time or instruments of leisure like books and musical instruments.

Second, the primary advantage of the free market is its usefulness in helping overcome scarcity. We all like and need useful things, but as Aristotle repeatedly observes in his Nicomachean Ethics, the useful is not beautiful. Beauty consists in a gratuitous overflow of being that attracts our wonder and admiration, whereas the useful is merely necessary.

True, the market unleashes astonishing creativity and energy. Ayn Rand is a mediocre novelist, but her romantic entrepreneurs remind us of the kinds of human greatness that can find a place in the free market, and of the gratitude we should have for their efforts. Still, in the end, for most people, the market is about “getting and spending,” in which all too often “we lay waste our powers.” 

Third, the logic of the free market is impersonal. If the first two elements did not elicit immediate negative reactions, this one is sure to do so.

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Welfare for the Rich

Posted by M. C. on February 15, 2024

What we do get for the overall well-over-a-trillion in yearly military spending is…a hollowed-out military that doesn’t even have enough ammunition to defend the United States!

So both the Bell-Textron with the 360 Invictus and Sikorsky with its Raider X were funded and developed these past five years with more than two billion dollars and…suddenly…the Pentagon said, “never mind.”

by Daniel McAdams

https://ronpaulinstitute.org/welfare-for-the-rich

(This article first appeared as an exclusive update to RPI subscribers. Subscribe for free here.)

Why does the US military budget keep skyrocketing? The National Defense Authorization Act (NDAA) for 2024 passed in December came in at a whopping $841.1 billion, and that’s just part of the total amount that will be spent on military-related issues this year. Just this weekend, for example, the Senate cleared the way for a nearly $100 billion in additional spending to boost the military capabilities of Ukraine, Israel, and Taiwan!

What do we get for all that spending? A military that can do whatever it takes to defend the United States? A military whose mere formidable existence acts as a deterrent to any would-be invaders of our geographically unique country surrounded by a massive moat? We shouldn’t be naive! 

What we do get for the overall well-over-a-trillion in yearly military spending is…a hollowed-out military that doesn’t even have enough ammunition to defend the United States!

We get a military that is so unattractive to young people that they have had to make radical reforms in desperate attempt to recover from the recruiting death-spiral – including, in the US Navy at least, abandoning the requirement to have any educational credential at all, including a high school diploma or GED. Prospective US Navy personnel need only score 50 or above out of 99 on the notoriously rudimentary ASVAB test (that means with a score of 50% – which in the real world is a failing grade – you’re in!).

But surely for all those billions we are getting weapons that are absolutely crushing it on the battlefield? Not exactly. As we have seen for two years on the Ukraine battlefield of the US proxy war against Russia, each new “wonder weapon” sent by the Pentagon – starting with Javelins and continuing through HIMARS, Bradley fighting vehicles, M1A1 Abrams tanks, and even the new Ground-Launched Small Diameter Bombs (which are so new the Pentagon itself doesn’t yet have them in its arsenal) – is quickly defeated by Russian counter-measures. 

Even the rabidly pro-war and anti-Russia Washington Post – the Pravda of our regime – is admitting that Ukraine is headed for defeat. The Pentagon – and NATO – has sent all they had into Ukraine to fight Russia and still it is losing. 

How could it be that we spend orders of magnitude more on the military than a country like Russia and still are being bettered on the battlefield? It is not that our servicemembers are sub-par or that the US is incapable of technical and industrial innovation. 

The problem is very different. It has to do with a deeply broken system that serves not US security, but special interests.

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The Trouble with the Constitution and the “Social Contract” | Mises Wire

Posted by M. C. on June 30, 2023

As for the state’s supposedly indispensable role, once we grow up and leave behind the scare tactics from our sixth-grade textbooks — without your public servants you’ll starve, or be poisoned, or drive an exploding car — we discover how little we need the state after all. The historically unprecedented explosion in living standards all over the world had everything in the world to do with market-driven capital accumulation, and zero to do with government spread-the-wealth schemes.

The truth of the matter is this: the only welfare the state is concerned about, at root, is its own.

https://mises.org/wire/trouble-constitution-and-social-contract

Llewellyn H. Rockwell Jr.

Politics is of its very nature biased in favor of intervention and planning. Even in its “minarchist” or “night-watchman” version, politics is based at root on the idea that some decisions must be made coercively and imposed on unwilling minorities — or even majorities, as the case may be. This is contrary to the principle we observe in private life every day: the consent of both parties is necessary for a transaction to take place.

The state never stays “limited” in the long or even medium run, as we’ve seen for ourselves, and before long it worms its way throughout civil society. Once it becomes entrenched in some area of social life that had previously been managed by voluntary means, people grow accustomed to the state’s new role, even coming to view it as indispensable. The spirit of spontaneous, voluntary cooperation therefore atrophies and dies. This, in turn, is cited as justification for still further state interference, and the cycle continues.

In the modern state politics is coupled with government education in a one-two punch to the voluntary sector. That is, the moral principles and the unstated assumptions that govern politics have already been drilled into the heads of the young well before they become eligible to vote. By that time they have imbibed every comic-book platitude about the selfless public servants who are just out to improve everyone’s well-being. Were it not for the indoctrination of the public from a very young age, the state’s racket would be far more obvious and transparent.

(Incidentally, the first lesson kids in government schools learn is that if enough people want something — “free” education, for example — you should get it by having goons seize the funds from your neighbors. Why, how else could anything get done?)

The best known of the intellectual constructs by which the state seeks to legitimate itself must be the “social contract.” To evaluate this construct properly, consider how contracts function in civil society. You and I are interested in, say, an exchange of services for money. You are going to paint my house, and I am going to give you a cash payment. We spell out the terms of our understanding in a contract.

These terms may include the nature of the work, a deadline by which the task must be completed, and perhaps even the name of an independent arbitration service we agree to consult if one of us believes the contract is not being properly honored.

Contrast this with the state’s so-called social contract. Here, nobody signs anything. You are assumed to consent to the state’s rule because you happen to live within its territorial jurisdiction. According to this morally grotesque principle, you have to pack up and leave in order to demonstrate your lack of consent. The state’s authority over you is simply assumed (or it takes the form of a contract nobody ever signed), with the burden of proof on you, rather than — more sensibly — on the institution claiming the right to help itself to your life and property.

If my cooperation with the system is only under duress, and my repeated insistence that I do not consent, is insufficient to indicate my lack of consent, then what kind of crazy moral system is this?

Is there an analogous situation in the private sector? Do we just assume you intended to buy a car or a house, or to enter into a labor agreement, on the basis of dubious inferences? Do we not instead sign form after form, drafted in meticulous legal language, to ensure that the nature of the activity in question is clear to everyone?

Oh, but the state provides services, and you should pay for them! Again, though, when anyone else provides services, I decide for myself whether I want to use them (in which case I pay), whether I prefer an alternative provider of the service, or whether I choose not to avail myself of the service at all.

Ah, but the services the state provides aren’t the kind that can be provided competitively on the market, so you must be corralled into paying for them, like them or not.

But this is mere assertion. Education is provided on the market, and always has been. Scientific research was funded more copiously per capita before the state became heavily involved. Poverty relief took place on a vast scale long before the world’s welfare states amounted to much of anything. Even security and legal services can be and are quite effectively provided on the free market.

All right, so the state’s social contract may not amount to a hill of beans, and in fact is a transparent attempt to legitimize behavior we would not tolerate from any other actor or institution, but what about written constitutions? Aren’t these at least partly contractual in nature, and don’t they restrain government from the worst abuses?

Let’s consider the United States Constitution as a test case, since conservatives and even many libertarians point to it as one of the most brilliant political documents ever drafted.

The minarchist calls for a “night watchman” state, a state that limits itself to the production of security and adjudication services. (I shall leave aside the cognitive dissonance in warning about the dangers and wickedness of the state on the one hand, while simultaneously proposing the absolute necessity of the state in providing the most important and fundamental services of all.)

Interestingly, the US Constitution actually calls for something less than a night-watchman state, in the sense that most security services are assumed to rest with lower levels of government, and are not a federal function in the first place. So this would appear to be an excellent test of the “limited government” position, for here is a document that begins with such a limited government that it’s even less government than minarchists themselves would call for.

Well, how has it worked out?

For the answer to that question, simply look around you.

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Hands Off My Income | The Libertarian Institute

Posted by M. C. on January 19, 2023

Instead, most of Americans’ tax money is spent on welfare, grants, subsidies, vouchers, transfer payments, unconstitutional agencies and programs, foreign aid, hundreds of foreign military bases and tens of thousands of U.S. troops all over the globe, and offensive military intervention.

Taxes are not the price we pay for a civilized society, as is engraved on the exterior of the Internal Revenue Service building in Washington, D.C. Rather, taxes are the price we pay for the welfare/warfare state.

https://libertarianinstitute.org/articles/hands-off-my-income/

hands-off-my-income/

by Laurence Vance

pexels nataliya vaitkevich 6863244

House Democrats finally obtained former president Donald Trump’s tax returns and promptly released them to the public. No one should have his tax returns released: not presidents, not politicians, not celebrities, not sports figures, not cab drivers.

Released was nearly 6,000 pages of six years of individual and business income tax returns for the years 2015 through 2020. The returns show that Trump paid $750 in federal taxes in 2017, $0 in 2020, and had negative adjusted gross income in four of the six years. His highest year for charitable giving was 2017, when he donated $1.8 million.

But regardless of how “little” Trump may have paid in federal income tax, he neither wrote the tax code nor prepared his tax returns. His accountants merely did for him what they did for other rich businessmen. If there are loopholes, deductions, and credits that Trump’s accountants took advantage of, then good for them. As Supreme Court Justice Learned Hand wrote in the Helvering v. Gregory (1935) case: “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

Democrats took the opportunity to blast “the rich” for using the tax code to their advantage: “Trump’s returns likely look similar to those of many other wealthy tax cheats—hundreds of partnership interests, highly-questionable deductions, and debts that can be shifted around to wipe out tax liabilities,” said Senate Finance Chair Ron Wyden.

But who actually pays the majority of income taxes in this country?

According to the latest figures released by the Internal Revenue Service (IRS), as reported by the Tax Foundation:

The bottom 50 percent of taxpayers (taxpayers with AGI below $44,269) faced an average income tax rate of 3.5 percent.

The top 1 percent of taxpayers (AGI of $546,434 and above) paid the highest effective income tax rate of 25.6 percent — more than seven times the rate faced by the bottom 50 percent of taxpayers.

In 2019, the bottom 50 percent of taxpayers (taxpayers with AGI below $44,269) earned 11.5 percent of total AGI and paid 3.1 percent ($48.4 billion) of all federal individual income taxes.

The top 1 percent (taxpayers with AGI of $546,434 and above) earned 20.1 percent of total AGI in 2019 and paid 38.8 percent of all federal income taxes.

In 2019, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $612 billion in income taxes while the bottom 90 percent paid $461 billion in income taxes.

But this is not the whole picture. The IRS dataset excludes the refundable portion of tax credits. Not only do “the poor” pay little or no federal income taxes, they receive “refunds” of tax money that they never paid in via refundable tax credits like the Earned Income Tax Credit that can give them over $6,000 each year.

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The Covid Stimulus Isn’t Like Other Stimulus. It’s Much Bigger. | Mises Wire

Posted by M. C. on August 27, 2021

The US was running budget surpluses in the late forties and through much of the fifties. Americans were young, and there were far more workers producing than collecting government Social Security welfare checks.

Those days are gone, and although American workers continue to be highly productive, the burden each worker must bear to pay for the elderly and the unproductive continues to grow. 

What we have now is a country heavily dependent on ever-larger amounts of government spending and monetary expansion.

https://mises.org/wire/covid-stimulus-isnt-other-stimulus-its-much-bigger

Ryan McMaken

When it comes to policy debates, it’s now pretty clear that if you’d like to sound very quaint and old fashioned, be sure to express some concerns over the size of the federal budget and deficit spending.

Such concerns are now taken about as seriously by the average politician in Washington as is the constitutionality of the PATRIOT Act. Virtually no one cares.

Admittedly, the lack of interest in spending was already largely in place before the covid crisis began. During the Trump administration, reckless federal spending was the norm, and inflation-adjusted federal spending surged even past spending in 2009, when the federal government was panicking over the financial crisis and the Great Recession. In other words, the Trump administration gave us crisis-level spending when there wasn’t even a crisis.

Not surprisingly, deficit spending was also remarkably high under Trump—precovid—as well. By 2019, Trump had signed off on a trillion-dollar deficit, something many thought to be outlandish during a nonrecessionary period before that.

spe

But those numbers—including the numbers from the Great Recession bailout years—all look modest compared to the surge in spending that occurred with the covid panic of 2020 and 2021.

Let’s compare spending in the two periods. For example, from 2019 to 2020, federal spending rose 54 percent—from $4.5 trillion to $6.5 trillion, respectively—as Congress and the White House poured money into bailouts and stimulus. On the other hand, in the wake of the financial crisis, from 2008 to 2009, spending “only” increased 14 percent, from $3.6 trillion to $4.2 trillion.

spending

On a per capita basis, the numbers were similar. Per capital federal spending rose 13 percent from 2008 to 2009, rising from $12,000 to $13,700 for each American. But from 2019 to 2020, per capita spending rose 44 percent, from $13,600 to $19,700. (These numbers are all in constant 2020 dollars.)

Spending Levels Similar to World War II

At this point, defenders of runaway spending will often suggest that what really matters is spending compared to gross domestic product (GDP). 

So let’s look at that measure. In 2020, federal outlays as a percentage of the nation’s GDP surged to 31 percent, the highest number seen since 1945.

gdp

Similarly, the federal deficit as a percentage of GDP surged to nearly 15 percent in 2020. Again, this is the highest number seen of this measure since 1945.

gdp

(Proportional comparisons of this sort tend to understate the extent to which debt and spending is growing compared to the overall GDP. This is because government spending is itself a component of GDP, and since GDP is measured in dollars, monetary expansion—even without true growth in economic activity—can fuel GDP expansion as well.)

Also of political significance is the fact that while federal spending was taking off over the past eighteen months, growth in state and local spending nearly flatlined, dropping to 0.38 percent growth over the previous year. That’s the lowest growth rate in state and local spending since 2011, in the wake of the 2008 financial crisis. Yet, at the same time, federal spending increased by 25 percent—the largest year-over-year increase in federal spending since the Korean War.

All combined, this means federal spending surged to comprise more than two-thirds of all government spending in the US during 2020. We’d have to go back to the dark days of the Cold War and the Vietnam War to find the last time federal spending so dominated government spending in America.

fed

This all reflects the fact that state and local governments are actually affected by economic crises. That is, when incomes and economic activity fall, state and local revenues—and spending—fall. Not so with the federal government, which, thanks to the central bank’s willingness to buy up US debt, can much more easily engage in large amounts of deficit spending than can state and local governments.

See the rest here

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Contact Ryan McMaken

Ryan McMaken is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power&Market, but read article guidelines first. 

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Welfare Payments and Foreign Policy Fears Are the Only Things Holding America Together | Mises Wire

Posted by M. C. on August 13, 2021

A lopsided majority of 84 percent are sure a nuclear-armed Iran would be a grave threat to the US. It remains unclear why a nuclear-armed Iran should be any more of a threat to the US than a nuclear-armed Pakistan, yet such explanations are surely unnecessary from the point of view of the American foreign policy establishment. It’s a safe bet that few Americans are even aware that Pakistan is a nuclear state. Americans fear Iran because policymakers and media pundits have told them to be afraid.1

https://mises.org/wire/welfare-payments-and-foreign-policy-fears-are-only-things-holding-america-together

Ryan McMaken

In case you haven’t noticed, America is “deeply divided.” At least, that’s what a seemingly nonstop stream of headlines from major media sources would have us believe. “Trump Leaves America at Its Most Divided since the Civil War,” reads one CNN headline from earlier this year. Meanwhile, in his speeches from the first few months of his presidency, President Biden frequently claimed to be trying to restore national “unity.” More recently, the debate over vaccine mandates has prompted countless op-eds on how there are now “two Americas” or that differences in vaccination rates from state to state reflect a “deeply divided” America.

How deep are these divisions, really?

Well, there is no doubt that the divisions are nontrivial. In recent years, talk of secession has become more frequent and more urgent. For several years now, a quarter of Americans polled have claimed to support the idea of secession. In 2018, a Zogby poll concluded 39 percent of those polled agree that residents of a state should “have the final say” as to whether or not that state remains part of the United States. Nor are predictions of secession among Americans something reserved only for the distant future. In a 2020 poll, Zogby pollsters found that “[a] little over one-half of likely voters believe all 50 states will remain united under the Constitution five to ten years from now. In contrast, roughly one-quarter believe at least one state will secede from the union during the 2020s.”

These trends suggest a deterioration of national unity, to be sure. But has the movement toward disunity reached a critical point at which de facto political disunity results? If we’re not there yet, at what point will it be reached?

The answer is we still have a long way to go until we reach the point when US citizens will demand, en masse, political separation from Washington, DC.

This is because there are two important factors that continue to work in favor of a unified political system controlled by Washington. The first is the welfare state, and the second is American paranoia over foreign “enemies.”

Welfare Spending

With the advent of the New Deal in the 1930s, the federal government built a system of largesse that tied most Americans, at some point in their lives, to federal benefits through the Social Security system. Until that time, state and local governments in the United States had long employed a variety of poverty-relief programs. But after the 1930s, thanks to Social Security, Americans would look to the federal government for direct cash payments. Over time, of course, this would be greatly expanded with the invention of Medicare, and then Medicaid, and then again with the Bush administration’s immense expansion of Medicare with the prescription drug benefit.

Today, 69.8 million (one in five) Americans receive some kind of benefit through the Social Security administration. Sixty-one million Americans (18 percent) are on Medicare. An additional 72 million Americans are on Medicaid. (Preliminary data suggests total Medicaid enrollment surged to above 80 million during 2020.)

Indeed, the American welfare state is the largest in the Western world, by far. Most European welfare states, for example, “serve” populations that are small fractions of the size of the US’s population. While the US has 330 million people, Norway has 5 million. Switzerland has 8 million. Even the larger European welfare states—i.e., Italy with 60 million and Germany with 84 million—are mere fractions of the size of the US. 

The political effect of all this is to keep Americans tied to federal spending, thus contributing to political unity. For example, were a US state to contemplate secession from the US, it’s easy to imagine what would happen. The federal government would vow to cut off all Medicaid, Medicare, and Social Security recipients from payments. Elderly voters would panic, demanding that no secession could be possible until they received assurances that they would somehow continue to receive “their” monthly welfare payments.

Essentially, the American welfare state functions as an enormous carrot to ensure that a sizable portion of the American electorate think twice before risking its access to the federal welfare trough.

We saw this phenomenon at work in Britain the run-up to the Scottish independence vote in 2014. It is likely not a coincidence that the over-sixty-five demographic constituted one of the largest anti-independence blocs. According to postelection polls, among those Scottish voters polled, a whopping 73 percent of voters over sixty-five reported voting no. For those under fifty-five, the no vote was closer to 50 percent. Fears over maintaining pension benefits from the central government in London likely were a significant factor.

Military Paranoia

A second major factor pushing the US toward continued political unity is the American tendency toward paranoia over perceived foreign threats. As the Old Right journalist Garet Garrett pointed out, Americans are routinely caught up in “a complex of vaunting and fear.” This is a complex in which Americans talk tough about being the most powerful nation in the world, yet they are also fundamentally fearful, sure that countless foreign powers are poised to attack the United States at any time.

We continue to see this today. For example, a July 2021 poll of Americans concluded “two-thirds of Americans believe Iran poses a threat to the U.S.” A lopsided majority of 84 percent are sure a nuclear-armed Iran would be a grave threat to the US. It remains unclear why a nuclear-armed Iran should be any more of a threat to the US than a nuclear-armed Pakistan, yet such explanations are surely unnecessary from the point of view of the American foreign policy establishment. It’s a safe bet that few Americans are even aware that Pakistan is a nuclear state. Americans fear Iran because policymakers and media pundits have told them to be afraid.1

Similarly, many Americans remain fearful over China. Gallup polls from earlier this year show Americans increasingly fear China, with 63 percent of Americans polled labeling China a “critical threat.”

Facts suggest China isn’t nearly as powerful geopolitically as today’s new Cold Warriors would have us believe,2 but the true extent of China’s power is a separate matter from what matters for domestic politics—the common perception among many Americans that China is immensely powerful.

These perceptions will continue to fuel the notion among many Americans that the American regime ought to pursue a goal of maximum geopolitical power. This means a continued preference for a unified American regime with enormous tax revenues and military spending.

In other words, fear of China and Iran, combined with the more practical desire for continued “free” money from the federal government, will continue to fuel opposition to any serious movement toward secession.

On the other hand, this is all true only in the short term. Over a longer time horizon, matters are far less certain. Should the US continue with its current policies of reckless deficit spending, the longer-term prognosis points toward insolvency, and a relative decline in federal power compared to state governments, which may find themselves picking up the welfare slack as the spending power of federal welfare payments declines thanks to a declining dollar.

We saw similar dynamics at work in the waning days of the Soviet Union. A bankrupt regime is a regime with declining legitimacy. In such a situation, it is also likely that domestic concerns would overwhelm geopolitical concerns, and the stage would finally be set for true de facto separatism in the US. But for now, this does not appear to be likely in the short term.

  • 1. For more on nuclear proliferation, see Bertrand Lemennicier, “Nuclear Weapons: Proliferation or Monopoly,” in The Myth of National Defense: Essays on the Theory and History of Security Production, ed. Hans-Hermann Hoppe (Auburn, AL: Mises Institute, 2003), pp. 127–44; and Ryan McMaken, “Why No State Needs Thousands of Nuclear Warheads,” Mises Wire, Feb. 10, 2021.
  • 2. As Michael Beckley notes, “China may have the world’s biggest economy and military, but it also leads the world in debt; resource consumption; pollution; useless infrastructure and wasted industrial capacity; scientific fraud; internal security spending; border disputes; and populations of invalids, geriatrics, and pensioners. China also uses seven times the input to generate a given level of economic output as the United States and is surrounded by nineteen countries, most of which are hostile toward China, politically unstable, or both.” For more see Michael Beckley, “China’s Century?,” International Security 36, no. 3 (Winter 2011/12): 41–78.

Author:

Contact Ryan McMaken

Ryan McMaken is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power&Market, but read article guidelines first. 

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The High Cost of Using the Minimum Wage as a Form of Welfare | Mises Wire

Posted by M. C. on February 20, 2021

Another important finding is that employers often respond to higher mandated wages by replacing low wage workers with those who have more education, skills and experience which make them more productive. This adjustment may have little effect on the observable employment numbers, but the effect is devastating for those who are replaced. Employers can be forced to pay higher wages, but they can’t be forced to hire or retain employees whose contributions don’t match the higher wage.

https://mises.org/wire/high-cost-using-minimum-wage-form-welfare

Martin Jones

In recent years a number of economic studies have concluded that small to moderate increases in the minimum wage do not necessarily cause a discernible decline in employment. Social activists have seized on these findings to argue that there are no job losses and that it is possible to increase mandated wages by almost any amount without ill effects. The result has been a rush to raise the minimum wage to $15 in a number of states and cities and now at the national level.

The reality is that there is little consensus among economists about the effects of the minimum wage on aggregate employment. In their 2014 book What Does the Minimum Wage Do? Dale Belman and Paul Wolfson survey over two hundred minimum wage studies and conclude that moderate increases can raise the wages of low-income workers without significant employment effects. A 2019 paper by economist Jeffery Clemens is a shorter survey of many of the same studies. It concludes that the case for large increases (an increase from $7.25 to $15 would qualify) “is either mistaken or overstated” and adds that “[i]n contrast to the research emphasized by advocates, the broader body of work regularly finds that increases in minimum wages cause job losses for individuals with low skills.”

In a January 2021 study, economists David Neumark and Peter Shirley assembled “the entire set of published studies in this literature” and conclude that “there is a clear preponderance of negative estimates“ and that the evidence is particularly strong for teens, young adults, and the less educated—exactly the results economic theory would predict.

In the face of competing complex statistical analyses that may reach contradictory conclusions, voters and legislators should be aware that findings about the effects of wage increases on the unemployment rate often ignore or obscure other significant consequences. For example, small increases don’t always have a discernible effect on employment, because employers try to make other adjustments before laying off workers they are happy with and need. One of the first adjustments is to raise prices, the success of which depends on the competitive environment and the flexibility of demand for their products or services.

Along with price increases, employers may reduce hours, and Belman and Wolfson note that “[i]t has long been suggested that employers may respond to minimum wage increases by reducing spending on training, fringe benefits and working conditions valued by employees.”

Another important finding is that employers often respond to higher mandated wages by replacing low wage workers with those who have more education, skills and experience which make them more productive. This adjustment may have little effect on the observable employment numbers, but the effect is devastating for those who are replaced. Employers can be forced to pay higher wages, but they can’t be forced to hire or retain employees whose contributions don’t match the higher wage.

Some studies (see Clemens 2019) suggest that the pace of job creation slows when mandated wages rise. The increases also accelerate automation, which reduces the number of entry-level jobs and further penalizes those whom the increases are meant to help. In coming years, the combined effect of substitution, slower job creation, and accelerated automation is likely to be a growing core of workers, many of whom are young and poorly educated, who are unemployed and unemployable.

Social activists and progressive editorial boards now regard the minimum wage as another welfare program that can reduce the costs of programs like Medicaid and food stamps, and can reduce inequality. But the minimum wage is very poorly targeted for these purposes. The Congressional Budget Office estimates that “roughly 40 percent of workers directly affected by the $15 option in 2025 would be members of families with incomes more than three times the federal poverty level.” If the goal is to aid low-wage households, rather than teenagers and other part-time workers in middle-income and affluent families, expanding the Earned Income Tax Credit would be far more effective, because it is designed to aid the working poor.

The national minimum wage was established in 1938, and along with periodic increases has become widely accepted as desirable public policy. But it has also become a textbook example of the failure to think separately and equally about ends and means. If there is a public consensus that low-income families should receive additional aid, that policy should be paid for by the public, not by private businesses, many of which will try to offset the higher costs by raising prices to consumers and cutting employee hours and benefits, and some of which won’t survive with higher mandated costs that they can’t adequately offset.

The notion that third parties can pick the right starting wage for every employee, in every job, in every business, in every industry is folly. Those who support increases in the minimum wage do so with the best of intentions, but they should be aware of the substantial hidden costs and negative consequences which are often ignored in the public debate and should be aware that there are much better alternatives for helping those in need. Author:

Martin Jones

Martin Jones is a financial analyst and investment manager, and a former Senior Managing Director in the investment division of US Bank.

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Some Facts Worth Knowing – LewRockwell

Posted by M. C. on June 3, 2020

A recent study by Just Facts, an excellent source of factual information, shows that after accounting for income, charity and noncash welfare benefits such as subsidized health care, housing, food stamps and other assistance programs, “the poorest 20% of Americans consume more goods and services than the national averages for all people in the world’s most affluent countries.”

Scientific surveys of U.S. residents have found that the mental health of about one-third to one-half of all adults has been substantially compromised by government reactions to the COVID-19 pandemic. There are deaths from non-psychological causes, such as government-mandated and personal decisions to delay medical care,…

https://www.lewrockwell.com/2020/06/walter-e-williams/some-facts-worth-knowing/

By

Imagine that you are an unborn spirit in heaven. God condemns you to a life of poverty but will permit you to choose the country in which you will spend your life. Which country would you choose? I would choose the United States of America.

A recent study by Just Facts, an excellent source of factual information, shows that after accounting for income, charity and noncash welfare benefits such as subsidized health care, housing, food stamps and other assistance programs, “the poorest 20% of Americans consume more goods and services than the national averages for all people in the world’s most affluent countries.” This includes the majority of countries that are members of Organization for Economic Co-operation and Development, including its European members. The Just Facts study concludes that if the U.S. “poor” were a nation, then it would be one of the world’s richest.

As early as 2010, 43% of all poor households owned their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage and a porch or patio. Eighty percent of poor households have air conditioning. The typical poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens and other cities throughout Europe. Ninety-seven percent of poor households have one or more color televisions — half of which are connected to cable, satellite or a streaming service. Some 82% of poor families have one or more smartphones. Eighty-nine percent own microwave ovens and more than a third have an automatic dishwasher. Most poor families have a car or truck and 43% own two or more vehicles.

Most surveys on U.S. poverty are deeply flawed because poor households greatly underreport both their income and noncash benefits such as health care benefits provided by Medicaid, free clinics and the Children’s Health Insurance Program, nourishment provided by food stamps, school lunches, school breakfasts, soup kitchens, food pantries, the Women, Infants & Children Program and homeless shelters.

We hear and read stories such as “Real Wage Growth Is Actually Falling” and “Since 2000 Wage Growth Has Barely Grown.” But we should not believe it. Ask yourself, “What is the total compensation that I receive from my employer?” If you included only your money wages, you would be off the mark anywhere between 30% and 38%. Total employee compensation includes mandated employer expenses such as Social Security and Medicare. Other employee benefits include retirement and health care benefits as well as life insurance, short-term and long-term disability insurance, vacation leave, tuition reimbursement and bonuses. There is incentive for people to want more of their compensation in a noncash form simply because of the different tax treatment. The bottom line is that prior to the government shutdown of our economy in the wake of the coronavirus pandemic, Americans were becoming richer and richer. The question before us now is how to get back on that path.

Speaking of the COVID-19 pandemic, Just Facts has a couple of interesting takes in an article by its co-founder James D. Agresti and Dr. Andrew Glen titled “Anxiety From Reactions to Covid-19 Will Destroy At Least Seven Times More Years of Life Than Can Be Saved by Lockdowns.”

Scientific surveys of U.S. residents have found that the mental health of about one-third to one-half of all adults has been substantially compromised by government reactions to the COVID-19 pandemic. There are deaths from non-psychological causes, such as government-mandated and personal decisions to delay medical care, which has postponed tumor removals, cancer screenings, heart surgeries and treatments for other ailments that could lead to early death if not addressed in a timely manner. Interesting and sadly enough, New York state enacted one of the strictest lockdowns in the U.S. but has 22 times the death rate of Florida, which had one of the mildest lockdowns.

As I pointed out in a recent column, intelligent decision-making requires one to not only pay attention to the benefits of an action but to its costs as well.

 

 

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Camus: The Welfare of the People Is the Alibi of Tyrants – Foundation for Economic Education

Posted by M. C. on November 8, 2019

https://fee.org/articles/camuss-forgotten-lesson-on-liberty/?utm_source=zapier

In America, people who were once admired or held up as inspirational are now torn down (literally, in the case of statues) as too flawed in one way or another to deserve our respect or emulation. But demanding “purity” in the eye of the beholder before being willing to even consider any wisdom someone might offer can be a terrible waste.

Rejecting an insight because of words or acts unrelated to it or that do not disprove it is an error—treating an ad hominem attack as sufficient criteria for judging the quality of logic—with serious consequences. Restricting oneself to the insights of those you view as ideologically “pure” enough can offer important endorsement to the power of a valid insight.

For instance, that approach can put much of the wisdom of America’s founders “off-limits,” even though their shortcomings do not reject their insights into the importance of liberty and the corollary need to curb government.

Restricting oneself to the insights of those you view as ideologically “pure” enough can offer important endorsement to the power of a valid insight. Those who have earned reputations for correctly recognizing and acting on principles provide a degree of insurance against potential mistakes. Yet a true statement is true even when the source is “impure,” while falsehoods do not become true when stated by good men.

Camus’s Inspiring Defense of Liberty

To illustrate, someone can have a valid objection to something as wrong without having an adequate conception of what is right or of what would best correct the wrong in view. If so, your disagreement with their broader understanding or “solution” does not justify ignoring the truths they recognized. This is frequent in considerations of justice—people can often recognize when an injustice is imposed on them, but their preferred “solutions” often impose injustices on others…

From the perspective of liberty, a good example would be Albert Camus, the 1957 Nobel Laureate in Literature…

But his defense of liberty against tyranny in World War II and its aftermath was inspirational. For instance:

  • “The real passion of the twentieth century is servitude.”
  • “Political utopias justified in advance any enterprises whatever.”
  • “The welfare of the people…has always been the alibi of tyrants…giving the servants of tyranny a good conscience.”
  • “The tyrannies of today…no longer admit of silence or neutrality…I am against.”
  • “The only conception of freedom I can have is that of the prisoner or the individual in the midst of the state. The only one I know is freedom of thought and action.”
  • “Absolute domination by the law does not represent liberty, but without law there is no freedom.”
  • “Freedom is not a gift received from the State.”
  • “Freedom is not a reward or a decoration…It’s a long distance race, quite solitary and very exhausting.”
  • “Freedom is nothing else but a chance to get better, whereas enslavement is a certainty of the worse.”
  • “Liberty ultimately seems to me, for societies and for individuals…the supreme good that governs all others.”
  • “Is it possible…to reject injustice without ceasing to acclaim the nature of man and the beauty of the world? Our answer is yes.”
  • “We have to live and let live in order to create what we are.”
  • “The aim of art, the aim of a life can only be to increase the sum of freedom and responsibility to be found in every man and in the world. It cannot, under any circumstances, be to reduce or suppress that freedom.”
  • “Without giving up anything on the plane of justice, yield nothing on the plane of freedom.”
  • “More and more, when faced with the world of men, the only reaction is one of individualism. Man alone is an end unto himself.”

There are things about Albert Camus I take issue with. But it would be a shame to lose his wisdom and inspiration because of differences unrelated to their validity.

With time and energy both scarce, paying attention to those we have learned to consistently expect insight from makes a great deal of sense. It increases the chances that the time will be well spent. It expands our insights. But we cannot stop there. We can also learn from and be inspired by those who are fellow travelers only in part.

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Camus

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The Hidden Costs of a Universal Basic Income | Mises Wire

Posted by M. C. on October 10, 2019

A likely outcome is a significant decline in the overall output of the economy — meaning impoverishment across the board…

https://mises.org/wire/hidden-costs-universal-basic-income?utm_source=Mises+Institute+Subscriptions&utm_campaign=b9f282b0a0-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-b9f282b0a0-228343965

The universal basic income (UBI) is gaining popularity as the alternative to the current welfare system. The idea is to give each citizen the same amount of money, no matter if he or she works or not. Therefore, unlike traditional welfare systems, the UBI has no means test, nor willingness-to-work test. Nobody would be then left without a livelihood even if there is no work for him. Doesn’t that sound great?

The problem is that the program must be financed somehow. Let us assume for simplicity that there are 250 million adult Americans and that each of them would receive $1,000 monthly (as presidential candidate Andrew Yang proposes). So we get a total cost of $250 billion monthly and $3 trillion annually. It would amount to about 14 percent of US GDP, or 42 percent of total government spending, or 73 percent of the federal outlays. For comparison, this is more than the total expenditure on health care, defense, and education. And yet we are talking about “just” $12,000 annually (or 19 percent of the median household salary, or 36 percent of the median personal income). Good luck with such an expensive program!

This is why the UBI is a utopian idea. Its introduction would require either a departure from universality (e.g., providing benefits only for young people), or a departure from unconditionality (e.g., the introduction of an income criterion), or reducing payment to small symbolic amounts. Other options include a radical increase in taxes, or implementing “modern monetary theory” and launching the printing press.

The first two options would distort the idea of ​​the program, transforming it into another traditional welfare program. The third scenario would not fulfill the program goals, as it would neither eradicate poverty nor significantly increase social security. And the last two options would have negative overall economic consequences that could lead to the results contrary to the intentions of the program, (e.g., an increase in the unemployment rate as a result of additional tax burden on wages), or a reduction in the amount of real benefits as a result of increased inflation. It means that the implementation of the UBI at a substantial level without incurring significant economic costs is a myth.

This is confirmed by a recent article “Basic income or a single tapering rule? Incentives, inclusiveness and affordability compared for the case of Finland” published by OECD economists on the occasion of an experiment with UBI in Finland (which was not a government program). They estimated that the replacement of the current social benefits system by the UBI in Finland would either be too expensive or would mean insufficient benefits for the most deprived and, consequently, an increase in the share of people below the poverty line from 11.5 to 14.3 percent!

The second economic problem with UBI is the negative impact on the labor supply. Economic analysis clearly suggests that an increase in non-wage income shifts the budget constraint line up and increases the reservation wage, which leads to a reduction in working time. And this is what the previous experiments with negative income tax, a concept similar to the UBI, showed — especially in case of women and youth, which were less attached to the labor market. The results are not surprising given the fact that giving people money for nothing reduces the opportunity cost of not working…

Such a perverse perspective is, however, a consequence of the view that UBI should be a right, not a privilege. That is, supporters believe that everyone should have the right to taxpayer-provided income, regardless of their contribution and the possibility of earning on the market. The problem is that someone would have to finance this program, so UBI would still be the privilege of some people at the expense of others. One person’s right to a basic income means that someone else has to pay for it.

The idea of the UBI boils down to breaking the link between income and work, i.e., freeing people from the unpleasant necessity to earn. And here we come across several problems. First thing: who will do the needed, albeit low-paid jobs, since everyone will be emancipated from the yoke of work? Is it possible to eliminate the unpleasantness of work at all or is it just the reality of the temporal world? Will robots take care of our grandmothers? A likely outcome is a significant decline in the overall output of the economy — meaning impoverishment across the board…

But there is a paradox that comes with the promise of socioeconomic independence: someone still must pay the UBI. So the dependence would not disappear — only people would become more dependent on Leviathan. Robert Nisbet writes in The Quest for Community that the desire for a sense of belonging does not disappear — if it cannot be realized within the family, neighborhoods, and regional communities, then the gap will be filled by the nation and centralized state. Are you sure this is what we want? Maybe the UBI is thus not merely a utopia we can’t afford, but it’s actually a dystopia?

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A World Without Work: Universal Basic Income's "Deal With ...

 

 

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