Laissez Faire Links: Rational Production, Debt Hysteria, Economic Ignorance, and Obamacare

Where does wealth come from?  The answer is simpler than you ever thought.  Washington’s antics over the current debt crisis and people’s ignorance of Obamacare’s deceptive design.

  • Over at Objectivism for Intellectuals, the idea that wealth comes from action based on rational thought is not a new revelation, but simply a rebuttal to those who still maintain otherwise.  Wealth, according to the classical tradition in political and economic theory (i.e. Locke and Smith), is a product of one’s labor.  See my discussion here for elaboration on this point.  Wealth cannot be anything but a “product” of action, not wish or whim.
  • Dan Mitchell from the Cato Institute points out the current debt hysteria in Washington as nothing more than political posturing.  The issue of raising the debt ceiling, lest the government default on its obligations, overlooks many aspects of U.S. fiscal responsibilities that point to a much less severe predicament.  His comments on the Treasury Report are particularly insightful:

“The Obama Administration is deliberately trying to blur the difference between defaulting on the debt, which would have real consequences, and “defaulting on obligations,” which is a catch-all phrase that includes mundane and uneventful matters such as postponing a Medicare payment to a hospital or delaying a grant disbursement to a state government.”

“The White House wants people to believe genuine default is likely even though tax receipts this fiscal year are expected to be more than $3 trillion and interest on the debt is projected to be only $237 billion. In other words, the Treasury will collect more than 12 times as much revenue as needed to pay interest on the debt….I want to reiterate that a default only would happen if the White House wanted it to happen.”

  • The Objective Standard has an interesting, albeit bit depressing, piece on how many of the Americans who voted for Obama visualize how government, economics, and insurance markets actually function.  I highly recommend taking a minute or two to read this!
  • On a related note, Laissez Faire Today provides a piece with particular insight into why health insurance markets are so difficult to understand and so expensive.  For example, what makes them different from life insurance markets?

“When premiums reflect expected costs, people are essentially paying their own way. When that happens, it really doesn’t matter very much who chooses to buy insurance and who chooses to self-insure and bear the risk themselves….Why are things so different in the market for health insurance? Because in this market, premiums are regulated, and that regulation is completely dominated by the idea that it’s unfair to charge real premiums. In fact, the most common belief is that everybody should pay the same premium for health insurance, even if everyone’s expected health cost is different.”

See the whole article here.

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Laissez Faire Links: Government Shutdown, Delaying the Obamacare Mandate, the Morality of Abortion, and Myths Against Capitalism

What would a proper government shutdown look like?  Why will President Obama need to delay his mandate provision?  Can a woman be charged with homicide for aborting her baby?  Did capitalism cause the 2008 financial crisis?

  • Ari Armstrong over at The Objective Standard talks about a government shutdown that would be welcomed.  His brief piece Toward a Shutdown to Celebrate makes the point that most government functions are superfluous, and there are many.  Beneath the umbrella of laissez-faire capitalism, the proper function of government is strictly limited to protector of individual rights.  He states, “In order to protect rights, the government needs to run an effective military, police force, court system, and the aspects of government necessary to support them. Those, and nothing else, are the essential functions of government.”
  • Forbes contributor Scott Gottlieb discusses problems the new government healthcare exchanges are having out of the gate.  Why President Obama Will Have To Delay His Health Insurance Mandate makes the case that technical problems with the virtual exchange rollout will necessitate a delay in the requirement for those uninsured to purchase coverage.  His prognosis is not optimistic: “The Administration started building these systems late, and rushed them online, without perfecting these networks. Working them out now, in real time, is going to take months, and maybe a year.”  With that large of a delay, the Obama Administration will have to backpedal on its threat to penalize the uninsured.
  • Just a little more from our friends at The Objective Standard tells us about a possible Colorado ballot measure that would effectively criminalize any and all abortions, even in cases of rape and incest.  The measure would go further though.  In addition to calling for “homicide prosecutions for killing the unborn,” the “Brady Amendment” violates a women’s moral right to choose how she lives and what is best for her and her body.
  • Did Capitalism Cause the Financial Crisis?  This is a short, but invaluable video regarding the common myth that capitalism failed, resulting in the 2008 financial meltdown. Yaron Brook, Director of the Ayn Rand Institute, states that this is erroneous because a true system of laissez-faire capitalism did not exist prior to 2008.  What did exist was a degree of government intervention that distorted the market, leading to bubbles in asset prices that never would have existed under natural market forces.  It is no coincidence that the three most highly regulated industries – housing, banking, and mortgages – were those that failed.  Pay particular attention to his comments on the Federal Reserve system.  For more information, see my discussions of the Federal Reserve.

Minimum Wage Laws: State Intervention Leads to Individual Degradation

The following article from the Objective Standard Blog explains how minimum wage laws hurt individuals.  In addition, it highlights how the issue has become mischaracterized, cloaked in the shrouds of altruism.  This ideology is perhaps the most dangerous of all, for it legitimizes the State in almost every aspect of life.  Regarding the minimum wage, altruism supplants the individual’s ability to earn a living, with the State’s authority to forcefully redistribute wealth.

Minimum Wage Laws: Immoral, Crippling, and Nevertheless Supported by Many.

Obama’s American Jobs Act Spends More for Economic Recovery, Perpetuates Keynesian Myth

President Obama delivered his jobs speech this evening, which focused on job creation via tax breaks for small businesses, cuts in payroll taxes, and more infrastructure projects.  This is the usual rhetoric coming out of Washington and many will liken it simply to a last-ditch effort of the White House to improve polling numbers going into the campaign season.  But we should not focus on such drivel.  Rather what should be noted is that only one month after averting a U.S. sovereign default and seeing our credit rating downgraded for the first time in nearly a century, stimulus spending in the name of economic recovery has not left Washington, as it is at the heart of this legislation.  President Obama stated:

The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working. It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed. It will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business. It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and hire, there will be customers for their products and services. You should pass this jobs plan right away.

via Google Images

Wow!  I am so glad we learned our lesson about unrestrained spending and fiscal prudence.  Oh wait, President Obama also stated that every piece of this legislation is paid for.  But this depends not on dollars we currently have saved in some bunker beneath the White House or the U.S. Treasury.  The money that will pay for the American Jobs Act is that which has yet to be saved.  Recall the Budget Control Act passed last month to avert a default on U.S. credit.  It called for nearly $1 trillion in immediate cuts, but the term “immediately” in Washington-speak actually means spread out over the next ten years.  So we are to pay for this legislation, much of it with immediate costs, with spending cuts that will be enacted under a different Congress and Executive? Really?  But wait, there is also the additional $1.5 trillion in spending cuts to be determined by our beloved “Super Congress” before the end of the year.  But the likelihood that such cuts will see the balance sheet within the Obama administration, or even the next, is not likely.

Here are some more reasons why Congress should pass yet another Keynesian policy, despite the utter failure of its predecessors.

  • Pass this jobs bill, and starting tomorrow, small businesses will get a tax cut if they hire new workers or raise workers’ wages.
  • Pass this jobs bill, and all small business owners will also see their payroll taxes cut in half next year.
  • Pass this jobs bill, and thousands of teachers in every state will go back to work.
  • Pass this jobs bill, and companies will get extra tax credits if they hire America’s veterans.
  • Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.
  • Pass this jobs bill, and the typical working family will get a fifteen hundred dollar tax cut next year.

The bottom line is this.  Our government continues to spend and propose additional spending in the name of economic recovery with little results and an empty wallet to boot.  The results at this point are certain.  Any recovery proposed by Washington policy hounds or the President will fail because two things must happen for a recovery: (1) decreased government spending, and (2) increased spending in the private sector to fuel consumption.  Yet, our government is stuck in the ideological misnomer of Keynesian stimulus spending.  Consequently, they seek to accomplish private sector growth by crowding our private sector markets.  It is an economical contradiction and illuminates the lunacy of Washington politics.

The best policy that could come out of Washington at this point is no policy at all.  But that is not the take of our beloved President.  He made his ideological stance on the government’s role in the free market quite clear.  “As I’ve argued since I ran for this office, we have to look beyond the immediate crisis and start building an economy that lasts into the future – an economy that creates good, middle-class jobs that pay well and offer security.”  By “we” he does not mean the American people, but Congress and the Executive.  Despite the rhetoric of Washington politics looking to and “representing” the people, their record demonstrates actions often to the contrary.  So one must conclude from this statement that the intent is not to let the markets recover on their own, but to continue crowding out any chance at a recovery now and in the near to mid future.  The only substantive impact of increased spending now is increased taxes later, but without an economy to raise wages enough to offset such tax increases we will all see a real decline in living standards.  Welcome to the new America!

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Sad But Enlightening Debt Statistics

via Google Images

To those still hoping to see a reconciliation in Washington over the debt ceiling, the following statistics show that the debt problem is not a Democratic or Republican issue, nor is it an issue that can be solved by raising the debt ceiling.  Indeed, repetitive increases in the U.S. debt threshold have lead to the very problem Washington claims can be fixed by taking on more debt.  The current debt-ceiling debate is nothing more than a political charade meant to mask the vicious death spiral painted below.

The following are 17 national debt statistics which prove that we have sold our children and our grandchildren into perpetual debt slavery….

#1 As of December 28th, the U.S. national debt was $13,877,230,355,933.00.  (Currently, our national debt is 14,342,830,116,551.28, an increase of roughly $500,000,000,000 in just 7 months).

#2 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

#3 If the federal government began repaying the national debt at a rate of $10 million dollars a day it would take approximately 3,800 years to pay off the national debt.

#4 Today, the U.S. national debt is increasing by roughly 4 billion dollars every single day.

#5 The U.S. government is borrowing approximately 2.63 million more dollars every single minute.

Click to read the rest.

Government spending is quite simply an issue created by government.  Both parties are guilty, and the first and most important obstacle of the American people is to overcome their political allegiances to any given party.  Once this is done, government may be returned to the people.  But the people must first be ready.  That is, we must take account of our own faults so as not to repeat them.  Consequently, we must overcome a second and perhaps more difficult obstacle.  We must come to terms with our own bad spending habits.  Jim Quinn explains the behavioral phenomenon known as the “peacock syndrome” quite exquisitely.

“The herd has been mad since 1970 and with the post economic collapse of 2008, some people are recovering their senses slowly, and one by one. The country was overrun by flocks of ostentatious peacocks displaying their plumage in an effort to impress their friends, families and work colleagues. What set the flaunting American peacocks apart was the fact they financed their splendid display of plumage with $0 down and 0% interest for seven years. The lifestyles of the rich and famous miraculously became available to the poor and middle class through the availability of easy abundant credit provided by the friendly kind hearted Wall Street banks and their heroin dealers at the Federal Reserve.”

This is an intriguing read for those interested in the behavioral implications of economics.

“Sad But Enlightening Debt Statistics” also available on Technorati

 

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