Thursday, May 21, 2009

Government Intervention: A Vision for the Future

“The wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success but to create conditions under which every one will have a better chance to be successful.” (Calvin Coolidge)

Primitive human societies were characterized by the few taking from the many. Modern primitive societies are characterized by the many voting to take the property of the few.

As we have seen in the Middle East, true democracy is not just about majority rule, but an abiding respect for the rights of minorities. Foremost among these rights is the right to property.

What is deeply immature about post-1929 America, is that our government is obsessed with dividing up money through societal wealth transfers rather than with enlarging societal wealth. This response has become a costly habit, one which the rest of the world has broken after its disastrous flirtation with communism. It is also an inherently unstable policy framework.

Taking property from bondholders and giving it to union workers at Chrysler is gangsterism, not government. This idea we have in America that some can win on a long term basis by requiring others to lose is ridiculous. Either we all win, or we all ultimately lose. The UAW thinks it has found a new path. Donate to politicians and abridge fundamental constitutional rights.

America was founded on the proposition that all rights emanate from God in a state of nature, and that no government can abridge those rights, since those rights are dervied from God, not men. In Europe, the idea is that the government decides how much you can keep. We have seen the results—awful, structural, permanent unemployment, even in good times.

No one has the right to take property from one group and to give it to another. Americans may argue that if we vote for such a paradigm, that it is “right”. I ask such polemicists, If we voted to strip a minority group of civil rights, would that be ethical, just because we have voted on it? Why is it automatically ethical to take away people’s property? “Well,” they say, “high taxes are an accepted part of modern life!”.

I ask them, at what point are taxes antithetical to a free society,? At a 50% rate, at a 90% rate? Quite literally, at a 50% rate (local, state and Federal combined in places like New York City) out of every 10 days, for 5 of them, you work for the government. We don’t call it slavery, because in those 5 days, you can do whatever you want.

Was this the intention of the Framers? Can such a situation ever lead to prosperity? Are we so profligate in our bureaucracies that we cannot make provision for the poor without such high taxes? The answer is that a tax rate approaching 50% is not about making provision for the poor, the elderly, or the disabled. That is the great lie of our age. This latest crisis has brought payola out into broad daylight. The money is going to financial institutions, unions, car companies, and hundreds of other groups which have been generous to politicians. Do these entities have a divine right to our money?

The solution is for the government to start doing its job and to protect our rights. Once government is granted the right to dispose of a majority of prosperity with impunity, we cease to live in a free market. Market participants realize that the way to wealth is not through pleasing consumers, but in getting access to the public purse. Shrink the size of that purse and rational behavior will put the focus back on serving people’s needs, not stealing their money,

If the true goal of democratic society is to create prosperity, while educating our children and making provision for the poor, we can probably do so with a 20% flat tax rate, with no deficit spending. However, if the goal is affirmative action for the rich, the stupid, and the greedy combined with a modern empire and with permanent war, 50% will eventually look low. And it will destroy our society, just as surely as the British Empire and Rome collapsed under their own weight.

We must say yes to success and remember the values which made us great. We never wanted to be an empire. Our strength was in understanding, as the Austrian School reminds us, that free enterprise is not a system, but is a spontaneous phenomenon that occurs when people with full human rights are allowed to exchange freely with one another. Children will do it with marbles, unprompted. A keen understanding of mathematical economics will never suffice for a rudimentary knowledge of human nature. As Rev. William John Henry Boetcker (not Lincoln) pointed out:

You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help small men by tearing down big men. You cannot help the poor by destroying the rich. You cannot lift the wage-earner by pulling down the wage-payer. You cannot keep out of trouble by spending more than your income. You cannot further the brotherhood of man by inciting class hatred. You cannot establish sound security on borrowed money. You cannot build character and courage by taking away a man’s initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves.

Either we all win together, or we all ultimately lose. as Americans, we all succeed best when we enlarge the pie, rather than seeing its size as static and spending time divvying it up amongst ourselves to get unfair portions.

What is the solution? The solution is not to end democracy, as some have suggested, since it deteriorates when the many realize that they can take from the few. The solution is to create an “algorithmic democracy.” Total optionality within an envelope that is set in stone. We need amendments to our constitution which are unamendable and guarantee basic freedoms from tyranny. There should be a maximum constitutionally allowed tax rate, along with constitutionally mandated balanced budgets where are unamendable.

Then, the true scope of rational, ethical government, as a strong referee in a fair game, while making provision for the needy, would emerge. We would be forced to only spend on those things which are essential. The government would quickly learn the words, “we cannot afford this” and prioritize according to needs, not wants.

Only when we stop the primitive focus on taking from each other, can we enlarge real societal wealth and return to growth and to prosperity. We must remember who we are as a people, how we once acheived success as a nation, and in remembering, know how we will do it again.

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