AIER: Three Reasons to Reject Biden’s Tax Harmonization Scheme for “Global Minimum Taxation”

In Three Reasons to Reject Biden’s Tax Harmonization Scheme for “Global Minimum Taxation,” Daniel Mitchell at the American Institute for Economic Research discusses attempts to harmonize tax rates globally in order to bolster countries with high tax rates against economic competition in taxation.

Way back in 2007, I narrated this video to explain why tax competition is very desirable because politicians are likely to overtax and overspend (“Goldfish Government“) if they think taxpayers have no ability to escape. https://www.youtube.com/embed/nJWLemN29Wc?enablejsapi=1?feature=oembed

The good news is that tax competition has been working.

Maximum Individual Tax Rates

As explained in the above video, there have been big reductions in personal tax rates and corporate tax rates. Just as important, governments have reduced various forms of double taxation, meaning lower tax rates on dividends and capital gains.

Many governments have also reduced – or even eliminated – death taxes and wealth taxes.

These pro-growth tax reforms didn’t happen because politicians read my columns (I wish!). Instead, they adopted better tax policy because they were afraid of losing jobs and investment to countries with better fiscal policy.

Now for the bad news.

There’s been an ongoing campaign by high-tax governments to replace tax competition with tax harmonization. They’ve even conscripted international bureaucracies such as the Organization for Economic Cooperation and Development (OECD) to launch attacks against low-tax jurisdictions.

And now the United States is definitely on the wrong side of this issue.

Here’s some of what the Biden Administration wants.

The United States can lead the world to end the race to the bottom on corporate tax rates. A minimum tax on U.S. corporations alone is insufficient. …President Biden is also proposing to encourage other countries to adopt strong minimum taxes on corporations, just like the United States, so that foreign corporations aren’t advantaged and foreign countries can’t try to get a competitive edge by serving as tax havens. This plan also denies deductions to foreign corporations…if they are based in a country that does not adopt a strong minimum tax. …The United States is now seeking a global agreement on a strong minimum tax through multilateral negotiations. This provision makes our commitment to a global minimum tax clear. The time has come to level the playing field and no longer allow countries to gain a competitive edge by slashing corporate tax rates.

As Charlie Brown would say, “good grief.” Those passages sound like they were written by someone in France, not America

And Heaven forbid that  countries “gain a competitive edge by slashing corporate tax rates.” Quelle horreur!

There are three things to understand about this reprehensible initiative from the Biden Administration.

  1. Tax harmonization means ever-increasing tax rates – It goes without saying that if politicians are able to create a tax cartel, it will merely be a matter of time before they ratchet up the tax rate. Simply stated, they won’t have to worry about an exodus of jobs and investment because all countries will be obliged to have the same bad approach.
  2. Corporate tax harmonization will be followed by harmonization of other taxes – If the scheme for a harmonized corporate tax is imposed, the next step will be harmonized (and higher) tax rates on personal income, dividends, capital gains, and other forms of work, saving, investment, and entrepreneurship.
  3. Tax harmonization denies poor countries the best path to prosperity – The western world became rich in the 1800s and early 1900s when there was very small government and no income taxes. That’s the path a few sensible jurisdictions want to copy today so they can bring prosperity to their people, but that won’t be possible in a world of tax harmonization.

If you want more information, here’s a three-part video series on tax havens, and even a video debunking some of Obama’s demagoguery on the topic.

AIER: Tell Me Again How Governments Are Essential

Joakim Book at the American Institute for Economic Research rants about the uselessness of governments in Tell Me Again How Governments Are Essential.

I don’t like governments. I don’t like how they are set up, how they’re ruled, how their existence furthers a one-size-fits-all approach to complicated social problems, or how they distort markets and behavior when they grab a share of every productive economic activity that they can spot. I don’t like how they’re the antithesis of liberty, and I particularly don’t like how their services – almost always and everywhere – are subpar.

It would be one thing if governments took 50%, 60%, or 75% of the value you created but gave you such excellent services in return that you felt like you got your money’s worth.

Instead, we get a hodgepodge of regulatory failures, bank bailouts, dead kids in the Middle East, and a runaway national debt, while politicians live grand lives at the expense of the subjects they pretend to represent. Emergency by fake emergency, they grow in size, inching the battle lines of respectable power wielding a little further each time.

Everyone I know has stories about government malpractice, about navigating impossible bureaucratic jungles, about unfair tax practices or creatively interpreted conditions that render the service for which they’re supposedly eligible less than useful.

God knows there are plenty of such stories in the private sector too (dig deep enough and you often find an unsuited government programme or regulation at the bottom of that) but at least private enterprises are financially punished for providing lousy services. And usually there are plenty of options if you want a replacement.

Proponents of governments or social democracy more broadly are often untroubled by stories of obvious government incompetence or inefficiency: that it’s always 45 minutes on the phone before one gets answers to simple questions about arbitrary tax rules; that it’s 10 weeks delay for a simple piece of paper; that every five years or so I must renew official documents that they demand I have, at my own expense. They happily shrug them off as one-offs: bugs and accidents in an otherwise well-functioning system.

It doesn’t take many steps down Alice’s more conspiratorial rabbit hole before you start thinking that the unending stories of government incompetence are connected. That it’s not by chance that government services are so bad. To put it bluntly: this is what governments do and what governments are. They are obstacles in the way: bureaucratic hurdles for the rest of us to move around. They don’t build or create anything; they live off the creation of others.

My latest story is an outstanding transaction I have with the Danish tax authority since 2017. A few years before I had the audacity to put some of my meagre leftover savings (after governments had pilfered their share) in a handful of shares in a Danish company. That was my first mistake: in a world of spendthrift governments, thou shalt not save or invest but merely spend (under certain circumstances, you may buy government bonds to keep down the interest rate on the government debt).

Through a quirk of international capital taxation that I most certainly don’t understand – and if I had to venture a guess: almost nobody does – many countries centered on taxing dividend payments from listed companies at 15%. We can argue over the ethics or efficacy of taxing money that has already been taxed several times (in consuming the company’s products and services, or through corporate income tax), but that’s not the point. Many tax systems adjust to deal with this, automatically deducting in your tax returns the dividend taxes that foreign governments have withheld against your domestic tax bill. Standard government bureaucrats shuffling money around without actually making much of an impact on anything, but since that’s what governments do nobody was much surprised.

A few countries then discovered a sneaky flaw in the system. If they upped their rate above 15% to, say 27% in the case of Denmark or 35% for Finland, they could pocket the difference if foreign shareholders were too lazy to file the papers that would claim back the excess tax. With a stroke of a legislating pen, there’d be more tax funds in the Treasury, involving only the processing of some supporting documents and a few more hires at the relevant tax authorities: a victory for everyone but taxpayers, naturally.

I was not too lazy (even though my time would have been better spent doing precisely anything else). In the winter of 2016-2017 I gathered the documents I needed, I navigated the Danish tax authority’s forms and websites, and submitted everything. A few months later, I received a confirmation that my issue had been received and was being processed. Great: I was on track to get back the lordly sum of DKK 76.68 – or about $11 at the time. More for me, and less for them – precisely in line with my ideological priors.

Then began a long stretch of silence. I made a note in my calendar to periodically remind me, but I mostly forgot about the issue. Some time in 2018, I think, I received a letter from the Danish authority saying that they’ve run into some obscure problem and that the process had been delayed: they guided, as is the way of enlightened government bureaucrats, 12-18 months.

Of course, while I waited, my 76.68 Danish Crowns were not earning interest and if anything were slowly depreciating in their purchasing power. Again, as is the government’s way.

Last week, almost four years to the date after the issue had first been recorded with the Danish authority (and about 12 months longer than the maximum they had estimated), I received the attached letter in the post saying that they had been subject of some unspecific fraud and were further investigating all claims – and estimated another 18 months before payout.

Intriguingly, they mention something about paying interest for the delay. When I peruse the legalese of relevant Danish tax law, it seems to say that it will run at the official central bank rate (0.05%) plus 8%. With compounding, this would be something like 118 DKK (about $19 on today’s exchange rate) by the summer of next year.

To be seen is how they crawl themselves out of that one.

This is just one story, and all things considered a microscopically small story. But, as an old saying goes – that has unfortunately fallen out of favor in the English language but whose Scandinavian equivalent is still widely used – “Many a little makes a mickle.” And stories like these are everywhere.

In public finance, we might tip our hats to what Senator Everett McKinley Dirksen may or may not have observed against excessive government spending: “A billion here, a billion there, and pretty soon you’re talking real money.” Of course, that was before the Great Inflation, and these days the same sentiment must be expressed with “trillions.”

I’m still routinely shocked that people think governments are essential to the operating of civilized life and crucial for our well-being. The more interactions like these that I have, the more confused I am that not everyone jumps ship and embraces a smarter world.

So: tell me again, why do we need governments?

AIER: Congressional Hypocrisy and the Crackdown

James Bovard at AIER talks about Congressional Hypocrisy and the Crackdown

The political frenzy unleashed by last week’s clash at the Capitol between police and Trump protestors poses a growing danger to Americans’ constitutional rights. Senate Majority Leader Charles Schumer compared the ruckus to Pearl Harbor – a “day of infamy.” Schumer complained that the “temple to democracy was desecrated… our offices vandalized.” Sen. Cory Booker (D-NJ) compared an incursion that broke some windows and furniture with the 1814 British invasion that torched the Capitol.

The pro-Trump mob should not have charged into the Capitol. President Donald Trump should not have fired them up with absurd claims that he won the election “by a landslide.” Even conservative firebrand Ann Coulter declared that “it was assholic [for Trump] to tell a crowd of thousands to march to the capitol.” Trump lawyer Rudolph Giuliani should never have called for a “trial by combat” when addressing Trump supporters. Once the protestors charged into the Capitol, Trump should have speedily called for an end to the confrontation.

Trump deserves much of the blame for the Capitol chaos. But the debacle would have been far less without blundering by congressional leadership and their small army of protectors. A Washington Post analysis of the “disastrous failure” by Capitol Police noted, “Security at the Capitol building is controlled by Congress itself.”

The Capitol Police have an annual budget of almost half a billion dollars and two thousand officers – equal to the entire police forces of Cleveland or Atlanta. At some points video showed police standing back as people thronged inside the Capitol. The Post noted, “One image posted on social media showed an officer taking a selfie with one of the intruders, and a video seemed to show officers opening the security fence to let Trump supporters closer.”

One policeman was killed when he was dragged into a mob and beaten, and a 34-year-old female Trump supporter was reportedly trampled to death in the clash between police and protestors. Another Trump supporter died of a heart attack and another protestor died of a stroke.

President-elect Biden said that the protestors’ action was “an assault on the citadel of liberty: the Capitol itself…. An assault on the rule of law like few times we’ve ever seen it.” But rather than a “citadel of liberty,” the Capitol is the locale where politicians have negligently authorized endless assaults on the liberties of average Americans and the lives of uncounted victims around the world.

Violence of all types should be condemned, including that which comes from the government itself. SWAT teams carrying out no-knock raids happen thousands of times a year in American neighborhoods across the land. These attacks have been aided by a profusion of military-style equipment provided by Congress and federal agencies, as well as by the Justice Department constantly championing the legal prerogatives of law enforcement to use deadly force in almost any situation. An ACLU report characterized SWAT raids as “violent events: numerous (often 20 or more) officers armed with assault rifles and grenades approach a home, break down doors and windows (often causing property damage), and scream for the people inside to get on the floor (often pointing their guns at them).”

Failure to instantly submit to SWAT raiders can be a capital offense. A New York Times investigation found that “at least 81 civilians and 13 law enforcement officers died in raids from 2010 through 2016. Scores of others were maimed or wounded.” The vast majority of members of Congress have ignored the perennial police carnage they helped bankroll around the nation.

Dozens of protestors have already been charged with unlawful entry. The same standard should also apply to government officials in other contexts In 1984, the Supreme Court entitled government agents to intrude onto private land without a search warrant as long as they did not venture into areas where individuals were involved in “intimate activities” (i.e., nudist camps). “No Trespassing” signs no longer applied to G-men. The same court decision unleashed government helicopters to buzz low over any private land they chose to investigate – no warrant needed. (Private helicopter operators who perform the same trick over federal buildings are entitled to front-page obituaries.)

President-elect Joe Biden condemned the protestors “rummaging through desks. But where was the umbrage on Capitol Hill when the National Security Agency vacuumed up millions of Americans’ emails? Where was the outrage when Edward Snowden exposed NSA documents showing that the agency turns its surveillance dynamos on anyone “searching the web for suspicious stuff“? Thanks to lavish congressional appropriations, the NSA continues devouring Americans’ privacy.

We should also condemn the violence that Congress has authorized by U.S. military forces, which are now engaged in combat in 14 nations. Most members of Congress could probably not even name half of the nations where U.S. troops are fighting. After four U.S. soldiers were killed in Niger in 2017, Sen. Lindsey Graham (R-SC) and Schumer admitted they did not know that a thousand U.S. troops were deployed to that African nation. Graham, a member of the Senate Armed Services Committee, admitted, “We don’t know exactly where we’re at in the world militarily and what we’re doing.”

Washington Post columnist David Ignatius in 2017 proudly cited an estimate from a “knowledgeable official” that “CIA-backed fighters may have killed or wounded 100,000 Syrian soldiers and their allies over the past four years.” Syria has taken no hostile action against the U.S. but few members of Congress have taken any responsibility for the carnage inflicted by the Biden-Trump intervention in the Syrian Civil War. No evidence has surfaced thus far linking Syrians to any broken windows in the Capitol.

We should also condemn the blockades that the US government has imposed on Syria, Venezuela, Iran, and other nations. US Navy ships are ready to intercede even medical supplies to those nations whose governments have raised the ire of Washington policymakers.

In the wake of the clashes at the Capitol, Democrats are calling for a sweeping new “domestic terrorism” law that could profoundly restrict Americans’ freedom of speech and association. Many politicians have called for charging the Trump protestors with sedition, There are already more than enough criminal laws and the feds should concentrate on discovering and vigorously prosecuting the individuals who attacked police.

Shortly before the protestors forced their way into the Capitol, Mitch McConnell declared that American democracy could go into a “death spiral of democracy” if the 2020 election result was not accepted. McConnell warned that challenging the 2020 election would mean “every four years would be a scramble for power at any cost.” He also said that “self-government requires a shared commitment to the truth.” Rep. Tom Malinowski (D-NJ) condemned Wednesday’s protestors: “If you just feed this beast in an effort to appease it, it just gets stronger and bolder until it comes after the very people who are trying to appease it.”

It is possible to condemn both the protestors and the career politicians whose perennial abuses have been lessening Americans’ trust in the federal government.

AIER: Book Review – “A Republic if You Can Keep It” by Justice Gorsuch

The AIER reviews Supreme Court Justice Gorsuch’s book A Republic if You Can Keep It.

America in 2020 does not look like the America we were taught about in school. Of course the values we are taught are aspirational in nature and our country is an ongoing project of moving closer to those ideals. America has yet to live up to its founding principles but moving closer brings us closer to a more perfect union. Moving away from those ideas will doom societies to despotism and despair. That is what makes Justice Neil Gorsuch’s latest book, A Republic if You Can Keep It, so important. It is a book filled with tremendous legal knowledge, moving speeches, a stalwart defense of Originalism, and eternal wisdom regarding good government. Although it was published in 2019 to educate the general public, it could have just as easily been published in 2020 as a guide for a country that has lost its way.

America is a republic if you can keep it

Americans and now the rest of the free world live under a very special form of government. One that was built to preserve a system of self-governance and most importantly, individual liberty. It was not built to cater to the wishes of the mob such as a pure democracy and it was not built to cater to the elite such as an oligarchy or a monarchy. Justice Gorsuch writes,

“This republic belongs to us all–and it is up to all of us to keep it. I think that’s what Benjamin Franklin was getting at when he spoke publicly after he emerged from the Constitutional Convention. A passerby asked what kind of government the delegates intended to propose, and Franklin reportedly replied: “A republic, if you can keep it”.

As the saying goes: democracy is a verb. The success of our system is dependent on the participation and enthusiasm of the public. However, preserving a republic goes much further than that. In particular, a republic like ours requires an even greater emphasis on protecting individual liberty and upholding the institutions that do so, not just voting. Democracy in and of itself is nothing to be proud of nor will it lead to a flourishing society. A constitutional republic like the United States has laws that even the will of the majority must adhere to. The result is a rule of law that promotes freedom and prosperity. Things like the Bill of Rights, the Separation of Powers Doctrine, and federalism. Such institutions of liberty are not necessarily upheld by democratic participation but through a jealous and partisan defense of freedom.

Protecting our freedom is the ultimate reason why the American government exists. That is apparent in our founding documents that Gorsuch explains when he writes,

“Take the idea found in the very first sentence of the Constitution. The Constitution’s preamble says that “We the People” ordain and establish this Constitution” in order to secure the Blessing of Liberty to ourselves and our Posterity.” It is no small thing that the founders claimed our new government was formed by “We the People.” They didn’t say our new government was formed by the Continental Army or the Congress or the States or some bureaucratic drafting committee. Institutions like those, the preamble made clear, exist to serve the people–not the other way around.”

It goes without saying that service to the people means first and foremost protecting our liberty. Although it may be tempting to believe that our government should serve the interest of the majority or be a sort of parental body, our government exists first to preserve our life, liberty, and property. The Founders were adamant about this system of limited government because they saw firsthand what an unrestrained government was capable of. The entire premise of the Constitution and especially the Bill of Rights was inspired by their confrontations with the British crown. The Bill of Rights itself was a compromise with the Anti-Federalists who were skeptical of the Constitution’s ability to protect those rights. The Founders looked to history and observed the instability of pure democracies, the bloodshed created by monarchies, and the despotism inherent to systems without a separation of powers. They believed that with a robust system of constitutional self-rule that exists primarily to facilitate a system of ordered liberty, they could create a country that could last through the ages. That is why preserving our system of liberties is so important, even over alleged problems that might be solved by breaking these ideals. The temptations of short-term political gratification will likely render our country, the most prosperous and freest polity in human history, a short footnote in history.

The Separation of Powers Doctrine

The Separation of Powers doctrine is something Justice Gorsuch spends much time speaking about and for good reason. It is the bulwark against tyranny and essential to a system of self-government. In 2019, such a topic was certainly important because of the ever-growing power of the Executive branch and the atrophy of the Legislative branch along with the Judicial branch. In 2020, we have seen firsthand what happens when we deviate from this essential doctrine. Justice Gorsuch writes,

“The framers firmly believed that the rule of law depends on keeping all three governmental powers in their proper spheres. They knew, too, that eliding these boundaries can prove powerfully tempting. Handing over judicial functions to the executive branch, for example, surely holds much allure… They knew that when the executive is free to withdraw your legal rights, those rights are no longer protected by neutral legal principles, the judgment of independent judges, and a jury of your peers.”

Essentially the doctrine separates authority amongst the three branches of government, the Legislative, the Executive, and the Judicial. No one branch can be judge, jury, and executioner. The ability to make laws lies primarily with the hundreds of elected representatives in the legislature. They ought to be rambunctious, creative, and bold. The duty to enforce those laws lies with the Executive branch. This is where the heads of state reside along with their army of bureaucrats. It is important that they stay within the confines of the authority granted by the legislature, as many are unelected and exist to serve the mandate provided by the people. The numerous governors across America closing down businesses and restricting social activity without the blessing of their state legislatures is a clear violation of this doctrine. Finally, there is the Judicial branch which exists primarily to interpret the written text of the law as it was intended. It does not exist to create its own laws or interpret laws in a way that seems like it may forward what the court sees to be in the public interest.

Civility and Civics

What may be just as important as these institutional checks and balances on government are checks and balances on ourselves as well. Politics is warfare by other means which is why the government needs so many restrictions. However, what can be just as damaging as an unrestrained government is the unrestrained contamination of private life with politics. Justice Gorsuch writes,

“But a government of and by the people rests on the belief that the people should and can govern themselves–and do so in peace, with mutual respect. For all of that to work, the people must have some idea how their government operates–its essential structure and promises, what it was intended to do and prohibited from doing.”

A system of limited government and freedom is one that requires an informed as well as engaged population. Not necessarily just engaged in public service and duty, but also upholding common standards of decency towards one another. Human beings are inherently political animals that seek to dominate one another. One of the pillars of a free society is restraining those urges to give way towards a more inclusive and equal system.

Perhaps one of the most relevant pieces of wisdom Justice Gorsuch has on this topics is the following quote

“History teaches what happens when societies fail to pass on civic understandings and come to disdain civility: Civilization crumbles. Europe in the twentieth century had people, too, who, seeking to remake the social order in the vision of their ideology, thought the stakes of the day were too high to tolerate discourse and dissent. They also believed the ends justified the means, and it didn’t end well.”

The events he referred to have happened within the lifetimes of many still alive today. A continent that was and still is home to some of the most respected countries not too long ago saw the collapse of civilization and the rule of some of the most horrific tyrants in history. This is what makes our founding principles more important than any short-term political passion.

Originalism

With the ideological balance of the Supreme Court now shifted towards the Originalist side of judicial interpretation, reading this book will provide a strong explanation about this judicial philosophy. Prior to the tenure of the late Justice Antontin Scalia, the idea of Originalism was not taken seriously; now six out of nine Supreme Court Justices subscribe to the idea. Justice Gorsuch writes,

“When I was in law school many professors and students seemed to assume that in disputes over a statute’s meaning a judge should turn to its legislative history, seek to discern the law’s purpose, and then do whatever is necessary to promote that perceived purpose in the case at hand…We were told that the Constitution is a “living” document.”

Originalism on the other hand posits that the text has meaning and that a judge should not attempt to tailor the meaning of a law to fit the situation, but to enforce it as it was written. This is especially important when it comes to the Constitution, as Originalism ensures that the rights within it will not be simply waived by a judge who feels that they are not useful at the time. Deferring to the purpose of laws and policies made by the other two branches effectively voids the Judicial branch’s ability to act as a balance. A current example would be the ongoing lockdowns which have resulted in the violation of countless rights. Many judges remain deferential to the intent of lockdowns despite explicit written text in the Constitution preventing such policies. A more severe example would be Korematsu v. United States, where countless Japanese-Americans were rounded up in concentration camps by the US Government during World War 2. The Supreme Court at the time ruled that was constitutional because it did not want to disrupt the war effort. An Originalist court may have prevented such an atrocity by ruling that the text of the Constitution prevents such violations of rights and there is no clause that carves out such powers even in wartime. The policy goals of today do not hold preference over existing law.

Key Takeaway

Justice Gorsuch is a shining example of a patriot and a public servant. He is someone who genuinely cares about the institutions the United States of America was built on and recognizes that those institutions mean nothing without an engaged citizenry. His book attempts to take on the monumental task of educating the reader why exactly we have all sorts of complicated checks and balances, why we have a court system, why the Constitution says what it says. It reminds us that our government exists primarily to protect our freedom and that this framework is something we ought to work to preserve. Preserve not just for ourselves but for future generations of Americans so that they too may experience what it is like to live free.

AIER: FedCoin Revisited

A US physical coin, not a digital currency

This article at the American Institute for Economic Research talks about a new push for government-controlled, central bank digital currency to more easily track the income and tax liabilities of end users – FedCoin Revisited.

The Federal Reserve is thinking about issuing a central bank digital currency (CBDC). The International Business Times reports that the Fed “would be open to collaborating with private business on the creation of a digital currency but emphasized that they were not yet making any commitments.” Talk of a so-called FedCoin appeared to have quelled. But it is now back in full force.

To some, the idea of a FedCoin seems obvious. They see no reason for the Fed to forego adopting 21st century monetary technology. And, certainly, there are a number of benefits, such as lower transaction costs of electronic transfers and helping to execute instant payments (such as in the FedNow project). However, a CBDC also carries risks that must be weighed against the benefits.

One’s view on FedCoin is often related to his or her view on cash. If she thinks cash is good, she is likely to oppose FedCoin. If he thinks cash is bad, he is likely to see FedCoin as an improvement on the status quo. Indeed, some see the introduction of FedCoin as an important step in the direction of a completely cashless economy.

Advocates of moving towards a cashless economy argue that making all payments electronic would help to fight tax evasion and crime. If the move were required, however, it would harm those preferring to use cash for legal transactions as well.

Many people place a high value on anonymity. For some, it’s personal. They don’t want others to know what they are doing. For some, it’s political. They worry about the degradation of institutions, as private information might be used for political ends. The threat of obtaining and revealing private information might silence opposition and undermine the democratic process.

A cashless economy might also lead to policy changes. In order to foster spending during a recession or an economic downturn, the Fed might tax money demand with negative interest rates. If holding cash is an option, then depositors can withdraw their deposits and avoid the negative interest rate. But, if cash is not an option, then consumers are stuck paying interest on their FedCoin holdings. Since they cannot avoid the negative interest rate, consumers would rather spend their money than see their bank balances go down.

In addition to the issues related to one’s view on cash, FedCoin might also undermine financial intermediation. By offering FedCoin, the central bank might crowd out commercial banks.

A checking account at Bank of America is guaranteed by the Federal Deposit Insurance Corporation up to the max of $250,000. An account at the Fed is a liability of the government. If both offer the same payment services, why would one opt for the riskier commercial bank account?

Many will see little cause for concern with depositors having access to safer accounts. But that’s because they don’t think much about banking. Banks attract deposits with payment services and interest payments. They then funnel those funds to productive investment ventures. Financial intermediation makes us more productive, thereby raising the standard of living. As the World Bank reports, private credit to GDP high-income countries is “more than 4 times the average ratio in low-income countries.”

If would-be depositors hold FedCoin instead, the corresponding funds will have to be intermediated by the Fed. At best, the Fed would just auction off funds to private financial institutions. But recent events suggest the Fed might be inclined to allocate credit.

My concerns with FedCoin, and other CBDCs, are admittedly speculative. We don’t know whether the Fed would take steps to eliminate cash or impose negative rates on FedCoin balances. We don’t know how it would go about intermediating funds. But such speculations should make one thing clear: there are risks. At the least, we should develop strong institutional checks before permitting the Fed to plow ahead.

Ron Paul Institute: ‘Choose Your Liar’ Democracy

‘Choose Your Liar’ Democracy comes via the Ron Paul Institute and is written by James Bovard.

The final weeks of a presidential campaign is one of the best opportunities to view political perfidy in spectacular colors. While the media lectures Americans about their civic duty to vote to save the nation, the candidates continue conniving nonstop with no respect for the facts or decency. After the election is settled, the media and the political establishment will announce “the system worked” and Americans must again respect and obey their rulers (unless Trump is re-elected, of course).

Politicians have mandated warning labels for almost everything except voting booths. Federal agencies require full disclosure of risks for everything from mortgages to volunteering for medical experiments. People are entitled to far more information when testing baldness cures than when casting votes that could lead to war.

Hopefully Americans will not be as gullible after the election as many are before casting their ballot. Dishonesty is the distinguishing trait of the political class, going all the way back to ancient Athens and the satirical plays of Aristophanes. In 1799, Thomas Jefferson observed, “Whenever a man casts a longing eye on offices, a rottenness begins in his conduct.”

A successful politician is often merely someone who bamboozled more voters than the other liar running for office. Political campaigns rely on deception because, as economist John Burnheim explained, “Overwhelming pressures to lie, to pretend, to conceal… are always present when the object to be sold is intangible and its properties unverifiable until long after the time when the decision to buy can be reversed.”

Lying has long been part of presidents’ job description: the names of Lyndon Johnson and Richard Nixon practically became synonyms for deceit. Former president George W. Bush is being rehabilitated by the media nowadays. But Bush made “232 false statements about weapons of mass destruction in Iraq and another 28 false statements about Iraq’s links to Al Qaeda,” as the Center for Public Integrity reported. Bush’s determination to dishonestly drag America into another Middle East war led to the deaths of more than 4,000 American troops and hundreds of thousands of Iraqi civilians.

President Barack Obama received sainthood even before his election and he retained his halo even though he falsely promised dozens of times that people could keep their doctor after Obamacare’s decrees took effect. Obama campaigned in 2008 on a peace platform and then bombed seven nations. Obama promised “no more illegal wiretapping” but he unleashed the National Security Administration to target any American “searching the web for suspicious stuff.”

The 2016 presidential race was a landmark: never before had American voters been obliged to choose between two such widely despised candidates. Routine deceit by both candidates helped make “post-truth” the 2016 word of the year according to the Oxford English Dictionary.

The 2020 race is also deluging voters with near-record levels of malarkey. Joe Biden denied referring to American soldiers as “stupid bastards” (despite a video of his spiel), denies that his son Hunter has done anything wrong (despite the pesky laptop emails), and exaggerated the Covid death toll a hundredfold. Trump has ludicrously portrayed his pandemic response as faultless, wildly exaggerates the economic achievements of his administration, and perennially denies the damage inflicted here by his trade wars. The one certainty is that the 2020 election will not be won by an honest man.

If a new president is elected next month, the media will insist that “this time is different” and that Americans can safely trust the White House again. In reality, Election Day merely marks a brief intermission between campaigning lies and governing lies. Yet, if Biden wins, Americans will be encouraged to pretend that election victories expunge the sins – or at least the character defects – of triumphant politicians. Winners supposedly deserve a “honeymoon” where people pretend they are trustworthy enough to enact new laws and launch ruinous new federal programs.

But nothing happens after Election Day to make politicians less venal. Presidents and members of Congress take oaths to uphold and defend the Constitution. But, as former U.S. senator Bob Kerrey explained in 2013, “The problem is, the second your hand comes off the Bible, you become an asshole.” When elected officials scorn the Constitution, politics becomes little more than promising and pilfering.

America is increasingly a “Garbage In, Garbage Out” democracy. Politicians dupe citizens and then invoke deluded votes to sanctify and stretch their power. In the post-9/11 era, politicians treat Americans like medical orderlies treat Alzheimer’s patients, telling them anything that will keep them subdued. It doesn’t matter what untruths the people are fed because they will surely forget them.

Lies subvert democracy by crippling citizens’ ability to rein in government. As Willie Brown, the former mayor of San Francisco and mentor for Vice Presidential candidate Kamala Harris, said, “In politics, a lie unanswered becomes truth within 24 hours.” Any lie accepted by a sufficient number of ignorant voters becomes a political truth.

Disregarding political lies paves the way for official crimes. As former New York City mayor Michael Bloomberg declared, “When we tolerate dishonesty, we get criminality.” If elected politicians can lie and cover up their actions, then how can any reasonable person not expect to be oppressed?

Politicians assure that voters’ apparent consent is irrevocable regardless of how many lies permeated election campaigns. But there is no such thing as retroactive self-government. Belatedly exposing political lies does nothing to resurrect lost freedoms.

Deceiving voters is as much a violation of their rights as barring them from the polling booth. Only if we assume that people consent to being lied to can pervasive political lies be reconciled with democracy. And if people consent to deceit, elections become little more than patients choosing who will inject their sedatives.

President Obama, in his January 2017 farewell address, criticized Americans who “blame the leaders we elect without examining our own role in electing them.” By Obama’s standard, the perpetual perfidy of the political class would justify condemning voters almost regardless of how they cast their ballots. Obama also condemned people who did not vote. Obama thereby created a no-win situation – except for politicians.

Obama, in his 2016 speech to the Democratic National Convention, also declared, “We do not look to be ruled.” Regardless of the irony of a heavy-handed ruler tossing out that line, it rings true for tens of millions of Americans who make their own liberty their supreme political value.

In the short run, the political game is rigged so that winners capture far more power than many, if not most, Americans would willingly cede to them and vastly more than the Constitution permits. But citizens can reduce the hazards they face by remembering that winning votes never redeemed a rascal. The winner of next month’s presidential election will be a clear and present danger to Americans’ rights and liberties regardless of his margin of victory.

AIER: James Buchanan’s Normative Vision Fifteen Years Later

This article from Art Carden at AIER delves into some political philosophy reflected in the writings of James Buchanan – James M. Buchanan’s Normative Vision Fifteen Years Later. What does it mean to be a conservative vs a classical liberal? What does it mean to be equal? What are the roles of economists and social scientists?

“It is not who governs but what government is entitled to do that seems to me the essential problem.” ~ Friedrich Hayek, “Why I am not a conservative”

Sixty years ago, Friedrich Hayek published The Constitution of Liberty. To it was appended a short postscript titled “Why I Am Not a Conservative.” Fifteen years ago, James M. Buchanan published a short volume titled Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism. At just over one hundred pages, it might look like a quick read. The appearance is deceiving. Buchanan turned 86 in 2005, and Why I, Too, Am Not a Conservative is a mature statement of how he thinks the world “should” be in light of a very long career wrestling with the most fundamental principles of social organization. It’s a compact statement from a serious thinker who wrote for the ages.

The book collects short essays published after his twenty-volume Collected Works appeared in 1999. This means there is some repetition, but this does not detract from his overall message. Throughout, it shines with the convictions of a man who took his own ideas seriously and, perhaps more importantly, took others’ ideas seriously.

Buchanan consistently rejects the idea that the economist’s role is to develop a social owner’s manual for those at the top of the moral, political, and economic hierarchy. It is, rather, to identify the principles facilitating cooperation among moral and political equals. Buchanan’s normative vision doesn’t flatter anyone with the notion that they are better than anyone else. To the extent he opposed noblesse oblige, it was on the grounds that no one is noblesse.

Buchanan frames the institutional question in terms of a disagreement between Plato on one hand and Adam Smith on the other. As he puts it on pp. 4-5 (emphasis added):

“We may personalize the discussion here, even if loosely, as the continuing debate between Plato on the one hand, and Adam Smith on the other. Plato had no misgivings about classifying human beings along a hierarchy of superiority. To Plato, some persons are natural slaves; others are natural masters. For Adam Smith, persons are natural equals, and one of his familiar references is to the absence of basic differences between the philosopher and the street porter.

The issue is not one as to whether persons differ; the issue is whether or not persons differ in their potential capacities as participating members of a body politic. What could be the basis for any presumptive classification that would elevate some persons above others? By what criteria are the hierarchical classifications to be made? What transcendent values inform any such criteria? And, importantly, who is to establish the ordering?

The liberal faces no such questions as these, since he accepts more or less without conscious deliberation the Smithean presumption of natural equality. The conservative acknowledges the challenges posed by such questions, and I suggest that implicit acceptance of the hierarchical interpretation of human beings is a distinguishing feature of the stance described by this rubric. The conservative almost necessarily infers that persons who stand higher in the hierarchy should possess differentially higher authority in matters of governance. The natural fit is with aristocracy.”

He returns to these themes again and again. That people differ in tastes and talents is so obvious as to barely deserve mention. That they differ in tastes and talents does not, however, mean that some are fit to rule while others are fit only to obey. There is nothing in the nature of the philosopher that makes him fit to rule over the porter. “The Smithean presumption of natural equality” is an indispensable part of Buchanan’s vision.

Buchanan works at the level of fundamental ideas about social organization and begins, always and everywhere, with the presumption of equality. As he writes on pp. 105-106, “I remain disinterested in efforts to analyse social structures that presume a hierarchical classification among persons and groups. And this attitude persists despite the disturbing, and increasingly encountered, claims about biological evidence for differentiation.” As he puts it on p. 27, “…markets, as efficient generators of the values desired by participants, also fail if, prior to each transaction, persons must identify the trading partner by some discriminatory mark.”

The book is peppered with references and allusions to the “some animals are more equal than others” doctrine in George Orwell’s Animal Farm. Buchanan has little use for the doctrine as he concerns himself throughout the book with the implications of the idea of equality among natural equals. Equality is characteristic of desirable social processes, not an outcome produced by those processes. He arrives at sometimes-severe conclusions: implicit in many benevolent and altruistic schemes is the notion of latent inequality and natural hierarchy in which the morally and intellectually enlightened–the philosopher-kings, or our betters–decide on our behalf and care for us the same way they might care for “dependent” animals (cf. pp. 8-9,50). To be a person, to Buchanan, is to be more than just another mouth to feed. It’s to be a responsible moral agent with all that entails.

The role of the status quo is one of the more interesting elements of Buchanan’s normative vision, and it’s where he parts ways from conservatives. The fact that it’s the status quo as such, he argues, does not have any special meaning, but the way people accept or at least acquiesce to it still might be informative: “Acceptance rather than continuing contestability offers evidence that should not be ignored” (p. 3). In a world where obvious injustice persists, this will leave many readers cold; however, this is one of the areas where Buchanan is “slippery,” as Michael Munger calls him. For institutional change to be sustainable, as Barry Weingast has argued in several places, the de jure distribution of power cannot deviate too much from the de facto distribution of power. This seems like a matter of prudence in holding one’s nose and accepting an unhappy trade-off rather than a question of abstract justice: in various places, Munger offers the example of Chile and notes that democratization would have been short-lived had the functionaries of Pinochet’s junta government been brought to “justice.” They likely would have responded with a military coup, and Chile would not be a liberal, democratic member of the OECD.

This notwithstanding Buchanan is at least a little “constructivist” in that he is optimistic about prospects for human improvement. He emphasizes two conditions for a well-functioning free society: autonomy (enough people have to want to be free) and reciprocity (enough people have to see others as rights-bearing, dignified moral equals). While he acknowledges that this is not the case and hasn’t typically been the case historically, he is nonetheless optimistic about people’s ability to “perfect” themselves, at least a little bit, by adopting and promulgating “puritan” ethics (see, for example, his 1994 book Ethics and Economic Progress and this paper).

One thing that comes out loud and clear in Buchanan’s work is that he does not see social science as a tool of social engineering insofar as statecraft, for Buchanan, is not a question of which levers to pull and which buttons to push in order to generate a specific outcome. Rather, statecraft asks how societies develop and enforce bodies of rules making it possible for moral, intellectual, and political equals to cooperate advantageously without one person or group of persons being subservient to the “more equal” animals a little higher in the social hierarchy. We are lost, Buchanan thinks, when a critical mass of people see the state as a way to enrich themselves at the expense of others.

As befits a volume that borrows the title of Hayek’s “Why I Am Not a Conservative,” Buchanan devotes a lot of space to commentary on Hayek and his vision. He notes in applying his own work on moral communities and moral orders that “…the Hayekian moral order does contain important communitarian elements, even if these are different from those that are familiarly stressed” (p. 72). We are individuals in that, as Buchanan argues elsewhere, the individual is the fundamental and irreducible unit of consciousness. As individuals, however, we live in and strive for community. This means, therefore, that there are ethical prerequisites for cooperation and coordination. He emphasizes autonomy and reciprocity. He doesn’t seem to think Hayek appreciates these the way he should.

Why I, Too, Am Not a Conservative lays out a subtle, complex, and principled vision for a functioning society of equals. Autonomy and reciprocity, he argues, are necessary for peace, order, and prosperity, but at the same time he doesn’t see it as his role to deconstruct society and rebuild it along these lines. Buchanan is critical of radicals who would force others to be free, or who would seek liberal ends by illiberal means. On one hand, Buchanan has a very clear social idea in mind. On the other hand, he isn’t willing to burn it all down and try to replace it with a constructed order he finds appealing. His contractarianism is too radical for that. As he writes (p. 20), “The classical liberal violates his own principles if he thinks of himself as philosopher-king.” It’s certainly not the role Buchanan sought for himself.

AIER: Fed District Court Holds Stay at Home Orders Unconstitutional

AIER has an article on a recent court decision from the federal District of Western Pennsylvania – Federal Court Holds “Stay-at-Home” Orders and Mandatory Business Closures Unconstitutional. The author hopes that the judicial branch is here to finally save people from executive overreach, but there is a way to go before one district court decision spreads across the land.

or six months, Americans in 43 states have lived under unprecedented executive orders restricting freedoms as basic as whether they can work, leave their homes, and expose their faces in public. These mandates are not duly enacted laws — they are orders issued by one of the three branches of government. They constitute a system of one-person rule — something none of us expected could ever happen in the United States — and no one, apart from the 43 newfound state dictators, is sure when it will expire.

Today, after six months of this, a Pennsylvania Federal Court in Butler County v. Wolf reviewed the indefinite “emergency” restrictions imposed by the executive branch of Pennsylvania government, declaring limitations on gathering size, “stay-at-home orders,” and mandatory business closures unconstitutional. Refusing to accept the alleged need for a “new normal,” the Court stated that an “independent judiciary [is needed] to serve as a check on the exercise of emergency government power.”

About time. The Judicial Branch is coming to save us.

The Judicial Branch exists to check Executive authority even in times of emergency.

Abraham Lincoln once said, “Our safety, our liberty, depends upon preserving the Constitution of the United States as our fathers made it inviolate. The people of the United States are the rightful masters of both Congress and the courts, not to overthrow the Constitution, but to overthrow the men who pervert the Constitution.” In 2020, sad to say, there are numerous governors across this nation who have perverted the Constitution — New Jersey’s Phil Murphy even declared its interpretation “above his pay grade” — with unprecedented orders restricting Americans’ rights to peaceably assemble, practice their religions, earn a living, travel freely, engage in commerce, and even manage their own health and exposure to risk. While global pandemics pose challenges for governors — particularly when the population is panicked by a hysterical mass media — entire populations cannot be indefinitely subjected to tyranny and deprived of fundamental rights and liberties. As the Court said today:

“There is no question that our founders abhorred the concept of one-person rule. They decried government by fiat. Absent a robust system of checks and balances, the guarantees of liberty set forth in the Constitution are just ink on parchment.”

We cannot allow our freedom to become “ink on parchment.” Many of our governors seek to do just that — they won’t even designate an endpoint to their “emergency” powers. When does the “emergency” end? This should be easy to say — X number of deaths per million, X number of deaths over X number of weeks — yet they will not say it. They want us to live under the constant threat of house arrest and livelihood deprivation, even though all we ever agreed to was a two-week effort to “flatten the curve.” We never agreed to an indefinite or permanent “new normal,” or to do whatever our wise governor dreams up and declares necessary to “eliminate infections.”

“In times of crisis, even a vigilant public may let down its guard over its constitutional liberties only to find that liberties, once relinquished, are hard to recoup and that restrictions — while expedient in the face of an emergency situation — may persist long after immediate danger has passed.”

Thank you, Judge Stickman, for recognizing our predicament, and for taking the first step towards restoring our freedom today by reminding those with authoritarian leanings that “governors cannot be given carte blanche to disregard the Constitution for as long as the medical problem persists.” The response to an emergency cannot undermine our system of constitutional liberties, or the system of checks and balances protecting those liberties. Liberty before “governor-guaranteed safety” — this is the American way, famously stated by Benjamin Franklin: “Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety.”

“Stay-at-home orders” are so draconian as to be presumptively unconstitutional.

Substantive due process is “a recognition that the government may not infringe upon certain freedoms enjoyed by the people as a component of a system of ordered liberty.” Plaintiffs in Butler County v. Wolf argued that the governor’s “stay-at-home order” violated substantive due process in restricting intrastate travel and freedom of movement in a manner that exceeded legitimate government need and authority. Incredibly, Governor Wolf responded that his stay-at-home orders are “not actually orders at all, but merely recommendations,” and that they are constitutional because they do not “shock the conscience.” I’m willing to bet that Pennsylvania citizens would beg to differ.

In analyzing the constitutionality of “lockdowns,” the Court first traced the origin of the concept to its source — Wuhan, China — and recognized that population-wide lockdowns are “unprecedented in American law.” Even during the Spanish Flu, the deadliest pandemic in history by far, “nothing remotely approximating lockdowns were imposed.” Although the United States has faced many epidemics and pandemics, “there have never previously been lockdowns of entire populations — much less for lengthy and indefinite periods of time.” Quarantines are legally recognized, but refer to the isolation of sick people and those known to have been directly exposed to sick people. They are statutorily limited to the duration of the incubation period of the disease — a period which Governor Wolf’s “lockdown” plainly exceeded.

Not only have lockdowns never been imposed in American history, but they are not even mentioned in recent pandemic management guidance offered by the Centers for Disease Control and Prevention (“CDC”). In its 2017 guidelines for managing pandemics, the CDC recommends numerous protective measures such as hand washing, limited-duration school closures, and cancellations of mass gatherings, but nothing “even approximating the imposition of statewide (or even community-wide) stay at home orders or the closure of all [‘non-essential’] businesses.” Even for pandemics of “Very High Severity,” the CDC recommends only voluntary isolation of sick persons and their household members. “This is a far, far cry from a statewide lockdown such as the one imposed by [Governor Wolf’s] stay-at-home order.”

The Court speculates that United States lockdowns were imposed due to a “domino effect” instigated by China, a nation “unconstrained by concern for civil liberties and constitutional norms.” In the United States, by contrast, the default concept is liberty of movement. Our government has never before dreamt of implementing mandatory house arrest, no matter the threat — it has always used far less restrictive, voluntary means to manage pandemics, similar to those used by Sweden during COVID19. (Notably, Sweden has lower per-capita mortality for weeks 1-33 of 2020 than it did for weeks 1-33 of 2015 — a far better mortality outcome than heavily locked-down U.S. States such as NJ, NY, and MI).

Ultimately, the Court concludes that lockdowns are so draconian that they are nearly “presumptively unconstitutional”:

“The stay-at-home components of Defendant’s orders were and are unconstitutional. Broad population-wide lockdowns are such a dramatic inversion of the concept of liberty in a free society as to be nearly presumptively unconstitutional unless the government can truly demonstrate that they burden no more liberty than is reasonably necessary to achieve an important government end. The draconian nature of lockdown may render this a high bar, indeed.”

This bears repeating: the burden of proof that “lockdown” is absolutely crucial to achieve a scientifically-substantiated goal rests with the government. The burden does not rest with the people to disprove the necessity of lockdown. Liberty is the default!

Mandatory business closures violate the Fourteenth Amendment’s guarantee that every citizen may support himself in an occupation of his choosing.

Mandatory business closures, like “stay-at-home” orders, are utterly unprecedented in American law. There is not even any historical jurisprudence for the Court to consider in its analysis of the issue — a rare event, indeed…(continues)

AIER: So You Want to Overthrow the State – Ten Questions for Aspiring Revolutionaries

Art Carden, writing for the American Institute for Economic Research, has some questions for those interested in overthrowing the government. These apply whatever your political bent, not just right or left. So You Want to Overthrow the State: Ten Questions for Aspiring Revolutionaries

A professor at Washington and Lee University is offering a writing seminar called “How to Overthrow the State,” which “place(s) each student at the head of a popular revolutionary movement aiming to overthrow a sitting government and forge a better society.” Students are charged with writing their own revolutionary manifesto in light of readings from revolutionaries like Che Guevara. The right-wing outrage machine, as you can imagine, is feasting on it and offering it as an example of the radical takeover of higher education.

I’m intrigued by the class because I tend toward free-market anarchism myself and think that states are neither necessary nor sufficient for prosperity. There’s a burgeoning academic literature on this with books like Peter T. Leeson’s Anarchy Unbound exploring the theory and history of statelessness and AIER’s own Edward Stringham’s Private Governance looking at how institutions and organizations that protect people and property have emerged without coercion. There’s a lively and ongoing debate in these circles about whether or not one would push a button that would allow us to wake up tomorrow morning without governments. WLU’s course represents an excellent opportunity for students to take the revolutionaries’ arguments seriously, and if they do their due diligence, to think really hard about their shortcomings. I offer, therefore, ten questions for the young leaders of these revolutionary movements.

  1. Do I have the facts straight? Karl Marx said that “Philosophers have hitherto only interpreted the world in various ways; the point is to change it.” I doubt very much that you will know which changes you need to make if you don’t have a very good idea about your starting point. In his book Factfulness and in his many excellent online presentations, the late Swedish Professor of International Health Hans Rosling identifies a lot of the ways things have gotten better, especially for the world’s poorest.

    Suppose, for example, that you encounter the name “Milton Friedman,” perhaps in connection with lamented “neoliberalism” and maybe in connection with human rights abuses perpetrated by the brutal Chilean dictator Augusto Pinochet. Friedman has been denounced as the “father of global misery,” and his reputation has taken another beating in the wake of the fiftieth anniversary of his 1970 New York Times Magazine essay “The Social Responsibility of Business is to Increase its Profits,” which I suspect most people haven’t read past its title. But what happened during “The Age of Milton Friedman,” as the economist Andrei Shleifer asked in a 2009 article? Shleifer points out that “Between 1980 and 2005, as the world embraced free market policies, living standards rose sharply, while life expectancy, educational attainment, and democracy improved and absolute poverty declined.” Things have never been so good, and they are getting better, especially for the world’s poor.

    In 2008, there was a bit of controversy over the establishment of the Milton Friedman Institute at the University of Chicago, which operates today as the Becker Friedman Institute (it is also named for Friedman’s fellow Chicago economist Gary Becker). In a blistering reply to a protest letter signed by a group of faculty members at the University of Chicago, the economist John Cochrane wrote, “If you start with the premise that the last 40 or so years, including the fall of communism, and the opening of China and India are ‘negative for much of the world’s population,’ you just don’t have any business being a social scientist. You don’t stand a chance of contributing something serious to the problems that we actually do face.” Nor, might I add, do you stand much of a chance of concocting a revolutionary program that will actually help the people you’re trying to lead.

  1. What makes me so sure I won’t replace the existing regime with something far worse? I might hesitate to push the aforementioned button because while the world we actually inhabit is far from perfect, it’s not at all clear that deleting the state overnight wouldn’t mean civilization’s wholesale and maybe even perpetual collapse. At the very least, I would want to think long and hard about it. The explicit mention of Frantz Fanon and Che Guevara in the course description suggest that students will be approaching revolutionary ideas from the left. They should look at the results of populist revolutions in 20th century Latin America, Africa, and Asia. The blood of many millions starved and slaughtered in efforts to “forge a better society” cries out against socialism and communism, and macroeconomic populism in Latin America has been disastrous. As people have pointed out when told that “democratic socialists” aren’t trying to turn their countries into Venezuela, Venezuelans weren’t trying to turn their country into Venezuela when they embraced Hugo Chavez. I wonder why we should expect WLU’s aspiring revolutionaries to succeed where so many others have failed.
  2. Is my revolutionary program just a bunch of platitudes with which no decent person would disagree? In 2019, Kristian Niemietz of London’s Institute of Economic Affairs published a useful volume titled Socialism: The Failed Idea That Never Dies, which you can download for $0 from IEA. He notes a tendency for socialists and neo-socialists to pitch their programs almost exclusively in terms of their hoped-for results rather than in terms of the operation of concrete social processes they hope to set in motion (on this I paraphrase my intellectual hero Thomas Sowell).

    Apply a test proposed a long time ago by the economist William Easterly: can you imagine anyone seriously objecting to what you’re saying? If not, then you probably aren’t saying anything substantive. Can you imagine someone saying “I hate the idea of the world’s poor having better food, clothing, shelter, and medical care” or “It would be a very bad thing if more people were literate?” If not, then it’s likely that your revolutionary program is a tissue of platitudes and empty promises. That’s not to say it won’t work politically–God knows, nothing sells better on election day than platitudes and empty promises–but you shouldn’t think you’re saying anything profound if all you’re saying is something obvious like “It would be nice if more people had access to clean, drinkable water.”

  1. Is my revolutionary manifesto really any better than the Underpants Gnomes’ business plan from this 1998 episode of South Park?

    In 2011, I wrote that a lot of policy proposals are “‘Underpants Gnomes’ Political Economy” after an episode of South Park in which the Underpants Gnomes’ business plan had three phases. Phase 1 was “collect underpants.” Phase 2 was a question mark. Phase 3 was “profit.” Most revolutionary proposals are like that. Phase 1 is “abolish private property” or “Build That Wall” or something. Phase 2 is a question mark. Phase 3 is “equality and superabundance” (from the left) or “America has been made Great Again” (from the Trumpist right). There are more than a few very important details missing.

  1. In other words, how is this actually going to work? I’m not a socialist not because of antipathy toward poor people or callous selfishness. I’m not a socialist because it doesn’t work in practice and doesn’t even work in theory. Ludwig von Mises and Friedrich Hayek, among many others, have argued that private property, market prices, and market-determined profits and losses are necessary for rational economic calculation. Marx summarized the program of the communists as “abolition of private property.” Mises countered that socialism, or abolition of private property, would mean “abolition of rational economy.” Marx (in)famously never spelled out exactly how socialism would work; he just knew it would. Vladimir Lenin didn’t appreciate the calculation problem and thought that managing an entire economy as if it was just one big factory didn’t require much more than arithmetic and receipts. He was grievously, tragically wrong. I think Mises and Hayek, ultimately, were the ones vindicated by theory and history.
  2. Does my argument for how it will work rely on people discarding self-interest, becoming a lot less horrible, and/or becoming a lot smarter? In a famous cartoon by Sidney Harris, two scientists are standing at a chalkboard. There are equations on the left and right sides of the board with “THEN A MIRACLE OCCURS” between them. One scientist says to the other, “I think you should be more explicit here in step two.” If you’re relying on a change in human nature to make your program work, be prepared for a very long wait. Or be prepared to spill oceans of blood like those who tried to create a “New Socialist Man” in the twentieth century. The socialists and communists wanted to run the economy as if it were one big factory. For the most part, they have also wanted to run the rest of society as if it were one big family. This brings us to a problem that vexed Friedrich Hayek his whole career. The rules, norms, traditions, and other practices that make families or very small communities work well don’t scale. Similarly, if you tried to run your life with family and friends according to a “market logic” in which you try to do everything via literal price-mediated exchanges–charging your kids to rent the TV when they want to watch a movie, for example–it’s probably going to backfire spectacularly. You can’t run your family as if it’s the Chicago Board of Trade. You also can’t run a society of millions of people as if it’s one big happy family.
  3. How has it worked the other times it has been tried? Are you considering “land reform,” whether land expropriation and redistribution, or straight up collectivization? Satellite images of the effects of land reform in Zimbabwe should make you think twice.

    Years before the Russian Revolution, Eugene Richter predicted with eerie prescience what would happen in a socialist society in his short book Pictures of the Socialistic Future (which you can download for $0 here). Bryan Caplan, who wrote the foreword for that edition of Pictures and who put together the online “Museum of Communism,” points out the distressing regularity with which communists go from “bleeding heart” to “mailed fist.” It doesn’t take long for communist regimes to go from establishing a workers’ paradise to shooting people who try to leave. Consider whether or not the brutality and mass murder of communist regimes is a feature of the system rather than a bug. Hugo Chavez and Che Guevara both expressed bleeding hearts with their words but used a mailed fist in practice (I’ve written before that “irony” is denouncing Milton Friedman for the crimes of Augusto Pinochet while wearing a Che Guevara t-shirt. Pinochet was a murderous thug. Guevara was, too). Caplan points to pages 105 and 106 of Four Men: Living the Revolution: An Oral History of Contemporary Cuba. On page 105, Lazaro Benedi Rodriguez’s heart is bleeding for the illiterate. On page 106, he’s “advis(ing) Fidel to have an incinerator dug about 40 or 50 meters deep, and every time one of these obstinate cases came up, to drop the culprit in the incinerator, douse him with gasoline, and set him on fire.”

  1. Are people moving toward or away from the kind of society I want to establish? We get a lot of information from how people “vote with their feet” for different policies. If you’re advocating some version of socialism, you have to deal with the fact that so many people are trying desperately to leave socialist countries. The East German government did not build the Berlin Wall to keep westerners out, and pretty much all of the traffic between Cuba and the United States moves in one direction. It isn’t toward the Castros’ workers’ paradise.
  2. What will I do with people who aren’t willing to go along with my revolution? Walter Williams once said that he doesn’t mind if communists want to be communists. He minds that they want him to be a communist, too. Would you allow people to try capitalist experiments in your socialist paradise? Or socialist experiments in your capitalist paradise (Families, incidentally, are socialist enterprises that run by the principle “from each according to his ability, to each according to his needs.”)? Am I willing to allow dissenters to advocate my overthrow, or do I need to crush dissent and control the minds of the masses in order for my revolution to work? Am I willing to allow people to leave, or will I need to build a wall to keep people in?
  3. Am I letting myself off the hook for questions 1-9 and giving myself too much credit for passion and sincerity? The philosopher David Schmidtz has said that if your best argument is that your heart is in the right place, then your heart is most definitely not in the right place. Consider this quote from Edmund Burke and ask whether or not it leads you to revise your revolutionary plans:

    “A conscientious man would be cautious how he dealt in blood. He would feel some apprehension at being called to a tremendous account for engaging in so deep a play, without any sort of knowledge of the game. It is no excuse for presumptuous ignorance, that it is directed by insolent passion. The poorest being that crawls on earth, contending to save itself from injustice and oppression is an object respectable in the eyes of God and man. But I cannot conceive any existence under heaven (which, in the depths of its wisdom, tolerates all sorts of things) that is more truly odious and disgusting, than an impotent helpless creature, without civil wisdom or military skill, without a consciousness of any other qualification for power but his servility to it, bloated with pride and arrogance, calling for battles which he is not to fight, contending for a violent dominion which he can never exercise, and satisfied to be himself mean and miserable, in order to render others contemptible and wretched.” (Emphasis added).

A lot of colleges and universities have first-year writing seminars that try to teach students to write by exploring a particular set of issues, and as long as the course actually teaches students how to become better writers, we should welcome new experiments. A course that asks students to put themselves in the positions of aspiring revolutionaries and to prepare their own revolutionary manifestoes is extremely creative. I think it’s the kind of course from which students can benefit mightily–if, of course, they ask the right questions.

AIER: Government, Govern Thyself

Michael Munger is a Professor of Political Science, Economics, and Public Policy at Duke University and Senior Fellow of the American Institute for Economic Research. In the article Government, Govern Thyself, he argues that the state is always either too weak to do what we want, or so strong it can do whatever it wants.

leviathan

In January 2014 then-President Barack Obama made a speech in Washington, D.C. In that informal speech, just before a cabinet meeting, he explained he found it necessary to ignore the U.S. Constitution and unilaterally impose his vision of the good society on the nation:

We’re not just going to be waiting for legislation in order to make sure that we’re providing Americans the kind of help they need. I’ve got a pen and I’ve got a phone…

And I can use that pen to sign executive orders and take executive actions and administrative actions that move the ball forward in helping to make sure our kids are getting the best education possible, making sure that our businesses are getting the kind of support and help they need to grow and advance, to make sure that people are getting the skills that they need to get those jobs that our businesses are creating.

Many people on the right complained (I thought correctly) that this was Presidential overreach. To be fair, even the New York Times called the overzealous suppression of information and prosecution of whistleblowers “a stain on Obama’s legacy.”

Now, of course, all my friends on the left are appalled by the actions of the overreach of the Republican administration. Many who were fine with Obama ordering states around on the environment have recently taken a strong interest in the 10th Amendment, worrying about immigration enforcement and sending federal police to Portland and other cities. Understand: this is no partisan disagreement, but an irredeemable flaw in the nature of the state. The modern state is either too weak to do what we want, or so strong it can do whatever it wants.

The problem is often stated recursively. In Luke 4:23, Jesus mocked his skeptical listeners, “Physician, heal thyself.” The audience doubted Jesus’ claim that he was the messiah, because “Is not this Joseph’s son?” Just some local kid putting on airs and getting above his raisin’. Jesus’ taunting response was, in effect, “Nobody wants a sick physician, or a skinny cook, right?”

There are other observations in this vein; perhaps the most famous is that of the Roman satirist Juvenal. Around 100 C.E. he wrote about a problem of making sure someone does the right thing, even if the boss isn’t watching. His example (it was a satire) focused on ensuring the sexual fidelity of wives:

I know well the advice and warnings of my old friends: “Put on a lock and keep your wife indoors.” Yes, and who will ward the warders? They get paid in kind for holding their tongues as to their young lady’s escapades; participation seals their lips. The wily wife arranges accordingly, and begins with them…. (Satire #6)

Juvenal’s question, “Quis custodiet ipsos custodes?” (I’ve seen it translated “Who will ward the warders/guard the guardians?”), and Jesus’ parable, both illustrate the problem with the dual nature of the state. The usual social contract myth endows the state with the duty to enforce all agreements. But who then is to enforce the agreement between citizens and the state? Can the state be both enforcer and a party in the dispute? Physician, heal thyself.

There is of course a long history of just this kind of critique among libertarians, particularly those of us with some anarchist sympathies. One of the most interesting, important, but (to my mind) underrated of these was the late Anthony de Jasay. The origins of government are supposed by our inability to enforce contracts. So we create an entity that specializes in violence, to force everyone to obey their contracts. In Hobbes’ terms, “Covenants, without the sword, are but words.” Of course, once “we” “consent” to this universal contract enforcer, we have some problems. Who is this “we?” It all happened a long time ago. And very few people actually “consented;” all that happened is that we didn’t leave the country. And who will enforce our contract with the violent contract enforcer? Somehow, the government has to govern itself.

According to Jasay, there are two fatal flaws with the “social contract” idea. The first is the “enforceable contracts” justification, and the second is the “limiting Leviathan” problem of self-governance.

If contracts are unenforceable, then who governs the government? If we can’t enforce contracts with equals, how can we trust Leviathan? Jasay compares this magical thinking to “jumping over your own shadow.” As he puts it, “[I]t takes courage to affirm that rational people could unanimously wish to have a sovereign contract enforcer [itself] bound by no contract.” And by “courage” he intends no encomium. Either (1) those who make this claim are contradicting themselves: since we can’t have contracts, we’ll use a contract to solve the problem; or (2) the argument is simply circular: cooperation requires enforceable contracts, but these require a norm of cooperation that makes the state obey the contract. Of course, if there is a norm of cooperation then other contracts are enforceable without the state.

We are on the horns of a dilemma: either the former claim—contracts cannot be enforced—is true, and we cannot conjure enforceable contracts out of a shadow; or the latter claim—people naturally cooperate on their own—is true, and then no state was necessary in the first place. Robert Nozick (1974) put it well: “Tacit consent isn’t worth the paper it’s not written on.”

The second problem highlighted by Jasay is “limiting Leviathan.” Let’s assume the best: state officials genuinely intend to do good. We might make the standard Public Choice claim that officials use power to benefit themselves, but let us put that aside; instead, suppose officials genuinely want to improve the lives of their citizens.

That still means a minarchist state is not sustainable.

Officials, thinking of the society as a collective rather than as individuals with inviolable rights, will immediately discover opportunities to raise taxes, create new programs and new powers that benefit those who, in the minds of the officials, need help. In fact, it is precisely the failure of the Public Choice assumptions of narrow self-interest that ensure this outcome. It might be possible in principle to design a principal-agent system of bureaucratic contract that constrains selfish officials. But if state power attracts those who are willing to sacrifice welfare, even their own welfare, for the “greater good” then the constitutional dams of minarchy are quickly overtopped, and Leviathan floods the land.

I should hasten to add that it need not be true, for Jasay’s claim to go through, that the concept of “greater good” has any empirical content. It is enough that (some) people believe. The true believers will brandish “the greater good” like a truncheon, smashing rules and laws designed to restrain the expansion of state power. No one who wants to do good will pass up a chance to do good, even if it means changing the rules. This process is much like that described by Hayek in “Why the Worst Get on Top,” or Bertrand de Jouvenal’s On Power.

So, the argument has the same structure, creating a logical dilemma or contradiction. Either

  1. Minarchy is not possible, because it is overwhelmed by the desire to “do good,” which cannot be controlled by the state because it would require officials to limit themselves for moral, not legal reasons, or
  2. No state, minarchist or otherwise, is necessary because people can limit their actions on their own, without the state’s use of coercion.

Jasay is especially scornful of those who would invoke constitutions and “parchment barriers” to protect a minarchist arrangement. A formal state and a constitution are either unnecessary (if people are self-governing) or ineffective (if they are not). Leviathan either cannot survive because everyone opposes it, or else it is illimitable because no one can resist it.

Most people seem to think that the problem with government power is that the wrong people are in office. That’s not right; the problem is that we want to rely on a physician who suffers an illness that cannot be cured.

AIER: Fear, Tyranny, and the Fairy Tale of Our Times

Dr. Caroline Breashears at the American Institute for Economic Research has an enjoyable article on metaphor and  evil elites with Fear, Tyranny, and the Fairy Tale of Our Times.

malficent

Fairy tales often get a bad rap. Among politicians and activists, “fairy tale” connotes “fantasy,” as in Greta Thunberg’s rant at the U.N. Climate Action Summit: “We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth.”

Yet fairy tales not only promise the hope that Thunberg rejects: they register each culture’s sociopolitical concerns, offering moral and practical solutions.

Consider Charles Perrault’s 1697 tale of “Little Thumbling,” which depicts the poverty of French peasants, the greed of the rising moneyed class (the ogre), and the corruption of the court. For the little man, only cunning can save the day.

Or recall Jacob and Wilhelm Grimm, who collected and reshaped fairy tales during the Napoleonic wars, defiantly presenting a German tradition (take that, Boney). And in the twentieth century, the Nazis revised the Grimms’ classics to spread their own propaganda. In one chilling film, Little Red is saved from the wolf by an SS officer.

Which brings us to one of Disney’s latest releases: Maleficent: Mistress of Evil (2019). As critics have observed, it seems overloaded with themes and subplots, from genocide to environmentalism to the history of the dark fey.

Technically, it is not a great film.

Yet Maleficent: Mistress of Evil performs an essential service by reflecting our time: it foregrounds how fake news promotes our national divisions, and it models how to reject bias in favor of facts, moral judgment, and the prosperity brought by peace.

Spinning Stories: #MaleficentIsEvil

Disney is of course an expert at updating and promoting scripts. Maleficent (2014) retells its own Sleeping Beauty (1959), itself based on the Grimms’ variant, though Disney identified Perrault’s version as its source text. No need to remind viewers of the Germans so soon after World War II.

Maleficent then recuperates the villain as the victim of a man who literally stole her fairy wings. In retaliation, Maleficent cursed his daughter, Princess Aurora, to be poisoned by a spindle, but then redeemed herself by growing to love the child. That film ended with Maleficent, not Prince Phillip, awakening Aurora with “true love’s kiss.”

So why is the sequel’s subtitle Mistress of Evil? It is a puzzle that the narrator foregrounds at the start, noting that Maleficent’s love for Aurora “was somehow mysteriously forgotten. For as the tale was told over and again throughout the kingdom, Maleficent became the villain once more.”

To paraphrase one politician, everybody says so.

The mystery is solved near the film’s end, when Prince Phillip’s mother, Queen Ingrith, tells Aurora that it was she who spread the lies:

Do you know what makes a great leader, Aurora? The ability to instill fear in your subjects and then use that fear against your enemies. So I spread this story of the evil witch and the princess she cursed. It didn’t matter who woke Sleeping Beauty. They were all terrified. And the story became legend.

To be fair, Ingrith believes that fairies like Maleficent threaten humanity. She claims that when she was young, the crops in her father’s kingdom died, leading the people to suffer. Meanwhile, the magical fey of the Moors continued to thrive.

“My brother and I believed we should take what we needed,” Ingrith states, echoing modern rationales for the redistribution of wealth. Why create when one can simply take? Did the fairies really deserve what they had? But her father, the king, disagreed, sending Ingrith’s brother to ask the fey’s help. He never returned.

In this context, Queen Ingrith’s tales about Maleficent and other fairies may be factually incorrect, but she believes them to be morally true, which is apparently the new standard in journalism. And so she spins her stories with an effectiveness that even Walter Duranty would envy.

To solidify her narrative, Queen Ingrith stages a family dinner for the newly engaged Aurora and Phillip. First she antagonizes Maleficent, working her into a rage. Then Ingrith poisons her own husband with the iconic spindle and frames Maleficent for it. Even Aurora falls for the lie. The people, terrified, are primed for war.

Pick Your Poison

As Maleficent leaves Queen Ingrith’s castle, she is shot with a poisoned bullet by one of Ingrith’s servants, Gerda. Fortuitously, a mysterious fairy rescues her and takes her to a remote location to heal. When Maleficent awakens, she discovers a world of Dark Fey who have been exiled from their lands by humans.

As Maleficent navigates this new realm, she is pulled in different directions by two fairies. One, the warrior Borra, is motivated by resentment: they must kill the humans and reclaim their lands. Another fairy, the peaceful Conall, points a different way: Maleficent, the descendant of the Phoenix, possesses great powers that could be used to heal, not destroy, if she can forgive Aurora.

The characters’ options mirror our own. Do we focus on the past and continue the resentments? Do we, like one prominent activist, threaten that if demands are not met, “we will burn down this system and replace it?” Or do we unite to move forward?

The question involves not only politics but moral judgment. As Adam Smith observes in The Theory of Moral Sentiments, “The real, revered, and impartial spectator . . . is upon no occasion, at a greater distance than amidst the violence and rage of contending parties. . . . Of all the corrupters of moral sentiments, therefore, faction and fanaticism have always been by far the greatest.”

Even as Maleficent struggles with judgment, Aurora, now at the palace for her wedding, comes to suspect that she has condemned Maleficent unfairly. She finally realizes that Ingrith plans to exterminate the fey. She warns Prince Phillip and saves a group of fairies being exterminated by Gerda.

Waking Up

In the end, it comes down to individual choice. Borra and Ingrith, driven by revenge, choose to lead their armies into battle. Ingrith warns Phillip, “These creatures stand between us and everything we need to survive.” Her solution is to destroy.

Phillip rejects her logic, telling Borra, “My mother wanted a fight, and you’re giving it to her. I won’t allow her hatred to ruin my kingdom or yours.” His argument leads Borra to awaken from his own hatred to consider who is driving the war and why.

Maleficent goes a step further. She dies to save Aurora when Ingrith shoots her with a poisonous bolt. Her love trumps race, politics, and resentment for past wrongs. And because Maleficent is a descendant of the Phoenix, she regenerates.

At first glance, the Phoenix motif seems like a sadly artificial solution, but it follows a tradition of fairy tales depicting symbolic rebirth to capture a character’s growth in wisdom. Snow White is “reborn” after her time in the coffin; Little Red is “reborn” after her time in the wolf’s belly; and Maleficent is “reborn” after her sacrifice.

The result is hope that what was imperfect—a person, a relationship, a country—can be made better. The film ends with humans and fairies celebrating the marriage of Philip and Aurora. While negotiations are surely ahead, the first step has been taken toward peace and the prosperity brought by mutual exchange.

Ultimately, Maleficent: Mistress of Evil is a fairy tale of our time. Reflecting the national divisions that have only escalated since its release, it illustrates how false stories spread to infect hearts and minds as fatally as a virus. The solution is to reject these fictions and judge for ourselves. As Conall tells Maleficent, “I’ve made my choice. Now make yours.”

AIER: Why Didn’t the Constitution Stop This?

Robert Wright at the American Institute for Economic Research writes about Constitutional issues surrounding the pandemic and lockdown orders in Why Didn’t the Constitution Stop This?

constitution

The genius of the U.S. Constitution is that the Framers, especially James Madison and Alexander Hamilton, saw it as a constraint on bad policymaking. Given the number of really bad policies that various US governments and officials, from school boards to POTUS, have implemented, especially recently, it is high time to restore weakened or lost Constitutional restraints against arbitrary rule.

Five forces threaten Americans with destruction: 1) nature; 2) foreign powers; 3) the national government; 4) state and local governments; 5) themselves. The threat from 3, 4, and 5 is double-edged, meaning that Americans can be harmed by the actions of those forces as well as by their inaction.

The national government, for example, can harm Americans by being insufficiently prepared for natural catastrophes and foreign incursions, as with Hurricanes Katrina and Rita and the 9/11 attacks. It can also harm Americans, though, by doing too much, as with the invasion of Iraq and the way-too-long occupation of Afghanistan. (Relying too much on FEMA instead of states or private initiatives may be another example, but less clear cut than the needless wars.)

The national and state governments are supposed to check each other’s power, so that if one overreaches, the other can thwart it. We usually think about this in terms of “states’ rights” but in fact federalism, as the concept is sometimes called, runs both ways: the states should check the national government when necessary but the national government should also check the power of the states when they overreach, as they sometimes do.

Advocates of states’ rights often cite the Tenth Amendment, which reads in its entirety “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Because the word “expressly” does not occur before “delegated” in the ratified version of the amendment, however, it is among the weakest parts of the Constitution.

Traditionally, though, the states retained primary control of so-called “police powers,” the powers that form the legal basis for the economic lockdowns that have imprisoned most Americans for over a month now. Books have been written about this stuff so obviously I cannot relate all the details and nuances involved but ultimately they matter little in the present case. The key point is that police powers, national, state, or local, do not provide carte blanche to governments. Specifically, the Constitution constrains state police powers in numerous ways.

Importantly, courts see Constitutional rights as tradeoffs between conflicting interests. So while the Constitution says that the national and state governments cannot infringe individual speech rights, they can pass laws that make it illegal for an individual, for example, to falsely yell “fire” in a crowded theater. The notion is that the property and natural rights of the theatergoers trump the free speech rights of the liar.

Similar restrictions apply to the right of assembly. All Americans have the right to assemble with other Americans for any lawful purpose but state police powers, the positive duty of states to protect the physical safety of assemblers and non-assemblers, mean that governments may restrict assemblies through permit systems.

Similar arguments are made to defend the pistol permit systems common in many states. They are bogus but show how far courts go to balance one person’s rights with those of others. If you believe that gun control laws should be followed because they are laws passed by democratically elected representatives you have missed the point of the Constitution, which, again, is to constrain policymakers, to protect individual Americans from the national and state governments and also other Americans.

Just because a majority wants some policy doesn’t mean that that policy is a good idea, after all. I imagine at one point in March 2020 a majority of Americans might have thought it a good idea to deport, tax, infect, or maybe even kill Chinese-Americans in order to make “them” pay for what “they” did to “us.” (I don’t want to link to evidence of that … just look at your social media feeds if you need evidence.) That is a typically ugly human reaction to trauma but one that would have been proven empirically wrong as well as morally bankrupt and economically inane (sunk costs). Thankfully, the Constitution remained strong enough to prevent that horror.

It did not, however, prove strong enough to prevent state governments from taking their police powers too far. They engaged in fancy word play to hide the fact that they acted without a shred of precedent. What they imposed is not a quarantine, which constrains the movement of sick people, nor a cordon sanitaire, which locks people into an afflicted area, nor a protective sequestration, which locks people out of an unafflicted area. Instead, they have implemented partial martial law (military rule essentially) by imprisoning Americans in their own homes without due process of law and stolen their property by shuttering their businesses. (Some recompense has been attempted but of course only bluntly and at a cost to all taxpayers, including those in states that did not shutter most businesses.)

Remember, just because a state has general police powers doesn’t mean it can do whatever it wants, whenever it wants, simply because its actions are popular, or passed into law, or urged by some scientist. Imagine, for example, if some executive thought everyone ought to drink bleach, crazy as that seems, and actually mandated it. Would you do it? (Hint: Don’t do it! Even if some guy in a suit or lab coat tells you that you must.) What if some leader believed that the coronavirus is spread primarily by clothing and mandated that we all go naked in public, except for our masks and gloves of course? Or if one thought an EMP (electromagnetic pulse) would solve the problem (and destroy all computers in the process)?

Any promulgation that violates the Constitution, in any way, shape, or form, is null and void. A federal judge has the authority to declare any state law or executive order unconstitutional and demand that it be revoked. Judges generally give governments broad leeway to protect “public health” but the policies must be rational and they must weigh the rights of all involved parties. Historically, many government epidemic responses never got litigated because the crises passed before suits could be brought and because quarantines, cordons, and sequestrations can make rational sense in specific situations. But, again, state governments for some reason have tried to combat the novel coronavirus with novel policies that come with huge negative side effects for everyone — workers, consumers, and taxpayers — and that have and will continue to cause deaths, minimization of which is the ostensible goal of lockdown policies.

Why draconian lockdown rules have not yet been deemed unconstitutional I still do not know, but the fact that a former federal judge who teaches at Harvard apparently does not know the difference between a quarantine and a lockdown might provide a clue…(continues)

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AIER: How Liberalism Can Survive Left-Right Polarization

This article from the American Institute for Economic Research looks into the rise of political extremity, both left and right, in the US, and what we need to do to affirm dedication to liberty while rejecting the vengeful appeal of authoritarianism.

The rise of political extremes in America, both left and right, poses a particular challenge for those of us who prefer liberty over government control. It’s not only in the US; the same grows in the UK, Europe, Latin America, and Brazil. As the old managerial elite in all countries loses credibility and power, socialist and nationalist forms of statism are vying to take their place, while relegating liberalism to the political margins.

To survive and thrive, we will need to gain greater confidence in who we are and what we believe about the social order, clarifying and focusing on what liberty looks like and what precisely we are going for, while avoiding partisan traps along the way. In particular, we need to avoid being lumped in with movements – rightly or wrongly, by expedient or intellectual error – that are contrary to our tradition and philosophical longings.

In case you haven’t heard, for example, many academic and media observers are on a hunt to discover the origin of the nationalist resurgence, and particularly its most bizarre and violent segment of the alt-right. To the horror of many dedicated intellectuals and activists in the liberty space, some academics and journalists have tried to link this movement backward in time to the libertarian political movement as it developed over the last two decades, and, by extension, the rise of the Trump-controlled Republican Party.

It should be obvious that, in theory and contrary to what the socialist left has long claimed, there is no connection whatsoever between what we call libertarianism and any species of rightist ideology. One negates the other. As Leonard Read wrote in 1956, “Liberty has no horizontal relationship to authoritarianism. Libertarianism’s relationship to authoritarianism is vertical; it is up from the muck of men enslaving man…”

And yet today, there does indeed appear, at least superficially, to have been a social, institutional, and even intellectual connection, and migration, between what is called the liberty movement and the emergence of nationalism, right-wing identitarianism, and the politics of authoritarianism. Some of the most prominent alt-right voices in the 2017 Charlottesville marches once identified as libertarians. This fact has been widely covered. It’s a fair question to ask: did these individuals ever really believe in a liberal worldview? Were they trolling all along? Were they just deeply confused?

I’ve been interviewed many times on these questions. How did this come to be? The answer is complex. It was more than six years ago that my article “Against Libertarian Brutalism” raised a conjecture: a libertarianism, rendered simply as nothing more than a “leave me alone” outlook, with no larger aspiration for the good life, and no interest in the subject of social cooperation, could find itself divorced from a historical conception of what the advent of liberty has meant to human life and society as a whole. Without that, we fail to develop good instincts for interpreting the world around us. We are even reduced to syllogistic slogans and memes which can be deeply misleading and feed even illiberal bias.

And where does this bias end up? Where are the limits? I see them daily online. In the name of fighting the left, many have turned in the other direction to embrace an alternative form of identitarianism, restrictions on trade and migration, curbs on essential civil liberties, and even toyed with the freedom of the press and the rights of private enterprise, all in the name of humiliating and eliminating the enemy. Some go further to celebrate anything they believe the left hates, including even odious causes from the authoritarian past.

The rhetoric at the extremes approaches nihilism. The press isn’t really free so why not impose restrictions, censorship, and litigated punishments? The borders aren’t private so why not prohibit all entry? Some speech doesn’t support freedom so why permit it the rights that freedom entails? Social media companies aren’t really private enterprises, so why not force them to carry and promote some accounts that I like? That large company has a government contract so why not bust it up with antitrust?

The gradual evolution of language has unleashed all kinds of confusion. Activists denounce “the establishment” without a clear distinction between government and influential media voices. They will decry “globalism” without bothering to distinguish the World Bank from an importer of Chinese fireworks. They promote identitarianism and racial collectivism without the slightest understanding of the illiberal origins and uses of these ideologies in 20th-century history. After all, they say, there is nothing “inherently un-libertarian” about casting down an entire people, religion, gender, language, or race, so long as you don’t directly use violence.

It takes a special kind of circuitous sophistry to justify, in the name of liberty, collectivistic animus and state violence against voluntary association. But the history of politics shows people are capable of making huge mental leaps in service of ideological goals. All it takes is small steps, little excuses, tweaks of principle here and there, seemingly minor compromises, some element of confirmation bias, and you are good to go, ready to make as much sense as the old communist slogan that you have to break eggs to make omelets…

Click here to read the entire article at AIER.

AIER: The Stakes of Politics are Far Too High

This piece by economics professor Alexander Salter at the American Institute for Economic Research dwells on the idea that growth in federal government and expansion of federal power are at odds with maintaining liberty, thus The Stakes of Politics are Far Too High.

Despite the comedy of errors that was the Iowa Democratic Caucus, not to mention the ambiguity of New Hampshire, the national fervor grows. Bernie Sanders’ strong performance makes him the Democratic frontrunner: his odds of winning the nomination stand at 33%, with Michael Bloomberg at a surprising 27%.

Sanders’ campaign is notable because he is explicit about his radical vision for the U.S. economy. An advocate of the Green New Deal, Sanders has promised to reengineer the American economy from the top-down, at a cost of more than $10 trillion over the next decade.

On the Republican side, President Trump never leaves campaign mode. His proposed budget, released on Monday, will not balance for at least 15 years, suggesting he is more than happy to bestow gifts on the electorate without paying for them. Overall, the national debt has grown by $3 trillion since Trump took office. Now it seems trillion-dollar deficits are the new normal.  This suggests Republicans have made their peace with a government empowered to direct more and more of our lives.

In short, Democrats are close to going “all-in” on democratic socialism, or at least a hardcore form of social democracy that entails a large degree of federal dirigisme. And Republican policy (which differs greatly from Republican rhetoric) is heading towards the same.  Using new programs and new spending to secure electoral support is nothing new. But given the dire fiscal situation of the United States, as well as the ominous growth federal power, we have a very good reason to worry that the political clash that will culminate in November will end poorly for everyone, regardless of who wins the White House.

Plenty of op-eds have been written on the economics of deficits and the growth of the national debt. We know our fiscal trajectory is unsustainable. Less well known are the political consequences.  Those consequences can only be understood by first refamiliarizing ourselves with the purpose of our Constitutional system.

Why do we have a Constitution that fragments political power and divides it among many organizations? The typical answer is to prevent tyranny, which is true. But it is incomplete. Our Constitution has so many procedural safeguards in place because the Founders understood the first need of a durable government at the federal level was to lower the stakes of politics. Because it is difficult to enact sweeping changes at the national level, control over the national government is not perceived by any political faction to be an existential threat.

That is how it is supposed to work. In fact, we have deviated significantly from the politics of prudence and restraint envisioned by the Founders. Congress increasingly authorizes greater and greater spending, upon which the well-being of millions has come to depend.

The Executive increasingly governs by fiat, selectively enforcing laws and allocating significant fiscal resources of its own. In this world, the game of politics has necessarily become high-stakes: the benefits of controlling the government are enormous, and as a result, efforts to secure this control have become a matter of life or death. Bloated budgets and perpetual deficits are a sure sign we are moving towards winner-takes-all politics.

The political philosopher Thomas Hobbes, in justifying the state, wrote that rational individuals willingly cede political power to a central arbiter and enforcer so that they may escape the “war of all against all.” Unfortunately, our fiscal scenario has reignited this war.

The first axiom of sound governance is to lessen the dangers caused by differences in principles and worldviews among citizens. But when the state becomes an all-encompassing institution—when everything and anything is political—disagreements become existential threats.

“When you play the game of thrones, you win or you die.” This quote by a fictional Machiavellian monarch aptly describes our situation. Unless we commit to lowering the stakes of politics, once again embracing moderation and humility, we doom ourselves to a never-ending cycle of reciprocal political domination. This is the death of liberty under law, and of democratic self-governance itself.

AIER: Paul Krugman Is Wrong on Gov Debt

The American Institute for Economic Research has up an article on why economist Paul Krugman is wrong when he says that government “debt is money we owe to ourselves” and therefore not anything to worry about.

Krugman’s Zombie Idea: We Owe It to Ourselves

Paul Krugman coined the term “zombie ideas” to describe “policy ideas that keep getting killed by evidence, but nonetheless shamble relentless forward, essentially because they suit a political agenda.”

Krugman has revived one of his favorite zombies: the notion that high government deficits aren’t dangerous in the way that an individual incurring heavy debt is because the national debt is “money we owe to ourselves.” He doubled down on his claims in response to an article comparing the dangers the debt poses to future generations to climate change.

Krugman has repeatedly written on this topic at his blog (see here and here). It was a common refrain of his during the Eurozone crisis and in the aftermath of the Great Recession when there was a bipartisan push to cut future deficits to prevent future Greek-style debt crises.

As with most myths, there is a grain of truth to the claim. National debt does differ from the debt individuals and households incur in a few notable ways. Individuals have a finite lifetime to incur and repay their debts. Governments don’t; they can pass debt onto future generations. So long as people are willing to lend it money and the government can service debt as it comes due, government debt can persist in perpetuity. And to the extent that the debt is owned by domestic citizens, the money that is used to repay the debt needn’t leave the economy.

That said, this grain of truth doesn’t eliminate the ocean of evidence against Krugman’s claim that worrying about the burden the national debt might impose on future generations is nonsensical. Here are some reasons why this argument is fundamentally flawed.

A large share of the national debt is owed to foreigners

For starters, it’s not the case that the national debt is entirely owed to “ourselves” (i.e., that it is exclusively owned by US citizens). Nearly one-third of the US debt ($6.636 trillion of the $22 trillion in debt) is owned by foreign governments and international investors.

This isn’t necessarily a bad thing. The willingness of foreigners to lend to the U.S. government has helped keep Treasury rates at historical lows, making it cheaper for future taxpayers to repay the interest on the national debt. If the US government is running deficits to finance justifiable initiatives (say, fighting World War II) and spending programs that will boost future growth, we should welcome funds from investors regardless of their nationality.

Nevertheless, it undercuts Krugman’s case that repaying the debt won’t burden future taxpayers and the future economy on net because the money will “stay in the U.S. economy.”

The fallacy of “we” and the reality that future taxpayers really do “foot the bill”

A bigger problem is that Krugman commits what Don Boudreaux calls the “Fallacy of Us, We, and Our.” Even if the entire national debt is owned by US citizens, there is no real sense in which “we” owe the debt to “ourselves.” The individuals incurring and benefitting from the debt are entirely different from the individuals who must bear the burden of repaying that debt.

Once we move past the intellectual sleight of hand of using collective pronouns like “we” and “ourselves” to describe all Americans across time, we get a much clearer picture of who gains and loses from the national debt.

Current taxpayers and citizens clearly benefit; they receive the benefit of increased government spending without incurring the full cost of those expenditures. Future taxpayers and citizens, who will have to repay the debt as it comes due, are clearly hurt. They have to pay higher taxes to repay the debt incurred and owned by the prior generation.

This insight remains true even if the older generation sells them its bonds before they pass. As James Buchanan astutely noted decades ago, future generations first have to buy these bonds from the prior generations. And, in order to buy them, they must first reduce their consumption. It is that reduced consumption — not the higher taxes they’ll have to pay when the debt is retired (since, by assumption, that money will flow right back to them as bondholders) — that is the true cost imposed on future generations from government debt.

Government debt “crowd outs” private investment and creates deadweight loss

The “we owe it to ourselves” argument also glosses over two of the most important arguments for why deficit spending is not a free lunch for taxpayers or the future economy.

First, deficit spending crowds out private investment…

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