Tag Archives: government spending

Government Cannot Be Run Like a Business

Despite his big-government record as a governor, Mitt Romney has run for president as a conservative who would allow the free market to work. To bolster his credibility, he points to his success as CEO of Bain Capital. Romney led that company to become one of the largest and most successful private equity investment firms in the nation.

Many of his supporters have been able to look past the fact that he consistently raised taxes and pioneered Obamacare in Massachusetts because of this private sector success. They echo Romney’s argument that “the government should be run like a business” and believe that only a proven, successful businessman can do the job.

There are two problems here. The first is that history has already shown that successful businessmen are terrible for the free market whenever they get anywhere near government power. The second is that government cannot ever be run like a business. Its very nature makes that utterly impossible.

Regarding the first problem, one need only study the 19th century. If you don’t like the progressive movement, you can thank the 19^th century Republican Party for creating the conditions that led to its birth.

The entire period is a record of big business getting together with government to intervene into the free market. Always under the pretense of protecting consumers, the true purpose of these interventions was limiting or eliminating competition for connected companies.

For example, Republicans wrote and passed the Sherman Anti—Trust Act. Standard Oil’s competitors were unable to deliver similar quality oil at the same price, so they went to the government for help. They successfully broke up a company that at the time the Act was passed had over 300 competitors and had lowered its prices for decades. Why? So that they could survive selling their oil at higher prices.

John D. Rockefeller, founder and chairman of Standard Oil, learned from this experience. Contrary to popular myth, Rockefeller was not a robber baron in the oil business. Like Romney, he had achieved his success honestly in the market through reinvestment, voluntary contracts, and his commitment that ““we are refining oil for the poor man and he must have it cheap and good.”[1]

However, when he got into banking, his strategy was different. Having seen the advantages of having government as a partner, Rockefeller made sure that he was well-represented at the secret meetings held on Jekyll Island to create the Federal Reserve System.

Pitched as a consumer protection against bank instability, it set up a government cartel that controls the money supply, interest rates, and most banking activity in general. Free market economists cite the Federal Reserve System as the chief cause of economic booms and busts, including those that led to the Great Depression and the 2008 housing crisis.

Railroads provide another example. 19^th century government-subsidized railroads were plagued by fraud, waste, and recurring bankruptcies, while James J. Hill’s non-subsidized Great Northern Railroad operated profitably. Unable to compete, his subsidized competitors persuaded the government to pass the Interstate Commerce Act of 1887 and the Hepburn Act of 1906. As Thomas Dilorenzo observes, “What these two federal laws did was to outlaw Hill’s price cutting by forcing railroads to charge everyone the same high rates. This was all done in the name of consumer protection, giving it an Orwellian aura.”[2]

Romney’s economic policy as laid out on his issues page continues in the interventionist tradition. According to Romney, “History shows that the United States has moved forward in astonishing ways thanks to national investment in basic research and advanced technology.” He must read the same history books as Barack Obama. True proponents of free markets argue that entrepreneurs have moved the United States forward despite government intervention, not because of it.

Romney makes the distinction of “investing” in basic research rather than “politically favored approaches” to energy solutions. However, basic research is just another investment that should be made by private capital in the hope 0f profits, not by government for “the common good.” The latter is just more of Barack Obama’s collectivism repackaged. It will yield similar results: more bridges to nowhere, bankruptcies, and waste.

Despite the popular conservative misconception, government cannot be run like a business. Government simply does not exist under the same conditions as private firms. It does not receive its money voluntarily from its “customers.” The ability of customers to choose not to buy is the driving force behind all market innovation and efficiency. Private companies are not owned and run by more noble creatures. They are simply under conditions that force them to innovate and control costs in order to survive.

Contrary to the arguments made by Romney, Santorum, and Gingrich, there is only one role for government in a free market economy: to protect private property rights and enforce contracts. Regardless of good intentions, anything else the government does destroys the market. Only Ron Paul understands this. If you truly believe in free markets, he is your choice for president.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

[1] Folsom, Burton, Jr. John D. Rockefeller and His Enemies from The Freeman https://www.fee.org/pdf/the-freeman/0805FreemanFolsom.pdf.

[2] Dilorenzo, Thomas How Capitalism Saved America Three Rivers Press New York 2004 pg. 120

To the People of Texas: Concerning the Republican Presidential Primary

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It is no accident that so many of the books and movies about the Old West are set in Texas. There is something about Texas that stirs the soul. It is the yearning for freedom.

From before its birth as a republic or a state within this union, Texas has been a place where people have gone to be free. As an isolated state in the Mexican republic, Texas provided a sanctuary for all who wished to live their lives without interference from a distant capital. When the Mexican government attempted to exert centralized, despotic power over your ancestors, they fought with Santa Anna and the federalists. When that general later repudiated liberty and betrayed the Texans, they stood against him and won their freedom again.

Americans have always thought of Texas as an independent state that only reluctantly joined the union, with one foot out the door ever since. It is not that Texans are unpatriotic. On the contrary, Texas is the last place in America where the principle of federalism still seems to live. None doubt that Texas will support and defend her fellow states. However, Americans have always fondly imagined Texas’ stance towards the federal government to be, “Don’t push us too far or we’ll leave. We’re quite capable of taking care of ourselves.”

In an age where centralized power has reached into every aspect of our lives, only Texas exudes a spirit of resistance. When Americans think of a well-armed, independent populace, they invariably think of Texans. If the federal juggernaut is ever to be checked, who better to lead?

The limits on government power have been under attack since the birth of the republic. Now they are all but gone. The government no longer protects your life. It claims the power to kill you without trial. It no longer protects your property, but loots it to fund its failed social programs and foreign adventures. Worst of all, it no longer recognizes your God-given right to liberty. It believes that it can tell Texans what they can eat, what they can drink, how they must run their businesses, what they can and cannot do on their own property, and even what they can think.

Sadly, most Americans have forgotten how abhorrent these ideas are. Many of us like to think that Texans have not forgotten. Have you? You have an opportunity to answer that question during this election year. There is one man running for president that opposes everything that is wrong with America. It is no mistake that he comes from Texas.

For Texas Republicans, every election must bring back the sting of Santa Anna’s betrayal. Republican politicians are elected specifically to cut the size and scope of government. They never do. The Democratic Party openly admits that it seeks to expand government at all levels. At least they are honest. The Republicans claim to oppose that agenda, but have expanded government whenever they have been in power.

This election year is no different. Certainly, Barack Obama makes no promises to shrink the government. He believes that all economic growth originates from some sort of government intervention. He believes that the purpose of government is to redistribute wealth. He opposes the basic ideals that made America great. He makes no secret of this. At least we know where he stands.

It is the Republican candidates that represent the potential for another betrayal. As usual, they say that they intend to cut federal spending and power, but they will not name one specific program that they will cut. None of them, that is, except Ron Paul.

Congressman Paul has stood alone for decades against the unchecked growth of government and is the only candidate committing to cut it. He has already published a budget that cuts $1 trillion from the federal budget during his first year as president. It eliminates five federal departments, not only saving money, but reestablishing the principle that the federal government has no business regulating education, housing, commerce, energy, or “the interior.” These are all powers properly left to the states or to the people. His opponents do not make similar promises because they do not truly believe in these principles.

You may have been told that Ron Paul is “unelectable” because of his foreign policy. What is that policy? It is that only the American people may decide to go to war, through their elected representatives in Congress. Ron Paul insists that no president or general may usurp that power. If war is truly necessary, then there should be a debate in the Congress and a declaration of war. When America followed this constitutional process, we won wars. Since America has abandoned it, we have never really won a war.

We instead send our soldiers to far-off lands with no definition of victory. Their hands are tied with confusing rules of engagement that prevent them from winning and allow the wars to drag on. This benefits those who profit from war, but not those who give their lives or are forced to pay. How much longer will we go on like this? Sixty years later, what is the U.S. military’s mission in Korea and when will it end? Germany? Japan?

Ron Paul will end those missions now and recommit our military to defending this country. Most importantly, if war should comes during his presidency, he will have it properly declared by Congress and will allow our military to win it. Do you truly believe that any of the other candidates will do likewise? Make no mistake, Ron Paul is the only president that will win the next war.

Our nation is on the verge of socio-economic collapse. Every reasonable person recognizes that the federal government is the root of the problem. Who will stand up and oppose it? Every media outlet is arranged against Ron Paul and anyone else that suggests pushing back. Americans are bombarded daily with propaganda supporting the status quo. The Republican Party leadership doesn’t oppose it at all.

Ron Paul is our last hope. A vote for anyone else is a vote for more of what has led us here. Time is running out on the option to reverse course. Courageous people in many states have already cast their votes for liberty in large numbers, but they have not yet given Ron Paul a victory.

You can change that when you hold the Texas Republican Primary. You will have an opportunity to strike a blow for freedom. Texas commands 155 delegates. A Ron Paul win in Texas can prevent another big government elitist from clinching the Republican nomination. Most importantly, it sends a message that a large and prominent state has rejected the unnatural form of government that we have adopted. It says to the federal government what our forefathers once famously said to the British, “This far shall you go and no farther.”

It is the responsibility of every individual to defend his or her own liberty. It is the responsibility of every state government to defend the limits on federal power. Texas cannot do it for the other states, but she can lead by example. The stand against tyranny must begin somewhere. If not in Texas, where else? If even Texas does not resist, who will?

There is a yearning for freedom within every American heart. Ron Paul has reawakened it in millions. The forces of tyranny recognize this and are uniformly aligned against him. They despise freedom and independence. They thrive on dependence and control. One side is going to win. Freedom can only prevail with Texas leading the way. Do not let us down. Give Ron Paul a victory in the Texas Republican primary.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

What is Your Fair Share?

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“For were the impulses of conscience clear, uniform, and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest…”

– Thomas Paine, Common Sense (1776)

There were not many surprises in President Obama’s 2012 state of the union address on Tuesday. He touted what he claims are the accomplishments of his administration and pushed his left-leaning economic agenda. For the president, all economic growth has its roots in some sort of government intervention, including “help financing a new plant, equipment, or training for new workers,” giving “community colleges the resources they need to become community career centers,” or trying to “spur energy innovation with new incentives.” Of course, further expanding a government that already spends about 50% more than it collects in taxes can only be accomplished one way – by collecting a lot more taxes.

To this end, the president resorted to the perennial liberal/progressive mantra that everyone “pay their fair share.” Obama used this term three times during the speech in regard to taxes. As even many of the Republican presidential candidates seem to buy into it, the president was also unable to resist the urge to promote the latest left-wing myth that millionaires like Mitt Romney pay less in taxes than their secretaries. This is complete nonsense, of course, but it is effective in eliciting the appropriate outrage from people who don’t stop to do either some simple math or even a little critical thinking.

For the president, there doesn’t seem to be a ceiling on what anyone’s fair share might be. However, he does have a clearly defined floor. “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.” Exactly why that number is “fair” or even the millionaire’s “share” is somewhat difficult to determine. Neither does Obama answer the question that should logically follow. If you make under $1 million per year, what is your fair share in taxes?

Now, in any other situation where a group of people agrees to pool its money to buy something, this is a very easy question to answer. If you and three friends decide to go in on a large pizza, each of you will pay 1/4 of the cost. Assuming it is a typical pie, it will be cut into eight pieces and each of you will eat two. Thus, everyone has received an equal amount of the pizza and each has paid his fair share of the cost.

Of course, before anyone determines your fair share of the cost, you would be asked if you want pizza in the first place. In all such arrangements between human beings, other than government, you have a choice of whether you want to buy or not. Perhaps you’d like to eat something else. Perhaps you’re not hungry. You can always allow the other three to buy pizza and provide for your own meal yourself.

Not so with government. Not only can the other three take a vote and force you to buy part of this pizza, but they add insult to injury by proclaiming that their vote represented your consent to buy it. With this dubious consent in hand, they then decide what your fair share of the cost of the pizza will be, regardless of how the slices are distributed. If you have acquired too much wealth, even honestly, then you might find yourself paying for 3/4 of the pizza and only getting one slice in return. Once voluntary consent is eliminated and force is put in its place, it becomes difficult to use words like “fair” and “equitable” without committing grave offenses against the language.

Putting that aside for the moment, let’s assume that 315 million people have actually all agreed to constitute a government and pool their money to pay for its services. Before determining what anyone’s fair share of the cost would be, we first have to determine what services the government can offer. It would not make any sense for the government to offer services that only benefit one or two people, because all 315 million are paying. No, the only legitimate services that the government could offer would be those that contributed to the “general welfare.”

This widely abused term is not anywhere near as mysterious as it is made out to be. Promoting the general welfare is offering only those services that benefit every member of society equally. For example, if the government devotes resources to a military establishment to protect the nation’s borders, it is promoting the general welfare. Regardless of how effective the service might be, every member of society within the borders is benefitting equally from it. From the Wall Street financier to the general contractor to the grocery clerk to the homeless man, all are receiving equal protection from foreign invaders. Thus, a defensive military establishment is a service that promotes the general welfare and therefore could be offered fairly under such an arrangement.

Similarly, a system of law enforcement and courts would also promote the general welfare. If the person or property of one member of society were invaded by another, then employees of this agency would investigate the incident, determine if a tort or crime had been committed, and make a determination on what penalty or restitution should be paid by the defendant. This, too, would benefit all members of the society equally. Whether you were a Wall Street financier whose partner had embezzled millions or a taxi driver whose modest home had been burglarized, you are equally protected by laws against theft.

Notice also that the cost of providing these services is the same for each member of society. Obviously, it costs no more for an army to defend the financier from an invading army than it does to defend the taxi driver. The army defends against the invader for all within the borders at one cost. Similarly, it costs no more to provide a police officer, a judge, a jury, etc. for the financier than it does for the taxi driver. The only exception is defense attorney, which is provided for a defendant who cannot afford one, but this is a minute percentage of the entire cost.

In short, any defense of life, liberty, and property, whether from foreign invasion or aggression by another member of society, is a service that benefits the general welfare. It benefits all members of society equally and costs relatively the same to provide to all members of society.

Let us now consider some services that the government offers that do not promote the general welfare. Healthcare is obviously one. First, all members of society do not benefit equally when the govenrment provides healthcare. For example, Medicare only benefits people over 65 yeras of age and disabled people under 65. Not only does the program not benefit all members of society equally, but it actually does not benefit those paying for it at all, while those receiving the benefits (those over 65 and the disabled) do not pay at all. Recall the pizza example. Imagine if you had to pay for a whole pizza that your three friends ate, and then had to pay additional monies to provide for your own meal. Medicare, Medicaid, or other government programs for specific groups are really no different.

In addition, government medical care can never cost the same to provide to all members of society, as security services do. Some people will be sicker than others, either through misfortune or their own lifestyle choices. Some will need surgeries or chemotherapy or other expensive care. Some will need relatively little care. It is not an exaggeration to say that there may be 315 million different costs to provide healthcare to 315 million different people.

Education is another service that does not promote the general welfare. When the govenrment provides education, it is of absolutely no benefit to anyone that is not in school or does not have children in school. Neither does it benefit parents who homeschool their children or enroll them in private schools or childless adults who all must pay for government education. Some of the people who benefit do pay part of the expense, but obviously this does not constitute “fairness.” It is no different than if four friends all paid for 1/4 of the pizza, but two of them ate it all. Certainly, the other two had no “fair share” for any of the pizza at all. As with healthcare, the cost of education is also going to be different for different people. An education in medicine has a different cost than an education in engineering or art.

In looking at the federal government’s budget, one can see that the overwhelming majority of the money spent is not spent for the general welfare. Almost all of it is collected from one group of people and spent for the benefit of others. The only services provided by the federal government that truly promote the general welfare are those that concern defense of the borders and defense of person and property related to interstate commerce. At the state level, only defense of person and property within the state promotes the general welfare. All other services represent a forced redistribution of wealth from one person or group to another. When anyone other than the government engages in a “forced redistribution of wealth,” we call it “armed robbery.”

It should also be noted that even the “Defense” portion of the federal budget largely does not promote the general welfare. Only that portion necessary to defend U.S. citizens from aggression by foreign nations does. Those expenditures related to defending people in other countries or which are unnecessary for security not only do not promote the general welfare, they do not benefit anyone within the United States at all – except for those military contractors and financiers that are fortunate enough to profit from these activities.

There is also frequent confusion about government services commonly referred to as “infrastructure.” It is argued by some that if the government builds a road that is accessible to everyone, it promotes the general welfare. However, this argument does not hold up to scrutiny. If federal money is used to build a light rail system in Florida, it is going to benefit people who live or travel frequently in Florida much more than people who do not. Certainly, a citizen in California or Montana is unlikely to ever even see that railroad, much less benefit from it equally. Who would not agree that his fair share of this railroad is zero?

Even at the local level, a road or a bridge does not benefit every member of society equally. The local businessman whose products are more cheaply transported is going to benefit far more than the occasional traveler that might use the road for convenience. Yet, when the government builds the road, both are forced to pay equally. Furthermore, since the businessman is running heavier vehicles over the road with much greater frequency than the occasional traveler, it costs more in maintenance to provide this service to the businessman than to others. Obviously, the road or bridge does not promote the general welfare even at the local level.

So, what is your fair share in taxes? The answer is that you owe an equal share of those services provided by the government that promote the general welfare. Those services benefit you and everyone else equally. However, examination of any government budget, at the federal, state, or local level demonstrates that these services are now a tiny fraction of overall spending. A quick look at Florida’s budget summary reveals that about 8.7% of government spending promotes the general welfare. That $4.9 million in expense should be born by every citizen of Florida equally. The other $51.4 million does not promote the general welfare and should not be provided by the government at all.

An examination of the federal government’s budget for 2012 yields similar results. Once you subtract services that do no promote the general welfare, like education, healthcare, social security, and that part of the defense budget that is devoted to purposes other than protecting U.S. citizens from foreign aggression, you are left with a tiny fraction of overall spending.

For services that promote the general welfare, there is a finite cost. It does not vary depending upon how productive you are, so your fair share of that cost certainly can’t be a percentage of your income. Logically, the way to determine your fair share is to divide the total cost of services that promote the general welfare by the total population. If you have no dependents, then the quotient is your fair share. If you have dependents, then you simply multiply that quotient by the sum of your dependents and you. When you do the math, you’ll find that your fair share in taxes is a very small amount. As Thomas Paine pointed out, it is that tiny portion of your property necessary “to furnish means for the protection of the rest.” It would be easily paid by even a person of modest income. It would not require an income tax, as history before 1913 demonstrates.

For those services that the government provides to other people, your fair share is zero. However, the government routinely forces some people to pay more than their fair share and allows others to pay nothing at all. It generally collects the most in taxes from people who receive the least in benefits, which is the predictable result of offering services that do not promote the general welfare. Now, President Obama wants some people to pay even more. He and the Congress have the power, but that does not make it right. And please, President Obama, don’t insult our intelligence by calling it “fair.”

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Why a Debt Default Would Be Wonderful

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While it is likely the two parties in Congress will reach a deal before the August 2 deadline, I can’t help reflecting on how wonderful it would be if they didn’t. While Congressman Ron Paul has correctly pointed out the government has already defaulted at least three different times in its history, and continues to default every time it prints new money, it is not quite the same as an “on-the-books” failure to make a timely payment. That is exactly what America needs.

Politicians, mainstream economists, and the media tell us a U.S. government debt default would be catastrophic. Treasury bonds would be downgraded, interest rates would soar, and the massive government spending that has supposedly fueled the present (jobless) recovery would be severely curtailed, plunging the U.S. and possibly the world back into a deep recession.

Perhaps that is true. Nevertheless, a debt default by the federal government would still be a blessing, for several reasons.

First, one must remember that all government spending represents a redistribution of wealth (what we regular folks call “stealing”). The government forcibly confiscates money from those who have earned it and spends it for the benefit of someone else. The most insidious way the government does this is by borrowing. When it borrows, it is confiscating money from people in the future – some of whom are not yet even born – to hand out to special interest supporters today. To the extent it would prevent or decrease this, a default would result in a more just society.

However, even if one doesn’t care about justice or property rights, a default would help correct the malinvestment that has caused this crisis in the first place. As I’ve said before, the entire U.S. economy is really one, huge bubble of misallocated resources, caused by a century of government intervention. The government’s backing of mortgages, together with monetary inflation by the Federal Reserve, were the primary causes of the housing bubble. This same dynamic exists in almost every sector of the economy.

The government also backs student loans for college. Just like it did to the housing industry, this government guarantee has inflated prices in higher education far beyond what could be supported by real demand. That in turn has led to the creation of millions of jobs in the education sector that only exist because the government subsidizes them. When the government funds are no longer there, the price of education will plummet, just as housing prices did, and all of those people will be out of work.

Healthcare is another sector with all of the same intervention-related problems. Government subsidies create artificial demand, inflating the price and misallocating resources to the healthcare sector. The healthcare industry is not forced to innovate in terms of delivering its services in more efficient ways because customers are forced to buy its products,

If you doubt this, just withhold the Medicare portion of your payroll taxes and see what happens.

This also creates jobs in the healthcare sector which are not supported by natural market forces. When the government can no longer subsidize them, those jobs will go away, just as they did in housing and education.

Banking, research, agriculture, energy, automobile manufacturing – there is not one sector where government is not overriding the voluntary transactions market participants would otherwise engage in. Wherever the government is spending taxpayer money, it is overriding a previous choice by taxpayers not to purchase that product. As F.A. Hayek observed in The Road to Serfdom, the government has never and can never make better choices than millions of market participants acting in their own self-interest. They simply lack the information necessary to do so.

Therefore, wherever the government is spending money to try to boost some aggregate statistic, it is making a problem bigger. If government spending is creating jobs, they are not real jobs. A real job is a voluntary contract between a buyer of services (an employer) and a seller of services (an employee). If that job is created because of government spending, a third party is introduced into the transaction who is not acting voluntarily.

Government-created jobs force taxpayers to purchase services from employees because it is not profitable for the employers in that sector to purchase them. Forcing taxpayers to purchase them doesn’t make those jobs any more profitable. It just depletes the capital available to create profitable jobs elsewhere.

The prospect of tens of millions more people unemployed may seem frightening, but that day is coming regardless of what politicians do. Economic laws are like the laws of nature. They will assert themselves in the end. Any job that requires the government to borrow more money to subsidize it is also a job that depends upon the lenders continuing to lend. As we have seen in recent Treasury bond auctions, those days are coming to an end. Raising the statutory debt ceiling only allows more phony jobs to be created, setting up more employees for the painful correction.

The most important reason a debt default will be beneficial is a philosophic one. It will force a complete paradigm shift in the way Americans think about the role of government. For a century, there has been no area of life that some special interest has not appealed to government to manage or subsidize. From the way we conduct commerce to the way we make personal decisions on food or healthcare to the way we coexist with our neighbors in other countries, nothing has been off-limits.

Complacency about our liberty has been one reason. The other has been the perception of infinite financial resources. The great wealth the United States generated in freer days provided a tax base and borrowing collateral that has always been perceived as unlimited. A debt default would shatter that foolish perception.

The default would be a bucket of cold water in the faces of a drowsy and compliant populace. It would wake people up to the reality Thomas Paine was aware of over 200 years ago, when he wrote that government “is at best, a necessary evil.” People would realize the government doesn’t “have our back,” other than to stick a gun in it to loot our liberty and wealth. We would no longer hear that horrid refrain from media pundits after some new government incursion or heist: “Well, the government had to do something.”

Instead, we would hear the resigned chorus, “Well, the government couldn’t do anything.” And perhaps, in some glorious, enlightened future, we’ll hear “The government shouldn’t do anything.”

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The Three Types of Government Spending

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Any objection whatsoever to some new, tax-funded government program elicits a consistent response from liberals or progressives. “You just don’t want to pay your fair share,” or “I guess we won’t see you driving on any of those government roads or calling the government police or fire departments.” The underlying assumption is that taxation is an all or nothing proposition. Either there is nothing that the government can collect taxes for or there is nothing that the government cannot collect taxes for. There are no principles upon which to base an answer to the question, “Is this a legitimate function of government?”

While there are probably thousands of different services that governments spend money on, they can generally be divided into three broad categories: security, public services, and wealth redistribution. Libertarians[1] argue that the only legitimate government spending is on security. Conservatives generally approve of security and some public services with their rhetoric while engaging in all three types of spending when in public office. Liberals generally endorse all three types of spending with both their rhetoric and their actions while in public office.

“Security” includes all government functions which attempt to defend citizens from aggression against their rights by other human beings. These would include the military, various police forces, and the civil and criminal courts. These are the functions of government whose purpose is to secure the individual rights of life, liberty, property, etc.

It is important to remember that even if these are legitimate functions of government, it does not mean that they cannot be abused. For example, a small suburban village in a low-crime area may not need more than the county sheriff for a police force, but may instead bear a tax burden of village, town, county, state, and even federal police forces. However, these debates revolve around how efficiently the services are being provided, not whether they should be provided by the government at all.

“Public services” generally refers to services provided to all members of society. What makes a service a “public service” is that it can be reasonably assumed that every member of the society has an equal opportunity to utilize it. Examples include roads, bridges, public libraries, garbage collection services, and fire departments. Libertarians argue that these are goods and services that the private sector can provide. Their objection to providing them with tax dollars is that those who do not consent to purchase them are still forced to pay. While this is also true of security services, libertarians acquiesce to those on the assumption that it would be impossible to exercise property rights without a government in place to defend them.

Certainly, a bridge between a new suburb and the city may improve commerce for the entire city. However, it is not necessary to protect anyone’s rights. Therefore, libertarians argue that those who want to build the bridge should provide the capital for it themselves and are perfectly within their rights to charge a fee to those who wish to use the bridge. Conservatives have traditionally argued that these services can be funded by the government and provided by private corporations under government contracts. Liberals generally support public services as well, although they sometimes object to them being provided by private firms.

Like security services, public services are prone to abuse and corruption, even if one accepts that they are legitimate functions of government. Public funds are often wasted on services that are not needed or services that are poorly rendered because they are provided by politically-connected government employees or private firms, rather than by the most qualified. Consider the “bridges to nowhere,” the roadwork construction projects that never end, or the multitude of scandals where it was discovered that $500 was spent on a single nail or some other gross abuse of public funds occurred.

The third category of government spending is wealth redistribution. Wealth redistribution collects taxes from one group of people in order to provide services to another group. What makes this type of government spending different from public services is the fact that the goods or services provided do not benefit all members of society equally. For example, health benefits under Medicaid are paid for by all taxpayers but are only available to people whose income is under a defined eligibility level. Thus, those funds are literally taken from one group and redistributed to another. Both libertarians and conservatives argue that this is nothing more than legalized theft, although conservatives have often led or acquiesced to expansion of this type of spending once in office. President Bush’s expansion of Medicare is one of the most recent examples. Liberals and progressives generally support this type of spending, arguing that it is each person’s moral responsibility to “contribute.”

In order to have an informed debate about a new government program, one must identify which category the proposed program belongs in. Too often the distinctions between these categories are blurred by both critics and proponents. Most often, a program that would properly be categorized as wealth redistribution is represented as a public service in an effort to persuade those that must pay for it that it is their civic duty to do so.

Read the rest at Euro Pacific Capital…

The Constitution Does Not Protect Our Property

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>The U.S. Constitution is widely believed to have been written to limit the powers of the federal government and protect the rights of its citizens. Inexplicably, this belief is held even by those who acknowledge that the constitutional convention was called for the express purpose of expanding the powers of the federal government, supposedly because the government under the Articles of Confederation was too weak. That this was the purpose of the convention is not a disputed fact. Nevertheless, most people who care at all about the Constitution continue to believe and promote the “Constitution as protector of rights” myth.

To the extent that the Constitution enumerates certain powers for the federal government, with all other powers assumed to be excluded, it does set some limits on government. When one includes the first ten amendments of the Constitution, it also protects certain rights. Indeed, the ninth amendment makes the very important point that the specific protections of certain rights does not in any way deny the existence of others, while the tenth amendment makes explicit the implied limitation to enumerated powers in the Constitution itself. At first glance, the so-called “Bill of Rights” seems to confine government power within an airtight bottle, rendering it incapable of becoming a violator of rights instead of protector of them.

However, this theory does not hold up well under closer examination. To begin with, the Constitution itself does not protect a single right other than habeas corpus, and that comes with a built-in exception. What the Constitution does do is grant powers, and not just to a representative body, as the Articles of Confederation did, but to three separate branches. That leaves it up to the Bill of Rights to serve the purpose of protecting our rights. Generally, those ten amendments protect our rights under extraordinary circumstances, but not under ordinary circumstances. More specifically, the Bill of Rights provides protections for the individual during situations of direct conflict with the federal government, such as when one is accused or convicted of a crime, when one is sued, on the occasion of troops being stationed in residential areas, or when one speaks out against the government or petitions it for redress of grievances.

Make no mistake, these protections are vital and have provided protections for the people against government abuse of power many times in U.S. history. However, they have proven ineffective against the slow, deliberate growth of government power under ordinary circumstances, when the specific conditions described in those amendments do not exist. This is primarily due to the absence of protection, either in the Constitution or in any subsequent amendment, of the most important right of all: property.

By “property,” I do not mean exclusively or even primarily land ownership, although land ownership is one form of property. By “property,” I mean all that an individual rightfully owns, including his mind, body, labor, and the fruits of his labor. It is specifically the right to the fruits of one’s labor that the Constitution fails entirely to protect. In fact, it makes no attempt to do so whatsoever.

In the Constitution itself, the word “property” appears only once, and that is in reference to property owned by the federal government (an inauspicious start). Nowhere does it make any mention of property owned by the citizens.

The document does grant the federal government the power to tax “to pay the Debts and provide for the common defense and the general welfare of the United States.” This is a strikingly unlimited scope for which the federal government may tax its citizens. Arguments that taxes may only be collected to underwrite the subsequently enumerated powers have been struck down. Sadly, those decisions have probably been correct. While the power of the Congress to pass laws is explicitly limited to those “necessary and proper for carrying into Execution the foregoing Powers,” no such language binds the power to tax. The fact that the explicit limitation exists for lawmaking (which Congress ignores anyway) but not for taxation lends further weight to the argument that the Constitution grants Congress unlimited power to tax its citizens.

One can certainly make the argument that in 1789, the term “general welfare” would have been interpreted much differently than it is today. Indeed, one might assume that the term “general welfare” meant the general protection of each individual’s rights. Perhaps that is what many of the founders believed at the convention. However, it is clear that Alexander Hamilton and his Federalists, the driving force behind calling the convention, had far different ideas about what the term “general welfare” meant. Remember that for Hamilton, the purpose of government was not the protection of rights, but the realization of “national greatness.” This could only be achieved at the expense of individual rights, primarily property rights.

So, the Constitution itself grants Congress unlimited power to tax and does not even mention, much less protect, the individual right to keep the fruits of one’s labor. Certainly the Bill of Rights addresses this deficiency, doesn’t it?

It does not. Like the Constitution itself, the Bill of Rights is virtually silent on the central right of property. Out of all ten amendments, the word “property” appears in only one of them:

“No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

Unlike the congressional power to tax granted in the Constitution, the constitutional protections codified in the Fifth Amendment are severely limited to specific, extraordinary circumstances. The entire Fifth Amendment is set in the context of criminal law, granting certain protections to the accused and/or convicted. The phrase “due process of law” is a specific legal term that refers to those accused of a crime being given notice of the charges, opportunity to face their accusers, call witnesses in their defense, etc. This was obviously the intent of this protection of property, rather than a general protection of property rights against taxation.

Even if one discards the clear intention of this clause of the Fifth Amendment and interprets “due process of law” more broadly, the amendment offers no more protection of property than if one interprets the clause narrowly. Since the power to tax is an enumerated power, Congress would be following due process of law simply by levying the tax in the first place.

The last clause of the Fifth Amendment, regarding property taken “for public use,” is similarly limited to extraordinary circumstances. This clause undoubtedly refers to eminent domain, which is a grievous abuse of property rights, but certainly not one that affects a large percentage of the population. Even here, no right is protected. The clause merely requires the government to give the victim “just compensation.” There is no mention of the primary component of the right of property, consent.

Furthermore, there is no mention of how “just compensation” is to be determined, although history has shown that the government itself determines what compensation is just arbitrarily. In a free society, the value of property is determined by the price at which the owner is willing to exchange it. However, since there is no requirement here of the owner’s consent, no such price determination can occur.

As for the remaining protections of property in the Constitution and Bill of Rights, there are none. These two phrases, protecting property under only the most extraordinary circumstances are the length and breadth of the Constitution’s involvement with this most fundamental right. It is this deficiency that has allowed the federal government to grow into the monster that it is, concerned with virtually nothing but the redistribution of wealth.

If you believe the official myth about the Constitution, this might seem shocking. After all, the document was drafted by the same people that had seceded from their nation and fought a long and bloody war primarily to defend their right to keep the fruits of their labor. How could they draft a document to recreate their government, which they said only existed to secure their rights, and not only fail to secure the most important right, but actually empower their government to violate it with impunity? Certainly this was history’s most colossal error.

However, when you consider the political platform of the Federalists, which included corporate welfare, monetary inflation, deficit spending, government debt, and militarism, all designed to maintain the wealth and power of a privileged elite at the expense of the rest of the citizenry, the unlimited power to tax and lack of protection of property seem less like error and more like deliberate intention.

Whenever the subject of “constitutional rights” (a problematic term itself) comes up, people reflexively refer to the right of free speech. This is an important right, and one defended across the political spectrum. However, free speech, freedom of the press, and the other rights protected by the Bill of Rights, without property rights, are inconsequential – the mere window dressing of liberty. It is property that enables one to determine the course of one’s own life. Without it, the right to life is no right at all, but rather a privilege granted by those who own your labor.

George W. Bush was an enthusiastic supporter of the right of “free speech.” During a town hall meeting, an average American who opposed Bush’s policies rose and began hurling insults at the president, eliciting boos from the Bush-friendly audience. Bush reprimanded the crowd, reminding them that this man had a right to speak his mind, even if they did not like what he had to say. It was not the only time that he stood up for free speech. This was no accident. A government that has the unlimited power to seize the property of its citizens can afford to be magnanimous when it comes to free speech. Yet, for the citizen who no longer owns the fruits of his own labor, the right to complain makes him no less a slave.

>The Government Bubble Heads for a Blow-Off Top

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>I have a friend that tends to express his ideas about everything in the jargon of a securities trader. Of course, this is probably because he has been a very successful trader, both in bull and bear markets, for many years. “Every trend in history, even liberty, can be charted like a stock,” he has often observed. I tend to agree.

As any trader will tell you, bull markets do not go straight up and bear markets do not go straight down. Rather, they tend to meander in the direction that they are headed. During a long-term bull market, a trend will have major pull-backs and long periods of consolidation. It is the experienced trader that knows how to “buy low and sell high,” taking advantage of the back and forth action of a stock or a sector on its journey. However, even wiser is the investor that can spot the trend at the beginning and keep buying lows without having to attempt to time the market and sell at all. The legendary Jim Rogers has often said that he is “the world’s worst short-term trader.” He would rather buy something that he can own forever than buy with the intention of having to sell.

Gold has been the most spectacular bull market over the past decade. Like all trends, it had periods of dramatic rise, followed by sharp pullbacks that gave back a portion of the gains, and then long periods of consolidation. Once a consolidation was over, another dramatic rise in price followed. The first run began at the beginning of the decade, with gold selling under $300 per ounce. It ran up to over $700 per ounce in 2006 before pulling back sharply under $600. The price then consolidated there for an entire year before the next leg up began. That second leg ran all of the way over $1,000 per ounce before pulling back to the low $700’s. Again, there was a long consolidation before this latest run, which will take gold we know not where.

All of the movements in the price have explainable reasons. When the fundamentals are stronger than the actual price of the security or commodity, investors begin buying. Once the price starts to move up, traders begin wading in to make profits on the movement of the price, both up and down. At any given time, there are those who are long and those who are short. Contrary to the nonsense you hear from government officials and their kept economists, short sellers play a vital role in keeping the market healthy. When a stock, commodity, or sector beings to fall in price, short sellers help stabilize that price because they have to buy the stock that they sold short to cover their short sales.

You will often hear the wisest of investors say that a trend is about to reverse when there is no longer any disagreement about it. When everyone is positive on a stock or a bull market, it is about to go down. When everyone is negative, it is about to make a run up. When all of society agreed that the NASDAQ would never go down – when every conversation in every coffee shop, supermarket, or dinner party revolved around the wonderful opportunities in technology stocks, wise investors knew it was time to get out.

Of course, this is not some sort of market magic or voodoo. It is simple cause and effect. When there are few sellers in a market and many buyers, the price is going to be inflated far beyond its value. From an opposite standpoint, when short sellers are forced out of the market in a “short squeeze,” there is now nothing to stop the price from falling precipitously once it starts to fall. With no short sellers covering their shorts, the price falls like a stone. Thus, at the end of long bull market, a bubble usually develops, characterized by a final, parabolic “blow off top,” followed by an equally dramatic drop in price.

The past 100 years has been a bull market for government. While the seeds of the run were sown in the mid-19th century, the bull market in government really began at the turn of the 20th century. The first signs of the bull could be spotted as early as the (Teddy) Roosevelt administration, but the real advances came under Woodrow Wilson. The income tax, the Federal Reserve, and the 17th Amendment were advances in government that made gold’s move from $275 to $700 look tame.

There was then a period of consolidation during the so-called Roaring Twenties. It was not so much a pull-back of government as a slow-down in the pace of its growth. Under three Republican presidents, the government bull market consolidated as Americans convinced themselves that they had restored a free market (because the Republicans said they did, despite their actual support of big government fundamentals).

The next big move came during the Great Depression. While the stock market and the real economy went south, government went on another tear as FDR fully instituted the modern welfare state, the fascist regulatory structure, and took America to war. After 16 years of absolute misery, even the most enthusiastic government bull must have thought it was time for a pullback. It was brief, but it came.

Americans again elected a Republican president in the 1950’s and convinced themselves that they had restored the American system and rejected the big government philosophy of FDR and his liberals. However, this, too, was only another consolidation. In actuality, it was Eisenhower that paved the way for LBJ’s Great Society by creating the Department of Health, Education, and Welfare (now the Department of Health and Human Services). The 1950’s are fondly remembered as a period of (mostly) peace and prosperity for America. It was only another consolidation period for government’s century-long bull run.

The next great move came during the 1960’s, when LBJ again lead a tremendous run up for government. Medicare and Medicaid, the other two entitlement monsters that will eventually combine with Social Security to bankrupt the United States, were born during this fabulous period for big government. The move ran right through a two-term Republican presidency (counting Ford’s mop-up after Nixon’s resignation) and into the Carter administration.

Most bull markets have two legs. Some have three, but usually no more than that. It seemed like that axiom would hold true for government as Ronald Reagan gave his first inaugural address. “In this crisis,” he told us, “government is not the solution to our problems – government is the problem.” It was the greatest inaugural speech of the 20th century. The government bull market was over. Or so we thought.

We now know that government didn’t get smaller during the Reagan years, but much bigger. However, there was at least a feeling of negativity about government during the Reagan-Bush years that even forced Bill Clinton to pass himself off as a free-market friendly centrist. It was another consolidation period, with a seemingly impossible fourth leg to follow.

We are in the midst of that fourth leg now, as government makes a more precipitous run up than at any time in history. In a few short years, the government will have nationalized the banking, auto, and health care industries. There are no more government bears to be found anywhere, either among Republican or Democratic politicians or (let’s face it) among 99% of the citizenry. Outside of a tiny constituency of libertarians, paleo-conservatives, and anarchists, there are absolutely no non-believers in government left. The rise is accelerating too fast for any protest or community organizing to stop. It’s a short squeeze as the government bull stampedes.

While this might be a terrifying period for anyone remotely interested in living his own life, there is much reason to be hopeful. As most bull markets eventually do, government is experiencing a blow-off top. The curve has bent straight up, with nary a short to be found in any political party or in any bowling alley or church social. Americans have convinced themselves that government either “should” or “must” do something about absolutely everything. We should expect the run to pick up speed, as government invades every aspect of our lives. Never before – not even in the most barbarous ages – has government made such enormous claims upon the life, liberty, or property of its subjects. Medieval serfs were taxed less. Ancient slaves were freer. Not even the brutal Romans killed with such efficiency and on such a scale.

For all of these reasons, it is about to end. With almost uncontested faith in government, its role has expanded so far beyond what it is actually able to deliver that soon we will see a fall that will make the real estate meltdown look like a mild pullback. Having rode the last leg of the move and squeezed out the last of the shorts, government is about to remind everyone that it not only should not be providing what it is attempting to provide, but that it cannot provide it.

At the moment that the whole world has accepted that government will centrally plan all of the economy, take care of its citizens from cradle to grave, and rule a worldwide military empire –all with money that comes from nowhere – at that very moment the age of government will end. The end is going to come fast, too, just like the end of the bull markets in technology stocks and real estate. Ben Bernanke will still be telling government bulls that there is nothing to worry about long past the moment when his time is up. That’s how fast it’s going to be. As in any market, the moment when every bear is gone is the moment that the bull run is over.

This will not be a pleasant experience. No correction ever is. Fortunes will be lost (albeit mostly fortunes dishonestly made), but innocent people will be hurt, too. All of society will come to the realization that government really can’t provide anything, beyond the brute force that is only justified in self defense. It may take a generation to repair the damage. It’s going to be rough.

However, we should remember one thing. When a bubble deflates, the capital that is not destroyed seeks another refuge. When the NASDAQ melted down and the U.S. dollar began to implode, the smart money fled to gold. It will be no different during the bursting of the government bubble. With a precipitous fall in government, there is an equally dramatic rise in its opposite – liberty.

Americans will have to forego the ill-gotten gains provided by government and do with less while they rebuild. That is unavoidable. While the NASDAQ bubble actually started on a real foundation, the fundamentals of the government bubble were never real. It was all an illusion and it is five minutes from ending.

It’s going to be great.

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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