Tuesday, October 15, 2013

Washington Budget Debacle Highlights Extent of Our Dependence on Government

The Washington budget debacle has a silver lining: It could be a wake-up call for every American who considers himself responsible. The litany of "catastrophes" we're told will descend on Americans (and the world) without a budget agreement highlights the extent to which we have become dependent on government.

For example, a Washington Post article by Zachary A. Goldfarb and Jim Tankersley
screams Debt-ceiling breach would push economy into free fall, without a government safety net. That's debatable. But, if true, how and why did it come to this? How and why did the once powerful, dynamic American economy become hooked on the drug of government spending; spending, we must remember, that is fed by money that Americans themselves earned? How and why did so many Americans become dependent on government confiscating his fellow Americans' earnings and property to get through temporary hard times?

For answers those questions, I direct the reader to Ayn Rand's Atlas Shrugged and her other works. For a quick short-hand answer, Yaron Brooks and Don Watkins's Free Market Revolution would be immensely helpful.

As to some concrete consequences resulting from the partial government shutdown, a related failure to raise the borrowing capacity of the U.S. government, and what to do about them, here are a few alleged problems that could result from the partial shutdown and possible short and long-term solutions: 

The shuttering of National Parks (not mentioned in the WP article). Why does the government own and operate the parks to begin with? And since it does, why are the parks not free-standing financial entities, funded entirely by admission and other fees paid by visitors, or by voluntary private donations? End taxpayer support for the parks in the short term, and sell off the parks to private owners in the long term.

The delaying of Social Security checks. What ever happened to the "Social Security Trust Fund"? After all of the years productive Americans work to "pay into the system" through payroll deductions, we are dependent on current taxpayers and government borrowing for the promised benefits. If the system were converted to a personal account system invested in the taxpayer's own name—effectively walled off from congress's greedy hands—the money would be there for retirees regardless of Washington shenanigans. Longer term, because it violates our rights to spend and invest our money according to our own judgment, Social Security should be phased out and abolished.

Goldfarb and Tankersley note that, if the budget impasse isn't resolved, "daily tax receipts will make up only about 70 cents of every dollar of necessary [federal] spending [including interest on the national debt]." The federal government, they say, will have to prioritize its spending to stay within its means. What's so bad about that? The question is, what principles should guide the decision-makers' prioritization? That's easy. Focus cuts on areas that are contrary to the government's proper purpose of protecting individual rights.

For example, Goldfarb and Tankersley claim that "delayed safety-net payments [like food stamps and unemployment benefits] are one of the biggest worries because of their outsize economic impacts." But these are rights-violating programs, so why not simply cut those payouts by 30% to bring them into line with tax receipts? Longer term, these programs should be phased out. As to their "outsize economic impact," Goldfarb and Tankersley cite studies that claim that "every $1 spent on food stamps or unemployment benefits tends to drive about $1.70 in economic growth." But this ignores the economic growth that would result if the money feeding those expenditures remained in the hands of those who earned it to spend (or invest) as they choose. 

Goldfarb and Tankersley note that, in order to save the "safety net" payouts, the feds "might have to suspend all federal salaries and benefits and veterans benefits, as well as operations of the Justice Department, the Energy Department, the FAA, the Environmental Protection Agency and other agencies." But with rights-violating safety net payouts cut by 30% across the board, funding for rights-protecting functions associated with the military and the Justice Department could be preserved. Instead, the Departments of Energy and Environmental Protection could be suspended, along with other departments like Education and Agriculture. 

As to the FAA, the funding for much of what it does, like air traffic control, can be permanently picked up by the airline industry and its customers. Whey should the non-flying public be subsidizing the flying public like vacationers and business travelers?

One area ripe for spending cuts has to be corporate subsidies like those handed out for so-called "clean energy." The fed prioritizers should find choice pickings in corporate welfare.

This is just a sampling of what can be done to adjust to smaller, but nowhere near laissez-faire, government. There is so much government spending that violates the principle of rights protection that the cuts listed above represents only a down payment on what adhering to proper principles of government would require. 

Of course, this is all hypothetical. In today's political environment, the Republicans will cave in, lacking as they do the required philosophical firepower. (They are actually welfare statists, which is why their budget strategy is, I believe, a bad one and doomed to fail.) The cuts will be restored, and the government will resume its growth. But let's imagine, just as an exercise in "what if?", that the government must suddenly stop borrowing because no debt ceiling increase can be agreed upon.

Sure, there may be a sharp, short-term economic correction resulting from the sudden curtailment of government spending. But the contraction, if it happens at all, will be followed inexorably by a monumental economic boom, just like after World War II. Why? Because, contrary to Keynesian statists, the government can't create wealth out of thin air, like some sort of giant tooth fairy. It gets it money from productive private individuals. Every dollar the government doesn't spend will be one more dollar the private sector has to dispose of; which means another dollar used by the people who earn it to better their own lives by their own efforts, rather than to finance cronyism and subsidize un-productiveness and sloth. 

And sure, there will be a substantial reallocation of resources, resulting in many businesses and individuals dependent on government spending facing declining sales and loss of jobs. Their pain will be real, but new businesses and new jobs will emerge to take up the slack. The businessmen and workers will find new opportunities. 

Modern welfare states are in deep trouble, and Americans suddenly have an opportunity to head off the inevitable before it's too late. Call it "tough love." Call it the "meat ax"  approach. Call it what you want. But if the budget impasse continues and the government runs into a borrowing wall, we will find that the country can survive and adjust to smaller government, and be better off in terms of prosperity as private enterprise flourishes due to less private-sector wealth being seized by government.

Longer term, of course, setting America on a permanent course toward more prosperity and liberty is fundamentally a philosophical task of educating people on individual rights and capitalism. But the current budget drama, once it passes, could, and should, be a chance for Americans to start to reexamine the direction our country has been moving—toward more and more dependence on bigger and bigger government—and do something to start taking back control of our lives, property, and long-term financial security. Americans should look at the areas of "economic pain" and ask: Why and how did so many Americans' well-being get chained to the political class for its funding? 

Related Reading:

How About: Hands Off Our Money and Our Choice?

From Middle Class to Welfare Class

Sequestration"—A "Teachable Moment"

No comments: