Radical Idealism

Have you seen the AARP’s latest ad campaign? It shows a series of children who urge us to take action on the “five core needs” of AARP: “the need for health; the need for financial security; the need to contribute or give back to society; the need for community and to stay connected to family, friends and social networks; and the need to play and enjoy life.” The children imply that the policies advocated by the AARP will benefit future generations. The reality is that the policies the AARP advocates are not just wrong, but are viciously dishonest in harming the very people they claim to champion.

The AARP started out as a program for selling insurance to retirees. After the government investigated its non-profit status in the 1990’s, it changed its focus to political advocacy. Rather than sell insurance to seniors, it now advocates policies which force everyone else to pay for their member’s expenses. Our government will not allow AARP to sell products to members and still call itself non-profit, but it has no problem with AARP’s advocacy of policies which provide “benefits” directly to AARP’s members. These “benefits” can only come at the expense of working people and claims on the future income of children – the very groups the current ad campaign claims to champion.

Contrary to the claims of better ties between older people and the community, the welfare policies the AARP advocates create division and bitterness. Working young people hold no delusions about the “benefits” that programs like Social Security and Medicare promise. Even if these ponzi schemes pay out, they return a pittance compared to voluntary investments and waste a huge portion of the confiscated funds on bureaucratic waste and unrelated projects.

The AARP’s lobbyists know that our welfare system will go bankrupt as baby boomers retire – but they staunchly oppose efforts to reform it. They want to milk as much as possible from working people for as long as possible – regardless of the hostility and division it will create when today’s children and young adults are forced to pay for the living and healthcare expenses of a growing retired population.

The alienation experienced by many retired people is a real problem – but its cause is the very policies that organizations like the AARP advocate. Instead of fostering responsible investing, financial independence, long-term planning, and mutual support of family members, the welfare state replaces individual decision making with central planning, family members with an intrusive nanny state, and individual responsibility with faith in the omnipotent state to provide for all needs.

The policies the AARP advocates to solve the “needs” of its members are a claim of ownership over the lives of the very people its commercials claim to champion. Contrast the socialist policies pushed by the AARP to the capitalist model in the ads of financial companies: instead of stealing your future from working people, they offer to help you turn the fruit of your own productivity into wealth.

[Crossposted:] Watching a segment about the U.S. Coast Guard today, I heard an agent describe the immigrant smugglers who bring people from Cube as “ruthless” men who “care nothing for human life.” That may well be true. Yet moments before saying those words, the agent intercepted a Cuban family moments before their attempt to seek a life of freedom would have been successful. They likely paid their life savings to the smuggler – and will probably be sent back to prison – or worse.

The smugglers risk their life to bring desperate people to a free society. The border agents casually condemn people to a life of persecution and oppression and force them to undergo a perilous and financially ruinous journey. If it were not for their persecution, the trip from Cuba, Mexico, and China would certainly be far safer and cheaper for the immigrants. Yet the border agents are supposed to be celebrated as the moral heroes? The agents are well aware of their atrocities: "They hear the stories. But they need work. They need to eat. They're desperate." Why isn't everyone else?

(By the way, as much as their are vilified, the smugglers have a strong incentive to keep their cargo alive and out of jail - so much that they provide free legal aid if they are caught. If they sometimes get too aggressive about making a profit, the migrants have only an uncaring and hostile immigration policy to blame.)

First, let's deflate the protectionist rhetoric.  What are trade deficits and surpluses?  

A trade deficit means that in sum, American dollars are going abroad in exchange for foreign goods.  Consider what this means.  If foreigners never cashed in those dollars, Americans would essentially be getting foreign goods free of charge.  Protectionists like Buchanan condemn this as "borrowing" but this is actually a form of investment - both in U.S. industry and in the U.S. dollars.  Foreigners have been investing in the U.S. for decades for two primary reasons: the superior returns due to the growth potential of American capitalism, and the dominance and (relative) stability of the U.S. dollar, which made them useful as a means of exchange apart from their purchasing power of U.S. goods.  Americans are not living "beyond our means," as Buchanan claims, - we are simply a more profitable investment, with a more stable currency than the foreign investor's own countries.

A trade surplus on the other hand, means that in sum, U.S. goods are being sent abroad in exchange for foreign currency.  A trade surplus is a form of investing in other countries, since (fiat) foreign currency is only worth the foreign capital it can purchase.  This happened after World War II, when the U.S. sent capital to shattered foreign economies and reaped returns as the value of their economies - and thus their currencies grew.

So are trade deficits preferable to trade surpluses?  In a narrow sense, yes.  A nation that has strong economic prospects will attract foreign investment and therefore experience trade deficits.  Conversely, when the domestic economy is stifled by regulations and monetary manipulations, investors will send their savings abroad and the country will run a trade surplus.   (This explains why the U.S. deficit has consistently fallen during recessions and grew during periods of expansion.)  However, the broader lesson is that trade inequalities indicate the net flow of foreign investment, and the benefit of the inequality is ultimately validated by the profitability of those investments.  Profitable foreign investment results in GDP growth and positive currency valuations, whereas unprofitable foreign investment erodes economic growth and devalues the currency of the investment's recipient.  Could a sufficiently large and wasteful investment be responsible for the current dollar crisis?

A large part of the U.S. trade deficit comes from the bonds (treasury securities) the U.S. government has been selling to foreigners to finance the growing federal budget deficit.  The value of these bonds depends on both the strength of the U.S economy, and the loss of value caused by expansion of the money supply.  When the U.S Treasury sells bonds to individuals, it diverts savings from private investments, and thus is a form of taxation.  When it sells bonds to the Federal Reserve, it exchanges bonds for dollars and thus is a form of monetary expansion (inflation.)  Additionally, when the government sells debt to foreigners, it creates a liability against the U.S. economy.  Foreigners buying deficit debt are in essence betting on the ability of the government to provide a return on the investment in the form of positive economic growth.  What happens when the investment fails to turn a profit?

The primary reason for the $9 trillion federal deficit is the so-called "War on Terror," including the spending on Homeland Security, Afghanistan, and Iraq.  Unless you believe these funds averted an economic meltdown due to terrorism, these funds represent a near-total loss.  Tanks, bombs, and bureaucratic paper-pushers consume vast funds yet aside from military contractors, they contribute nothing to the economy.  This economic destruction is one of the biggest reasons for the declining dollar.  (Perhaps the major reason is the credit bubble created by the inflationary policy of the Fed since the early 2000's, which is now collapsing and making the economy less attractive as an investment target.)

The falling dollar will make it increasingly more expensive for the U.S. government to accumulate more debt.  Eventually, it will be forced to either cut spending, explicitly shift costs to U.S citizens by increasing taxes directly, or (most likely) to increase taxes through higher inflation.  Investors have already anticipated this and flocked to other currencies and gold as a refuge.  The slide will likely continue until some kind of budget reconciliation is evident.

The overwhelming response to the problems created by the government's financial irresponsibility has been to call for more protectionism, as Mr. Buchanan is doing.  Because it creates barriers to trade and investment, protectionism makes the U.S. dollar less valuable to both foreign consumers and investors, thus accelerating the fall of the dollar.  Investors have certainly anticipated this as well - but don't blame them for betting on the gullibility of Americans to the protectionist rhetoric of economic ignoramuses like Paul Krugman and Pat Buchanan.

If we can avoid the protectionist trap and reconcile the budget, the falling value of the dollar will eventually attract investors and stimulate exports.  As the developing world becomes richer and freer, the U.S. dollar is unlikely to enjoy the unchallenged superiority it once had, but maturing foreign markets will attract products and services designed in America, and we will once again become a recipient of foreign investment.  Free markets and American ingenuity made the U.S. the greatest economy in the world, and they are the only way we will keep it that way.

According to the Malthusian theory subscribed to by socialists and environmentalists, the amount of resources and capital in a particular region is fixed, so the average income of individuals can be calculated by dividing the total resource/capital base by the number of people.  A fixed resource base means a fixed number of jobs, so a large influx of immigrants means rising unemployment and falling standards of living.

Fortunately, it is socialism, not open immigration that is "insanity."  The premise that the resources available to meet human needs are fixed - that each new human being requires a fixed amount of land, metal, and fossil fuels to live - is absurd.  Each additional individual creates not only new demand for the products of civilization, but also provides new resources and insight for meeting those needs.  Every self-supporting worker produces more than he consumes, adding to total productive output and raising the real wage rate for everyone.  Historically, the American standard of living rose fastest during peak immigration periods and continues to rise today.  Our greatest source of wealth is not natural resources or the capital base, but the ingenuity and creativity of our entrepreneurs and workers.

By increasing the division of labor, immigrants free up workers previously employed in maintaining the capital base to invest their time in growing capital and efficiency.  So for example, by lowering labor costs, new immigrant factory workers free up engineers to invest in expanding production and improving the efficiency of labor.  This improves everyone's living standards.  A free society allows a growing capital and knowledge base to be multiplied by entrepreneurs who find new methods to improve human life, proving an exponential growth in prosperity. 

A further complaint of Dr Paul is that "taxpayers should not pay for illegal immigrants who use hospitals, clinics, schools, roads, and social services."  I completely agree.  However, this is besides the point.  No one has a right to live of other people, regardless of where he was born.  American welfare bums do not have any more right to my property than Mexican bums.  It is the welfare state that is immoral, not immigration.  Furthermore, the argument is misleading because illegal immigrants and permanent residents are generally not eligible for welfare, and already pay the property, fuel, and sales taxes that pay for schools and roads.  Illegal immigrants don't pay income taxes, which Dr. Paul believes we should eliminate anyway, but they often pay social security taxes via bogus social security cards - effectively subsidizing legal workers.  Do people who oppose granting illegal immigrants driver's licenses realize that they are for forcing citizens to pay for the illegal immigrants' share of road-maintenance costs? 

For more on the issue, read my case for open immigration.

Most people understand that there is no absolute right to "happiness."  Such a claim would mean that anyone could turn everyone around them into slaves by demanding their labor or property in order to be "happy."  Rights define the actions men make take in a social context, but do not impose any obligation, except to respect the same rights of others.  This is why the U.S. Declaration of Independence declares the right to the pursuit of happiness, not to happiness itself.

Despite this, democratic governments enforce a "right" to happiness through the formation of a contradictory set of "fundamental" rights.  By "rights" they mean both freedom from coercion (negative rights), and "rights" to various goods and services, which are paid for by coercion (positive rights).  To clarify: rights include the right to be free from coercion as well as the power to coerce others.  Democracies hide this contradiction by the pretence that allowing citizens to participate in elections qualifies as consent to the coersion.  In fact, elections only give individual voters a miniscule power to choose the people who decide who gets to rob whom.  Democracies are a civil war in which votes are weapons, "positive rights" the cause and public property is often the battleground. 

All "public" property ultimately benefits individuals.  There is no such thing as a collective mind or a collective stomach.  "Common services" like welfare, schools, and parks are consumed by the unemployed, students, and nature enthusiasts.  In democratic societies, most of the debate over conflicting "rights" comes from attempts by groups with conflicting values to use the same public property.  For example, the debate over prayer in schools exists only because public schools are used by people with conflicting religious beliefs.  No such issue exists for private schools - parents simply send their children to schools whose teachings they find acceptable.  The "right to privacy" was invented primarily because states started monitoring and interfering with the consensual behavior of adults.  Likewise, the need to protect a right to speech is only necessary because people with conflicting values demand to use the same public spaces to express their ideas.  Over time, the right to speech has come to mean not just the freedom to express ideas on publicly-owned property, but the power to regulate private property by forcing property owners to permit or forbid certain content.  Controls on speech on private property include "equal time" requirements, censorship of "immoral" content by the FCC, campaign finance regulations, restrictions of commercial speech, and laws against "hate speech" and "hate crimes."

The solution to the morass of contradictory "rights" is to re-establish the principle of negative rights - that is, to define rights solely in terms of property rights (including ownership of one's own body.)  For example, in the Wesboro Baptist case, the only relevant question should be -  did the protester's actions constitute trespass?  If the protesters were on cemetery grounds against the owner's wishes, or were shouting from a neighboring property, the issue can be handled as a case of simple trespass.  However to criminalize merely putting someone in a state of "emotional distress"  criminalizes any speech or action that might potentially offend someone.    This is nothing less than a right to happiness - which means the right to use force against anyone to fulfill one's whims.