The myth of excessive wealth

I sent the following letter concerning wealth to the Daily Beacon, the University of Tennessee’s student newspaper, on February 15, but it was never printed:

Sam Smith’s February 15 column was illogical and economically ignorant. He begins by declaring that the federal government spends too much. His only solution to this problem: increase taxes on the wealthy. Low taxation does not water the root of our growing federal deficit–excessive spending is its true life-source. Over the past twenty years, federal spending has tripled. Because no level of taxation can keep up with this exuberant trend, the only realistic solution is to stop the government’s spending spree.

Smith then points his wayward cannon at the “excessively” wealthy, blasting the likes of Lane Kiffin, an easy target in this media market. It is a contradiction in terms to speak of “excessive wealth”; there is no such thing. An individual who gains wealth through productivity or capital investment, regardless of selfishness, benefits everyone else in the process, by meeting the demands of consumers. Moreover, the initial investment of wealthy consumers eventually allows even the poor to enjoy life’s luxuries. If there were no one “excessively” wealthy enough to buy the first television sets, the first computers, or the first cellular phones, then inventors would have toiled fruitlessly, and no reinvestment into their innovations would have taken place. Without the “excessively” wealthy purchasing high-dollar goods, we would not know many of the technologies we enjoy cheaply today.

Smith echoes many of my professors, who complain that the football coach earns too much money. This is in truth a lament over the rights of individuals to consume freely; it assumes that people who choose to watch football are somehow guilty of injustice. To the professor of this mindset, I offer a promise: When you attract 100,000 people to pay $50 a head to sit through one of your lectures, the University of Tennessee will kindly add a zero or two to the amount on your paycheck.

Liberty, justice, taxes, and the U.S. Constitution

1040

Article 1 Section 9 of the U.S. Constitution limits the taxation powers of Congress, saying:

“No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”

This simply outlaws income taxes.

The Fifth Amendment to the U.S. Constitution ends:

“…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.”

This says the government may not deprive the accused of natural rights, and that the government cannot take private property without paying for it.  

Some would argue that the last part does not apply to income or labor, but only to physical property, such as land or belongings.  Let it be recognized, however, that land and belongings are nothing more than tangible storages of income and labor.  Moreover, it would be absurd to suggest that a man’s labor is not his property, and therefore, according to this amendment, the government may not take a person’s labor (income) for public use without just compensation.

The Sixteenth Amendment grants Congress the authority to tax incomes:

“Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”

This is a clear contradiction of Article 1 Section 9.

Section 1 of the Thirteenth Amendment:

“Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.”

This prohibits any entity from forcing any individual to work by force or by state-imposed coercion (or threats thereof), unless as a punishment for a crime.  

The income tax is not technically a form of involuntary servitude to the government, because the government does not force anyone to work.  However, under the income tax, everyone who chooses to work is forced to work for the government, so the spirit of the amendment may very well apply to outlawing the income tax.  

There are certainly those who feel like slaves to the government, because the government takes a great part of the fruits of their labor; but technically, this is not true, because they may always choose not to work, and while this choice may be a threat to their survivals, it is not a direct threat from government.  This unhappy choice, however, contains the implicit threat: “work for the government, or die.”  So it is not completely clear whether the income tax qualifies as universal slavery, which would be prohibited by this amendment.

When this amendment ended slavery, note that it literally scribbled out all other portions of the Constitution that contradicted the new amendment.  Note also that, when the Sixteenth Amendment was written to allow income taxes, none of the previous portions that outlaw such taxes were removed from the Constitution.  

This practical difference, I believe, shows the spirit with which these two amendments passed.  When slavery was ended, the public was quick to remove from the record all evidence of its existence, because slavery was a stain on liberty and justice; it was an embarrassment to an otherwise proud society of free individuals.  But when the income tax was instituted, the amendment allowing it was the embarrassment to freedom, and all else in the Constitution that contradicted it was left to bear, so the people could still call it their own, and perhaps retain some nostalgic feeling of what it was to be free.

Henry Hazlitt and I on the Auto Bailout

Hazlitt

“Dying industries absorb labor and capital that should be released for the growing industries.  It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other.  These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits and costs.  They are solved by this system incomparably better than any group of bureaucrats could solve them.  For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day; whereas bureaucrats would try to solve it by having made for the consumers not what the consumers themselves wanted, but what the bureaucrats decided was good for them.  Yet, though the bureaucrats do not understand the quasi-automatic system of the market, they are always disturbed by it.  They are always trying to improve it or correct it, usually in the interests of some wailing pressure group.” – Henry Hazlitt, Economics in One Lesson, 1946

My beefs with the bailout:

  • It rewards failure (through “loans”) at the expense of success (through taxes).
  • The excuses are lame.  A few loosely-quoted examples:  “People won’t buy our cars because they think we might go bankrupt.”  More likely: they won’t pay for your inferior product.  People know that bankruptcy does not equal death, as I am sure all of your sales associates have told their customers.  Lame.  “Foreign companies are receiving good incentives to open new factories, but we have to use our old ones.”  More likely: the unions have you by the balls.  Lame.  “Foreign companies are getting assistance from their governments, which is why we need assistance from ours.”  Not sure if either of the claims made in this excuse are true, but lame nonetheless.  If other governments want to misplace investments, that’s their business.  Their economies will become weaker for it, and our overall economy will be relatively more productive than theirs, regardless of what happens to the automakers.
  • I live in Tennessee.  The auto industry in Tennessee is doing relatively well.  Why should Tennessee be punished for Michigan’s business failures?  For the taxpaying laborer at a Tennessee factory, there can be no sufficient reason.  It is stealing from the Tennessean.  It is immoral.
  • It is unconstitutional (see part 2 of Jefferson’s argument and replace “bank” with “auto loan,” then become disgusted by the monstrous parasite that is your federal government).
  • It will not save the automakers.  The beggars will be back to Congress, palms upturned, and because the government will have already invested in their success, it will be much more difficult to turn them away.
  • The government cannot “save” one industry without adversely affecting another, or–what is more likely the case–many others, through opportunity costs and/or taxation.
  • I prefer Honda, Toyota, and Nissan to GM, Ford, and Chrysler, mainly because, when the Japanese automakers take my money, they give me a car for it–not a promise to try to pay it back A.S.A.P.
  • The United States government is in a fiscal abyss, and one unfortunate generation will eventually have to fit the bill.  This is what I call generational slavery, because one or more generations has decided, rather than extinguishing its own debts, to pass them on to posterity, guaranteeing “confiscatory” income taxation (as if there were any other kind) in the future, and thus robbing future generations of their own labor.
  • As poorly as the executives at GM, Ford, and Chrysler have managed their businesses, the federal government (or “car czar”) would do the job even worse–much worse, I believe.

If this bailout passes, the Lions will go 0-16 this season.  Sorry Detroit, karma’s a bitch, but I’m sure one more quarter of Ford’s failing operations is preferable to one win at Ford Field.  Go Colts!

Who are the true patriots?

Young Ron Paul

“Complacency and fear drive our legislation without any serious objection by our elected leaders.  Sadly though, those few who do object to the self-evident trend away from personal liberty and empire building overseas are portrayed as unpatriotic and uncaring.

Though welfare and socialism always fail, opponents of them are said to lack compassion.  Though opposition to totally unnecessary war should be the only moral position, the rhetoric is twisted to claim that patriots who oppose the war are not supporting the troops.  The cliche ‘support the troops’ is incessantly used as a substitute for the unacceptable notion of supporting the policy no matter how flawed it may be.  Unsound policy can never help the troops.  Keeping the troops out of harm’s way and out of wars unrelated to our national security is the only real way of protecting the troops.  With this understanding, just who can claim the title of patriot?  Before the war in the Middle East spreads and becomes a world conflict for which we will be held responsible, before the liberties of all Americans become so suppressed we can no longer resist, much has to be done.

I am assured that our course of action should be clear.  Resistance to illegal and unconstitutional usurpation of our rights is required.  Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes.  But let it not be said that we did nothing.  Let not those who love the power of the welfare-warfare state label the dissenters of authoritarianism as un-patriotic or uncaring.  Patriotism is more closely linked to dissent than it is to conformity and a blind desire for safety and security.  Understanding the magnificent rewards of a free society makes us unbashful in its promotion, fully realizing that maximum wealth is created and the greatest chance for peace comes from a society respectful of individual liberty.” – Ronald E. Paul, M.D.

Patriotism is not blind nationalism.  In my view, there is none more foolish than the man who pledges his whole life to a government, only because it currently rules the accidental location of his birth.  True patriots are not loyal to a land mass, a government, a person, or group of people; they are loyal to ideas–the ideas that nature and history prove righteous to their own reflection, such as self-government and individual liberty.  It is not only the flag to which true patriots pledge allegiance, but also the republic for which it stands: one nation, under God, indivisible, with liberty and justice for all.  Sadly, these simple lines, which we have recited for as long as we can remember, have nearly lost their meaning for most Americans.

Perhaps we are so long removed from the origination of a free society that we have forgotten its price.  Perhaps we have forgotten what freedom is: the absence of government coercion.  Perhaps we have forgotten that truly beneficial policies almost always stand on their own merit, without the aid of massive government enforcement agencies.  Perhaps we have begun to take liberty for granted, so we allow it to be chiseled away each year by just a few more taxes, just a few more regulations, just a few more unconstitutional spending programs, just a few more harmless potheads turned into untouchable felons, just a few more unwarranted surveillance operations, just a few more troops on our streets to suppress the political dissenters, just a few more unfounded arrests and detainments, just a few more unnecessary casualties in the never-ending war for universal authority, just a few more computerized balloting systems, and just a little bit more government control.  After all, most of us feel we can still go about our business uninterrupted by these controls and live adequately, if not freely.  I fear now that by the time we realize that this is no longer true, by the time our old friends and fellow citizens–educated, hard-working, freedom-loving people of integrity–are declared dangerous enemies of the state, it will be too late to change the authoritarian direction of our nation, and it will be easier for us to act nationalistic and tolerated, silent and unencumbered, compliant and alive, than to be honest and endangered, righteous and imprisoned, patriotic and dead.  The false patriots will have won, successfully driving freedom out of the only safe harbor it has ever known.  American freedom, having long treaded in tempestuous weather, is drowning in the vast seas of prosperity and contentment it produced.  Its only lifeline is We the People.

Open bailout opposition letter to Congress

Stolen from you by U.S.

“That government is best which governs the least, because its people discipline themselves.” – Thomas Jefferson

There is a lot of hype in Washington this week, a lot of short-term thinking, but very little honest reflection and philosophically sound governance based on the long term prospects of the American economy.  Jefferson was right: our financial markets have fallen into a cycle of government dependence and therefore no longer discipline themselves.  The American economy has lived beyond its means; to deny this is to declare yourself ignorant and unfit to govern.  We have floated on a cloud of credit, and believed ourselves to be in heaven, and though we have ventured far from earth, the latest liquidity squeeze has allowed us to see just how far we must fall when our economy’s bill comes due.  Though the $700,000,000,000 proposal before you may indeed postpone the payment date, the American people will eventually have to pay dearly for living on money that has been given value–not by production–but by irrational faith, and you can be certain that every postponement will make that future payment more painful than it would be today.  Do not be convinced that there are no free market solutions to this crisis.  The unspeakable ideal of economic freedom will pump more liquid capital into our financial markets than the government ever could, and more importantly, the money generated by such a system would be sound and valuable.  The chronic risks of moral hazard and inflation this bailout poses far outweigh the risks of a brief credit crisis caused by market-liquidated debt.

We cannot become wiser before we admit that we have been foolish in the past.  Market interference was, in most instances, foolish.  The Community Re-Investment Act was foolish.  Taxing capital gains was foolish.  Turning over Congress’ constitutional money-coining responsibility to a private, secretive organization was foolish.  Encouraging irresponsible lending through never-ending taxpayer bailouts was foolish.  Artificially low interest rates were foolish.  Price manipulation was foolish.  Giving up on sound money was foolish.  Losing faith in freedom was foolish.  Ours, however, is not a fated existence.  Nowhere is it written in stone that we must remain foolish, or that we cannot obey Constitutional principles.  If, as Senator John McCain likes to say, you “came to Washington to change Washington,” now is your chance to realize your lofty dreams.  Crisis is the proper time for reform.  Now is the time to embrace real capitalism.  The American people should not be told to fear freedom, as they are being told now, but to embrace it.  The time has come for Americans to be rewarded for their own successes, and held accountable for their own mistakes.  The time has come for the ambitious legislators in Washington to stop fiscally abusing the children of this nation.

1994, 2000: Remembering the words of Goldwater and Reagan, American median voters want smaller government and balanced budgets, so they elect Republicans; in return, they receive the most rampant growth in government (and public debt) this continent has ever known.  2006: the median American voters want out of a conflict that is unrelated to their security or welfare, so they elect Democrats; in return, the war’s funding is not cut off but greatly increased.  2008: the American people want no taxpayer bailouts, they want to end the bubble-blowing policies of the Federal Reserve, and they want to stop the growing cycle of debt that has ruined a once free economy; in return, they are presented with the largest taxpayer bailout ever, a more powerful and secretive central bank, the largest economic bubble-blowing scheme ever contrived, and more debt than they can ever afford to pay off.

The blindfold has been removed from the American people.  They are awakening to a pattern that reveals self-government as a myth.  The extraordinary actions of the federal government are only serving to remove its mask, revealing its nationalist, socialist, imperialist, authoritarian, unresponsive, evil face.  We can accurately predict that, on matters of true importance, when a particular course of action is supported by more than 70% of the American people, their government will pursue the opposite course, pretending the people are a force of no consequence–an attitude to be expected of King Louis’ court, but not of a republic’s elected leaders.  I need not remind you of the French response to that attitude.  The United States government has lost so much legitimacy that it may not survive the latest proposal, should it pass.  The American people are well-aware of the truly criminal nature of any financial bailout; a huge one will both injure and offend them.  Moreover, it will not come without consequence; their lanterns are burning, their pitchforks are raised, and they are prepared to halt the criminal acts of this government, should it become necessary for them to do so.

Sifting through the crap

Crap

99.9% of everything you will ever hear from a U.S. politician or media pundit is total crap. I present to you five widely discussed issues that do not matter, so that next time you hear them on the radio or television, you can say to yourself “this is pointless conversation”:

  1. Energy policy: The energy industry is part of the economic market. It operates most efficiently on its own and requires no help from the government (unless there is a monopoly in the market). Anyone who thinks limiting our choices on energy is a good thing is delusional. Stay away from them. It is remarkable how many believe that people can be made better off by the imposition of limitations on their choices. Here’s how it works, honestly and simply: when (and only when) gas prices become too high, an alternative energy source will become dominant.
  2. Environmental issues: If your property is being damaged by another person’s (or group’s) pollution, sue them. If you can prove your case, you will win. Chances are, you’ll be one of many, and those who choose to pollute will soon stop because of the amount of expenses they are incurring from mounting lawsuits. There are no regulations necessary–just the simple legal protection of property.
  3. Illegal immigration: The leaderships of both parties have decided nothing will ever be done to stop this. In fact, they hope to someday unify Mexico, Canada, and the U.S. under a multinational government.
  4. Racism, sexism, feminism, anti-religious sentiments, and other prejudices: You are easier to control if you think along these lines at all. Whether you are practicing these or blaming others for doing so, you are falling right in line with what the status quo wants. You are focusing on an issue that does not matter, which works out perfectly for the people trying to make sure they can continue to steal money from you without your noticing.
  5. Islamofascism: This is a huge myth. If you think radical Muslims are about to take over the United States, you are wacko. You need to see a mental health professional and talk about your irrational fears.

From now on, if you hear one of these issues mentioned on the news or anywhere else, remember that someone is trying to entertain or bewilder you, and that nothing they say can swindle you out of a wise and well-reasoned vote. The list above is far from exhaustive.

Now that you know what sorts of issues don’t matter, here’s some that do: The Constitution, Bill of Rights, fiscal restraint, and sound monetary policy (the elimination of fiat currency). If your legislators are focusing more on the first list than this one, they need to be replaced.

You’re welcome.

The role of government, as taught in university

welcome to the dark ages

I like studying the arguments of those who disagree with me, mostly because of the proof that they provide, that the American educational system is worthless, even at its highest levels. In my earnest opinion (and I think most would agree), Americans should not spend a penny on anything that is worthless, and they certainly should not be forced to do so.

The modern “progressive” professors, perhaps in different words, are telling me the following consistently: not only is big government a reality, it is preferable to limited government, and it is the proper choice for people in this country–the people need big government. From a slightly related project that I felt worthy of posting here, I give you my response to a major university class on policymaking:

“I was disappointed to learn that the current expansive roles of government, many of which have been stolen from the unsuspecting individual, have become an assumption unworthy of discussion in America’s university setting. Expansive government is accepted among many so-called intellectuals as an unavoidable reality, like the presence of air, or the passage of time–theoretically, these realities can be removed, but there is a dependency in humankind that keeps us from beginning their removals, for fear of suffocation in the case of air, fear of boredom in the case of time, or in the case of removing government excess, fear of choices.

Dependency on government is not a creation of post-Enlightenment wisdom (boldly assuming that such a thing exists); it is ancient and awful, morally corruptive and mentally corrosive. Dependency has locked the door to a vast room called freedom (a room we loved for its superior rewards, despite its pitfalls), and allowed us only to enter a narrow space that seems comfortable to some at first, but is ultimately restrictive to everyone. This narrow space is a high-tech world of limited products, limited jobs, limited entertainment, limited incomes, limited choices, limited words, and even limited thoughts–all limited by the anti-competitive forces that shape this narrow reality, distract the rational human mind with cheap excuses for education, progress and entertainment, and keep locked the door to freedom. Most of government is unnecessary imposition, and its number one priority is to keep those imposed upon from realizing how sorely they are being screwed.

The belief that the role of government is limited to the protection of individual rights and private property is now seen in the “intellectual community” as a primitive ideal; it has been relegated to the rank in the U.S. that it served in numerous fascist and totalitarian regimes. Just as the philosophy that advocates individual liberty, classical liberalism, has been viciously (and correctly) called anti-slavery, anti-monarchy, anti-German, anti-English, anti-Soviet, and anti-Italian in the past, it is today earning the title “anti-American”, not because of its unwavering principles, but because of the disappearance of America’s principles. This is saddening when we realize classical liberalism is the ideal philosophy upon which the country was founded.

“But,” we are told, “democracy allows the people to vote for new roles of government–roles the people want government to assume.” It is as if we are supposed to believe a warped version of history in which, against all evidence to the contrary, the horrific decisions of the masses–from enslavement to inquisition to lynching–are absolved, and the perpetrators are proven wise. I am not buying it.

Progress should not be named for its conformity to public opinion; it comes only in the advancement of individual liberty for every individual party. An increase in market competition can be called progress, as can the emancipation of individuals from bondage, but something like the coercive confiscation of individual property (and by this I am referring to the taxing of an individual’s labor) should never by called progressive. A tax levied on an individual’s income is always restricting to individual progress, whether or not public opinion supports it. Even those who may appear to benefit from the redistribution of printed labor are restricted from production by the realized incentives of laziness. Moreover, the confiscation of individual property (your labor is your property) is precisely what America, in its foundation, was trying to escape and avoid forever.

Big government is old and unnecessary, and America proved it. For hundreds of years the people of England and France tolerated high taxes and endless international conflicts under the “protection” of their kings. Monarchy was popular. It was, in the opinions of the so-called intellectuals of that era, necessary and proper. It seemed good, but it never really was good, was it? People began to realize this, and they became “enlightened.” People will soon become enlightened again about the unnecessary impositions of yet another sour government. History points to a lengthy, violent and impoverishing end to the narrow confines in which Americans suddenly find themselves, as they realize the growing illegitimacy of U.S. democracy, and understand that their democratic choices are only illusions; I hope, however, with faith in the wisdom of good Americans (despite the coercions of their rulers), for a reasoned and rational end to the exponential growth of government, and if I did not believe that were possible, I would not be writing for it, because my pen would be an insufficient weapon for the battle.”