Monday, June 27, 2011


(How Free Trade Increases Value)

by James Craig Green

My friends Paul Prentice and Penn Pfiffner are professional economists and Senior Fellows at Colorado's Independence Institute who teach their Free People, Free Markets courses from time to time. Paul, in Colorado Springs, teaches a three hour version of the course, and Penn, in the Denver metro area, teaches a longer version.

I have taken both courses twice now, and learned some new things every time. I last took Penn's course on two consecutive Saturdays in Longmont, Colorado several months ago, and originally took his 4-week course in 2007. I have also gone to Colorado Springs twice now to see Paul's "Three Hour Tour" (Jon Caldara calls it the "One Night Stand").

One of the most interesting features of their courses is a segment called the Demand Wizard. It reveals an elegant insight into market economics most people never think about, even longtime advocates of free market economics. It can be a struggle to explain how markets work, especially to those who think government should heavily regulate them. The Demand Wizard makes it easier.

As shown in the following YouTube video (Introduced by Jon Caldara), Penn Pfiffner plays the part of the omniscient (all-knowing) Demand Wizard who attempts to allocate wealth to improve the economy. The demonstration begins with four food products (diet coke, chips, cookies and yogurt), each of which sells in the store for about 60 cents. However, this unique demonstration illustrates the variation and importance of each person's subjective opinion of value:

DEMAND WIZARD VIDEO   (click BACK button to return here)

As the famous Austrian economist Ludwig von Mises pointed out in Human Action, each person places a subjective value on everything he wants or uses, which is unique to him and varies with time, place and conditions. For example, when you are at home, a glass of water costs you practically nothing, because your monthly water bill may be less than a penny per gallon. However, if you are at a ball game or concert, you may pay two or three dollars for a small bottle of water. If you were extremely thirsty and a store was not convenient, you would gladly pay more. This concept is at the heart of billions of sales and purchases each day that comprise the American economy.

Demand Wizard Results

As you can see from Penn's video, when the Demand Wizard selects which products each member of the class received, the total value of this mini-economy was 25 units, based on each class member assigning a relative value from 1 (least preferable) to 4 (most preferable) for each product. This was done prior to the re-allocation of the same products based on free trade among class members.

After class members were allowed to trade the items, the total value of the class economy doubled to 47 units. This is but a small example of the awesome power of markets to satisfy people's desires without forcing other people to pay for them.

Paul Prentice also presents the Demand Wizard exercise in his classes, with similar results, though the numbers vary from class to class. Please note this simple example involves only four products, constrasted to the large number of economic decisions people make every day. In fact, it was Paul who first brought the Demand Wizard concept to the FPFM classes. Also, the increased wealth from this example does not consider increased production and innovation from profit incentives and the freedom to pursue them.

In this THREE MINUTE EXCERPT from a presentation at the Independence Institute, Dr. Prentice explains the connection between property rights and human liberty, which counters popular arguments that they are contrary to each other.

The following articles by Dr. Prentice further explain the benefits of free markets for three current issues. They are posted on the Pikes Peak Economics Club website (he is a founding member), which you can further access by clicking the "Home" tab on any one of them:




From Subjective Values Comes Objective (Market) Value

The Demand Wizard demonstrates an important principle that few people understand. From the subjective, individual, whimsical choices by many people, a market develops - a voluntary collective in which each person trades by his own whims and temporary choices. But, the collective action of many such choices produces an objective value that is measurable and produces a permanent record that can be seen by anyone. That is the "market price" of any given product, service or commodity at any given time. The stock market is an example. So is a store that sells anything. When demand falls off, the store owner may lower the price, even below his cost if necessary to get rid of inventory that is not moving. When demand picks up, he may raise prices again. These prices are the objective value of some thing or things in a market, integrating hundreds or thousands of subjective individual decisions. They may remain constant for long periods of time, or they may vary each hour or day, depending on the supplies and demands that produce changing prices. Ebay auctions are an excellent example of rapidly changing prices among many different bidders.

This is something no Commissar or other pretend Demand Wizard can possibly do, because no one has the complete knowledge necessary to make self-interested decisions for someone else. However, politicians, lobbyists, and special interest groups daily make deals, supposedly in your interest, but always in their own. This process cannot possibly produce a better outcome than having individuals or voluntary groups make their own decisions each day about what to buy and what not to buy.

Unfortunately, this choice is denied by government for its services, imposed on society by force of law and the threat of jail for non-compliance.

It is this denial of choice that creates most damage government does to economies in the name of the "public interest." It is naive to believe that 1) politicians have your best interest as their primary goal and 2) that they and their so-called "experts" armed with KEYNESIAN ECONOMICS can know how to allocate goods and services. A lifetime of applied Keynesian theory has resulted in unprecedented, unsustainable public debt (including unfunded liabilities) between 45 and 104 Trillion Dollars, as discussed in a recent CATO INSTITUTE study (Table 1 on Page 7).

Sunday, June 26, 2011


by James Craig Green

Most people in government don't have to worry about costs, waste or efficiency, because they don't have to earn the money they receive in salary or spend on the job. Unlike money earned in the marketplace through voluntary exchange, government money is acquired by force, which destroys the price communication between supply and demand, reducing overall value and economic activity.

The profit motive in business and its absence in government guarantee this.

Government employees often benefit from waste, high costs and economic inefficiency, because a shortfall in this year's budget can be used to increase a department's budget for the following year. In other words, government usually rewards failure (high costs, waste and less efficiency), while markets usually reward success (low costs, minimal waste and higher efficiency). When, due to economic downturns (more often than not created by government), local governments do have to tighten their belts, they always cut the most important people first: police, fire protection and utilities.

Perverse and destructive incentives in local government are magnified in the federal government, since it not only has a Department of Revenue like cities and states, but it also has the Federal Reserve, which can create money out of thin air.

If printing money improves the economy, why not allow everyone to print their own? The Fed and members of Congress benefit from this symbiotic relationship, as neither is blamed for the foibles of the other. Congress gets unlimited funding without obvious taxation (inflation and public debt are hidden taxes), while the world's most powerful private banking cartel (The Fed) enjoys a monopoly for the money supply. More on this below.

The Essence of Government

When a thief takes your property by force or fraud, his gain appears to be your loss, but that's not accurate in an economic sense. What you worked hard to get, he took for much less effort, so your loss in value is greater than his gain. This is true whether the theft is illegal (a burglar) or legal (government).

Government reduces the value of goods and services in the economy because it transfers wealth by force and fraud, just like the common thief or con-man. You may believe that legalized theft (taxes, inflation, public debt, unfunded future liabilities) is justified to maintain a system of law, courts and police, but claims that the economy will be better off are almost always false or greatly exaggerated. One reason is that government today is more likely to take your property than protect it, as it has long since evolved into a wealth-destroying monster.

The French economist Frederic Bastiat (1801-1850), in THE LAW said the primary purpose of the law is to protect people and their property. But, as soon as it begins to transfer wealth by force, it violates that primary duty. He also said the use of collective force can only be justified by its duty to protect the individual's right to use force to protect himself and his property. Today, government spends much more time and effort transferring wealth by force than performing its primary duty, which is to protect people and their property.

You might argue that a certain amount of force is necessary to maintain order, protect people and provide a system of dispute resolution, among other things. But, when the American Republic was created by the U.S. Constitution for such purposes, its powers were severely limited. Its first ten amendments, known as the Bill of Rights, listed individual rights considered to be superior to the collective powers of government. Please read the NINTH AMENDMENT to the U.S. Constitution. While you're there, also read the TENTH AMENDMENT, which limits the powers of the federal government to those stated in the Constitution.

Over the last two centuries, American government has consistently shifted away from the limited use of its force justified for protection, to an almost unlimited use of force for transferring wealth, without regard to individual rights. The Constitution has been ignored and re-interpreted to accomplish this, especially among lawyers, judges and politicians who have become high priests in the cult of unlimited government power. This has corrupted almost all elements of American society and will destroy its economy unless this trend is reversed. See MARKETS WORK - GOVERNMENTS DON'T, CRONY CAPITALISM and WHO BENEFITS AND WHO PAYS FOR GOVERNMENT?.

Voluntary vs. Involuntary Transfer

To further explain the relative value of voluntary vs. forced transfers of wealth, let's say a thief steals your car. Clearly, he gains, and you lose, but it's not that simple. Since you earned the money you spent on the car and its features reflect your own individual choices, it is worth more to you than to the thief, who spent much less effort acquiring it, and with much less careful thought about how it fits his particular wants. This means that every act of theft, while benefiting the thief, hurts the economy.

If you paid say, $20,000 for the car, it means you wanted that particular car, at that time, more than you wanted the money (cash or credit). The dealer who sold it to you may have hundreds of cars, for which he pays less (wholesale) than you (retail). Therefore, he wants your $20,000 more than the car, to gain his profit. This is a market transaction, since both parties improve their satisfaction by giving up something they want less to get something they want more. When the thief steals your car however, it is transferred from someone who values it highly to someone who values it less. This creates an overall loss of value, in addition to the obvious, but inaccurate, view that $20,000 of value was maintained; just moved from one person to another. This reduction in value remains even if the thief sells your car to someone who values it more than him, but less than you.

I credit my most recent, improved understanding of this concept to my friends and professional economists Paul Prentice and Penn Pfiffner, who teach different versions of their Free People, Free Markets course in Colorado. Their classroom demonstration of the Demand Wizard is brilliant, elegant and insightful. Tomorrow, I will dedicate an entire article to the Demand Wizard.

Government gets money the same way as the thief (Bastiat called it "plunder"), but the process is sanitized, legalized and characterized as something good instead of bad. When you peel the onion away from government lies, half-truths and exaggerations however, you find a much different reality than you learned in government schools. Since politicians, government-subsidized businesses and government workers all benefit from this unsavory process, most never think of their careers as working for the Mafia, or adversely affecting the economy. In fact, government is much worse than the Mafia, because its lies, half-truths and exaggerations are hidden, popular and much more difficult to understand than the common thief, especially among government employees themselves. See SOLAR JOBS.

This means the real value or real need for government services can never be determined. As the great Austrian economist Ludwig von Mises pointed out in his 1951 book SOCIALISM, economies based on force rather than exchange have no rational way to determine the price that will balance supply and demand, nor the incentive for government officials to even try. This is why the Soviet Union produced chronic shortages of poor quality goods, the tyranny of a police state and the starvation of millions of people from the forced collectivization of agriculture and its entire economy. America is already a long way down the same path. President Obama is the highest priest, the culmination of more than a century of the stifling collectivist ideology of the Soviet Union, applied most successfully in the U.S., not the Soviet Union or Russia. See Chart 5 in HERITAGE on GOVERNMENT SPENDING and REVENUE.

There are exceptions to this, but they are trivial. For example, some government agencies produce goods and services that customers may choose to buy or not, like maps, books and other optional services. The Colorado Division of Wildlife has funded its annual operating expenses, including salaries, from fishing and hunting license sales.

Government Workers Don't "Earn" Their Salaries

Let me explain what I mean that government workers don't earn the money they get. In the marketplace, goods and services are exchanged based on voluntary transactions, producing a net benefit to both parties involved, and therefore to society. But, each act of theft, legal or illegal, reduces society's wealth, as I have discussed. This does not simply transfer the same value from one person to another, but diminishes its overall value in the economy.

Through government subsidies, establishing government-sponsored monopolies (like the Fed) and other forceful interventions into the economy by government, private businesses quickly learn that the State provides them with immediate benefits without risking legal recourse for damages, intended or not. Most don't realize that government can only steal, cheat and otherwise hurt others to provide those benefits (with few and trivial exceptions). This is the addictive allure that corrupts many businesses, as their profits increase and risks decrease when they provide services to government. Occasionally, police, enforcement agents and other public employees get caught red-handed doing something so outrageous that their normal immunity as government employees is set aside, but this is the exception rather than the rule. This is being brought to the attention of the public more than ever before, due to the proliferation of cell phone videos and YouTube.

It is more lucrative and less risky to defraud, control and steal with the legal sanction of the state than without it. This makes today's governments, at all levels, much more dangerous and destructive than smaller, limited ones focused on citizen protection. Despite mottos seen on some police cars ("to protect and serve"), police spend most of their time enforcing laws passed by legislatures controlled by special interests. Law Enforcement is not protection, except by coincidence on occasion.

The Federal Reserve, a private banking cartel, was given a legal monopoly over the money and credit of the United States by Congress in 1913, the same year the Income Tax was created. Unlike the Income Tax however, the Fed was not the result of a Constitutional amendment, but just an act of Congress. This means any future Congress could abolish it, without affecting the Constitution. See my recent paper on the Constitution, SUBORDINATE ACTS.

Give me control of a nation's money and credit, and I care not who makes its laws.
--Mayer Amschel Rothschild


In short, free markets and government limited to protection are more like a good parent: protecting the freedom to prosper, but not guaranteeing success. See THE LITTLE BOY WHO COULDN'T FAIL. Today's government, on the other hand, is like an abusive or too-permissive parent, transferring wealth from those who produce it to those who don't, by force. It corrupts individuals and businesses by offering its generous benefits without the stigma attached to its theft-laden revenue agencies. It's law, always designed to protect and enhance government above all other considerations, is widely accepted, even when overstepping its bounds (a common feature of government monopolies). Although there may always be theft, fraud and aggression, today's large, oppressive governments encourage and subsidize it, while markets tend to minimize it. Most people, educated in government schools for two-thirds of their formative years, think otherwise, considering its law to be, at worst, a necessary evil for society to function and at best, a cornucopia of wealth from little or no effort.

These are ignorant, naive beliefs from the indoctrination of children in government schools. In fact, mandatory, free public education was the tenth plank of Karl Marx's COMMUNIST MANIFESTO (Scroll to the end of Section II, Proletarians and Communists, for his list of ten planks).

Unfortunately, government almost always creates more problems than it solves and makes the economy worse with each intervention, while failing to accomplish its most important task - the protection of people and their property. America would be much better served by restoring the Founding Fathers' vision of limited government instead of today's unsustainable, bloated monster that promises everything to everyone, for "free."

Saturday, June 25, 2011


by James Craig Green

The Heritage Foundation recently released its 2011 BUDGET CHART BOOK on Federal Spending, Federal Revenue, Debt &Deficits; Deficits and Entitlements; each of which comprise major tabs at the top of its main page. Please note there are two Chart 5's below, one from the Debt and Deficits tab (with presidents' pictures) and one for Federal Revenue. Following are some excerpts to illustrate high points:

Please note these figures, up to about $36,000 per household by 2020, do not consider the tens of trillions of dollars that have been promised to future recipients of social security, medicare and medicaid which would increase them about tenfold. Heritage does deal with these later, conceding to them ten percent of GDP forever. Please don't make the mistake of confusing these figures for total government spending with amounts received by households. See my April 2011 blog post on WHO BENEFITS AND WHO PAYS FOR GOVERNMENT? to see that 40 percent of Americans pay into government more than they receive, while the remaining 60% majority gets more from government than they pay in. Is this what Karl Marx meant by "winning the battle of democracy?"

Please note that under Republican presidents, government spending has been much greater than under Democrats... that is, before Obama. Most recently, George W. Bush became the first president in more than 100 years to not veto a single spending bill in his first term in office. Also, his enthusiastic support for the 2003 Medicare prescription bill he signed into law was called "the most irresponsible law since the sixties," by U.S. Comptroller General David Walker. But, Obama is becoming the all-time champion of U.S. presidents for increasing government size regulation and scope, while punishing the markets that produce all wealth.

This Chart 5 is from the Federal Revenue section, not the same as Chart 5 from the Debt and Deficits section. This Chart is the very best argument against Obama's recent claim that "taxing the rich" can significantly increase government revenue. In 1945, the year of my birth, the highest individual tax rate was 94%. In 1950, the rate was 91%. It declined to 70% in 1965, 50% in 1982, 28% in 1988, up to 40% in 1993 and finally down to 35% in 2003.

My Criticism of the Heritage Plan:

First, to concede half the federal budget to entitlements forever is the height of both stupidity and naivete. Stupidity because of the repeated falure of socialist governments around the world (based on entitlements instead of production) and naive because of the tendency of government to grow much faster than projections. However, unlike anything we've seen from a pathetic, anti-free-market Republican House of Representatives, at least the Heritage budget includes real cuts, instead of just trivial reductions in future spending growth. That's probably because none of the Heritage study authors (to my knowledge) are trying to get elected to Congress.

Second, please note on the last graphic there are no cuts for so-called Defense Spending. As I have been pointing out for three decades, very little of what I prefer to call Military Spending is for national defense. Too many of my conservative friends are locked into the idea that everything in Washington, D.C. is bureacratic, inefficient, wasteful and largely fraudulent, EXCEPT FOR the military and its contractors... and, of course, their own jobs.

As the last graphic shows, military spending has declined from about 6-8% of GDP during the Vietnam War to about 5% of GDP today. Well, since the Soviet Union finally collapsed of its own weight, I would hope so. But, as long as conservatives refuse to see the same bureaucratic, inefficient, wasteful and largely fraudulent forces at work in the U.S. military as with every other portion of government, no department should retain its current funding.

When it was called the Department of War, its purpose was defense.
Now that it's called the Department of Defense, its purpose is war.

--Jack Swigert, former Apollo 13 astronaut, just before his election to Colorado's Sixth Congressional District (1982).

The U.S. military, annually funded by Congress, has become an instrument of the President's foreign policy with little concern for the U.S. Constitution which Congress, the President and Supreme Court are sworn to uphold and defend. Today, U.S. military forces are in more than 170 countries around the world, with broad, nebulous and often conflicting missions. As Congressman Ron Paul has pointed out repeatedly, its purpose should not be nation-building or serving as the world's policeman, but should be focused on defending the U.S. from attack. It has become just another jobs program for bureacrats, military contractors and politicians who keep funding and building more sophisticated weapons designed to defeat the armies of the past. The fact that Republicans cannot find one dollar to cut from this bloated monstrosity is a testament to their insincerity toward solving the problems of the federal budget. Today's annual military spending budget is about the same percentage of GDP as Social Security.

While I applaud the Heritage plan for its breadth, much bolder than any elected official can accept, it's clearly partisan, and as such, insures its own failure in Congress.

Despite my criticism, I encourage you to consider the details of the Heritage plan, as it contains some very good ideas if America is ever to get back to its libertarian roots instead of the welfare/warfare state it has become.

Monday, June 13, 2011


Texas Congressman and Medical Doctor Ron Paul, often called "Dr. NO" because he votes against taxing and spending bills he thinks constitutional, is the only person in the political process today of whom I am aware who backs up his principled stand against big government with his actions. My friends know of my great respect for him. In my opinion, he is the only current American who I would place in the same category as the founders of the American Republic, because he consistently attempts to uphold their Constitution as his oath of office demands. Even his political opponents describe him as "principled" and "courageous."

In today's article, Dr. Paul has once again hit the nail on the head. For those not familiar with Dr. Paul, you may find his bio interesting before reading his current article, which I have copied in its entirety below the second link. Please note that Dr. Paul has always rejected his lucrative congressional retirement benefits. That should tell you something of his character, even if you don't like some of his ideas.



I have copied Dr. Paul's current article in it's entirety below. I believe it is one of the most comprehensive and rational summaries of his wisdom and lifelong commitment to our uniquely American liberty.

by Congressman Ron Paul

Recent economic data show that U.S. job growth in May was negligible, while the official unemployment figure-- at least the figure the Labor Department admits to-- rose to 9.1%. The real unemployment figure, however, as compiled by economist John Williams, may well be higher than 20%. It is clear the U.S. economy is in terrible shape, and that no amount of government spending or Federal Reserve quantitative easing can reduce unemployment, increase real productivity, or address our debt fiasco.U.S. jobs and productivity are dependent on the accumulation of private capital to finance existing businesses or fund new entrepreneurial activity. Private capital-- whether accumulated by profitable U.S. businesses, invested by private equity and venture capital firms, or attracted from abroad-- is the key to economic growth and new jobs. But we cannot create jobs if we demonize profits, punish risk-taking capitalists, and stay hostile to foreign investment.

The steps to encouraging capital investment and creating new jobs in America are simple, though not easy:

· First and foremost, we must create a sound U.S. currency backed by gold or some other commodity respected by the market. No nation in history with a rapidly depreciating currency has attracted private capital. Unless and until we prohibit the Treasury and Federal Reserve from essentially creating money and credit from thin air, we cannot restore the U.S. economy.

· Second, we must create a favorable regulatory environment for U.S. business. This cannot be stressed enough. When businesses don’t know what’s coming next from the EPA, when Obamacare spikes their healthcare costs, or when the Dodd-Frank bill adds almost unknowable regulatory compliance burdens, businesses simply will not expand and hire. It is time to start shrinking the federal register.

· Third, we must stop spending trillions of dollars overseas on foreign wars. There is no point in debating a foreign policy we cannot afford. It no longer matters what neoconservatives want. Our interventionist foreign policy is financed on credit, and our credit limit has been reached. Our economy would be infinitely better off if those trillions of dollars had never been removed from the private economy or added to our debt.

· Finally, we must completely revamp the U.S. tax system and move to a territorial model that does not tax foreign source income. U.S. corporations are sitting on more than a trillion dollars in foreign earnings that cannot be repatriated to the U.S. because of taxes. We need to stop taxing unpatriated funds to bring those earnings home. Better yet, we need to abolish the income tax altogether.

The U.S. economy is in deep trouble. Congress needs to act immediately to restore the rule of law and create an environment that rewards, rather than punishes, the critical components of any healthy economy: capital accumulation and investment.

In this struggling economy it is essential for politicians to take a step back and think about what government has been doing to business in this country. In less than 200 years, the free market, property rights, and respect for the rule of law took this nation from a rough frontier to a global economic superpower. Today, however, our nation and our economy clearly are headed in the wrong direction.

Of course, America has never enjoyed absolute free-market capitalism: creeping government intrusion and special interest political patronage have existed and increased since our founding. But America historically has permitted free markets to operate with less government interference than other nations, while showing greater respect for property rights and the rule of law. Less government, respect for private property, and a relatively stable legal environment allowed America to become the wealthiest nation on earth.

By contrast, the poorest nations almost always demonstrate hostility for free markets, private property, and the rule of law. Capital formation, entrepreneurship, credit, and wealth accumulation are uniformly discouraged in poor countries. Private contracts are not reliably enforced, and private property is not secure in the hands of owners. The predictable result is widespread poverty and misery.

Monday, June 6, 2011


by James Craig Green
(updated 3/20/2013)

Today, it seems like wants become needs, needs become rights, and, well... you know what happens when enough people say they have a right to something. It becomes yet another excuse to grow government.

John Locke's ideas on NATURAL RIGHTS were based on your ability to mix your labor with unowned natural resources to create something new; thereby becoming your property. In other words, you OWN the fruits of your labor. By producing something new, you have a right to keep it, sell it, give it away or otherwise decide how it is used or disposed of. Also, Locke talked about man's inherent rights to life, liberty and property. This was revolutionary in the 1600's, when the prevailing law was that the King owned everything, including you. Unfortunately, these rights are once again revolutionary.

The Declaration of Independence described these rights as life, liberty and the pursuit of happiness, but retained Locke's idea of natural rights.

Groups may facilitate the protection of these natural rights, but group rights depend on and are limited by the individual rights of those who create or support the group. Frederic Bastiat wrote about this in THE LAW.


Contrary to the natural, defensive right to protect yourself and your property from theft or other aggression; another, completely different set of "rights" sprang up over the last several decades, especially since the New Deal of the 1930's. To best describe these "rights," I call them Theft Rights, because that is how they differ from Locke's natural rights. Theft Rights, as the name implies, depend on theft against innocents.

Following the popular "progressive" tide by taking some people's property and giving it to others, President Roosevelt came up with some new rights in 1944, mixed with the old ones so few would notice the difference. His ECONOMIC BILL OF RIGHTS (AKA Second Bill of Rights) included several new benefits, which had nothing to do with protection of individual rights. On the contrary, the only means of providing these would be the forceful theft of money and property from others to fulfill them. These "rights" included the idea that everyone should be provided with the following tangible things:

  • Employment with a living wage
  • Freedom from unfair competition and monopolies
  • Housing
  • Medical Care
  • Education
  • Social Security

These "rights" greatly enhanced the power of government to implement Roosevelt's progressive agenda, changing government from a protector of individual natural rights to a gang of thieves who takes property from some by force and gives it to others. It was Republican President Hoover, a former mining engineer and Roosevelt's predecessor, who began the New Deal, which Roosevelt finished. Roosevelt perverted one of the natural rights described in the Declaration, (pursuit of happiness, which became just happiness) as an excuse to provide these Theft Rights. In short, government now guaranteed happiness (not just freedom to pursue it), without mentioning the only way to do this is to steal wealth from others. This became the second-greatest fraud of the twentieth century (first was the Fed).

Tibor Machan recently (2013) published an essay that supports my thesis here:

The Fed, income tax, New Deal, escalation of the welfare state and decades of undeclared wars since 1945 were all the result of this brilliant, though destructive, power grab. This idea, and its addictive "free" benefits to some, is why today's U.S. government has unfunded future financial liabities between 50 and 100 TRILLION DOLLARS, depending on assumptions. The highest credible estimate I've seen, by the Cato Institute, is 120 trillion dollars, which is more than eight times current GDP. The lower figure is more consistent with former Comptroller General of the U.S. David Walker's estimates, who quit the federal government and went to work for the Peter G. Peterson Foundation to promote government austerity measures from outside the beast. Roosevelt's power grab, arguably the most blatant, was not the last. Today, every branch of the federal government rountinely steps outside the bounds of its constitutional powers. Without exaggeration, America's government is no longer limited.

It's good to be the King.

No Congress, no Supreme Court, no Constitution, not even a popular vote; just the President promising prosperity by theft. This is why some call today's democracies "kleptocracies," where everyone is entitled to steal from everyone else. Although Roosevelt's action was not the first such aggression against the natural, defensive rights upon which the American Republic was founded, it was arguably the most destructive. It opened the flood gates for everyone to claim they have a right to anything, for which somebody else would pay. This is why government is so large and oppressive today, so easily manipulated by the left and the right.

Both the left's welfare state and the right's warfare state were greatly enhanced by these policies, to the detriment of every American's freedom - even those who directly benefit from them.

Since I was born in 1945, the year of Roosevelt's death, It's been like a decades-long football game between Democrats and Republicans, where each time one team gets the ball, it has grown much larger. Eventually, the ball will explode. Whoever has the ball when it explodes will get blamed for both parties' sins, but by then, it won't matter.

Of course, when Roosevelt was concocting these new Theft Rights, which would eventually be cheerfully embraced by both political parties, there was no mention of the theft part. Since 1913's Sixteenth Amendment (income tax) was passed (previously unconstitutional) and the Federal Reserve Act (also in 1913; still unconstitutional), the U.S. government had cleverly segregated its revenue from its spending. After these two advances in "progressive" government, now supported by almost all conservatives, government began a long, modern tradition of endless promises of benefits without considering costs or tradeoffs. Now might be a good time to review how this was done by Presidents Hoover and Roosevelt by reading Lawrence Reed's excellent pamphlet, GREAT MYTHS OF THE GREAT DEPRESSION.

If you think these new "rights" represented a cornucopia of wealth, please remember that the Mafia, just like government, can also create prosperity by theft, but only for its beneficiaries. Similarly, 60% of Americans today get more from government than they pay in, while 40% pay more than they receive, as I discussed in WHO BENEFITS AND WHO PAYS FOR GOVERNMENT. After 1913 and again during and after the New Deal, the U.S. Government became a super-Mafia, combining theft and intimidation with unconstrained violence to benefit some at the expense of others. Both organizations do the same thing - take (steal) portions of the lives of productive people, deduct government's (mafia's) cut, and give the remainder to those who worship it as benefactor and savior. This is what American Mafia Government has become.

The Godfather should be so lucky.

Friday, June 3, 2011


by James Craig Green

Here and elsewhere, I have written about today's out-of-control government spending, public debt and the failure of Republicans, including their new brash-talking tea party congressmen, to do anything about it. The pathetic, anemic and trivial rhetoric coming from six months of a born-again Republican House of Representatives has resulted in no spending reductions of any kind, or even their prospect. In fact, the only member of Congress who I respect (Ron Paul) hit the nail on the head a while back when he said, Instead of the left agreeing to cut social spending and the right agreeing to cut military spending, the right agrees to more welfare and the left agrees to more warfare.

I have often pointed out the tragic conversion of America's federal government from a small republic limited by the U.S. Constitution to a few important tasks, into a massive, bloated behemoth that, along with its Frankenstein Monster the Fed - has accomplished unlimited government spending for anything and everything imaginable. As I described in PRIVATE PROPERTY PUBLIC PLUNDER and my Unchain the Builders series article on JAMES MADISON, America has unfortunately become much more democratic, and less republican, than the American founders intended.

I should point out the obvious, but so many refuse to see: today's so-called republicanism has almost nothing in common with the republicanism of America's founding. If it were not for current Republicans' empty rhetoric which never translates into meaningful, government-limiting results, there would be no connection at all.

Also, as I described in MARKETS WORK-GOVERNMENTS DON'TCRONY CAPITALISM and SOLAR JOBS, government today almost always does more harm than good when it gets involved in the economy. This is because it only knows how to used its oppressive tools: the sledgehammers of unconstitutional law, promotion of coercive monopolies and forced wealth transfer.

The American Republic's founders thought they made sure the new federal government being considered from 1787 to 1791 would be able to avoid the michiefs of faction described by James Madison in FEDERALIST NO. 10. They were wrong.

I can think of no better analogy to illustrate the silliness of democracy than a family operating under democractic principles to show what is wrong with America today, and why.


Imagine a fairly typical American family, with two working parents who bring in all the family's income, and their three young children who do not work. Suppose, in their zeal for democracy, unrestrained by any rule of law, much less a Constitution, these compassionate parents decide to implement pure democracy in their family.

All it takes is a simple rule: every dollar spent by the family will be based on a majority vote of all five members. So, if the parents want to make a house payment but the kids want to go to Disneyland, the house payment does not get made. The kids are so happy about the trip, they next vote for anything and everything they want, realizing their parents will have to comply, by the parents' own chosen rules.

At this point, you might consider this the stupidest thing that any group of adults ever did, but you would be wrong. As P.J. O'Rourke once opined, Giving Congress the power to tax is like giving teenage boys whiskey and car keys.

Well, America, you have not only done just that, but much, much worse. You have given your immature children (voters, looking for "free" benefits at the expense of others) not only whiskey and car keys, but a printing press with which to make unlimited amounts of money (The Federal Reserve) without increased production of goods and services. All this from the insane idea that unbacked paper money, and not real goods and services, represents wealth. If the Fed really improved the economy, then everyone should be allowed to have a money-printing press in his basement, and the illusion that counterfeiting is illegal could be done away with once and for all.

And, as if this weren't enough, you've given these immature, reality-challenged voters the idea that they have a right to continue their high-on-the-hog lifestyle, regardless of cost or damage to others. Of course, it is easy to see how quickly any family who would be so foolish to live under pure democracy would quickly be bankrupt, or worse. But, like the childish members of public employee unions who believe they haven't gotten enough from taxpayers already, they also want the right to force more, and more, and more money from those who actually produce the useful goods and services they consume at the expense of more productive enterprises. As Mel Brooks said in the movie Blazing Saddles: We've got to protect our phony-baloney jobs, gentlemen.

You might think I chose the two working parents and three nonworking kids by chance, but it is actually a pretty good representation of America today, as shown in my recent post WHO BENEFITS AND WHO PAYS FOR GOVERNMENT?. Sixty percent (three out of five) of Americans receive more from government than they pay in, and only 40% (two out of five) pay more than they receive. A democratic America is already here.

The excesses of democracy, frequently called mob rule by American Founders, clearly manifested themselves in differences between the American and French Revolutions. Whereas the constrained republicanism of the American Revolution produced the Declaration of Independence, the U.S. Constitution and the Bill of Rights, the almost purely democratic French Revolution a few years later produced the Reign of Terror, the Guillotine and eventually, the Emperor Napoleon.

Today's America resembles more closely the democratic excesses of the early French democracy, than the constitutional republic created by America's founders.

Several famous people have characterized the damage done by democracy:

  • Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself - John Adams
  • Democracy means simply the bludgeoning of the people by the people for the people - Oscar Wilde 
  • A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine. - Thomas Jefferson
As with the French Revolution, too much democracy, as evidenced by unfunded U.S. government liabilities estimated by the Cato Institute to be between 45 and 100 TRILLION DOLLARS (Table 1 on Page 7), cannot be continued without severe additional damage to the American economy.

If Americans don't soon get their government addiction under control; foreign bankers, bond markets and more economic collapses will.