Category Archives: Economics

Biden’s Student Loan Bailout is More Proof the Government Doesn’t ‘Invest’

President Biden today announced he would forgive up to $20,000 in student loans for people making less than $125,000 per year, with several other qualifications determining the amount each applicant is eligible for.

Biden’s political opponents have raised very reasonable objections to this politically motivated favoritism just over two months before the mid-term elections. What about people who paid off their loans? Why only student loans and not others arguably taken to underwrite more productive efforts than women’s studies or French poetry?

Why does someone who borrowed money to start a profitable business that employs people have to pay back its loans when someone who works a tax-subsidized job does not?

While calling out such blatant vote-purchasing for its violation of equal justice under the law and other statist dogma is perfectly valid, let’s not forget the economic law demonstrated by this bailout: the government cannot “invest.”

Politicians love to use that word for its wealth transfer schemes. “Invest in infrastructure,” “invest in working families” (which families don’t work?), and, in this case, “invest in education.”

Merriam-Webster dictionary provides two relevant definitions for the word “invest.” Government-guaranteed student loans doesn’t meet either of them:

1: to commit (money) in order to earn a financial return

2: to make use of for future benefits or advantages

Had the government’s “investments” in student loans met the definition of the word, there would be no need for a bailout. The money spent on tuition would be paid back out of the additional earnings students realized over and above what they would have earned without going to college.

That they not only aren’t in the black based on additional earnings to what they would have earned with a high school diploma, but can’t pay the loans back at all, should end once and for all the ability for politicians to claim they are “investing” in anything.

This excludes all the student loan borrowers who can pay back their loans but now will shift some of that burden onto others. Doctors, lawyers, university professors, and other affluent debtors will force plumbers, taxicab drivers, and construction workers – not to mention other doctors, lawyers, etc. who worked their way through school without student loans or who already paid them back – to pay their debts.

The grand experiment with government “investing” in higher education has produced two returns: people who can’t earn enough to pay back the loans and people who can but choose to force somebody else to do so.

All the same arguments against student loan bailouts can be made against public education in general. Why are homeowners forced to pay for public schools whether they use them or not, while wealthy renters pay nothing? Why is the service called “education” Sovietized in the first place? Is there something special about education that makes the government owning its means of production successful?

Of course not. Just look at the results. The more the government has “invested” in education, the less literate and numerate graduating students have become. Like every government-provided service, the cost keeps going up and the quality keeps going down.

Education, healthcare, infrastructure, transportation, the military – they are all the focus of massive government “investment.” And those investments all continue to produce the same returns: skyrocketing prices and plummeting quality.

Everything the government does is Afghanistan.

Investors in the private sector aren’t better people. They merely work under different incentives. When private sector actors invest, they stand to lose their own money. This powerful incentive doesn’t produce perfect results, but it produces infinitely better results than government spending. And when private sector investments go bad, no one else is forced to pay for their mistakes.

That is, unless one is on the Christmas list of the ultimate government investor, the Federal Reserve System. Its “investments” in stimulating the economy are the most damaging of all, producing steadily rising prices, artificial booms, disastrous busts, and more and bigger bailouts over time.

We have no choice but to pay for Biden’s latest vote buy. But let’s not let him or any other politician continue to call their loot distribution “investment.” Doing so should be tried in The Hague as a crime against veracity.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

We are at war Part 3: Woke Capitalism

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The war on civilization and its peaceful inhabitants is testing us like nothing else in our lifetimes. It is not only testing our resolve, but our principles. And nothing has tested the latter more than what has come to be called, “woke capitalism.”

As I wrote in last week’s installment of this series, it is important that the resistors have the right ideas. It is not enough simply to defeat our enemies. We must do so in a way that we don’t win battles but lose the war. And as with the political system, the arguments against woke capitalism are riddled with errors that will ultimately undermine our cause.

To understand if and why woke capitalism is a problem, we must first understand what capitalism is and why it is the only economic system compatible with a free society.

Our principles

We believe that every human being is created equal in one way and in one way only: no one has an inherent right to rule over another person. As a result of that equality, every individual owns himself or herself.

This state of self-ownership implies certain rights. They are first and foremost to not be killed by another person (right to life), to act according to one’s will (right to liberty) and to exercise ownership over legitimately acquired possessions. The natural limit to these rights is that one does not violate the equal rights of others.

John Locke reduced all of the above to a single word, saying people enter society and form governments for the “mutual preservation of their lives, liberties and estates, which I call by the general name, property.”

Another way to say this is that everyone has a right to what he or she owns and nothing more. This is the standard by which to determine what is a legitimate right and what is not.

One’s physical body, thoughts, beliefs, speech, actions, and peacefully acquired possessions are all one’s property. They cannot be taken away by someone else without one’s consent. Therefore, “healthcare” cannot be a right, it being the thoughts, speech, actions, and possessions of someone else. Neither does anyone have the right to involuntarily dispossess Person A to trade with Person B to provide healthcare to himself or Person C.

One may not claim a right to something that requires the labor of others without violating the property rights of those others. This applies equally to conscripting either Person A or Person B in the above example.

The right to possess real and movable estates contains within it three basic elements: use, exclusion, and disposal. If one owns a thing, he may use it as he sees fit as long as he does not do so in violation of the property of others. He may exclude others from its use without his consent. He may also dispose of the thing as he sees fit, meaning give it away as a gift, exchange it for other property, or destroy it.

Justice consists of preserving the property of individuals or making them whole when their property has been violated. Conversely, injustice is harming the property of individuals other than in self-defense. There is no other legitimate definition of justice, nor does legitimate justice require modifiers like “social” or “racial.”

Governments are formed ostensibly to administer justice, or, as John Locke put it, for the “preservation of their property.”

The American Declaration of Independence unnecessarily complicated the matter by separating “property” into myriad enumerated and unenumerated “rights,” going on to say, “to secure these rights, governments are instituted among men.” But the intent of those words was the same as Locke’s:

Anarcho-capitalism disputes none of the above other than the means for administering justice. Rather than a monopolist agency designated for the purpose, anarcho-capitalism proposes a free market solution. But the purpose of that solution is the same: to administer justice, meaning to preserve property.

What is capitalism?

The economic system generally known as “capitalism” or “the free market” derives directly from these principles. Capitalism assumes only one rule: that transfer of property may occur only with the voluntary consent of the owner. All other elements of the system: contracts, market prices, competition, etc., proceed from this rule.

Inherent also in capitalism is an element of property described by the founders as the right to “the pursuit of happiness.” This was listed separately from the right to liberty to emphasize that one is entitled to act exclusively in one’s own self-interest, rather than towards ends determined by others, within the same limit of not violating the property of others.

Adam Smith famously observed that people acting exclusively in their own self-interest do more good for society as a whole than those who intend to do so.

This is known as the “invisible hand” of the market. It is this aspect of the capitalist system from which all benefit to society springs. It is the reason capitalism always outperforms socialism. To reject the right of economic actors to pursue exclusively their own interests is to deny the right to the pursuit of happiness and to negate capitalism’s benefits to society.

How is woke capitalism a problem?

Woke capitalism rejects the invisible hand principle. It postulates that businesses should not merely pursue profits within a framework of property rights, but rather should also pursue “environmental, social, and governance (ESG)” goals. It also seeks to limit or exclude market participation by people who do not accept and demonstrate their support for various progressive dogmas.

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We Are at War Table of Contents

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

A recession by any other name

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The Biden administration says two straight quarters of negative GDP is much ado about nothing. Like accusations of Hero’s lost chastity in Shakespeare’s play, Biden’s economy is falsely accused of being in recession, the president’s spokespeople say.

Biden’s defenders in the media concur. The Hill informs us that two straight quarters of negative GDP defines a recession in many countries but, contrary to public opinion, not in the United States. Here, there is no recession until the National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee – the “experts” – declare one.

The committee looks at a broad range of economic indicators to determine whether the economy is in recession. While declining GDP is one factor, it is not the only factor. And the chief reason the NBER has not declared a recession, according to the Biden administration and others, is the “red hot jobs market.”

Nobel Laureate Paul Krugman helpfully tweeted a chart showing the relative number of jobs “added” to the economy during the presidencies of Presidents Trump and Biden.

It is true that unemployment is near historic, pre-pandemic lows at 3.6%. And although that doesn’t count the vast number of people who have left the workforce due to retirement or discouragement, the administration can still point to over 2.7 million jobs created in 2022, according to the BLS jobs report.

But arguing there is no recession because new jobs are being created rather misses the point.

Jobs are not an end in itself. The purpose of creating jobs is to produce products. One would only want to create more jobs if it would lead to producing more products. Creating more jobs to produce the same or less products wastes scarce resources.

Just imagine a manager triumphantly reporting to the owner of a company that, although production decreased in the last two quarters, the lower output was accompanied by higher payroll costs. He’d be fired immediately; perhaps referred for a mental health evaluation.

What makes a company profitable is to satisfy demand for its product with as few employees and other costs as possible. The wealth of an economy is no different. As fewer employees are needed to produce each product, more are available to produce others.

Not only does this contribute to greater wealth for the economy as a whole, but it also represents higher worker productivity and thereby higher wages.

This is why tax incentives to corporations tied to the number of jobs they’ll create is economically idiotic. While in most cases, companies will take the tax breaks and only create the jobs they need, leaving the politicians and their constituents to complain the jobs never materialized, it is really the complaining that is erroneous. Had the company created more jobs than necessary to produce its products, it would by definition be wasting resources and thereby making the population poorer in the aggregate.

It is also important to remember that what is produced matters as much as how much. A population does not become wealthier merely because the total amount of goods produced rises. It only becomes wealthier if more of what consumers value is produced.

Value can only be determined if consumers are free to refuse to purchase the increased output. Only by freely choosing whether to purchase at all and at what maximum price can the value of the new output can be determined.

This is why output resulting from government spending is at best of unknown and often of no value whatsoever. Since taxpayers have neither the opportunity to decline to purchase nor to set their own maximum price, there is no mechanism to determine the value of this output.

That government spending, currently at massive levels, is counted in GDP and GDP is still declining accentuates the fact that Americans are getting poorer in the aggregate. Not only are they producing less, but a significant percentage of what they are producing – like missiles sent to Ukraine – provide no value to American consumers.

Government bureaucrats can arbitrarily define the word “recession” any way they wish. But creating less wealth by any other name would smell as foul.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

We are at war and I don’t mean in Ukraine

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Everyone knows there is something wrong. America and much of the world is now firmly into its third year of unrelenting “emergencies,” real and imagined, that forbid them from returning to the quiet comfort of their previous lives. For twenty-eight months they have been told they must sacrifice their personal interests for the government-media complex defined “greater good.”

It started with “fifteen days to flatten the curve,” a reasonable-sounding request in the face of a supposedly novel respiratory virus. One hundred years of science had already confirmed quarantining asymptomatic people is ineffective, but it was only going to be fifteen days.

It is only now, after the fifteen days turned into fifteen months or more in some places, after mask and vaccine mandates were enforced long after it was obvious both are ineffective, after the demand for sacrifice seamlessly metamorphized from “flattening the curve” to “slowing the spread” to “defending Ukraine” to “climate change emergency,” that a critical mass of people have finally realized they are being had.

If it were just your money they were after, it would be bad enough. And make no mistake, they do want that. Trillions have been fleeced from the many and handed to the few during this long con. But it isn’t just your money the perpetrators are after. Neither is it merely your freedom, although there is no “life” beyond biological existence without it.

No, the architects of this dystopia aren’t satisfied to loot your wealth and crush your liberty. Even controlling your physical movements isn’t enough. They want to control your thoughts, what many people would call your “soul.”

It’s not as if they make any secret of this. What else can the obsession with stamping out “misinformation” mean? They do not want you exposed to information contrary to their ends because you may think the wrong thoughts.

You may question whether the vaccines really are “safe and effective,” whether the war in Ukraine really is any of your concern (or “unprovoked,” for that matter), whether there really is a “climate change emergency” that demands you make enormous sacrifices to solve, or whether those sacrifices would really make a difference if there were.

There are only two possible reasons why information questioning any of the above narratives would need to be kept from you. Either the claims being made aren’t true and would not hold up to challenges or you are incapable of discerning truth from falsehood. If the former is true, there are criminal trials that need to be held. If the latter, then why this anguished cry about dangers to “our democracy?”

The question is constantly raised whether the architects of this assault on civilization are evil or merely misguided and incompetent. Does it matter? Is there even a clear distinction between the two? Was Vladimir Lenin evil or merely misguided? Did he not believe he was acting in the best interests of his fellow man and merely had to “break a few (million) eggs to make an omelet?” Can we not say the same for Stalin, Hitler, or Mao?

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We Are at War Table of Contents

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

No, Mussolini didn’t define fascism as the “merger of state and corporate power”

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I hear it all the time. “Mussolini defined fascism as the merger of state and corporate power.” It has been suggested that modern American corporations like Disney, Meta (Facebook) or Alphabet (Google) acting in ways that align with the federal government’s wishes constitute fascism, based on this “merger of power” definition.

Here is the problem. Not only did Mussolini never define fascism that way, but he said almost precisely the opposite. “Merger” implies cooperation, partnership, or a meeting of the minds between equals. Fascism bore no resemblance to this. Mussolini’s actual words were, “The Fascist State lays claim to rule in the economic field no less than in others.”

What was a fascist “corporation?”

When Mussolini used the word, “corporation,” he didn’t refer to a single company like Disney or Alphabet. Rather, each corporation was a cartel formed from all companies in a particular economic sector. Mussolini divided the economy into twenty-two such “corporations,” which were run by members of the Fascist Party appointed by Mussolini himself. As John Gunther wrote in Inside Europe,

“Every corporation contains three supervising delegates of the Fascist party; each corporation is headed by a member of the cabinet or an under-secretary, appointed by Mussolini. The deputies, moreover, are “voted” into he chamber from an approved list chosen by the Grand Fascist Council; electors are privileged simply to say Yes or No to the whole list. Mussolini’s two general “elections” have been grossly dull affairs.

The state, being supreme, regulates economy for its exclusive benefit. Fascism may be, spiritually, “an attempt to make Romans out of Italians,” but physically it made Italy a prison.”[1]

This was not a “merger” of powers. It was the state exercising absolute power over the economy. It was autocratic rule over private businesses by the government.

So, why is this misquote and misunderstanding of fascism so popular? Because it coincides with a general tendency towards the “anti-capitalist mentality” Von Mises described and which is again ascendant across the political spectrum in America.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

[1] Gunther, John. Inside Europe. Harper and Brothers, New York and London, 1938. Pg. 252

Which Presidents Increased Spending the Fastest?

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“Can you believe this spending with a REPUBLICAN in the White House????”

I’ve heard it my entire adult life, starting during the Reagan years. I’m not sure how many times Republicans have to increase spending twice as fast as their Democratic predecessors before people get used to the idea that this is what Republican presidents do, regardless of which party controls Congress.

This shouldn’t be a surprise. The Republican Party was born out of the ashes of the Whigs, whose stated goal was to expand the range of things the federal government spent money on. Before the Civil War, most roads were privately owned. Not just privately built; privately owned. Taxpayers didn’t contribute a cent towards them.

Not only did the Republican Party Sovietize the road system, they did the same with railroads and all sorts of other areas of life. Before FDR, it was Republicans who established most new federal departments.

Today, the government has Sovietized the distribution of Covid-19 vaccines and other treatments, a precedent established under the last Republican president.

When you consider the actual records of Republican presidents from Lincoln through Trump, it turns out that Harding and Coolidge were the real “RINOs.”

In the post-WWII era, spending almost always goes up (not counting the obvious decrease right after the war – which led to an economic boom, btw). But I decided to take a look at how fast it went up during the various presidential administrations starting with JFK/LBJ. I used the following methodology:

Measure the increase in yearly federal spending for each president as a percentage of the spending in the last year of his predecessor. For example, spending was $590 billion in the last year of the Carter Administration. It was $1.06 trillion in the last year of the Reagan administration, an increase of $473.4 billion or 80.1%. That comes in at just over 10% per year on average.

You’ll never guess who grew spending at the slowest rate since 1951. Certainly not the Gipper. Nor was it either Bush. No, as a percentage of spending during his predecessor’s last year in office, the president who grew the budget at the slowest rate was Barack Obama.

I broke it all down on Episode 85 of Tom Mullen Talks Freedom. I provide documentation of the outlays and receipts on the show notes page. A summary table is provide below.

Source: https://www.whitehouse.gov/omb/budget/historical-tables/

A few notes:

All spending increases are aggregated for the full term of the presidency and then averaged. Example: to calculate President Obama’s spending increases, 2008 spending is subtracted from the spending during the last year of his presidency (2016) to arrive at an increase of $870 billion over eight years. That total is divided by 2008 spending of $2.9 trillion to arrive at the 29.2% aggregate spending increase. Spending increases for each presidency is calculated in similar fashion.

I combined the presidencies of Kennedy/Johnson and Nixon/Ford as Kennedy and Nixon both served partial terms which were completed by members of their own parties.

Calculations are made for the Trump years 2017-2020 and 2017-2019.

Spending is not adjusted for inflation. All spending is in billions

Of course, regardless of how quickly or slowly it increases, federal spending is always destructive. It’s important to remember the government has failed at every major spending initiative it has undertaken in my lifetime, whether it is military or domestic policy. Vietnam, Iraq, Afghanistan, the Department of Education, the War on Drugs, Covid – it’s always all pain and no gain when it comes to the government. And the price just keeps going up.

Still, it is remarkable that spending goes up so much faster when a Republican is in the White House. The excuse is often made for Reagan that he had a Democratic Congress. But the Republicans controlled the Senate for 6 of Reagan’s 8 years in office, so that claim isn’t even true. The Democrats did have both houses of Congress during George H.W. Bush’s 4 years, but spending didn’t go up as fast during those years. Oops.

The other excuse often brought up in defense of profligate Republican presidents is that Congress “has the purse strings.” This is technically true, but when one looks at the spending proposed by the presidents in question and compares it to what Congress eventually appropriated, there is never much difference.

When an opposition party controls Congress, there is always some demagoguing over financially inconsequential components of the president’s proposal. See “funding Big Bird.” But in general, the executive branch proposes the spending and Congress rubber stamps it. And let’s not forget, no spending can occur without the president’s signature.

There is also some evidence that the combination of a Democratic president and Republican Congress may slow spending increases the most, but comparing spending increases during the first two years Presidents Clinton and Obama were in office (with Democratic Congresses) to spending increases over the remainder of their terms hardly provides conclusive proof.

The record does show that spending seems to grow relatively slowly with a Democratic president and a Republican Congress. And since gridlock in Washington is always good, to the extent we get it, for all sorts of non-fiscal reasons, let’s hope for a Republican landslide in this year’s midterms.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Why We Can’t Stand Prosperity

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“They can’t stand prosperity.” My father used to say it about his beloved Buffalo Bills during periods in the 1970s when they were competitive but couldn’t quite break into the ranks of the elite contenders. He was referring to the team’s maddening habit of ceasing to do what had previously been successful and “snatching defeat from the jaws of victory.”

What he said of the Bills applies to Americans in general.

There is no mystery to why the United States in a matter of decades grew from a few agrarian colonies to the richest, most powerful nation in history, surpassing competitors with over a millennium head start. It was capitalism. Period.

That’s what “the land of opportunity” meant, back when America was so styled. The opportunity was economic opportunity. The million-plus wave of immigrants who came here in the late 19^th and early 20^th centuries weren’t pursuing abstract notions of liberty. They were coming because there was an opportunity to make a materially better life for themselves and their families. That opportunity existed solely because America was economically freer – more “capitalist” – than the countries they left.

While America may be the most prominent example of capitalism’s success, it is by no means the only one. Indeed, history is replete with examples of economic freedom emerging, bringing with it unprecedented prosperity, and eventually being strangled by the re-emergence of state meddling.

Murray Rothbard documents this phenomenon occurring repeatedly throughout Europe in the pre-colonial period. More recently we’ve seen it in Asia, with the rise of the “Asian Tigers” in the 1990s, culminating in the rise of prosperity in China. During the same years, both Scandinavia and Canada dramatically cut taxes, regulations, and government spending to save their economies from becoming what Venezuela is today.

Throughout history, countries that freed their economies from mercantilist or socialist controls, even if not completely, have seen a dramatic reduction in poverty and rise in living standards. Nowhere is the opposite true.

Yet, in almost every case, including America, people just “can’t stand prosperity.” There is always and everywhere an instinct to kill the goose that laid the golden egg. Even among Americans today who by no means consider themselves socialist, there is an inherent resistance to allowing the conditions that has made the lives they lead possible.

Why?

Ludwig Von Mises wrote an entire book exploring the reasons for the “anti-capitalistic mentality.” I believe his insights were correct, especially in in terms of academia’s resentment towards the way free markets reward less educated, “vulgar” businessmen with more wealth than they enjoy themselves.

Walter Block has done research with fellow academics indicating there is an evolved preference in humans to prefer what he calls the “direct benevolence” associated with socialism over the “indirect benevolence” of the market economy.

Then, there is the plain, old human failing called, “envy.” The market economy results in the most prosperity for the most people, but it doesn’t distribute that prosperity equally. In fact, it doesn’t “distribute” prosperity at all. It allows each individual to keep the fruits of his labor and dispose of them as he sees fit. Some people are able to produce more than others and therefore accumulate more wealth.

There are some people who simply cannot abide this. Forget that no system has ever produced economic equality, least of all socialist systems, but the fact that no one even seems to be trying to correct this unjust inequality, in the envious person’s eyes, makes him resentful of the capitalist system that allowed the rich person to accumulate so much more than he.

While the above explanations certainly provide part of the answer, I do not believe they address the primary reason so many people are resistant to economic freedom. We use reason to overcome our passions and even our evolved instincts every day. But there is one instinct, one emotion that I believe transcends all the rest in motivating us to be suspicious of freedom.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

QT by the Federal Reserve Starts This Month and It Could Get Ugly

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There are some people who think the Federal Reserve is irrelevant in today’s economy. Rather than exerting control, they argue, the Fed merely “chases” the market rate of interest, eternally behind the curve and not having near the effect someone who, say, wrote a book called, It’s the Fed, Stupid might believe.

John Tamny is an example. He agrees with us free market types on most things, but not the Fed. He says the Fed is “a rate follower, not a rate setter.”

I don’t agree on the whole, but there are examples where the Fed is chasing the market, rather than making it, in terms of its interest rate policy. The recent explosion in 10-year Treasury bond yields, well beyond the Fed’s target fed funds rate, and the Fed’s subsequent interest rate increases, is an example.

But since 2008, interest rate policy and control of the money supply are not as intimately linked as they once were, for reasons I explain in today’s episode of Tom Mullen Talks Freedom. For that and other reasons I discuss, we ain’t seen nuthin’ yet in terms of the effects Fed policy is going to have on financial markets and the economy.

Of course, all the Fed is doing is trying to fight the price inflation it caused itself with previous monetary inflation. And if lowering prices was the only effect removing dollars from circulation was going to have, there would be no need to worry about it (the same is true for adding dollars – they could just give us all a million dollars a year!).

The Fed has finally found itself between that rock and hard place Austrian economists predicted they would reach, where there is no good option. Remove money from the economy aggressively and risk dramatic deflation of financial markets and economic malaise or don’t remove money and allow inflation to persist.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

True federalism would have prevented Covid lockdowns

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In one sense, the Covid-19 era revitalized American federalism. While every U.S. state except South Dakota at first followed the advice of the federal government’s various national public health agencies and their spokesman, Anthony Fauci, M.D., eventually more and more diversity began to emerge in the way individual states responded to the virus.

In September of 2020, after televising a roundtable of non-government scientists from Harvard and Stanford, Governor Ron DeSantis reopened Florida completely and banned local jurisdictions from fining people for noncompliance with mask mandates.

Observing the political gains DeSantis enjoyed from lifting restrictions and the absence of disaster predicted by all opposed to DeSantis politically, Iowa’s governor lifted all restrictions in February 2021, followed closely by Gov. Abbot of Texas the following month.

While states with Republican governors trumpet their states as “free states” due to generally less severe and shorter-lived lockdowns, and proponents of decentralization from across the political spectrum point to this as a triumph of local government, federalism completely failed in the most important respect. Every United States citizen, regardless of the decisions of their state and local elected leaders, is being forced to pay for lockdowns equally.

Although Covid relief was federally funded, it wasn’t paid for with higher taxes. It would have been impossible to collect more taxes from a society producing considerably less wealth. Instead, the money was created by the Federal Reserve and handed out through programs created by the CARES Act and subsequent legislation.

We are feeling the effects of that money creation combined with decreased production now. Although his Republican critics would like to blame President Biden for rising prices today (and he has certainly contributed to them, especially energy prices), the majority of the spending authorized and new money created occurred while Trump was still in office.

M1 showed the supply of dollars at $4 trillion in February 2020. It was $16 trillion by May 2020 and $18 trillion when Trump left office in January 2021. It was just over $20 trillion as of January 2022.

President Biden, on the other hand, has largely failed to get most of the spending he wanted beyond an early Covid relief bill similar in size to the CARES Act. However, due to the mechanics of the way money gets spent by the federal government after it is appropriated by Congress, even much of the money appropriated in 2020 wasn’t spent until 2021.

That and the general lag between new money creation and the resulting rise in consumer prices is why price inflation only began in earnest in 2021. But this is not to lay the blame at Trump’s or Biden’s doorstep. Rather, it was the very bipartisan departure from reality, including by most the American public, that a large percentage of the economy could be turned off while people went on consuming as they did before.

Many otherwise “fiscally conservative” people threw up their hands and justified Covid bailouts on the grounds that those ordered to close their businesses or stay home from their jobs weren’t “at fault,” and therefore were entitled to bailouts.

It doesn’t matter who was at fault for lockdowns. Goods that are not produced cannot be consumed. One cannot consume more than one produces unless someone else provides the difference. Scarcity does not make exceptions for assignment of blame, political theories, or feelings. Even if lockdowns significantly reduced Covid deaths, which they didn’t, one still had to face the reality that producing enough to survive takes priority over avoiding the virus.

The truly “federalist” approach to Covid-19 would have been to allow each state to decide and pay for the policies it chose to implement in response to the virus. Politicians spoke in absolutes, saying lockdowns were “necessary.” Well, producing enough to survive was more necessary. This would have been true even if the virus had turned out to be as deadly as it was originally touted.

Had governors been forced to face reality and decide how to respond to lockdowns without external bailout money, there may not have been any lockdowns at all. If there were, they would have been fewer, of less severity, and of shorter duration.

This would not have made a bit of difference overall in the number of Covid deaths, as the retrospective comparisons of “open” vs. “locked down” states so clearly show.

Like TARP in 2008 and every other bailout, profits have been privatized and costs socialized. People who elected governors who took a more realistic approach to Covid and who themselves balanced the personal risk of contracting the disease more realistically with the responsibility of supporting themselves are paying the same cost in runaway inflation as those whose governors closed their economies completely and kept them closed for much longer periods of time.

Today, Americans are being asked to again support a departure from reality. The U.S. government, the most prolific invader of foreign nations in the past seventy years, has proclaimed Russia’s invasion of Ukraine beyond the pale and imposed drastic sanctions in response. President Biden has acknowledged this will have a cost to American citizens, although he has vastly understated the cost.

The president and others have tried to shift the blame for present economic pain onto Putin. This is dishonest for two reasons. One, it is not Putin’s invasion but the sanctions in response to the that will cause economic hardship, just as it wasn’t “Covid” but the government response to the virus that caused the economic fallout we’re experiencing now.

Most importantly, the economic consequences of Biden’s Russia sanctions have not even begun to be felt by American consumers. They are just now suffering the effects of Covid lockdowns. The Russia sanctions could have far more onerous economic consequences, especially if they result in a new world economic order where a significant portion of the global population no longer uses the U.S. dollar as its reserve currency. That is a reality Americans are not ready to face.

Regardless of whether Putin’s invasion of Ukraine was justified, America may not be able to afford the combined cost of Biden’s sanctions and the Covid lockdowns. Ignoring that reality may have fatal consequences for both America’s economy its political order.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

China is surpassing the U.S. economically because it is freer than it was; America is less free

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Outwardly, everyone condemns the Chinese government, run by the Chinese Communist Party (CCP). Their society is authoritarian and “anti-democratic” while in America, as the song goes, “at least I know I’m free.”

Yet, no one seems to believe freedom leads to greater economic prosperity or human happiness. Inherent in every political discussion about China is the idea that authoritarianism produces better results and the United States is handicapped by its devotion to freedom. Americans enviously note that when China’s central government decides to do something, they are not encumbered by adversarial processes inherent in the U.S. Constitution.

This is also the assumption underlying the trade wars. China has “taken advantage of” the United States by being more economically mercantilist while the United States has foolishly allowed its industry to migrate to China and other countries because of relatively freer trade policies.

That is demonstrably false. Manufacturing still comprises about the same percentage of real GDP as it has throughout the post-WWII period. The problem with American manufacturing isn’t the amount produced but what is produced. American manufacturing is far too skewed towards producing weapons and other items without utility, misdirected by a monetary system that allows resources to be directed towards unproductive ends.

The emergence of China as an economic power certainly provides the United States new competition, but that emergence is not a result of China’s authoritarianism. On the contrary, China’s economy has grown exponentially in the past thirty years because it is significantly less authoritarian, especially in the economic sphere, than it was previously.

Americans never seem to ask themselves why a country with four times the population didn’t have a much larger economy than the United States during the twentieth century. The answer is simple: communism. China had as authoritarian an economic system as has ever existed in human history. While they are by no means laissez faire now, they are far more “capitalist” in relative terms. This is the key to their success, not the authoritarianism that remains from the communist years.

The United States, on the other hand, is relatively less free than it was at almost any time in its history, with the exception perhaps of the 1930s and 40s. And its trajectory is towards more and more government intervention into the economy and life in general.

The United States became the most powerful economy in the world for the same reason the United Kingdom, comprised of two tiny islands with relatively small populations, was the most powerful before the United States. It had the freest markets. It was the most “capitalist,” for lack of a better single word.

The United Kingdom squandered its wealth trying to maintain a vast global empire that gave its government prestige but drained its wealth and led it to debauch its currency. Sound familiar? Empire may be made possible by capitalism, but it is not an inherent part of capitalism. Empire is anti-capitalist. Capitalism is about property rights and voluntary exchange. Empire demands taxes and misdirection of capital into production of arms and other imperial necessities that do not add to the happiness of the taxpayers.

Weapons, soldiers, and military infrastructure beyond what is needed for defense have no utility. Sooner or later, the productive part of the imperial economy can no longer afford to subsidize the unproductive part.

This has been the end of every empire in history. It is also the reason the USSR had a much more painful transition from communism to capitalism than China – it had an empire of other communist republics draining its already misdirected resources.

While the global standing army the United States maintains is a significant reason for its economic decline, it is not the only reason. In all areas of economic and social life, America has become less free with each passing year.

Americans have become accustomed to its government surveilling its phone calls, e-mails, and financial transactions. The New Deal regulatory structure, under which bureaucrats in executive branch agencies make most of the laws by fiat, rather than Congress in an adversarial process, continues to metastasize. Its entitlement programs, designed to cover the last few years of life, now demand the resources to cover decades of life beyond retirement.

The privilege of printing the world’s reserve currency has done the most damage to the dynamism of the American economy. All inflation leads to malinvestment, but the inflation made possible by the global dollar standard has led to bubbles that very well may comprise half of U.S. GDP.

Certainly, there are millions of people employed in the cartoonishly bureaucratic education and healthcare industries who are adding no value to consumers. As guaranteed student loans have redirected trillions towards the education industry, millions of administrative jobs have been added to the system that aren’t necessary to teach reading, writing, and arithmetic. Meanwhile, the education results continue to decline.

Healthcare is in much the same shape. That part of the industry on the cutting edge, where profits and losses are still available, which operates under the most capitalist circumstances, continues to produce miracles of innovation. But the rest, the heavily subsidized, increasingly bureaucratic part, is sclerotic and in decline.

In many ways, routine American medicine is still practiced the way it was in 1970. Why? Because it has no reason to improve. It’s on the dole, with half of all healthcare spending comprised of government spending. There is no reason to improve medical or business practices when your income is guaranteed by taxpayers. See the DMV.

Just ask yourself why you’re still asked to fill out multiple forms capturing your insurance information when the office already has it. In fact, they wouldn’t even give you the appointment until they not only got your insurance info but verified your eligibility with the insurer. But they still ask you to write it down on two different forms when you get to your appointment. Non-subsidized industries cannot afford inefficiencies like this.

What made America richer and more powerful in the past was being significantly freer than any other country in the world. And by “freer,” I do not mean more “democratic.” Democracy was not the key to American freedom; it was limited government. It was the fact that the vast majority of American economic and social life was not up for a vote. Rather, most decisions were left to the discretion of the private sector and the individual.

What made China destitute during the same period was its complete lack of freedom. There was nothing else keeping China from building the economy it has today. But since the late twentieth century, America has headed in one direction on the freedom scale and China in the other. It is not unreasonable to ask whether they haven’t now met at a point far lower than America’s freer past.

There is no reason for Americans to fear China eventually having a larger economy than the United States. That would be the natural result of having so much larger a population. But if America wants to regain its economic power in a post-dollar dominated world, it must stop imagining China’s success to be a product of its remaining authoritarianism and get back to what created America’s wealth in the first place: far more limited government, freer markets, and maximum individual liberty.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?