First step in raiding Europe’s private savings

From today’s Open Europe news summary:

According to a leaked document, seen by Reuters, the European Commission is probing ways to unlock the investment potential of EU citizens’ savings to boost the economy. The Commission will also ask the European Insurance and Occupational Pensions Authority (EIOPA) later this year for advice on a possible draft legislation “to mobilise more personal pension savings for long-term financing”.
Reuters

Don’t you just love the way these statists talk? They want to “mobilise” personal savings. Hum, I wonder what that means? It means that the government will confiscate, in some way, the private savings of European citizens to fund politically inspired so-called “investing”. And just look at all the wonderful “investing” the EU politicians and bureaucrats have accomplished in the past! Patrick Barron

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Just on example why printing money is irresistible

From today’s Air Force Magazine online:

Congress Restores COLA Increases
The Senate voted 95-3 on Wednesday to restore full cost-of-living pension increases for working-age military retirees. The vote comes one day after the House approved the measure with a vote of 326-90. President Barack Obama has said he will sign the bill, reported ABC News via The Associated Press. The controversial measure, which was expected to save the government $6 billion over 10 years, was included in the bipartisan budget agreement approved in December 2013. Republicans in the House paid for the restored retirement pay by extending cuts to Medicare. The Senate bill maintained the Medicare cuts. Rep. Adam Smith (D-Wash.), the ranking member of the House Armed Services Committee, who last week criticized colleagues for seeking to overturn the cuts, said taking Medicare funds to pay for the COLA funds was a “shell game,” and that rising personnel costs are a real long-term problem that will affect the Defense Department’s ability to maintain readiness.

Now, I’m sure that my retired Air Force friends feel fully justified in getting their COLA restored, but I use this as an example of why printing money becomes irresistible and almost ensures hyperinflation. (I certainly hope I am wrong.) The military has a powerful lobby to keep its funding flowing, but so do many, many other recipients of government spending. Just as the COLA cuts were restored, I predict that there will be few real cuts to military expenditures, especially given the fact that our leaders feel that the US has a God-given right to intervene anywhere in the world. Patrick Barron

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My letter to the NY Times re: A balanced government budget is NOT the definition of success

Re: Economy and Crime Spur New Puerto Rico Exodus

Dear Sirs:
Reporter Lizette Alvarez makes the common mistake of equating a balanced government budget with success. She lauds new Puerto Rican president Garcia Padilla for reducing the deficit by seventy percent, mostly through new taxes. Real success is not a balanced budget but a peaceful and prosperous economy. To achieve this Puerto Rico needs limited government. For starters it should sell its inefficient, state run electricity and water companies, close down its public schools, cut public workers, and cut taxes (definitely do not RAISE them), then get out of the way. In short, Puerto Rico needs economic freedom. Patrick Barron

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More money for Greece…why not?

Re: EU said to weigh extending Greek loans to 50 years
 
The Greeks will always get more money from the EU, because that is the very nature of the EU as a giant welfare system for entire nations.  But the experiment will fail, because the euro is a fiat currency which follows the inevitable destructive path of a tragedy of the commons.  Since the euro is a commonly held resource, it will be plundered to extinction.  In the meantime, the party (and the money printing press) rolls on.
 
This short Bloomberg News report contains some fascinating statistics.  The numbers have gotten so big that millions and billions don’t mean anything anymore.  So let me put this latest insult to the European taxpayer in perspective.
 
Greece has a population of 11 million.  It already has gotten bailouts to the tune of 240 billion euros; that’s US$29,673 per person.  Now the EU is contemplating another round of bailouts, this time to the tune of only 15 billion euros or US$1,855 per person.  In addition, the EU may extend all bailout maturities to 50 years, undoubtedly so that the criminal politicians foisting this insult onto the backs of the taxpayers will be long dead by the time the masses rise up and demand justice.  Patrick Barron

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My letter to the Wall Street Journal re: Anglo Bank didn’t bailout itself

Re: Trial of three former officials at Anglo Irish Bank begins

Dear Sirs:
Anglo Irish Bank did not bailout itself.  Why aren’t the politicians who gave the money to Anglo, which led to the collapse of the Irish economy, on trial, too?  And let’s get right to the heart of the matter and try all those politicians who maneuvered an unwilling Irish nation into the EU (the Irish voted “NO” the first time) and forced them onto the euro.  Now Ireland is at the mercy of inflationists like European Central Bank president Mario Draghi, who promises to do “whatever it takes” to save the euro.  We knew the ECB was a bad idea when one-by-one the German bankers quit the ECB board in disgust over its illegal bond buying schemes.  Patrick Barron

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Can the State Justify Welfare Spending?

The purpose of this brief essay is to present an argument that state spending on welfare, which necessarily rests on the state’s power to extract funds from the public, cannot be justified.  An argument in favor of state sponsored welfare is that a democratically elected government chooses to do so, therefore it follows that it must have the power to collect these funds from the citizen coercively.  Yet claiming that the democratic process is sufficient to justify state coercion fails even the most cursory examination.   One needs only to look at our own American past of slavery and the more recent history of Nazi Germany to disabuse oneself of the notion that democratically elected representatives can do no wrong.  Both the Old South and Nazi Germany had democratically elected governments.  No, something other than the temporary wishes of a majority of the people is needed to justify state coercion.

I will examine the issue from three perspectives: the natural rights of the individual vis a vis the state, whether one’s natural rights may be violated in order to achieve some higher conception of justice, and whether the state is capable of rational economic calculation.  I will show that state spending on welfare violates one’s natural rights, is unjust, and lacks necessarily rational economic calculation.  I have selected Frederic Bastiat’s natural rights-based argument for the limits of government as expressed in The Law; Immanuel Kant’s argument of true justice as explained by Roger Scruton in Kant: A Very Short Introduction and T. Patrick Burke’s No Harm: Ethical Principles for a Free Market; and Ludwig von Mises’ explanation of the source of rational economic calculation as expressed in Economic Calculation in the Socialist Commonwealth.

This essay focuses on the rational justification for state welfare spending and does not accept empirical claims that need exists.  I do not deny that state welfare can alleviate the suffering of some to some extent, especially in the short run.  Likewise, I make no attempt to calculate the cost to those whose property is expropriated to do so.  Furthermore, I make no claim whether such a benefit is necessary.  For one thing, it is possible that state spending could be replaced to some extent, perhaps completely, by private efforts.  It is also possible that the very attempt to remove some kinds suffering is counterproductive, such as the possibility that paying a man not to work in menial jobs or in uncomfortable conditions might destroy his ability to take care of himself and his family.  All this is irrelevant if we can conclude that state spending on welfare cannot be justified in the first place.

Man’s Natural Rights and the Limits of Government

In The Law Frederic Bastiat presents the irrefutable maxim that man’s rights exist prior to the formation of the state and that, therefore, the collective action of the state cannot conflict with man’s prior rights.   Man can delegate to the state only those powers that he himself already possesses.  Since man has the natural right to protect himself and his property, he can legitimately delegate to the state those powers, which we refer to domestically as the justice system and internationally as national defense.  However, man does not have the natural right to force another to give to a charity.  Since I cannot coerce you to give to the charity of my choice, neither can government force you to give to the charity of its choice.  Yet that is exactly what it does.  Let us say that you object that government gives money to a charity that you personally abhor.  You would not get very far arguing that you have a right to reduce your tax payment by a pro rata amount.  If you persisted in withholding payment, government will confiscate your assets.  If you try to protect your assets, government will kill you.  Yet, from the context of natural rights, government has no justification in forcing you to pay for a charity of which you disapprove and would not fund voluntarily.

True Justice and the Categorical Imperative

Perhaps there is a higher rationale for allowing the state to violate our natural rights by confiscating our property coercively for the supposed betterment of others.  For this rationale we turn to two philosophers–Immanuel Kant and T. Patrick Burke.  We’ll start with Kant.  Our conception of true justice has found no better expression than that by Immanuel Kant in his explanation of the “categorical imperative”.  A categorical imperative tells us what to do unconditionally in all places at all times and to all men.  It does not derive its power from any authority other than pure reason.  Kant distinguishes this categorical imperative from a hypothetical imperative, such as “need”.  Although a hypothetical imperative may be valid, such as “poor people would live better if they received welfare payments”, it can never be objective.  It gives a reason only to those who are affected, in this case poor people.  Giving welfare to poor people cannot be an unconditional action, applying to all people in all places at all times.

In his introductory book on Kant cited above, Roger Scruton explains that there are five variant forms of the categorical imperative.  The first two are the most important for our purposes here.  The first variant is the Golden Rule, Matthew 7:12: “So in everything, do to others what you would have them do to you, for this sums up the Law and the Prophets.”  Abraham Lincoln stated the Golden Rule when he said, “As I would not be a slave, so I would not be a master.”  It is based upon reason alone. The second variant is that all men be treated as ends and not as means.  Rational beings are ends in themselves and never merely means to some other end or as a means to achieve the ends of some men and not others.  By this natural law even if everyone in a community except one man voted that all should donate to a charity, the categorical imperative would deny that it is just for the community to coerce this one man.  The community of men would be using this one man as a means and not as an end, a rational being with human dignity.

Professor T. Patrick Burke adds an important addendum to the unjust nature of state coercion for the purpose of charitable giving.  He persuasively makes the case that the act of refusing to help someone in need is not unjust, for that needy person is left in the same position as before.  The act of refusing to help does not add to that person’s plight.  If we become bound by some higher concept of justice to help all who come to us in need, then we become slaves to all of mankind, a violation of the categorical imperative in that we would be used as means and not as ends.

The Impossibility of Economic Calculation by the State

In 1920 Ludwig von Mises wrote a devastating critique of the emerging socialist movement that has never been refuted.  At fewer than seventy-five pages, which includes an introduction by Professor Yuri Maltsev and a postscript by Professor Joseph Salerno, the Mises Institute edition of Economic Calculation in the Socialist Commonwealth explains that, absent private property, economic calculation is impossible.  Mises explained that no government knows what to produce or what resources to use in producing whatever the desired good may be, because only those who actually own property can dispose of it rationally.  Think of two worlds, the world of the mind containing preferences and the world of markets and prices.  One’s preferences are ordered in the mind according to greatest need.  These preferences are different for different people and change within the same person constantly.  These internally held preferences meet in the market with all other preferences to produce money prices, which allows us to make economic and economical decisions about what to produce, and how to produce it, and what to buy.  Mises pointed out that without market prices, the economic czar is blind as to what to produce and how to produce it.  Market prices are determined only by people expressing preferences for what they actually own; i.e., private property.  The economic czar is not spending his own money or taking his own product to market to sell.  So, how can he rationally decide what to do?  Mises’ answer was that he cannot.

Since the government is composed of individuals who are not spending their own money or taking their own product to market, there is no way that they can decide rationally which charities, if any, should be state supported.  They fall back upon what can only be called corrupt relationships; i.e., helping friends, choosing organizations that may hire them in the future, buying off organizations that are particularly persistent and annoying, etc.  This behavior is best described by “public choice theory”, which explains that actions of individuals in government are guided by the same self-interest as they are in all other areas of life, ridiculing the idea that those in government have higher ethical considerations.

Conclusion

In the end we observe that state welfare is imposed coercively; it has no justification other than that of pure force.  No one has a natural right to our labor or our property; there is no categorical imperative to demand the help of others and none to shame us for refusing to help others; and there is no possibility of rational economic calculation to determine which charities for the state to support and to what extent.

Patrick Barron

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My letter to the NY Times re: Looking for answers in all the wrong places

Re: Wall Street’s New Housing Bonanza, by Michael Corkery

Dear Sirs:
If Representative Mark Takano (D, CA) is concerned that securitizing investment in rental properties will result in a new, unsustainable bubble, he is looking for answers in all the wrong places.  Rather than restrict the free market’s apparently successful efforts to redeploy vacant, foreclosed homes as rental properties, he should lobby the Fed to end its massive and unprecedented money printing schemes that can only result in malinvested resources somewhere in the economy.  Patrick Barron

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My letter to the NY Times re: Reviving New Deal Fallacies

Re: Confronting an Old Problem May Require a New Deal, by Eduardo Porter

wpa_atchison_ksDear Sirs:
Mr. Porter recently trotted out every discredited economic idea of the New Deal, from Keynes’ fallacious idea of permanent, structural unemployment to the fallacious idea that technology permanently destroys jobs to the fallacious claim that raising the minimum wage is good for employment (the craziest one of all!) to the discredited claim that “the WWII production explosion” ended the Great Depression.  In an unhampered free market economy with sound money prices there is no unwilling unemployment, because the only true limit on an economy’s production capacity is the existing pool of labor.  Technology makes workers more productive, expanding production and lowering prices.  Make-work WPA projects drain resources from the private economy.  The minimum wage eliminates from the legal workforce those whose marginal productivity falls below the all-in minimum wage, which, of course, is much, much higher than the new $10.10 minimum.  Unemployment in WWII was solved by two factors–placing millions of men under arms, and sending them off to kill and be killed, and the elimination of the most onerous New Deal legislation that hobbled American war production.  The Great Depression really didn’t end until 1946 after the worst New Dealer, FDR himself, was gone and a Republican congress was able to end even more anti-business madness.  Patrick Barron

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My letter to the NY Times re: Yellen’s analysis won’t help

Re: Don’t expect job data to persuade Fed on rates

analysis_paralysisDear Sirs:
Floyd Norris reports that Janet Yellen loves to study all those employment statistics in order to set Fed policy.  And that is the problem.  The Fed’s new leader believes that monetary policy can be used to beneficial effects.  But nothing could be further from the truth.  By manipulating money and interest rates, the Fed confuses entrepreneurial activity, leading to what Ludwig von Mises called “malinvestments”.  The natural interest rate regulates savings with profitable investment.  By manipulating interest rates the Fed causes malinvestment in the time structure of production by sending too many resources to stages of production that are far removed from the consumer.  These malinvestments will be revealed when the Fed stops its interventions or when the value of the currency deteriorates.  Once monetary intervention is set in motion nothing can prevent the inevitable recession.  Patrick Barron

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My letter to National Review Magazine re: The Nobility of All Work

Re: The Hard-Working Rich, by Kevin D. Williamson

No_substitute_for_hard_work_by_VBAadminDear Sirs:
Mr. Williamson’s presents some truly amazing facts about what separates the rich from the poor…and it’s not just that the rich have more money, per Ernest Hemingway’s famous quip to F. Scott Fitzgerald.  Behind Mr. Williamson’s statistics about the rich lie people who just plain are willing to work.  A European immigrant friend of mine has told me many times that he is amazed that Americans will take jobs that would be beneath a person of his, shall we say, class or stature, and do so without embarrassment.  Americans who are self-sufficient and take personal responsibility may not be rich but they certainly are not poor. Despite our government’s best efforts to drive all of us to government dependency, the non-poor have a way of finding work and providing for themselves.  Before the age of the welfare state, the poor had role models for pulling themselves up by their bootstraps.  I fear that government welfare and the welfare state’s cheerleaders have convinced many that there is menial work that is beneath them or simply does not pay them the salary that they are due; therefore, welfare has become if not an honorable choice at least it has become a choice that the rest of us are not allowed to criticize.

Patrick Barron

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