The American Right is the New Target of Washington's "War on Terror"

The American Right is the New Target of Washington's "War on Terror"

04/28/2021Tho Bishop

Listen to the Audio Mises Wire version of this article.

The security walls around the US Capitol may be removed, but the federal response to the January 6 protests has only just begun. The Democrats in Washington are determined to treat the incident as on par with the events of September 11, which may explain a troubling report about the potential use of the famed No Fly List.

Yesterday Nick Fuentes, a right-wing social media pundit who attended the January 6 protests in the capital, alleged that he has been placed on the federal no-fly list, preventing him from traveling to Florida for a political rally. While Mr. Fuentes shared on social media audio of an airline employee suggesting that his flying restriction did come from the Transportation Security Administration (TSA), later that night Tucker Carlson informed his audience that his staff could neither confirm nor deny the report. While critics pointed to previous social media posts which documented his being removed from a plane for failing to comply with mask policies, Fuentes has noted that he had no problem flying to Washington in January.

It is unclear whether federal authorities will be in any rush to clarify the situation, but there is no reason not to assume that federal authorities would attempt to use this war on terror tool against political opponents. From its inception, what originally began as sixteen names federal authorities had connected to potential future terrorist attacks quickly grew to over 1 million. As is the case with other surveillance tools handed over to the deep state, there is very little oversight or due process involved in how federal authorities handle potential “terrorist threats.”

Since January there has been a concerted effort by Democrat leaders, former deep state officials, and America’s most despicable neoconservatives to push the Biden administration to utilize the power of the federal government against the supporters of Donald Trump. While the incidents at the Capitol on January 6 are used to justify these calls, the weaponization of federal power against political opponents goes back almost as long as the federal government itself. In more recent years, President Biden’s previous service in the White House saw a Democrat administration that used both the IRS and Department of Homeland Security to target conservatives.

Another reason to expect escalation from the Biden administration against vocal figures like Fuentes is the unique critique of the current regime from the right. The majority of Republican voters do not simply oppose President Biden due to politics, but flatly reject his democratic legitimacy.

As Murray Rothbard explained, it is precisely this sort of attack that the state fears most:

The increasing use of scientific jargon has permitted the State's intellectuals to weave obscurantist apologia for State rule that would have only met with derision by the populace of a simpler age. A robber who justified his theft by saying that he really helped his victims, by his spending giving a boost to retail trade, would find few converts; but when this theory is clothed in Keynesian equations and impressive references to the "multiplier effect," it unfortunately carries more conviction. And so the assault on common sense proceeds, each age performing the task in its own ways.

Thus, ideological support being vital to the State, it must unceasingly try to impress the public with its "legitimacy," to distinguish its activities from those of mere brigands….

The gravest crimes in the State's lexicon are almost invariably not invasions of private person or property, but dangers to its own contentment, for example, treason, desertion of a soldier to the enemy, failure to register for the draft, subversion and subversive conspiracy, assassination of rulers and such economic crimes against the State as counterfeiting its money or evasion of its income tax. Or compare the degree of zeal devoted to pursuing the man who assaults a policeman, with the attention that the State pays to the assault of an ordinary citizen. Yet, curiously, the State's openly assigned priority to its own defense against the public strikes few people as inconsistent with its presumed raison d'être.

This perspective explains the disproportionate treatment that mostly peaceful protesters at the Capitol in January have received in contrast to those arrested during riots in American cities throughout the past year. The state will always treat those who seriously threaten its perceived legitimacy with greater zeal than those guilty of simply destroying the livelihoods of its citizens.

This also highlights the self-defeating nature of the modern American conservative movement.

For decades now, the same political party that often gives lip service to “federalism” has often been the party directly responsible for the growth of federal power. As noted earlier, it took exactly one administration before the Department of Homeland Security, created by the Bush administration, began to target the very voters who elected him to office. It was just two election cycles before the PATRIOT Act was used to target a Republican presidential campaign.

The biggest question that now lies in American politics is whether conservatives are capable of learning from these examples. If the American right is capable of fully absorbing the reality that the greatest threat to their lives, liberty, and prosperity lies domestically—and not abroad—perhaps there is potential for a political rollback of the American empire.

If not, American conservatives will come to understand how little constitutional rights truly mean in the face of a hostile state.

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Banks are Still in Trouble

09/08/2023Jonathan Newman

Jonathan Weil at the Wall Street Journal reports that Republic First Bancorp (not to be confused with First Republic Bank, which failed earlier this year) is in trouble.

It is suffering the same kinds of problems that sank Silicon Valley Bank, Signature Bank, and First Republic Bank in March 2023.

What’s funny is that even though Republic First is “about 0.2% the size of JPMorgan Chase by total assets,” commentators and regulators are saying it could pose a systemic risk due to the fact that 60% of its deposits are uninsured by the FDIC.

If regulators closed the bank without an acquirer in place to take over, that could mean significant losses for uninsured depositors. Regulators have said that such a failure could spur runs on other banks. 

Weil recalled Janet Yellen’s remarks during the banking crisis, in which she said that making exceptions by bailing out small banks and rescuing depositors above the FDIC’s $250,000 maximum would be considered on a case-by-case basis.

Like many other banks, and the Federal Reserve itself, the severity of the problem is hidden by accounting practices that ignore unrealized losses caused by higher interest rates.

In May, Republic First Bancorp, the bank’s holding company, said it would stop making interest payments on its debt. Earlier this year, it tried and failed to raise $125 million to shore up its finances. Its stock now trades for 30 cents a share on the over-the-counter marketplace, and its stock-market value is $21 million.

Republic First’s total equity, or assets minus liabilities, was $183 million as of June 30, according to its quarterly report with banking regulators. However, that excluded $304 million of unrealized losses on bonds that it labeled “held to maturity,” which means the losses don’t count on its balance sheet. The losses are the result of lower bond values, which declined when interest rates rose and could rebound if rates fell.

Republic First still hasn’t filed audited financial statements for 2022, which it blamed in part on its “former executive team’s failure to maintain adequate internal controls.” For regulatory purposes, the bank said it was well capitalized as of June 30. Silicon Valley Bank, Signature Bank and First Republic Bank all were deemed well capitalized shortly before they failed, based on their reported regulatory capital.

Read the full article here.

Wanjiru Njoya

09/08/2023David Gordon

The great Wanjiru Njoya has done a podcast for the Tom Woods Show that is available here:

The Bank of Poland Embraces Stagflation as it Lowers Interest Rates with Inflation Still at 10 Percent

09/07/2023Ryan McMaken

As economies slow around the world—including the economy of the United States—we can expect central banks to quickly return to easy-money policies, most commonly manifested in central-bank efforts to force down interest rates. 

Most central banks claim that their policies are guided by efforts to ensure "price stability" and keep price inflation "low"—variously defined. In the euro zone and in the US, for example, the central banks claim that monetary policy seeks to ensure a two-percent inflation standard. These are mostly political slogans, however, and what will really matter going forward is how long it takes each central bank to hit the panic button in the face of bad economic news. 

If unemployment rates head upward, and if economies fail to perform as hoped—especially in election years—we can expect central banks to open the money floodgates again. 

We're already seeing some central banks lose their nerve. In China last month, for example, the People's Bank of China lowered its one-year loan prime rate to 3.45 percent from 3.55 percent. That's not a big change, but it was an early sign of how central banks are likely to respond to news of economic slowdowns—and a slowdown is increasingly apparent in China. 

We don't have to look to Asia to find new evidence, however. Wednesday, the National Bank of Poland (NBP) announced a substantial cut to its key policy interest rate. Reuters reports

Poland's central bank cut its main interest rate by 75 basis points to 6.00% on Wednesday, in a shock decision ahead of October elections that sent the zloty currency tumbling against the euro.

A narrow majority of analysts polled by Reuters had expected a 25-bps cut, but markets and economists alike were blindsided by the scale of the easing delivered. The zloty plunged 1.5% to its weakest level since May and banking stocks dropped over 5%.

Why now? Well, according to the bank, "In the Council’s assessment, recently incoming data point to a weaker demand pressure than previously expected, which will contribute to a faster return of inflation to the NBP inflation target." 

Observers who don't take everything the bank says at face value are likely to find this statement unconvincing. The NBP's target inflation rate is 2.25 percent. Yet price inflation in Poland remains above 10 percent as of August. Moreover, as recently as February, the price index hit a 23-year high in its growth rate, reaching 19.2 percent, according to the OECD. In other words, inflation in 2023 is the worst it's been since the bad old days of the 1990s when Poland was still recovering from its years as a Soviet satellite. 

poland inflation

A more likely motivation for the sudden cut is the fact that Poland is in the midst of an election year

Poland’s robust economy is also showing some signs of slowing down and an election is approaching on Oct. 15 in which the conservative governing party, Law and Justice, is fighting for an unprecedented third term. The central bank’s governor, Adam Glapinski, is an ally of the party and has taken actions in the past to help it.

It's unlikely this is all just a big coincidence. With price inflation running four times higher than the target rate, it's hard to see why a 75-basis point cut would be the appropriate policy, just a few months after price inflation nearly hit 20 percent. 

Poland's central bank, like the US central bank, can claim whatever it wants in terms of its forecasts and analysis of "the data." The NBP can simply say "we predict inflation will head down fast!" to justify its policies, just as the US's Fed assured us for months that mounting price inflation was non-existent, then "transitory," then "not entrenched." 

That said, the NBP can at least claim that its target policy rate remains near a twenty- year high. As with the rest of the developed world's central banks, the NBP forced down interest rates for well over a decade following the global financial crisis in 2008. Then, it pushed the target rate down to zero percent during the Covid Panic. Price inflation headed up soon after. 

Yet, as the NBP turns ultra-dovish once again, even more established economies' central banks are either letting rates rise, or are simply holding their own target rates flat. The European Central Bank's target rates continue to slowly rise. The central banks in the US, Canada, and Australia are all keeping target rates flat for now. 

Yet, Poland's central bank is hardly unique. It's likely to be just the first domino to fall, with plenty of central banks behind it, as slowing economies become political liabilities for parties in power. In the US, the economic trends are already less than heartening. We'll see how long it takes before the Fed goes the way of the NBP

Will BRICS Smash the Dollar?

09/06/2023Ron Paul

Donald Trump’s legal troubles, the possibility that Joe Biden will face an impeachment inquiry, and other stories related to the upcoming presidential election, caused the American media to miss a story of potentially greater significance. This was the decision of the BRICS (Brazil, Russia, India, China, and South Africa), who formed their alliance to challenge US political and economic dominance, to induct six new countries into their group: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates.

One way the BRICS hope to achieve its goals is to undermine the foundation of US power: the dollar’s global reserve currency status. Brazilian President Luiz Inacio Lula de Silva called for BRICS nations to create their own currency, while India is pushing to have its trading partners, including Russia, trade in Indian rupees rather than US dollars. China and other BRICS countries have also reportedly taken steps to explore using gold instead of dollars for international trade.

After then-President Richard Nixon severed the link between the dollar and gold in 1971, Henry Kissinger negotiated a deal with Saudi Arabia where, in exchange for US diplomatic and military support, Saudi Arabia would use dollars for its dealings in the international oil market. The “petrodollar” is the backbone of the dollar’s reserve currency status. Early this year, Saudi Arabia signed a deal with Brazil to accept Brazil's currency instead of dollars for oil purchases. If Saudi Arabia signs similar deals with other BRICS nations it will hasten the end of the dollar’s reign as reserve currency. 

The rejection of the dollar is also being driven in large part by resentment over the “weaponization” of the dollar’s reserve currency status. The US government uses the dollar's reserve currency position in order to force other countries to comply with US sanctions against the latest “designated Hitler.” Sanctions are an act of war, so by forcing other countries to follow US sanctions the US Government is dragging them into conflicts that are not in their national interests. It was inevitable that the arrogance of our foreign policy elite would eventually cause a backlash. The backlash started last year when the US demanded other countries join in sanctioning Russia, regardless of the effects of those sanctions on their own economies. 

The movement to replace, or at least create alternatives to, the dollar is also driven by concern over the long-term effects of the massive US national debt. Despite the claims of both parties that the recent debt ceiling deals showed that Congress and the President were getting serious about being fiscal responsibility, the US $33 trillion debt is still poised to grow by as much as $115 trillion over the next 30 years. Congress and the President refuse to cut spending in any area. They can’t even manage to stop shoveling billions into the no-win war in Ukraine even though this spending is opposed by a clear majority of Americans. 

Sadly it will take a shock like the rejection of the dollar’s reserve currency status and the resulting dollar crisis to force the US government and the people to take steps to kick their addiction to welfare-warfare spending and fiat currency. This will mean some tough times ahead. However, the economic downturn may not last as long as people expect. The good news is the crisis could lead to a return to limited constitutional government, a true free-market economy free of corporations and cronyism, a foreign policy based on peace and free trade, and a free-market monetary system.

Originally published by the Ron Paul Institute. 

Impeach Biden! (For All the Right Reasons)

09/05/2023James Anthony

As of now, President Biden stands to be keep being granted the privilege of signing for and executing takings of more than $6 trillion a year for another 1 1/2 to 5 1/2 years. This would total another $9 trillion to $33 trillion.

Compared to such a total, Biden’s likely $5 million bribe is less than a millionth of our exposure now to these ongoing and future deprivations of property. And that’s not even counting our exposure now to ongoing and future deprivations of life and liberty.

Constitutional Impeachment Is Loss Prevention

Impeachment, conviction, and punishment at most only deprives the convict of privileges to hold government offices. So while an impeachment defendant is due a constitutional impeachment process, he is not due the constitutional protections that are owed to criminal or civil defendants who if punished could lose their life, liberty, or property.

In the impeachment process, it’s we the people who are at risk of losing our life, liberty, or property at the hands of the defendant, if the defendant retains the privilege to hold a government office that would give him the power to do us harm. Constitutional impeachment protects we the people.

Most congresspeople and chief justices disregard what’s at stake for us. They don’t protect us, they protect their colleagues the impeachment defendants. They also see this as protecting themselves.

In the impeachment process, the current representatives are the grand jury.

Every grand jury should be a “runaway.” The jurors should take it into their own hands and find out for themselves what charges should be considered at trial. They should favor returning a broad indictment that encompasses nearly all offenses that matter.

In their indictment, the current representatives should prioritize counts that indicate how much that continuing to extend to the defendant the privilege to hold government offices would expose people to future deprivations of life, liberty, and property:

  1. As president, Biden has decreased the use of helpful existing generics and increased the use of harmful vaccines, depriving persons of life.
  2. As president, Biden has failed to faithfully execute constitutional immigration statutes that would have excluded criminals, which has deprived persons of life.
  3. As president, Biden, with no declaration of war, has disbursed support to Ukraine, depriving persons of life.
  4. As president, Biden has arrested and prosecuted January 6 demonstrators, but refuses to prosecute rioters on the left, depriving some persons of liberty while favoring other lawbreakers.
  5. As president, Biden has unconstitutionally disbursed funds to extra-governmental organizations and to administrative agencies and departments, using revenues from taxes and borrowing, effectively depriving persons of liberty, since people gave up some of their liberty to earn the property he took and used.
  6. As vice president, the evidence already available already suggests that more likely than not, Biden accepted bribes from foreign governments and in exchange supported those governments.

An appropriately-broad indictment clearly would include far-more counts and more detail. The counts above are just representative highlights that give our current representatives a good start.

Administrative Tyranny Is Bipartisan

Plenty of consequential counts could be charged against Trump as president, considering for example that Trump ratcheted up health tyranny and inflationary spending. Actually, since 1897 every president other than Warren Harding, Calvin Coolidge, and Ronald Reagan clearly tolerated or advanced administrative tyranny enough to warrant impeachment.

But supermajorities of Progressive legislators have done the worst. The core legislative powers are to pass rules and sanctions and to approve a single overall topline budget appropriation. Along with this power comes exposure to being voted out of office.

Progressive legislators have schemed to evade this accountability by grabbing unenumerated executive powers: creating administrative departments, agencies, and government-chartered organizations, and organizing, budgeting, staffing, and overseeing them.

Progressive executives haven’t stood in the gap. They have signed enabling unconstitutional legislation and they have executed such legislation.

Led by Progressive legislative committees, Progressive legislators and executives each have normalized having administrators enact rules and sanctions, depriving the people of both legislative and executive accountability. Candidates who would use their powers to demolish the administrative state find that their nomination and election is greatly impeded by both major parties’ defining processes.

Impeachment Should Demonstrate Constitution-Support

Impeachment of present or past executives won’t change the current parties or their politicians’ administrative tyranny. What’s needed is to change the future actions of legislators. But impeachment for the right reasons would indicate to voters that legislators are starting to faithfully follow the Constitution.

We the people need an indictment of Biden to, factually, adequately acknowledge what ongoing and future exposures we face if our representatives continue to allow Biden the privilege to use government power abusively against us. And we need the whole process of indictment, trial, and punishment to be completed speedily, to put a quick end to our current ongoing losses.

In impeachment trials, the current senators are accountable for providing the prosecution and defense and being the jurors. When trying someone other than a current president, a current senate’s president, who is the current vice president, is accountable for sitting as the judge. When trying a current president, a current chief justice is accountable for sitting as the judge.

A current senator’s and a current chief justice’s actions in a presidential impeachment trial will speak louder across history than any of these people’s other actions or words.

The fact that for many, their past actions have supported many of Biden’s actions is a separate matter that, realistically, clearly will be of far-less consequence to these people personally. Both history and simple practical considerations establish that these people will face few if any punishments, and they will face no punishments commensurate with the gravity of those past actions.

The best remedy they could offer us now in good faith as partial compensation for their past actions would be to begin to support the Constitution from now on—simply doing the right thing and letting the chips fall as they may.

A great start would be to impeach Biden for all the right reasons.

The Pentagon Wants To Affirm Your Gender Transition. But Not if You're Avoiding the Draft

09/05/2023Ryan McMaken

The costumed bureaucrats at the Pentagon we call "generals" have spent much of the last decade enthusiastically assisting three different administrations in "affirming" military employees who "transition" or consider themselves transgender. Openly identifying as transgender has been permitted in the US military since 2016 under the Obama administration. The Trump administration did not reverse this policy but took steps to limit the number of employees undergoing sex-change surgeries and other active efforts at "transitioning." Since 2021, however, the Pentagon has returned to the earlier Obama-era policy of paying for surgeries, hormone usage, and related treatments requested by military employees. From 2007 to 2009, more than $3 million has been spent on surgeries, with and additional $12 million spent on related procedures.

The Pentagon in recent years has fallen all over itself to pander to LGBT interest groups, as can be seen in this military recruitment video titled "Emma," and in the fact that the Navy promoted as "non-binary" drag queen as the face of one of the Navy's recruitment drives

Given that the Pentagon has made it clear it is devoted to affirming these life choices among potential recruits, it would be reasonable to assume that the Pentagon rejects the idea that one's "assigned sex" at birth has any objective meaning at all. After all, truly affirming the transgender ideology requires rejecting the notion that "men are men" or "women are women." 

That assumption would be wrong. When it comes to the military draft—which is presently inactive and called the "selective service program"—the military absolutely insists that "men are men." In other words, the military wants to make sure no man can get out of the forced military service by claiming to be a woman. Thus, the Selective Service System (SSS) makes it quite clear that "the registration requirement on gender assigned at birth and not on gender identity or on gender reassignment." In other words, maintaining the interests of the empire trumps transgenderism. 

In its FAQ on "who needs to register," the SSS states:

Selective Service bases the registration requirement on gender assigned at birth and not on gender identity or on gender reassignment. Individuals who are born male and changed their gender to female are still required to register. Individuals who are born female and changed their gender to male are not required to register.

The legal authority is based on the Military Selective Service Act (MSSA), which does not address gender identify or transgender persons. In addition, Presidential Proclamation 4771 refers to “males” who were “born” on or after January 1, 1960. Thus, Selective Service interprets the MSSA as applying to gender at birth because Congress did not contemplate transgender persons or a person’s gender identity when it required on “males” to register when the Selective Training and Service Act of 1940 was passed and amended by the Selective Service Act of 1948 to create the Selective Service System. Until Congress amends the MSSA or passes a separate law addressing transsexuals and gender identity, Selective Service must follow the intent of Congress when it required only males to register—the registration requirement is based on gender at birth.

In the event of a resumption of the draft, individuals born male who have changed their gender to female can file a claim for an exemption from military service if they receive an order to report for examination or induction.

There are a couple of ways we can interpret this discrepancy. One way is to note simply that Congress has been unwilling to change the definition of who is eligible to be drafted, regardless of White House policy Thus, even if the administration wants to "affirm" the claimed identities of transgender military employees, it can only do so much in terms of changing selective service policy. 

As second way of looking at this is to note that the regime's toying around with transgender ideology issues comes to an abrupt halt when that ideology might threaten the regime's prerogatives to force the maximum number of American men into military service. 

Both interpretations are likely true. The "needs" of the empire always come before social-policy pandering to select interest groups. But it's also true Congress appears unenthusiastic about explicitly changing SS policy. 

It's easy to see, however, how Washington could "fix" this apparent inconsistency in policy. We will likely hear more and more calls for the selective service to include women as well. It's already moving in that direction. This removes the problem of insisting that everyone who is a male "at birth" register for the draft regardless of stated "identity." Rather than debate  who is a man, it's easier to simply force everyone to register for the draft. Certainly, we have no reason to expect Congress to go in the opposite direction and make it possible for men to avoid the draft simply by "identifying as a woman." It's exceedingly unlikely Republican hawks would risk giving such a wide-open loophole to men seeking to avoid being enslaved by the regime for a period of years as conscripts. 

“Tax Expenditures” Is a Misnomer

The April 18 deadline for Americans to file their 2022 income tax returns had hardly passed before House Republicans began to talk about reviving three tax breaks for businesses that had lapsed or begun to phrase out under the Tax Cuts and Jobs Act (TCJA) that the Republican-controlled Congress passed, and President Trump signed into law, in 2017.


The TCJA temporarily lowered individual tax rates (until certain provisions expire after 2025); set the tax brackets at 10, 12, 22, 24, 32, 35, and 37 percent; eliminated the personal exemption; effectively ended the ACA (Obamacare) mandate that established tax penalties for individuals who did not obtain health insurance; raised the standard deduction; expanded the child tax credit; limited the mortgage interest deduction; increased the alternative minimum tax exemption; capped state and local tax deductions; ended the deduction for alimony payments; raised the estate tax exemption; doubled the estate tax exemption; and suspended some itemized deductions.

The TCJA lowered corporate tax rates permanently (from a high of 35% down to 21%) and temporarily allowed full expensing of short-lived capital investments rather than requiring them to be depreciated over time; limited the net interest deduction to 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA); raised the cash accounting threshold from $5 million to $25 million; eliminated net operating loss (NOL) carrybacks; eliminated the domestic production activities deduction; eliminated the corporate alternative minimum tax (already restored for 2023 in the Inflation Reduction Act of 2022); and allowed full expensing of research and development (R&D) costs in the year that those costs occur.

The three business tax breaks up for restoration include upfront expensing of research and development costs instead of over a five-year period, tax deductions for 100 percent of the costs for short-term investments in the first year they are purchased instead of just 80 percent, and a net interest deduction of 30 percent of earnings before EBITDA instead of just before interest and taxes.

But even as they planned to revive certain tax breaks, House Republicans sought to eliminate others. On April 26 — without a single Democratic vote — they passed the Limit, Save, Grow (LSG) Act of 2023 (H.R. 2811) to increase the federal debt limit in the present while promising to decrease spending in the future. Included in the legislation was a repeal of several energy tax credits that were included in the Inflation Reduction Act of 2022 (H.R.5376) that passed without a single Republican vote and was signed into law by President Biden on August 16, 2022. Even though the vast majority of current GOP House members signed Grover Norquist’s “no new tax pledge” — which includes a commitment to “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates” — the LSG Act eliminates tax credits with no offsetting tax rate cuts. House Ways and Means Committee Chair Jason Smith (R-MO), supported by House Speaker Kevin McCarthy (R-CA), issued a letter defending the elimination of the tax credits because they were “green” corporate welfare designed “to function like direct government spending.” The technical term for this is “tax expenditures.” But Rep. Smith should know better since the Ways and Means Committee is the House committee that writes the tax code. The tax code is riddled with scores of tax expenditures, most of which Republicans support.

Tax Expenditures

According to the U.S. Department of the Treasury, Office of Tax Analysis, “Tax expenditures describe revenue losses attributable to provisions of Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability. These exceptions are often viewed as alternatives to other policy instruments, such as spending or regulatory programs.” Some tax expenditures are in effect direct spending programs even though they appear to be tax breaks. Tax expenditures reduce the income tax liabilities of individuals or businesses that undertake certain activities. As explained by the Tax Policy Center of the Urban Institute and Brookings Institution:

Some promote broad social goals such as health insurance coverage or saving for retirement. Others supplement the federal social safety net by providing tax relief for certain groups of people, such as low-income working families, families with children, and seniors. Still others are incentives for activities that Congress has deemed worthy of support, including regional economic development, renewable energy use, provision of low-income housing, and investment in research and development

The Congressional Budget Impoundment Control Act of 1974 (Public Law 93–344) requires that a list of estimated tax expenditures be included in the federal budget, but only provisions that affect individual or corporate income taxes. Consequently, the Office of Management and Budget (OMB) and the congressional Joint Committee on Taxation (JCT) publish annual lists of tax expenditures. Tax expenditures are treated in the budget as revenue losses instead of spending. Only the portion of refundable tax credits that offsets individuals’ income tax liabilities are labeled as tax expenditures; the refundable portion over and above this is counted as spending. Tax expenditures may take the form of credits, deductions, exceptions, allowances, exclusions, exemptions, preferential tax rates, or deferral of tax liability. Most tax expenditures are not subject to a direct appropriation process by Congress each year, and come with no budget ceiling.

The Treasury Department lists 165 tax expenditures as of March 2023 under the headings of national defense; international affairs; general science, space, and technology; energy; natural resources and environment; agriculture; commerce and housing; transportation; community and regional development; education, training, employment, and social services; health; income security; Social Security; veterans benefits and services; general government; and interest. The largest tax expenditures are:

  • Exclusion of employer contributions for medical insurance premiums and medical care ($3,366,320 million)
  • Exclusion of net imputed rental income ($1,679,550 million)
  • Defined contribution employer plans ($1,535,700 million)
  • Capital gains (except agriculture, timber, iron ore, and coal) ($1,492,400 million)

Some of the most well-known tax expenditures are tax-exempt state and local bonds, tax exempt life insurance proceeds, the mortgage interest deduction, the state and local tax deductions, the student loan interest deduction, the adoption tax credit, the charitable contributions deduction, the credit for child and dependent care expenses, education tax credits, the child tax credit, the earned-income tax credit, tax-deferred interest earned on U.S. savings bonds, the medical expenses deduction, tax-free employer contributions to health savings accounts, additional deductions for the blind and elderly, the exclusion of scholarships and fellowships from taxable income, and the individual contributions to health savings accounts exclusion. And we are just talking about federal income tax. For example, individual contributions to health savings accounts not only lower income subject to income tax but also income subject to payroll taxes.

So, are tax expenditures good? Mainstream economists disagree on which tax expenditures are “worth it” and which have insufficient benefits to society to justify their “cost.” But their determinations are quite arbitrary. Typical is a Tax Policy Center report by Frank Sammartino and Eric Toder (“Are Tax Expenditures Worth the Money?”). Some tax expenditures “provide a significant share of government assistance to many worthwhile activities,” while others “provide unwarranted special benefits to certain industries and individuals.” However, sometimes they are undecided, like when they muse, “Whether the mortgage interest deduction serves a needed public purpose is unclear.”

The Problem

“Tax expenditures” is a misnomer. Tax expenditures are not expenditures. They are not subsidies. They are not spending programs. They are not outlays. They are not transfer payments. They are not “departures from an income tax with a comprehensive base.” They do not have to be financed. And they are not revenue losses unless you consider Americans keeping all of their income to be a loss to the government. The income tax, as Old Right stalwart Frank Chodorov (1887–1966) explained in his book The Income Tax: Root of All Evil (1954), means that the state says to its citizens, “Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide.”

Economists and politicians have things backwards. Every so-called tax expenditure allows Americans to keep more of their money in their pockets and out of the hands of Uncle Sam. Taxation is government theft. Acquiring someone’s property by force is wrong, whether done by individuals or governments. If someone claims that taxation is not theft because Americans pay their taxes voluntarily, then why does the Internal Revenue Service (IRS) have armed special agents “who shouldn’t be afraid of using ‘deadly force’,” as a recent IRS job posting said? What percentage of Americans would voluntarily pay their taxes if there were no consequences for not doing so? Thanks to withholding and payroll taxes, Americans are forced to “pay up” with every paycheck.

Try being in business in the United States and refusing to withhold a portion of your employees’ paychecks and see what happens. And if someone retorts that although taxation is theft, it is a necessary evil because the federal government could not function without it, I would remind them that for the majority of American history, there was no income tax, and the government functioned just fine until it decided to intervene in European wars. In addition, the case could also be made that over 90 percent of what the government spends income tax revenues on is blatantly unconstitutional.

One economist who recognized the nature of tax expenditures was the libertarian theorist Murray Rothbard (1926–1995). In his seminal article “The Myth of Tax ‘Reform,’” he tackles the subject of tax subsidies and loopholes:

But what about, say, deductions for payment of interest on mortgages, tax credits for investment, or deductions for payment of state and local taxes? In what sense are they “subsidies?” Instead, what is really happening here is that some people — homeowners, investors, or state and local taxpayers — are graciously allowed by the government to keep more of their own money than they would have otherwise. I submit that being allowed to keep more of your hard-earned money is not a subsidy in any true sense; it simply means that you are being fleeced less intensely than you would have been. If a robber assaults you on the highway, and is about to run off with all of your funds, and you persuade him to let you keep some bus fare, is he “subsidizing” you? Surely not. Being allowed to keep your own money can scarcely be called a subsidy.

The great free-market economist Ludwig von Mises once rose up in a conference on taxation that devoted much energy to the closing of tax loopholes, and asked the crucial question: “What is a loophole?” He answered that the assumption of the loophole theorists seemed to be that all of everyone’s income really belongs to the government, and that if the government fails to tax all of it away, it is thereby leaving a “loophole” that must be closed.

Rothbard also recognized the true nature of taxation:

We have to look differently at taxation. We have to stop looking at taxes as a mighty system for achieving social goals, which merely needs to be made “fair” and rational in order to usher in Utopia. We have to start looking at taxation as a vast system of robbery and oppression, by which some people are enabled to live coercively and parasitically at the expense of others. We must realize that from the point of view of justice or of economic prosperity, the less people are taxed, the better. That is why we should rejoice at every new loophole, new credit, new manifestation of the “underground” economy.

Rothbard concludes:

Every economic activity that escapes taxes and controls is not only a blow for freedom and property rights; it is also one more instance of a free flow of productive energy getting out from under parasitic repression.

That is why we should welcome every new loophole, shelter, credit, or exemption, and work, not to shut them down but to expand them to include everyone else, including ourselves.

The principle should be clear: to support all reductions in taxes, whether they be by lower rates or widening of exemption and deductions; and to oppose all rate increases or exemption decreases. In short, to seek in every instance to remove the blight of taxation as much as possible.

One would think that libertarians of all people would get this.

Libertarians for Higher Taxes

But some libertarians just don’t get it. They join with conservatives — who have no philosophical objection to taxation — and argue, in the name of simplicity and fairness, that certain tax deductions and credits are “loopholes” that need to be “closed” because they “distort” the tax code, “subsidize” high-income taxpayers, benefit “special interests,” “misallocate” resources, and encourage people to make “economically unwise decisions.” These libertarians would strenuously object if the income tax rates were increased, but at the same time are quite adamant that certain tax breaks should be eliminated even though doing so would accomplish the exact same thing: increase the taxes of some Americans.

Tax deductions serve to reduce the amount of one’s income subject to taxation. Tax credits serve to reduce the amount of tax owed on one’s income. Either one allows Americans to keep more of their money and the government to take less of it. Therefore, all tax deductions and credits are good; it doesn’t matter whom they benefit, why Congress enacts them, or how much revenue they cost the federal government. Yet, some libertarians have spent an inordinate amount of time reproaching tax deductions and credits, especially the deduction for state and local taxes paid — the SALT deduction. According to the Tax Policy Center:

State and local income and real estate taxes make up the bulk of total state and local taxes deducted (about 60 percent and 35 percent, respectively), while sales taxes and personal property taxes account for the remainder.

State and local taxes have been deductible since the inception of the federal income tax in 1913. Initially, all state and local taxes not directly tied to a benefit were deductible against federal taxable income. In 1964, deductible taxes were limited to state and local property (real and personal property), income, general sales, and motor fuels taxes. Congress eliminated the deduction for taxes on motor fuels in 1978, and eliminated the deduction for general sales tax in 1986. It temporarily reinstated the sales tax deduction in 2004, allowing taxpayers to deduct either income taxes or sales taxes, but not both. Subsequent legislation made that provision permanent starting in 2015.

The TCJA capped the SALT itemized deduction at $10,000 for tax years 2018 through 2025. Prior to the 2018 tax year, all eligible state and local taxes paid during the year, including real estate, personal property, and income or sales taxes, could be deducted. The SALT cap, then, amounts to a tax increase. It is a tax increase on the middle class and the “rich,” but, after all, they are the ones who actually pay income taxes. According to the IRS, the bottom 50 percent of taxpayers (taxpayers with AGI below $44,269) pay just 3 percent of the income taxes collected, and the top 1 percent pay more income taxes than the bottom 90 percent combined.

Because libertarians maintain that the government is not entitled to a portion of any American’s income, and that Americans should be free to keep the fruits of their labor and spend their money as they see fit, libertarians should be saying that no one’s taxes should be increased, and that everyone’s taxes should be decreased.

Tax expenditures don’t cost the government revenue; rather, they allow Americans to keep more of their money. As long as Americans have an income tax, and as long as the chances are slim that the tax rates will be substantially reduced, tax breaks like deductions and credits are the only way that Americans can hang on to more of their money.

This article was originally published in the August 2023 edition of Future of Freedom.

QJAE: An Austrian View on Risk and Its Quantification: A Reply to Hering, Olbrich, and Rapp

09/05/2023Joanna Turowska

Abstract: Hering, Olbrich, and Rapp (2021) pointed out limitations to the risk-adjusted method proposed in Kruk (2020) and advised using scenario analysis as an alternative. Based on their reply, some additional improvements of the method can be proposed, such as using the time-dependent discount rate. Business practitioners value the simplicity of the risk-adjusted net present value method. As a result, scenario analysis is not a viable solution to the problem of calculating investment profitability because business practitioners value the simplicity of other calculation methods.

Read the full article in the Quarterly Journal of Austrian Economics

JLS: Should the State Prohibit the Production of Artificial Persons?

ABSTRACT: This article argues that criminal law should not, in general, prevent the creation of artificially intelligent servants who achieve humanlike moral status, even though it may well be immoral to construct such beings. In defending this claim, a series of thought experiments intended to evoke clear intuitions is proposed, and presuppositions about any particular theory of criminalization or any particular moral theory are kept to a minimum.

Read the full article in the Journal of Libertarian Studies. 

Cruisin’ USA

09/01/2023Robert Aro

Earlier this month, I completed a three-week road trip across America’s east coast, driving through the states of New York, Pennsylvania, the Virginias, and the Carolinas, reaching as far south as Jekyll Island, Georgia. The American road trip is an enriching experience that provides ample opportunity for contemplation about economics and the structure of society.

It might be easier for those outside of America to grasp, but the privilege and uniqueness of the American experience stands out starkly when compared to the rest of the world. Broadly speaking, there are many countries or entire continents where people dare not travel, even if allowed. In some places, women never walk the streets unaccompanied by a man, where having a paid armed guard is advised. There are countries where electricity is as unreliable as the bridges or roads one drives upon; and of course, there are war torn countries.

For those of us living in the West, it's important to recognize our standard of living, on a world scale, is significantly higher than most countries. The American Revolution, the Industrial Revolution, the principles of freedom, liberty, and capitalism can largely be credited for this progress. In 2023, it is disheartening to see how many beneficiaries of such systems strive to adopt economic policies from countries that do not adhere to free market ideals at the core; but lies and propaganda can hold more sway than honesty and logic.

During the trip, American icons like Waffle House, were frequented throughout the Southern states. Regardless of personal opinions about the franchise or the Jonas Brothers' song about it, one should consider the fact that it all began decades ago when two entrepreneurs took a risk and opened a restaurant in Georgia. According to their website, there are now over 1,900 Waffle House locations in 25 states, employing more than 40,000 people. The rarity of such opportunities across the world should be self-explanatory by now.

As for architecture, the house of the Vanderbilts, the Biltmore Estate, in North Carolina was remarkable.

It was Peter Sellers’ movie Being There, where I initially became aware of the estate's existence. This highlights the influence of the power of film. Despite the present focus on Hollywood delivering social messages over artistic expression, the inextricable link between capitalism and creativity persists. No other country has ever managed to achieve a comparable balance.

Another building that speaks volumes about societal norms and values of its era is the University of Pittsburgh's 42-story Cathedral of Learning. It stands as a testament to a time when grand vision, truth and beauty, and audacious structures were constructed for posterity; however, times have changed…

Lastly, the Jekyll Island estate: a building so beautiful, yet home to one of the world’s greatest atrocities, i.e., planning of the Federal Reserve.

Sadly, it all really ties back to central banking. Discussions about central banks, their strategies, decisions, and the speculation regarding their next moves dominate news headlines. It is not hyperbole to say that on all business news stations, the Federal Reserve is not mentioned multiple times a day.

Central banking has woven itself so deeply into our society that only a few can, or even want to, consider a world without the Fed. Yet, as far as the American way, which values life, liberty, and the pursuit of happiness, there exists no greater menace, no more of an antithesis, and no larger adversary than a central bank. An entity that holds a legal monopoly over a nation's currency can hardly be said to provide any benefit to the masses. This reality is substantiated by history, rational thought, and the current state of world affairs.

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