Power & Market
As hard as it is to believe after the 2016 election, attempts to bend, fold, spindle and mutilate public opinion have become even more intense and partisan since. Attacks, accusations, misrepresentations, leaks, innuendo, “gotcha” questions, ad hominem attacks and more follow one another on an accelerating merry-go-round of political abuse.
While many decry this overheated partisanship, few have analyzed the issue better than James Fenimore Cooper, in The American Democrat, an 1838 primer on Americans’ political responsibilities, written in reaction to the political excesses of his era.
America’s first great writer recognized that “in a democracy, the delusion that would elsewhere be poured into the ears of the prince is poured into those of the people.” He also saw that citizens needed the vigilance to see through those delusions, to maintain a democracy that did not eviscerate liberty: “The elector who gives his vote, on any grounds, party or personal, to an unworthy candidate, violates a sacred public duty, and is unfit to be a freeman.” As we wade through the mountain of muck that is accumulating in anticipation of the 2020 election, Cooper’s analysis appears very prescient:
- In a democracy, as a matter of course, every effort is made to seize upon and create public opinion, which is, substantially, securing power.
- Failing of the means of obtaining power more honestly, the fraudulent and ambitious find a motive to mislead, and even to corrupt the common sentiment, to attain their ends. This is the greatest and most pervading danger of all large democracies...We see the effects of this baneful influence in the openness and audacity with which men avow improper motives and improper acts, trusting to find support in a popular feeling.
- The people are peculiarly exposed to become the dupes of demagogues and political schemers, most of the crimes of democracies arising from the faults and designs of men of this character.
- Party misleads the public mind.
- Opinion can be so perverted as to cause the false to seem to be true; the enemy, a friend, and the friend, an enemy; the best interests of a nation to appear insignificant, and trifles of moment; in a word, the right the wrong and the wrong the right.
- Party, by feeding the passions and exciting personal interests, overshadows truth, justice, patriotism and every other public virtue…by putting unworthy motives in the place of reason.
- Party feeling...induces men to adopt in gross, the prejudices, notions and judgments of the particular faction to which they belong, often without examination, and generally without candor.
- Thus it is we see half the nation extolling those that the other half condemns, and condemning those that the other half extols. Both cannot be right, and as passions, interests and prejudices are enlisted on such occasions, it would be nearer the truth to say both are wrong.
- The discipline and organization of party are…putting managers in the place of the people.
- When party rules, the people do not rule, but merely such a portion of the people as can manage to get control of party.
- Party pledges the representative...right or wrong, when the institutions intend that he shall be pledged only to justice, expediency and the right, under the restrictions of the constitution.
- No freeman who really loves liberty...will ever become a mere party man...it will be his earnest endeavor to hold himself a free agent, and most of all keep his mind untrammeled by the prejudices, frauds, and tyranny of factions.
Given how many Americans are now acting as if they were mere “party men,” Cooper’s warnings against putting party before serious thought were never more necessary. Unfortunately, those who most need to heed it show little inclination of doing so.
On September 24, the Supreme Court of the United Kingdom (UKSC) has declared the Prime Minister Johnson’s move to prorogued Parliament from the September 9 or 12 to October 14 was unlawful and that Parliament was not prorogued (2019 UKSC 41). An article on the Mises Wire (Ryan McMaken on 09/24/2019) has commented on this ruling, describing it as a ‘move of the UK’s political class designed to postpone Brexit yet again’. The article is asserts that ‘democracy is only allowed when the regime likes the outcome’.
There are certainly some valid arguments in this article. However, it is my position that the merits of the Court’s decision prevail.
The Brexit Referendum
The previous article has stated that, while the UKSC has not ruled on Brexit per se, in context it is an attempt to postpone Brexit. This may be true. The court proceedings have been initiated by an activist with a pro-European attitude, although her arguments have consistently been based on holding the executive accountable to the Parliament (see also 2017 UKSC 5). But the very recent context of power struggles within both the British Parliament and the British Conservative Party to which, I assume, Mr. McMaken refers, conceals the origin of these struggles. The question asked in the Brexit referendum was:
"Should the United Kingdom remain a member of the European Union or leave the European Union?"
51.89 % voted Leave, 48.11% voted remain. There are no further implications on the nature of the future relation with the EU or the withdrawal process. The Members of Parliament (MPs) have since then been split up into actual Remainers, MPs in favor of leaving with an agreement, MPs in favor of leaving without agreement (the so-called No Deal) and some positions in between.
Parliament has enacted the European Union (Withdrawal) Act 2018 defining an exit day, although with the possibility to extend, and requiring Parliament to approve any withdrawal agreement. As the agreement reached by then PM Theresa May was rejected, the exit day was postponed. The current position is that the UK will leave on October 31 with or without agreement, although since very recently, the European Union (Withdrawal) (No 2) Act 2019 requires the PM to seek a further extension if the Parliament does not consent to either an agreement or to no agreement.
While the political situation is therefore complicated, one thing remains clear: Parliament must have a say in the Brexit procedures. The government can negotiate with the EU, but it must be held accountable to the people’s representatives. It has no unlimited mandate.
The Court’s Ruling on the Prorogation
Prorogation ends a parliamentary session. During prorogation, the government can still exercise its powers, but Parliament may not meet, debate, pass any bills, debate Government policies, or ask questions to Ministers (2019 UKSC 41, §2). As such, prorogation prevents ministerial accountability to Parliament during the period of prorogation (2019 UKSC 41, §33).
Prorogation cannot be compared to a recess, which is voted upon in the House. Prorogation is a prerogative power. The Crown, advised by the Government, declares it. The Crown is obliged to accept the PM’s advice, which places constitutional responsibility on the PM as the only person with the de facto power to prorogue Parliament (2019 UKSC 41, §30).
While prorogation is a normal procedure, it is obvious that there must be a legal limit to prevent a completely unaccountable government. The UKSC has set the legal limit to the point when prorogation frustrates Parliament’s legislative and supervisory functions (2019 UKSC 41, §51).
The UKSC decided that the PM’s move to prorogue for around five weeks crossed this limit. The summer recess ended on September 3. Usually, Parliament would go into recess for around three weeks between September and October to allow for the party conferences. Then, the next session would have started with the Queen’s Speech which is prepared during prorogation. Normally, this takes six to seven days (2019 UKSC 41, §59). However, right now is not business as usual. The exit day and the preparations leading up to it are crucial for the future of the country, and, as outlined, there are multiple positions clashing. In fact, the majority of the House is opposed to the No Deal scenario (2019 UKSC 41, §53). Parliament could have decided to skip recess. Even if they agree to go into conference recess, they will retain their supervisory function. A prorogation of five weeks is unprecedented and creates a long time period just before the exit day where the government cannot be held accountable by Parliament. Above that, the Court found that the government did not provide reasonable justification for this unusually long time period. The government gave the impression that recess and prorogation are ‘much the same’ (2019 UKSC 41, §60). The motives of the PM did not matter to the Court. The length of the prorogation was not justified and frustrated the legislative and supervisory functions of Parliament.
The Merits of this Ruling
In his column, Mr. McMaken has brought several arguments relating to the politically charged situation in the UK. He criticized Parliament for preventing new elections, suggesting that they follow a party-political agenda and fear that Boris Johnson would win a majority in the next elections. He also asserted that only votes that help the pro-European position are allowed. Both statements might be true, and he has presented some cases to support them. But I suggest here that we should not let the noise around partisan power struggles conceal the facts. The PM has tried to create an unprecedented time where the government is not held accountable by Parliament. This is quite a drastic step, especially given the fact that the UK government is elected by Parliament. The government is only in office because it has the Parliament’s support. And we should also consider another fact: the Brexit referendum has only expressed the people’s will to leave the EU. There are still competing positions on the withdrawal agreement and procedure, even within the same party. It is the task of the Parliament to take those various interests into account.
Finally, I would like to defend the Court’s decision in view of one last statement which Mr. McMaken made: that democracy is only tolerated if it leads to the outcome preferred by the ruling class. This problem has been known before. J.S. Mill wrote that ‘the power of the people over themselves’ is often misinterpreted:
"The 'people' who exercise the power are not always the same people with those over whom it is exercised; and the "self-government" spoken of is not the government of each by himself, but of each by all the rest." (J.S. Mill, On Liberty, Ch. 1).
The majority might therefore try to oppress a minority to pursue their own interest. Mill already noted that the majority are not necessarily the most numerous people supporting a position, but it could also be those who made themselves accepted as majority. He therefore concludes that
"The limitation, therefore, of the power of government over individuals, loses none of its importance when the holders of power are regularly accountable to the community, that is, to the strongest party therein." (J.S. Mill, On Liberty, Ch. 1).
The "ruling class," or the majority, might prefer certain outcomes. But to prevent a tyranny of the ruling class, the government needs to be limited in its power. With its decision, the UKSC has prevented the government from creating an unusually long period at a crucial time where it would not have been accountable to all the People’s representative. The court procedures might have been initiated for purely partisan motives. The decision might be in favor of what is perceived a pro-European class. But it has prevented that a small group of people enforces whatever agreement they reach on all citizens of the UK.
In September 11, 2001, terrorists flew planes into the World Trade Center and the Pentagon. Hours later, more than 2,900 people were dead, the overwhelming majority of them in the civilian office buildings at New York's World Trade Center.
Within 24 hours, the US government was doing what it does best. It demanded more power, and set to work coming up with schemes for using its enormous military and national security apparatus — a group of agencies which had received more than half-a-trillion dollars during that fiscal year.
When the US national security state failed on 9/11, not a single person with any significant level of responsibility lost his job.
Notably, the very same people who failed utterly to provide national security on September 11th were the same people who were entrusted with providing security on September 12. Except now, those people, and their government agencies, were granted more power, bigger budgets, and were held to less legal and public scrutiny than ever before.
By November, the federal government had already rewarded itself lavishly for its incompetence. Congress passed, and the President signed, the USA Patriot Act a measure that transformed American jurisprudence and made every American a suspected terrorist, open to surveillance by government agents. DC politicians had also created yet another federal department, the department of Homeland Security, because apparently the Defense Department is concerned with things other than the defense of the US "homeland."
This war against the American people was complemented by ordinary shooting war against other nation states, including ones that had absolutely nothing to do with the 9/11 bombings. The invasion of Iraq, for instance was built upon intelligence manipulated and distorted by the White House and by CIA Director George Tenet. Iraq was not threat to the United States at all. But Washington, DC loves a war, and in the wake of 9/11, the American public was apparently willing to believe anything. So the politicians got their war. And have gotten many since.
Meanwhile, back home, the US government was transforming itself into something that looked like it was modeled more on China than on a government that claimed to revere the Bill of Rights.
As Jacob Hornberger writes :
Moreover, the [Chinese] regime can and does torture prisoners. Again, there is nothing anyone can do to prevent this. The torture is oftentimes so brutal that some independent minded, courageous individuals who were were protesting come out of the prison process as broken people, ones whose minds have been fixed through brutal and tortuous reeducation.
Before the 9/11 attacks, that sort of thing could not happen here in the United States, at least not legally. If the government arrested someone, it was required to file formal written charges (e.g., an indictment) that would notify the person of what he was being charged with. He also would be entitled to a jury trial instead of judge trial or a tribunal trial. He had the right to an attorney to represent him. He also had a right to an independent judge. And no cruel and unusual punishments, such as torture. That’s all because our American ancestors had the wisdom to guarantee such rights in the Bill of Rights.
What if U.S. officials did to someone what the Chinese government has done to Simon Cheng. In that event, the Constitution enables him to file a petition for writ of habeas corpus, a right that stretches back several centuries in English history and which actually is a lynchpin of a free society. An independent federal judge orders the government to bring the person to court and show cause why he should not be released. At the habeas hearing, the judge orders the government to charge the person with a crime or release him. No indefinite detention, like there is China. And of course no torture.
All that came to an end with the 9/11 attacks. At that point, the national-security branch of the federal government adopted many of the same powers as the Chinese communist regime, and without any amendment to the Constitution. The military and the CIA, two of the principal elements of the national-security state, now wield the power to take anyone, including both Americans and foreigners, into military or CIA custody by simply labeling them a “terrorist,” hold them as long as they want in a military dungeon or secret CIA prison camp, torture them, and even assassinate them. While Americans still have the right to file a petition for habeas corpus, federal judges will customarily defer to the Pentagon and the CIA on their determination that a person poses a threat to “national security.”
In today's America, everyone is a potential terrorist. The country is always at war. "National security" demands American citizens be murdered by drone without trial. Or dropped into Guantanamo and forgotten about. Just in case.
In the wake of the terrorist attacks, we were often told that we must go on about our daily lives, or else "the terrorists win." Except it wasn't the terrorists who did the most to change America. For America, the post-9/11 world meant more searches, more regulations, more spying, more debt, and more endless haranguing about how we must all "support the troops" and how "you're either with us or with the terrorists." "We must sacrifice" we were told. Your "freedom" demands it.
What was the upside? So far, there's no reason to believe that there is one. No evidence is provided, especially since the federal government maintains everything is secret, classified, or unfit for the public. "Trust us, we're keeping you safe" is the constant refrain. For some reason, a lot of people buy it.
Meanwhile, the feds themselves didn't sacrifice anything. For the feds, it was just more of what they'd always wanted. More taxpayer money. More power. More untrammeled authority to imprison, spy, tax, search, and control. Their abysmal failures on 9/11 led to no changes, no reforms, and no accountability. For them, everything got better.
If the destruction of American liberties was something the terrorists wanted, then they got what they wanted, too.
Stocks fell last week following news that the yield curve on Treasury notes had inverted. This means that a short-term Treasury note was paying higher interest rates than long-term Treasury note. An inverted yield curve is widely seen as a sign of an impending recession.
Some economic commentators reacted to the inverted yield curve by parroting the Keynesian propaganda that recessions are an inevitable feature of a free-market economy, whose negative effects can only be mitigated by the Federal Reserve. Like much of the conventional economic wisdom, the idea that recessions are caused by the free market and cured by the Federal Reserve is the exact opposite of the truth.
Interest rates are the price of money. Like all prices, they should be set by the market in order to accurately convey information about economic conditions. When the Federal Reserve lowers interest rates, it distorts those signals. This leads investors and businesses to misjudge the true state of the economy, resulting in misallocations of resources. These misallocations can create an economic boom. However, since the boom is rooted in misperceptions of the true state of the economy, it cannot last. Eventually the Federal Reserve-created bubble bursts, resulting in a recession.
So, recessions are not a feature of the free market. Instead, they are an inevitable result of Congress granting a secretive central bank power to influence the price of money. While monetary policy may be the prime culprit, government tax and regulatory policies also damage the economy. Many regulations, such as the minimum wage and occupational licensing, inflict much harm on the same low-income people that the economic interventionists claim benefit the most from the welfare-regulatory state.
The best thing for Congress and the Federal Reserve to do after the bubble bursts is to let the recession run its course. Recessions are painful but necessary if the economy is going to heal from the damage done by government’s inflate-tax-borrow-spend-and-inflate-some-more policies. But Congress and the Fed cannot resist the cries to “do something.” So, Congress spends billions on wasteful “economic stimulus” plans and bailouts of politically influential corporations. Meanwhile, the Fed tries to “prime the pump” via new money creation, restarting the whole boom-and-bust cycle.
This is not to say that no one would experience economic difficulties in a free market. Businesses and even whole industries would still close because of changing consumer tastes, new competitors offering superior products, or bad business decisions. There may even be bubbles in a free market as some investors misread fads as permanent changes in consumer preferences. But periods of downturn would be shorter, and most would only affect specific industries rather than the entire economy.
President Trump’s imposition of tariffs (which are a form of taxes on American consumers) has been particularly harmful. The tariff war has not just raised prices on imported consumer goods. It has also cut off markets for export-reliant businesses, such as manufacturers that import materials used to construct their products.
The trade dispute with China may be the event that pushes the US economy into a major recession or even a depression. However, the trade war is not the root cause of the downturn. The next recession, like every recession since 1913, will come stamped “Courtesy of the Federal Reserve.” The only way to end the boom-and-bust cycle and restore peace, prosperity, and liberty is to end the welfare-warfare state, repeal the Sixteenth Amendment, and audit then end the Fed.
Alexandria Ocasio-Cortez has suggested eliminating the Department of Homeland Security.
Her motivation seems to be reducing federal immigration enforcement powers, although it doesn't necessarily follow that abolishing the DHS would actually accomplish this.
Nevertheless, the DHS is just yet an other cabinet level agency pushed to facilitate even more government spending, and has never been necessary. Its abolition would be a step in the right direction.
The thing about raising government agencies to cabinet-level status is that the move makes it easier for the bureaucrats in charge of the agencies to politically agitate for more government spending in their favor, and to push bigger government in general. It's no coincidence that as the US government has grown ever larger and more intrusive, so has the number of cabinet-level agencies. So now, we have the EPA, the SBA, and the departments of HUD, Energy, and Education all provided with more direct access to the president and the media. Everything they do is deemed "essential." Everything they do, we're told, is a matter of national importance.
DHS is no different. When the 9/11 attacks occurred, they exposed the sheer incompetence, laziness, and inefficiency of government security and defense organizations. Year after year, hundreds of billions of dollars were poured into these organizations — in addition to the countless billions spent on the Pentagon. But when they were shown to be asleep at the switch, what happened? Rather than have their budgets cut, and senior officials fired in droves — as should have happened — George W. Bush and his cronies decided that what the federal government really needed was a new department into which billions more in taxpayer money could be poured.
The was politically important in the sense that making DHS a department made it easier to call for every more funding for its constituent agencies. But much of what the department does was already done before 9/11 — including immigration regulation.
What was new was the federalization of airport security, and new slush funds for domestic police departments.
In a 2017 article titled "Four Agencies to Abolish along with the Dept. of Education," I put DHS first on the list (followed by the EPA, Interior, and Agriculture):
One: The Department of Homeland Security, $51 Billion
Somehow, the United States managed to get along for more than 225 years before this Department was created by Congress and the Bush Administration in 2002.
The Department quickly became a way for the federal government to spread federal taxpayer dollars to state and local law enforcement agencies , thus gaining greater control at the local level. The DHS administers a number of grant programs that have helped to purchase a variety of new toys for law enforcement groups including new weapons, and new technologies. Also included in this is the infamous military surplus program which is supplies tanks and other military equipment to police forces everywhere from big cities to small rural towns. The crime-free town of Keene, New Hampshire made sure its police received a tank through this program as have many larger cities.
When the Orlando gunman opened fire in the Pulse nightclub in 2016, the police eventually rolled up in a tank — which did nothing to stem the bloodshed inside the club.
Police claim they need these half-million-dollar vehicles from the DHS to deal with civil unrest. Never mind, of course, that every state already has a National Guard force specifically for that purpose.
While the Department was created in response to the 9/11 attacks, the Department does nothing to address anything like a 9/11-style attack, and all the agencies that were supposed to provide intelligence on such attacks — the FBI for instance — already exist in other departments and continue to enjoy huge budgets.
DHS also includes agencies that already existed in other departments before, such as the Federal Emergency Management Agency, and the agencies that handle immigration and customs. Those agencies should either be returned to the departments they came from or be abolished.
And, few would miss the Transportation Security Administration — an agency that has never caught a single terrorist, but has smuggled at least $100 million worth of cocaine.
Alexandria Ocasio-Cortez is usually wrong about pretty much everything. But on this she's accidentally correct: abolishing the DHS would be a net good for America. It was never necessary, and is mostly a channel for violating the rights of Americans through a de facto standing army of federal agencies and local cops pumped up on federal dollars and military equipment. Politicians in Washington DC would hate to see it go. But the taxpayers would likely benefit were it to disappear forever.
Arthur Laffer, the recent Presidential Medal of Freedom winner and occasional Peter Schiff gambling partner, made headlines yesterday for questioning the value of an independent Federal Reserve.
As he told CNBC's Squawk Box:
I don't understand why the Fed is independent, to be honest," said Laffer, a former economic advisor to President Donald Trump and former President Ronald Reagan. "Fiscal policy is not independent. Military policy is not independent. Social policy is not. Why should monetary policy, this very powerful tool to control the economy not be subjected to democracy just like every other instrument of government?"
As expected, this quickly came under attack by Fed romanticists who believe that an independence should never be questioned (a faith they grasp on to in spite of the record of both Fed failures and its history of being politically influenced.)
In fact, as Dr. Joseph Salerno has written about over the years, there may be real value in getting rid of the illusion of an independent central bank.
As he wrote in The Austrian:
The desideratum of the Austrian political economist with classical-liberal or libertarian leanings involves the complete separation of government and money through the establishment of a commodity money like gold (or silver), the supply of which is determined exclusively by market forces. Nonetheless, there is great merit in replacing the opaque and pseudo-scientific control of “the money supply process” by entrenched Fed employees and officials with overtly political control of money by elected officials and partisan administration appointees. There are a number of benefits of stripping the Fed of its quasi-independent status and transforming it into a handmaiden of the Treasury, as the American Monetary Institute (AMI) and early Friedmanite reform programs call for.
Of course, a better approach would be to open the Fed up to competition by repealing legal tender laws and exempting parallel currencies from taxes. But, considering other Fed reforms that have been discussed in recent years, Laffer's suggestion is hardly that outlandish.
I woke up this Independence Day morning, surprised to find out that Bill Greene, the great 2016 faithless elector who cast his vote for Ron Paul, passed away. Among other things, Bill was a fierce advocate of making gold and silver legal tender, and was an assistant professor at South Texas College. He was an early supporter of Ron Paul, his support going as far back as Paul’s 1988 campaign.
[Editor's note: see Greene's Mises Institite author profile.]
Last summer, I had the privilege of interviewing Bill while working on a paper on the history of the Mises Institute and the Austrian Revival. Here, we discussed various different subjects, including Ron Paul’s 1988 campaign, and the growth of the Mises Institute. This has not yet been published, and I would like to do so as a tribute to Bill. Below is our interview, conducted on 6/19/18:
Atilla Sulker: Describe the state of the libertarian movement in 1988, and the extent to which the Mises Institute influenced the overall movement in America at this time?
Bill Greene: In 1988, the Mises Institute was only six years old, having split off from the Cato Institute in 1982 (a Mises co-founder, Murray Rothbard, had co-founded Cato). Up until that split, the Cato Institute was the leading influence on the libertarian movement in the United States since its founding in the mid-1970s (not long after the founding of the Libertarian Party itself in 1971 – Cato’s co-founder, Ed Crane, was the LP’s National Chair from 1974-1977). Even at such a young age, the Mises Institute had already begun to have a strong impact on the libertarian movement – specifically, on its economic policy foundations. Cato’s focus was on government policy recommendations from a libertarian-leaning position. Since that time, the Mises Institute’s influence on libertarianism in the U.S. has equaled, if not surpassed, Cato’s influence. [The Mises Institute was in fact never part of Cato.]
AS: Describe the relationship Ron Paul had with the Mises Institute in 1988, and the extent to which the organization influenced his campaign platform?
BG: Ron Paul’s relationship with the Mises Institute in 1988 was initially through one of its co-founders, Llewellyn (Lew) Rockwell, who had been Paul’s chief of staff, (from 1978-1982) when Paul was a Republican U.S. Congressman. When Rockwell left for Mises in 1982, Paul – who had been heavily influenced by the works of Rothbard beginning in the 1970s – continued his relationship with the co-founders of Mises, drawing much (or most) of his policy positions from the writings of Austrian school economists. When Paul ran for President as the LP nominee in 1988, most of his campaign platform was pulled from these same policy positions. He has continued to be a Senior Fellow of the Institute since that time, often working, writing, and speaking with others connected to it.
AS: Is there a point in Dr. Paul’s career in which it appeared that the Mises Institute’s influence on him was climactic?
BG: I don’t think so, because the relationship has always been symbiotic, and Ron Paul was already firmly in the Austrian school’s camp even before the Mises Institute was founded. Since its beginnings, it’s been difficult to separate the two from each other.
AS: Describe the influence the Mises Institute had on Dr. Paul’s VP candidate Andre Marrou.
BG: I don’t have any personal knowledge of the Mises Institute’s influence on Andre Marrou.
AS: Describe the overall size and sentiment of Ron Paul’s 1988 presidential campaign based on your experience.
BG: Ron Paul’s 1988 presidential campaign appeared to me to be more extensive than the LP’s past campaigns, as this was the first time they had two former elected legislators on the ballot (Paul was a former GOP U.S. Representative, and Marrou was a former LP Alaska Representative). As usual, the campaign’s biggest challenge was getting on the ballot in all 50 states plus the District of Columbia. Due to highly restrictive ballot-access laws in a number of states, Paul’s campaign was only on the printed ballot in 46 states & DC (although he did achieve write-in status in Missouri –and in North Carolina, where I headed the N.C. Students for Ron Paul and participated in ballot-access petitioning). Despite Paul’s (and Marrou’s) extensive travels across the country, the campaign was excluded from any debates and only achieved 432,179 votes (0.5%) – still twice as much of Lenora Fulani’s (New Alliance Party) campaign, which actually did achieve 50-state ballot access.
AS: Describe the nature of Andre Marrou’s 1992 Libertarian presidential campaign.
BG: I was not active in his 1992 presidential campaign, although I remember reading news stories on it here and there, such as when he received the highest vote total in the primary results of the first town in the nation to report its votes (Dixville Notch, NH).
AS: Briefly describe, based on your experience, the development of the libertarian movement in America up from Dr. Paul’s 1988 presidential campaign to his 2008 presidential campaign, and outline the role of the Mises Institute in this development.
BG: Based on my own experience, the Mises Institute played a vital role in the development of the libertarian movement in America during the 20 years after Dr. Paul’s first campaign for U.S. president. During the first decade, they published and disseminated massive amounts of literature, newsletters, books, audio, video, and more; once the internet became more and more ubiquitous, they were able to have an ever-growing impact, rivalling the much better-financed Cato Institute in scholarly publications and economic education activities. The Mises Institute’s website soon became the highest-trafficked economics website in the world, and when Dr. Paul decided to run for president again in 2008, he was able to draw upon, and direct his new followers to, that large body of works in support of his policy positions. As a result, his following grew and became ever more educated in libertarian thinking.
BG: When I ran for various political offices over the years, most of my own policy positions were influenced by publications I got from the Mises Institute. This was especially true of my unsuccessful campaign for the Florida House of Representatives in 1994, when I became the first state house candidate to be officially endorsed by the Political Action Committee of the nascent Republican Liberty Caucus (the “libertarian wing of the GOP” co-founded in 1991 by Paul). I had followed Dr. Paul out of the LP and back into the GOP, and I have been a member of, and active in, the RLC since that time.
AS: Is there anything else we should know about Dr. Paul’s 1988 campaign, or anything pertaining to the subject matter?
BG: My favorite story from Ron Paul’s 1988 campaign for President is from the time our N.C. Students for Ron Paul group brought him to the University of North Carolina at Greensboro for a speech to around 150 students and local residents. Following his speech (which professed many of the same policy prescriptions as his speeches today), he opened the floor for questions. A local group of Socialist Workers’ Party members were in attendance, and began challenging his free-market stances in a number of different areas. I remember Dr. Paul’s eyes lighting up at that, as he almost gleefully shot down every challenge with logical rebuttals, point by point. Twenty years later, when I chanced to run into Dr. Paul at a local restaurant while he was campaigning in Florida, I mentioned that event – and he remembered it, clearly and (quite obviously) fondly, remarking on how much fun he had that day. I was, to say the least, impressed.
It is not automation that scares people, it is inflation. Might sound odd, but what I mean is that the promise of a fully (or at least a more extensively) automated future seems like a threat because modern currencies are fundamentally inflationary.
When we work and save, the purchasing power of our saved funds diminishes with time. This is not a natural state of things, as many nowadays would assume. It is created. The reason prices tend to go up over time is that money loses its purchasing power.
If you think about it, shouldn't innovations and competition mean we become more productive and thus can get the same benefits (goods, services) at a lower cost? That is exactly what is happening, and it is evident in some industries like hi-tech (smartphones, tablets, PCs). Wherever there are private businesses producing and competing with others, prices fall.
The reason the number of dollars required to buy an item increases is that the number of dollars in circulation is increasing at a faster rate than productivity. Prices go up because banks, especially through central banks "run" by governments create new money. Prices of goods adjust to the additional money in circulation.
In other words, the 2% inflation target many central banks have is really, though simplified, a matter of creating new money at a rate that exceeds productivity gains by two percentage points.
So what does this mean for automation?
Inflation means it is immensely difficult to save for retirement, to accumulate funds to last a lifetime--or to use savings to cut down on work time. Because those savings, if in cash, lose purchasing power over time, or must be invested, which means you risk losing them.
In other words, losing one's job is a huge problem whether or not you have savings. Which means the lack of work in a future where machines can do the work (or, perhaps, all work) appears to be a threat.
Economically speaking, it is not a threat, but an opportunity: machines relieve us from hard, time-consuming, and dangerous work so that we can do other things – and since machines save us from working because they increase productivity (produce at lower cost), prices should fall even faster. So our wages and savings should last much longer!
But in a world with inflationary currencies, this seems impossible because the perception is that we must work longer hours to keep our standard of living (imagine if you never had a raise--your standard of living would fall due to inflation's rising prices).
This loss of purchasing power, compared to the increased purchasing power we should benefit from, is basically taken from us through taxation. And this is what makes an automated future seem like a threat.
Without inflationary money, that is in a world where we benefit in full from our (individual and collective) increasing productivity, automation means we can work less while at the same time have an even higher standard of living – because all prices would consistently fall, likely at an increasing rate.
How is that not a promise?
Adapted from Twitter @PerBylund
I wrote five years ago about the growing threat of a wealth tax.
Some friends at the time told me I was being paranoid. The crowd in Washington, they assured me, would never be foolish enough to impose such a levy, especially when other nations such as Sweden have repealed wealth taxes because of their harmful impact.
But, to paraphrase H.L. Mencken, nobody ever went broke underestimating the foolishness of politicians.
I already wrote this year about how folks on the left are demonizing wealth in hopes of creating a receptive environment for this extra layer of tax.
And some masochistic rich people are peddling the same message. Here’s some of what the Washington Post reported.
A group of ultrarich Americans wants to pay more in taxes, saying the nation has a “moral, ethical and economic responsibility” to ensure that they do. In an open letter addressed to the 2020 presidential candidates and published Monday on Medium, the 18 signatories urged political leaders to support a wealth tax on the richest one-tenth of the richest 1 percent of Americans. “On us,” they wrote. …The letter, which emphasized that it was nonpartisan and not to be interpreted as an endorsement of anyone in 2020, noted that several presidential candidates, including Sen. Elizabeth Warren (D-Mass.), Pete Buttigieg and Beto O’Rourke, have already signaled interest in addressing the nation’s staggering wealth inequality through taxation.
I’m not sure a please-tax-us letter from a small handful of rich leftists merits so much news coverage.
Though, to be fair, they’re not the only masochistic rich people.
Another guilt-ridden rich guy wrote for the New York Times that he wants the government to have more of his money.
My parents watched me build two Fortune 500 companies and become one of the wealthiest people in the country. …It’s time to start talking seriously about a wealth tax. …Don’t get me wrong: I am not advocating an end to the capitalist system that’s yielded some of the greatest gains in prosperity and innovation in human history. I simply believe it’s time for those of us with great wealth to commit to reducing income inequality, starting with the demand to be taxed at a higher rate than everyone else. …let’s end this tired argument that we must delay fixing structural inequities until our government is running as efficiently as the most profitable companies. …we can’t waste any more time tinkering around the edges. …A wealth tax can start to address the economic inequality eroding the soul of our country’s strength. I can afford to pay more, and I know others can too.
When reading this kind of nonsense, my initial instinct is to tell this kind of person to go ahead and write a big check to the IRS (or, better yet, send the money to me as a personal form of redistribution to the less fortunate). After all, if he really thinks he shouldn’t have so much wealth, he should put his money where his mouth is.
But I don’t want to focus on hypocrisy.
Today’s column is about the destructive economics of wealth taxation.
A report from the Mercatus Center makes a very important point about how a wealth tax is really a tax on the creation of new wealth.
Wealth taxes have been historically plagued by “ultra-millionaire” mobility. …The Ultra-Millionaire Tax, therefore, contains “strong anti-evasion measures” like a 40 percent exit tax on any targeted household that attempts to emigrate, minimum audit rates, and increased funding for IRS enforcement. …Sen. Warren’s wealth tax would target the…households that met the threshold—around 75,000—would be required to value all of their assets, which would then be subject to a two or three percent tax every year. Sen. Warren’s team estimates that all of this would bring $2.75 trillion to the federal treasury over ten years… a wealth tax would almost certainly be anti-growth. …A wealth tax might not cause economic indicators to tumble immediately, but the American economy would eventually become less dynamic and competitive… If a household’s wealth grows at a normal rate—say, five percent—then the three percent annual tax on wealth would amount to a 60 percent tax on net wealth added.
Alan Viard of the American Enterprise Institute makes the same point in a columnfor the Hill.
Wealth taxes operate differently from income taxes because the same stock of money is taxed repeatedly year after year. …Under a 2 percent wealth tax, an investor pays taxes each year equal to 2 percent of his or her net worth, but in the end pays taxes each decade equal to a full 20 percent of his or her net worth. …Consider a taxpayer who holds a long term bond with a fixed interest rate of 3 percent each year. Because a 2 percent wealth tax captures 67 percent of the interest income of the bondholder makes each year, it is essentially identical to a 67 percent income tax. The proposed tax raises the same revenue and has the same economic effects, whether it is called a 2 percent wealth tax or a 67 percent income tax. …The 3 percent wealth tax that Warren has proposed for billionaires is still higher, equivalent to a 100 percent income tax rate in this example. The total tax burden is even greater because the wealth tax would be imposed on top of the 37 percent income tax rate. …Although the wealth tax would be less burdensome in years with high returns, it would be more burdensome in years with low or negative returns. …high rates make the tax a drain on the pool of American savings. That effect is troubling because savings finance the business investment that in turn drives future growth of the economy and living standards of workers.
Alan is absolutely correct (I made the same point back in 2012).
And the implicit marginal tax rate on saving and investment can be extremely punitive. Between 67 percent and 100 percent in Alan’s examples. And that’s in addition to regular income tax rates.
You don’t have to be a wild-eyed supply-side economist to recognize that this is crazy.
Which is one of the reasons why other nations have been repealing this class-warfare levy.
Here’s a chart from the Tax Foundation showing the number of developed nations with wealth taxes from1965-present.
And here’s a tweet with a chart making the same point.
A reminder that most of the OECD has moved away from wealth taxes. 12 countries had them in 1990, while only 4 levy them today. Most countries found that the tax has high administrative and compliance costs, and didn't meet the goal of redistribution. pic.twitter.com/pHs7Q5ehjL— Garrett Watson (@GS_Watson) January 24, 2019
On November 1, Mario Draghi’s tenure as governorof the European Central Bank (ECB) will expire, and the European Council will appoint a successor for the role. Moreover, it is now known that northern European countries are pushing for replacing Mr. Draghi — widely recognized as a “dove” — with a “hawk” — less accommodating toward the loose monetary policy being demanded by southern European states. Most especially, Italy.
On the other hand, there are plenty of economic considerations — besides the historical and political ones blaming the alleged excessive (but totally sensible and legitimate) German fear of hyperinflation — which support the northern European preference for a less accommodating governor, and a tighter monetary-policy stance. Let’s look at three of them, which are the most prominent amongst several others:
One: From March 2015 onwards, the Quantitative Easing program (QE, officially known al the Asset Purchasing Programme, APP) implemented by the ECB has been distorting the relative prices of European private and public bonds, delivering a perfect textbook-case of how Cantillon-effects distort the economy. Indeed, for instance, the current difference between the yield of American 10-year government bonds and Italian ones is much lower than the same difference between German 10-year government bonds and American ones, in spite of the total absence of macroeconomic fundamentals to account for this fact. Moreover, as figure 1 and 2 show, the Asset Purchasing Programme has been highly biased towards its public-sector branch (PSPP, Public Sector Purchasing Programme, painted in blue). This also distorts the relative prices of private and public securities, and brings about a crowding-out effect damaging private investments;
Two: From a historical and political perspective, Italy has been blatantly breaching the deals — i.e., the 1992 Maastricht treaty and the 1997 Amsterdam treaty — requiring limits of its public debt over a GDP ratio to the 60% level. In practice, this has reached a historical post-war peak of more than 132%. Hence, it is evident that Italy has been only reaping the benefits stemming from European integration. This includes lower public expenditure for debt-interests (from 12.2% in 1993 to 3.7% in 2018), monetary stability, low inflation, and commercial integration. Of course, northern states are no longer willing to let Italy have everything it wants, and are perfectly aware that Italy has been the country gaining the most in terms of lower interest on its public debt brought about by Mr. Draghi’s monetary policies;
Three: The central bank has been claiming these inflations are “justified” by the alleged empirical evidence entailed by the Phillips-curve. The central bankers have been lamenting excessively low inflation within the Eurozone, and Mr. Draghi has expanded the Eurozone’s monetary base up to a level equal to 28% (3.217-trillion euros) of its GDP. Meanwhile, the American monetary base has been reduced to a level lower than 17% of American GDP. This, combined with a stable — even though low — growth in the Eurozone, with a macroeconomic outlook close to its full potential (even Italy, the weakest of all European economies, is predicted to have an output gap equal to -0.3% of GDP in 2019 and -0.1% of GDP in 2020, thus practically reaching its full potential output) and the fear of an economic slow-down caused by trade-wars, has convinced north-European politicians that the current monetary-policy stance is no longer what Eurozone — as a whole — needs. (Even Italy, the weakest of all European economies, is predicted to have an output gap equal to -0.3% of GDP in 2019 and -0.1% of GDP in 2020, thus practically reaching its full potential output.)
Lastly — and subsuming the three aforementioned bullet-points — a “hawkish” ECB-governor would be also in the interest of Italy itself. After all, Mr. Draghi’s monetary-policy stance has allowed Italian governments to keep implementing unsustainable fiscal policies without sustaining the associated economical and political costs, such as higher public expenditures for debt-interests and lower bank-lending. The latter is being caused by the huge exposure of Italian commercial banks to Italian sovereign risk.
Ultimately, northern-European savers, the stability of the monetary union and — especially — Italy itself do not need a lovely, charitable and “dovish” mother at the central bank. We need, rather, a stark, strict and “hawkish” tutor.