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Source link: http://archive.mises.org/9479/obama-and-government-fiscal-irresponsibility/

Obama and Government Fiscal Irresponsibility

February 20, 2009 by

On Monday, February 23rd, President Obama will be hosting a “fiscal responsibility summit” with the publicly declared purpose of reining in the growing cost of government, especially the projected unfunded liabilities for Social Security and Medicare in the years and decades to come.

However, as I explain in a new piece I’ve written on “Obama and Fiscal Irresponsibility,” undoubtedly there will be the usual smoke and mirrors that leave the fundamental issues untouched: Should government be in the retirement and health care business? How, instead, do we return to a free society in which individuals are responsible for planning for their own retirement years and managing their own medical expenses in a truly free market economy?

None of this will be on Obama’s agenda at this summit meeting, because as the president emphasized in his inaugural address on January 20th, he doesn’t want to discuss whether government is “too big” or “too small.” He has already made up his mind: government is responsible for providing jobs, health care, and pensions for all Americans. He only wants to sort out how to do that more comprehensively in the future and figure out where the money will come from to fund this governmental largess.

The only way this financial straightjacket will ever be lifted from the shoulders of the American citizen/taxpayers will be through a rejection of the premises and policies of the interventionist/welfare state.

A starting point for this revolution in ideology and ideas will be the repudiation of the “entitlement” mentality and its presumption that government is to be considered a giant redistributive transfer machine to rob Peter to pay Paul.

Along with this must be the disavowal of this dangerous notion of a “social contract” that that says that since the government has promised these redistributive benefits to multitudes of people there is no turning back. “Why, we can’t have the government ‘break its promise,’ can we?”

This “promise” is based upon the coercive legalized plunder that Frederic Bastiat so eloquently explained and warned against in the middle of the 19th century. A “promise” that relies upon a thief continuing to rob some to “give” to others, is immoral and dangerous to the character and functioning of any type of healthy and free society.

Ludwig von Mises also discussed this, in 1930, in an address that he gave before the Vienna Industrial Club:

“Whenever there is any talk about decreasing public expenditures, the advocates of this spending policy voice their objection, saying that most of the existing expenditures, as well as the increases in expenditures, are inevitable. Any notion of applying the concept of austerity to the machinery of the public sector is to be rejected. What exactly does ‘inevitable’ mean in this context? That the expenditures are based on various laws that have been passed in the past is not an objection if the argument for eliminating these laws is based on their damaging effects on the economy. The metaphorical use of the term ‘inevitable’ is nothing but a haven in which to hide in the face of an inability to comprehend the seriousness of our situation. People do not want to accept the fact that the public budget has to be radically reduced.”

Putting our heads in the sand will not make these fiscal burdens and their harmful effects on freedom and prosperity go away in contemporary America, and more than was the case in the Austria of the interwar period to which Mises was referring in this address.

{ 24 comments }

ehmoran February 20, 2009 at 1:20 pm

The Honorable Chris Dodd just interviewed with Bloomberg and I emailed a response to this interview:

Dear Chris Dodd,

I saw you on Bloomberg today.

You stated and summed up the problem MOST TRUTHFULLY.

Your Quote:
“I don’t understand what’s happening”.

And another Immortal QUOTE:

“If loyal ministers, though guiltless, still face peril and death, then good officials will go into hiding; and if evil ministers, though without merit, enjoy safety and profit, then corrupt officials will come to the fore. This is the beginning of downfall” (Han Fei Tzu).

Magnus February 20, 2009 at 1:38 pm

But, you see, we’re different. We’re special. We’re better. We’re exceptional. Economic calamity will not befall us. We will be saved by the overpowering force of our moral superiority and innate goodness as Americans/Democrats/Christians/Liberals/Socialists/Modernists/etc.

And if you say anything different, you’re a terrorist.

ehmoran February 20, 2009 at 1:46 pm

Magnus,

Very well PUT!

But you forgot to include “ARROGANCE of our Ignorance” in your list. Or is it “IGNORANCE of our Arrogance”, I forget.

Ludwik Kowalski February 20, 2009 at 1:49 pm

Dear reader,

1) Please reply, or forward this to a teacher of elementary economics.

2) I have asked a trivial question about prices at:

http://www.opednews.com/articles/Supply-and-demand-by-Ludwik-Kowalski-090216-588.html

3) Please help me to identify a mistake in my reasoning, preferably via email:

kowalskiL@mail.montclair.edu

Thanks in advance,
Ludwik Kowalski

Ludwik Kowalski February 20, 2009 at 1:49 pm

Dear reader,

1) Please reply, or forward this to a teacher of elementary economics.

2) I have asked a trivial question about prices at:

http://www.opednews.com/articles/Supply-and-demand-by-Ludwik-Kowalski-090216-588.html

3) Please help me to identify a mistake in my reasoning, preferably via email:

kowalskiL@mail.montclair.edu

Thanks in advance,
Ludwik Kowalski

Cybertarian February 20, 2009 at 2:04 pm

“that government is to be considered a giant redistributive transfer machine to rob Peter to pay Paul.”

In reality, the government first robs Peter, then he has more ressources to better rob Paul. Both Peter and Paul get robbed.

Then, homeless John asks for a subsidy of some sort, the government makes him lose his time in the never ending loop of bureaucracy and John never gets the help he needs, even after years and years of struggling with the authorities.

And finally, the government assaults James and shoot him dead because he was growing “illegal” crops on his land. They confiscate James land, house, bank account, car and have his dogs killed.

Judas is working for the government as a snitch and reports everyone to the government and earns hefty commissions on the proceeds of confiscation.

Caïphus lives the high life as a king, eating the best meals in his large mansion and all expenses paid for by the proceeds of confiscation. Then he repeatedly calls for collectivism and altruist action, saying how sinful it is to earn a profit or earn a salary and how people should tithe in those difficult times, that we are all in this together so hand me your money or else.

ehmoran February 20, 2009 at 2:14 pm

Ludwik Kowalski,

The deepest knowledge for understanding this subject is in “Wealth and Poverty” and von Mises’ “Human Actions”. In the Long run, Prices have nothing to with Mathematics. Too much human emotion involved.

As this Society moves closer to Socialism, we become more and more selfish, have you noticed that? We no longer take responsibility for or try to help our neighbor because we are have become so self-centered. SOCIALISTS EXPECT THE GOV’T TO HELP OTHERS, we don’t have the time or compassion. This type of system requires PRICE CONTROL and RATIONING (energy, health care, food, LABOR (UNIONS), etc.).

An old saying, “Socialist love the idea of society, but HATE people”! PURE Capitalism is PURE cooperation BETWEEN (the Key Word here) people.

But theoretically and mathematically, you probable outlined the subject well enough.

Socialists Suck February 20, 2009 at 3:48 pm

ehmoran,

How can you help others after the government has taken away more than half of your money and taken away your freedoms, your rights, your dignity, your pride, your joy of life etc.

In socialist regimes, the government takes away your power to help yourself, so you definitely can’t help others when you can’t even help yourself.

ehmoran February 20, 2009 at 4:46 pm

Socialists Suck,

Again from another BLOG

“There has NEVER even been a true “FREE-MARKET”. Throughout history, Gov’ts have always been involved and in direct competition with private enterprise.

In the late 1790′s, Hamilton issued Treasury bills looking for Private investment. Now who’s going to compete with a Military State for MONEY.

In the early 1900′s, we incorporated Socialism (The New Deal, “SOCIAL” Security, etc.) and have become more Socialistic. And the present state of the US proves Socialism is a COMPLETE failure. Imagine that. Has anyone ever thought of this????

The biggest problem today is the majority want to be told everything is fine, they want to be told what the truth is.

“Questioning everything or questioning nothing, this is the path of least resistance and requires the least amount of learning.” and this is amazingly true today.

Many assume that all the information they need can be found on TV. In this World of rapid information deployment through the internet, there’s no excuse for ignorance, as long as curiosity and personal advancement remains intact.

Now the above “IS” “SOCIALISM”!

Just remember B. Franklin “Those who want Liberty and Security will have NEITHER”.

From New Hampshire MOTTO: LIVE FREE OR DIE”.

And they meant it for a specific reason!!!!

Phil February 20, 2009 at 5:51 pm

Hi Ludwig,
I posted on the website that you listed above. Basically, the issue is when to maximize profit given the laws of supply and demand. One of the biggest issues that I needed to wrap my head around was the concept of marginal profit and costs, and the law of marginal utility. That is, how profitable will that extra unit of product be at a certain price? How much demand will there be for that extra unit produced? What is the cost of producing an extra unit? Its at these points where business will be truly profitable, and what gives the law of supply and demand its primacy….

Marc Sheffner February 20, 2009 at 6:07 pm

I’ve just read Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back by Sean Gabb, Director of the (British) Libertarian Alliance. Gabb sees the present situation, and libertarian solution, as class warfare: the ruling class in Britain, and their counterparts in the US, “want an end of liberal democracy… a settlement in which those at the top… can enjoy the most fabulous wealth and status, and in which their enjoyment of these can never again be challenged from below.” (page 6).
It’s good to be reminded of the political and ideological background to this present economic “crisis”.

ehmoran February 20, 2009 at 6:24 pm

Marc Sheffner,

But for this to happen in America, they need to get the GUNS from the Lawful and Patriotic Citizens.

And 50 million people KNOW this.

This whole story was PLAYED out by our forefathers. That’s why the CONSTITUTION is the way it is and includes reference manuals!

Gil February 20, 2009 at 7:11 pm

Gee if Cybertarian’s post was inverted such that Socialiism = good/Capitalism, profit = bad/redistribution = good, he would have been considered some sort of troll. He & others’ cheap presumption is that A, B, C and D are productive citizens and E to Z are lazy layabouts who live off a partial rates from A to D. Once again Libertarians presume the world of Atlas Shrugged. Heaven forbid in real society everyone pays some sort of tax and gets something back (albeit in different quantities). Most people tend to group in families and tribes for the sole sake of ‘socialising’ some of life’s problems as well gaining the secondary, more powerful protection of the tribe (an assault on one member brings down the wrath of the rest).

P.S. ehmoran I’m sure a ‘real’ Libertarian would see a right to self-defence via armaments a ‘natural right’ and wouldn’t dicker over what the U.S. 2nd Amendment says or doesn’t say.

kris erickson February 20, 2009 at 8:21 pm

Gil, if the tribal/communal way is superior, why did the capitalistic model of the European immigrants supplant the natives on the North American continent? Why did the capitalistic model (with item and land property rights) enable a much larger population density and productivity than the Tribal model (which had individual item-property rights but no concept of land ownership)?

Furthermore the legal system of the Europeans also gives us a far better way of resolving conflict than the “gangland” style you suggest.

You sir have watched too many episodes of the Flinstones; the Stone Age was not a nice time to live.

Jill February 20, 2009 at 9:53 pm

Isn’t it part of capitalism to let the failed businesses and business models go under? I mean, rather than letting the government bail them out when they get in trouble, which is what we’re seeing right now. Rather than believe sincerely the sort of thing that Magnus put forward with a healthy serving of sarcasm…(which I applaud, by the way.)

But hey, why be sensible, right? Just hold out your hand for your portion of the spoils.

D. Frank Robinson February 20, 2009 at 11:44 pm

Kris: “…why did the capitalistic model of the European immigrants supplant the natives on the North American continent?”

Some of my ancestors were Cherokees, who quickly and largely adopted Judeao-Christian culture and legal norms. The Anglo ruling elites and white trash proto-fascists of the time still killed them and swindled them out of their lands. So some of my ancestors used statism viciously to achieve domination of my ‘savage’ less statist ancestors. The Cherokees even won their case against the government in the Supreme Court, but President & SOB-in-Chief Andrew Jackson ignored the Constitution anyway. So much for constitutions and treaties. As soon as the immigrants from the ‘right’ countries were no longer need to over-run the natives, they too were shut out.

When the Empire collapses maybe the Cherokee nation will rise again as libertarian community. Regardless, in the market merit matters. When the market no longer matters, only numbers and guns matter.

gml February 21, 2009 at 12:10 am

“if the tribal/communal way is superior, why did the capitalistic model of the European immigrants supplant the natives on the North American continent? Why did the capitalistic model (with item and land property rights) enable a much larger population density and productivity than the Tribal model (which had individual item-property rights but no concept of land ownership)?”

Capitalistic model?
State sponsored extermination of a native peoples in the name of “manifest destiny” and expansionist ambitions is not my capitalism. In fact, that is an example of statism at its worst.
I have no doubt that the superior system (capitalism) would have won out but the reality is that we went with “might makes right.” I believe everyone has property rights, not just white Euorpeans.

Tony Hollick February 21, 2009 at 1:39 pm

A problem-situation for Misesians:

Ownership is possession and control over a physical object or area.

The US Government claims ownership and control over the land area known as “The United States of America”; and it enacts various statutes, levies taxed and so forth.

Looking at the words and stated intentions of the Founers and Framers under the Declaration of Independence and the US Constitution, We the People decide to restore ownership and control over this land are — the Base Strata Title.

Accordingly, property rights in the land area are transferred in equal separate shares to the Citizens of the United States of America, who henceforth own the country.

As shareholders do, they elect a Board of Directors to conduct the business of their Company.

The Board issue Terms and Conditions of Use to all those pepole and landowners and resource companies who are in their property.

Since they are acting on behalf of the owners of the underlying sovereign title, to maximize revenue and thus profits and dividends to the owners, these Terms and Conditions of Use (which are no different from the sorts of Terms and Conditions imposed by land owners, shopping malls and so forth) can be whatever they please, within the Common Law.

Instead of Statutes regulating behaviour, there are Terms of Use. Instead of taxes, there are Fees.

Is this situation better or worse than what we have now? Can it be defensible to assert that the Citizens of the USA do not own the place? If they don’t, who does?

If, for instance, the family business known as “Saudi Arabia” buys the newly-privatized highways of the US, and stipulates that their roads cannot be used or crossed by infidels, is this objectionable? If not, why not. If so, why?

Misesians usually assert sovereign rights for land-owners, after all.

The Business to be known as “America” is owned jointly and severally by the Citizens.

Why are Statutes and Taxes objectionable, when Terms of Use and User Fees are not?

The Dividends from “America” should provide a useful Basic Income for all the Citizen-Owners. The Board of Directors provides various services to the Citizens, always aiming to maximize the well-being of each and every Citizen-Owner, economic and otherwise. How can this be objectionable?

Would von Mises have called this “Socialism” or “The Free Market in Practice”?

I look forward to your replies.

Regards,

Tony Hollick

http://www.STARGATE.uk.net/agora5.txt

Christopher Lewis February 21, 2009 at 2:39 pm

“Heaven forbid in real society everyone pays some sort of tax and gets something back (albeit in different quantities).”

I must laugh. The idea that anyone should have to pay into a system, by compulsion, and receive some sort of service, who’s quantity and quality shall be decided by another human being, is nothing short of theft. Surrogate decisionmakers are completely inconsistent with Liberty. Furthermore, our nation, founded upon the principles of individual Liberty and natural Right, should serve as no avenue for your self-righteous idea of social engineering.

PS. D. Frank Robinson, we cannot honestly pretend that the warring tribes of people which existed on this continent prior to the Europeans were not mini-statist empires. Can we?

tp February 21, 2009 at 8:15 pm

I don’t see this getting any better until we as a nation and a people are willing to take back what was wrongly given away. We know, retirement, healthcare and other insurance against feeling the pain for bad decisions are coming.

Are we willing to take them away? Will we be willing to cancel the entitlements which are making the people of this country weak? Right now I would have to say no, politicians want to keep their jobs. They will continue the give aways.

I forget who the quote belongs to but:

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.
Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage. ”

Phil David February 23, 2009 at 1:42 pm

I could not hold back a laugh when reading about President Obama hosting a summit on fiscal responsability. Considering his stimulus bill and the way it was rammed down Congress’ throat, I doubt the man knows the meaning of fiscal responsibility.

Unless of course, he’s there to learn something…

ehmoran February 23, 2009 at 1:49 pm

I wonder where the grown-ups are in this administration???

I guess Volcker could be one?

ehmoran February 23, 2009 at 1:56 pm

Jim Cramer (CNBC) signals warning on TV with big sign:

“STOP TRADING”

because Geitner, Administration, Senate, and Congress are confused.

ehmoran February 23, 2009 at 2:45 pm

I guess running a Government, as inept as is was but reaching a higher level now, is a little tougher than the present administration THOUGHT???

But, they sure had all the answers during the campaign.

BLAH, BLAH, BLAH, the boys are marching…..

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