(revised March 14, 2012)
by James Craig Green
I have all but abandoned the word truth, by which I mean here "an irrefutable claim of absolute knowledge about reality." More often than not, people who claim to have found some universal truth in human knowledge are either 1) quoting some guru or hero which they worship without criticism, 2) stating a meaningless tautology ("A" is "A"), or 3) sloppy thinking through a lack of critical examination of long-held views (dogma).
By this more restrictive definition, I am not talking about common use of the word truth to mean beliefs in principles that may change slowly over time within a human lifetime. My friend Don Kirkland uses truth in this way. What I mean to criticize here is the dogmatic belief that our words can somehow represent reality for all time. This seems highly unlikely to me.
Here's an introduction to my current beliefs on this and related issues:
1. I gave up on truth decades ago. What people usually promote as truth is too often the result of sloppy thinking, or just belief in knowledge upon which they can rely for a while, maybe even a long while.
2. Most human knowledge is obtained through written or spoken words from others (as opposed to direct experience). Therefore, it is mostly subjective because language is subjective, beginning with circular logic (each word depends on other words, ad infinitum) and going downhill from there. In addition, human senses are limited in what they can perceive, so many aspects of reality are filtered through multiple layers of human thought, disguising parts of their nature from the human mind. Think atoms (too small) and galaxies (too large) - especially the assumptions, inaccuracies of measurement and other uncertainties that prevent direct, unbiased knowledge of such phenomena. We know about black holes in deep space not because of what they are, but what they are not (we "see" them as apparently empty space, but speculate on their nature due to their apparent gravitational effects on other bodies).
3. The study of general semantics (NOT common language semantics - the definition of words) is often necessary to identify errors in one's perception of reality. It has become part of some sciences, but is not, in itself, science. Even the most widely-known guru of general semantics (Polish Count Alfred Korzybski) himself made serious errors in thinking on the subject, typical of the dogma and chauvinism that dominate most, if not all, fields of knowledge. This use of the phrase "general semantics" is not commonly known to most people with whom I have attempted to discuss it. However, I think it is one of the most profound and useful aspects of human knowledge I have ever encountered, because it attempts to pierce the veil of confusion about what is real and what is not. I credit my long-time friend Dr. Dick Jones (retired medical doctor and lawyer) with my most recent and profound understanding of this subject. The essence of general semantics is "how do you know something is real instead of fantasy?"
4. Only science - frequently fraught with error (demanding revision of theories) - contains procedures for identifying errors and correcting them. This destroys popular paradigms and careers, which is why science is so easily corrupted by politics and the self-serving importance of those careers. Think global warming (AKA climate change). Among my libertarian and objectivist friends, think first principles - claimed to be without assumptions or other antecedent beliefs. It is easy, but most likely wrong, to claim that because one cannot think of an exception to a claim, it is absolute. I call this "sloppy thinking" instead of expressing some eternal truth.
I discussed my general theory of science in Science = Induction + Deduction in May of 2011, recently updated to better comport with this article.
5. Word definitions are arbitrary, tentative and subject to change. Definitions contain no truth (only clarification of intended meaning), so I prefer to call them assumptions, propositions or labels. This may seem counterintuitive, but think of the word "rock" to describe that large thing sitting in front of you and me in a field. The word "rock" contains very little specificity about the complexity of the object you, I and others may agree is real. For example, if you and others agree to call that thing "rock," this says nothing about its sub-atomic structure, which is mostly empty space. Also, it does not distinguish between different kinds of "rock" from geologists' use of terms like "granite," "shale" or "gravel." THE COMPLEXITY OF REALITY, especially our limited understanding of it, is a subject about which even people with advanced degrees in the sciences may not understand very well. This suggests caution to me in claiming to know some reality with absolute certainty. At best, we glimpse pieces of it, hoping to improve our understanding with future advances in instrumentation, observation and experimentation. This is why our knowledge about reality is incomplete and tentative.
6. According to Karl Popper, a statement is not scientific if it cannot be refuted by experiment. For example, neither "God exists" nor "God does not exist" are scientific theories by this definition. Both can be argued forever without end, since neither deals with testable hypotheses that could be wrong. My friend Don uses these as what I would call "tentative truths," which are by definition not the absolute truth subject of this article. It is easy for humans to see the limits of practical knowledge that can be achieved by an amoeba, but not themselves. Similarly, a more advanced species than humans could see our inherent limits, which so many of us cannot. HOWEVER, positively asserting that something (like God) does not exist is a fool's errand, although not believing in its existence (as I do not) may be sensible. Until black swans were discovered, "all swans are white" was apparent to all who had only seen white ones, though wrong based on our current knowledge of genetics. However, keep in mind that if swans were defined as WHITE birds, then the discovery of black swans would not contradict it, though it was prudent to re-define what swans were based on new evidence.
7. My general belief today is that practical knowledge about the real world (that which exists outside our minds) is discoverable, but not completely, nor can it be known well enough to be sure one's ideas about it will survive forever under scrutiny. The uncertainty of knowledge is the beginning of learning new things about the world around us. Certainty is the end. Dogma dominates so-called "science" among PhD's as much, if not more, than anybody else. Two decades ago, I described this as the "arrogance of orthodoxy," which I called "arrogoxy." Most people seem to adopt "truths" through osmosis; not critical thinking or the natural uncertainty that underlies our most honest and self-critical knowledge of reality.
8. Semantic games, hero worship and sloppy thinking are rampant in all fields of human knowledge - especially science, philosophy and other intellectual pursuits normally thought to be above reproach and "higher" forms of thought. Too many non-scientists have no idea how much faith, imprecision and confusion permeate science and other subjects they regard as "advanced." I've known engineering PhD's who couldn't problem-solve their way out of a paper bag, and auto mechanics who were brilliant, creative and incredibly productive at what they do. I worked in my dad's auto wrecking yards and garages from ages 12 to 22, when I left home with my first engineering degree in 1969. I had some technical jobs along the way in college, but never forgot how intelligent and creative some auto mechanics were.
9. Most people make and/or repeat these mistakes frequently, even without including those who profit from deception and intentional falsehoods. It is a struggle to avoid them, like Bastiat's Broken Window Fallacy is unknown to most professors of economics, which leads to the worst and most destructive of public policies. The essence of this extremely important fallacy is the idea that looking at only the benefits of destruction (like a broken window) such as the jobs it creates (glaziers and those on whom they spend their newfound money) are only the least important part of the story. The most important part - largely unknown to economists - especially those whose careers focus on justifying public policies - is that had the window not been broken, the money spent fixing it would have been spent on a whole chain of other things. This means there is no "stimulation" to the economy from such destruction, but a net loss (the window). If only government could understand this, but it is not in the interest of those in and around government to do so and naive to expect it. This lack of understanding is why some government-subsidized solar energy companies are going belly-up - a direct and predictable result of massive government subsidies without financial accountability or a real market demand. This fallacy permeates almost everything government does.
I welcome any and all criticism, and seriously look forward to those among you who can point out errors in my thinking on this subject. However, as I implied in my previous blog posts Rand's "Nature of Government" and Science=Induction+Deduction, conveniences in language shorthand are neither serious statements of absolute belief... nor their refutation. Too many semantic games fail to be serious attempts at better understanding reality, but succeed in promoting and protecting existing dogma.
Let the games begin...
Wednesday, February 29, 2012
Monday, February 27, 2012
UPDATED AGW SKEPTIC'S CASE
by James Craig Green
(with links to Alan Cheetham and Anthony Watts websites)
For several years now, I have been researching, discussing and writing about the issue of man-caused (anthropogenic) global warming, or AGW.
Early on, I tried to maintain my objectivity, but the vast conspiracy and duplicity of governments' climate scientists (refusing public records requests), the self-serving politics of the IPCC (Intergovernmental Panel on Climate Change), major media and even several (formerly respectable) professional societies have poisoned too many people with their self-serving and dogmatic assertions that:
1. Global warming during the last several decades has been primarily caused by human activity,
2. Only so-called "climate scientists" self-selected by the IPCC and its supporters have the credentials to publicly opine on the issue, despite their not being allowed to write the IPCC's "Summary for Policymakers" in each of their major reports, routinely published months before the release of technical reports.
3. Skeptics are hacks for oil companies and other polluters who profit from covering up the truth, and
4. The earth will experience an unprecedented warming, never before seen, unless drastic measures are taken immediately by the governments of the world to prevent catastrophic warming that will destroy the human economy as it currently exists.
Fortunately, several prominent climate skeptics (who deny that humans are the primary cause of recent warming) have compiled scientific and other information on websites and in many books that show the failure of the IPCC and its minions to prove their case. Astonishingly, the IPCC's incredibly shoddy and politicized work, including hijacking scientific societies and publications (such as Nature, National Geographic and Scientific American magazines), has been covered up by one of the most dishonest disinformation campaigns in more than a generation.
Enter my heroes Alan Cheetham and Anthony Watts.
I was first attracted to Alan Cheetham's global warming website several years ago because of its detail, excellent writing and voluminous data with graphs, tables and broad scope addressing AGW issues. I have referred to Alan's site many times in email correspondence and articles of my own. Here is his website, chock-full of scientific detail on a variety of technical issues:
http://www.appinsys.com/GlobalWarming/
Alan's "Simplified Nutshell" page has also been available for years:
http://www.appinsys.com/GlobalWarming/GW_SimplifiedNutshell.htm
In case you didn't know, all IPCC reports depend on a single assumption, that has no basis in reality -- that increases in CO2 warming should be multiplied several times and assumed to apply directly to water vapor, the most dominant greenhouse gas. CO2 comprises only about 1 part in 2400 of the atmosphere, even at today's elevated levels. The earth has been warming since the Little Ice Age from the mid 1700's, when the Thames River in London was frozen, as was the Hudson River in New York during the American Revolution. In other words, the earth had already been warming for two centuries before today's global warming became a "prime time" political issue.
I have more recently been following Anthony Watts' site, "Watts Up With That?" (The world's most viewed site on global warming and climate change)
In particular, his latest article as of this date is shown in the link below. It summarizes what I think is the achilles' heel of all IPCC work -- the unproven and dogmatic assumpion that human effects which may cause increased global warming from carbon emmisions should be multiplied several times as a "positive feedback" to the most dominant greenhouse gas, which is water vapor.
http://wattsupwiththat.com/2012/02/26/the-skeptics-case/
This article, with a handful of excellent graphs, explains the criticism of the IPCC's shoddy work and the case for the skeptic's position, using the most recent data and well-documented data sources.
It is the best focused explanation, with sufficient data, I have found to demonstrate the IPCC's failure to model reality for the last three decades. It focuses on the weakest, but most important link in the IPCC chain, which is the unfounded assumption that warming from CO2 can and should be multiplied and applied to water vapor. Without this assumption, IPCC models fail dramatically to even suggest, much less prove, their case.
(with links to Alan Cheetham and Anthony Watts websites)
For several years now, I have been researching, discussing and writing about the issue of man-caused (anthropogenic) global warming, or AGW.
Early on, I tried to maintain my objectivity, but the vast conspiracy and duplicity of governments' climate scientists (refusing public records requests), the self-serving politics of the IPCC (Intergovernmental Panel on Climate Change), major media and even several (formerly respectable) professional societies have poisoned too many people with their self-serving and dogmatic assertions that:
1. Global warming during the last several decades has been primarily caused by human activity,
2. Only so-called "climate scientists" self-selected by the IPCC and its supporters have the credentials to publicly opine on the issue, despite their not being allowed to write the IPCC's "Summary for Policymakers" in each of their major reports, routinely published months before the release of technical reports.
3. Skeptics are hacks for oil companies and other polluters who profit from covering up the truth, and
4. The earth will experience an unprecedented warming, never before seen, unless drastic measures are taken immediately by the governments of the world to prevent catastrophic warming that will destroy the human economy as it currently exists.
Fortunately, several prominent climate skeptics (who deny that humans are the primary cause of recent warming) have compiled scientific and other information on websites and in many books that show the failure of the IPCC and its minions to prove their case. Astonishingly, the IPCC's incredibly shoddy and politicized work, including hijacking scientific societies and publications (such as Nature, National Geographic and Scientific American magazines), has been covered up by one of the most dishonest disinformation campaigns in more than a generation.
Enter my heroes Alan Cheetham and Anthony Watts.
I was first attracted to Alan Cheetham's global warming website several years ago because of its detail, excellent writing and voluminous data with graphs, tables and broad scope addressing AGW issues. I have referred to Alan's site many times in email correspondence and articles of my own. Here is his website, chock-full of scientific detail on a variety of technical issues:
http://www.appinsys.com/GlobalWarming/
Alan's "Simplified Nutshell" page has also been available for years:
http://www.appinsys.com/GlobalWarming/GW_SimplifiedNutshell.htm
In case you didn't know, all IPCC reports depend on a single assumption, that has no basis in reality -- that increases in CO2 warming should be multiplied several times and assumed to apply directly to water vapor, the most dominant greenhouse gas. CO2 comprises only about 1 part in 2400 of the atmosphere, even at today's elevated levels. The earth has been warming since the Little Ice Age from the mid 1700's, when the Thames River in London was frozen, as was the Hudson River in New York during the American Revolution. In other words, the earth had already been warming for two centuries before today's global warming became a "prime time" political issue.
I have more recently been following Anthony Watts' site, "Watts Up With That?" (The world's most viewed site on global warming and climate change)
In particular, his latest article as of this date is shown in the link below. It summarizes what I think is the achilles' heel of all IPCC work -- the unproven and dogmatic assumpion that human effects which may cause increased global warming from carbon emmisions should be multiplied several times as a "positive feedback" to the most dominant greenhouse gas, which is water vapor.
http://wattsupwiththat.com/2012/02/26/the-skeptics-case/
This article, with a handful of excellent graphs, explains the criticism of the IPCC's shoddy work and the case for the skeptic's position, using the most recent data and well-documented data sources.
It is the best focused explanation, with sufficient data, I have found to demonstrate the IPCC's failure to model reality for the last three decades. It focuses on the weakest, but most important link in the IPCC chain, which is the unfounded assumption that warming from CO2 can and should be multiplied and applied to water vapor. Without this assumption, IPCC models fail dramatically to even suggest, much less prove, their case.
Saturday, February 18, 2012
CRAIG'S ARTICLES FOR COLORADO'S INDEPENDENCE INSTITUTE
by James Craig Green
The following are various articles I have written over the last two decades for Colorado's free market think tank, the Independence Institute, where I am a Senior Fellow in Water Policy. I was first contacted by John Andrews, the first director of II, in 1990 to write an article on Colorado's water rights. Years later, I was contacted by Dennis Polhill on behalf of Jon Caldara to write an updated water rights article during the extreme drought year of 2002. Subsequent articles were mostly on water subjects, with an occasional July 4th celebration of the Declaration of Independence. Many of these articles are hard to find today if you don't know where to look, so I have put links to them here in one place.
Colorado's Independence Institute includes some of the finest free market thinkers in the nation, including its important work to protect freedom and property rights. Recently Rob Natelson, perhaps the most scholarly of Constitutional scholars on original intent has joined Dave Kopel, a leading expert on the Second Amendment, to provide an impressive legal team for promoting liberty at II through the legal process. They are active on several important legal fronts, including the current movement to constrain the scope of the federal government by the Constitution's Tenth Amendment.
My work for II has always been about passion for freedom and the promotion of market solutions over the stifling conformity of bureaucratic ones.
Craig's first paper at II for John Andrews
JUST DAY NO TO CENTRALIZED WATER PLANNING (1990)
(footnote links no longer work, but footnotes are still at the end of the article)
Craig's drought-year (2002) Water rights Primer
USE IT OR LOSE IT (2002)
A review of proposed legilsation in the 2002-2003 legislative sessions
DROWNING IN LEGISLATION (2003)
Craig's article about how markets in water are better than government rules
LET COLORADO WATER MARKETS WORK (2003)
Craig's July 4th article on the flag of American Independence
SORRY, LOST IN CYBERSPACE...
DON'T TREAD ON ME (2007)
Craig's criticism of Colorado media concerning a false "water crisis"
POLITICIANS, MEDIA DUPED BY WATER CRISIS (2006)
Another July 4th article celebrating Thomas Paine's contribution
THOMAS PAINE'S JULY 4TH (2007)
Craig's reply to a Farmer who says the State didn't do enough
SORRY, LOST IN CYBERSPACE...
THE FARMER AND THE WATERCOPS (2009)
Craig's article on solar jobs replying to Denver Post article
SOLAR JOBS' FAULTY ECONOMICS, EXAGGERATION (2009)
Craig's article celebrating the work of Montana's PERC
FREE MARKET ENVIRONMENTALISM (2010)
Craig's article on a destructive 2012 Colorado ballot proposal
DON'T LET COLORADO CONFISCATE WATER RIGHTS (2012)
The following are various articles I have written over the last two decades for Colorado's free market think tank, the Independence Institute, where I am a Senior Fellow in Water Policy. I was first contacted by John Andrews, the first director of II, in 1990 to write an article on Colorado's water rights. Years later, I was contacted by Dennis Polhill on behalf of Jon Caldara to write an updated water rights article during the extreme drought year of 2002. Subsequent articles were mostly on water subjects, with an occasional July 4th celebration of the Declaration of Independence. Many of these articles are hard to find today if you don't know where to look, so I have put links to them here in one place.
Colorado's Independence Institute includes some of the finest free market thinkers in the nation, including its important work to protect freedom and property rights. Recently Rob Natelson, perhaps the most scholarly of Constitutional scholars on original intent has joined Dave Kopel, a leading expert on the Second Amendment, to provide an impressive legal team for promoting liberty at II through the legal process. They are active on several important legal fronts, including the current movement to constrain the scope of the federal government by the Constitution's Tenth Amendment.
My work for II has always been about passion for freedom and the promotion of market solutions over the stifling conformity of bureaucratic ones.
Craig's first paper at II for John Andrews
JUST DAY NO TO CENTRALIZED WATER PLANNING (1990)
(footnote links no longer work, but footnotes are still at the end of the article)
Craig's drought-year (2002) Water rights Primer
USE IT OR LOSE IT (2002)
A review of proposed legilsation in the 2002-2003 legislative sessions
DROWNING IN LEGISLATION (2003)
Craig's article about how markets in water are better than government rules
LET COLORADO WATER MARKETS WORK (2003)
Craig's July 4th article on the flag of American Independence
SORRY, LOST IN CYBERSPACE...
DON'T TREAD ON ME (2007)
Craig's criticism of Colorado media concerning a false "water crisis"
POLITICIANS, MEDIA DUPED BY WATER CRISIS (2006)
Another July 4th article celebrating Thomas Paine's contribution
THOMAS PAINE'S JULY 4TH (2007)
Craig's reply to a Farmer who says the State didn't do enough
SORRY, LOST IN CYBERSPACE...
THE FARMER AND THE WATERCOPS (2009)
Craig's article on solar jobs replying to Denver Post article
SOLAR JOBS' FAULTY ECONOMICS, EXAGGERATION (2009)
Craig's article celebrating the work of Montana's PERC
FREE MARKET ENVIRONMENTALISM (2010)
Craig's article on a destructive 2012 Colorado ballot proposal
DON'T LET COLORADO CONFISCATE WATER RIGHTS (2012)
Wednesday, February 15, 2012
THE END OF AMERICA
Introduction by James Craig Green
I have subscribed to several of Porter Stansberry's investment newsletters for years. During the last half decade, Porter has consistently predicted major economic trends, including the collapse of General Motors, Fannie Mae, Freddie Mac and several other projections that lost him thousands of subscribers.
As you will see below, this important article has been released from copyright by Porter to anyone who wants to reproduce and distribute it. I encourage you to learn more about Porter's work and take seriously what this man has to say. He crystalizes the fundamental economic problems of America that have been caused by decades, even lifetimes, of uncontrolled government growth at the expense of the freedom and prosperity upon which this country was built.
You will also notice that Porter, like me, blames both Democrats and Republicans for today's sorry state of affairs. In December 2011, I reproduced Porter's earlier piece on the END of AMERICA, also released without copyright for the widest possible distribution.
You may also like to read some of my blog posts over the last year, revealing how bad the economy is and why no politician is likely to do anything about it. The two most relevant to this post are linked below Porter's December article.
Porter's December 2011 Corruption of America article
Craig's Contrasting Government and Market Incentives
Craig's introduction to Jeffrey Tucker's article (click on graph to see how Republicans grow government faster than Democrats before Obama)
Porter Stansberry: These facts show the "End of America" is coming
Tuesday, February 07, 2012
From Porter Stansberry in the S&A Digest:
Most people still don't understand the risks we face as a nation because of our feckless leaders and their reckless ignorance of basic economics.
What follows are facts. Nothing in this essay will be conjecture or opinion. I will make no forecast – at least not in this essay. So please, stop the political name-calling... and grow up. The problems we face are ours. All of ours. It doesn't matter how we got here. It only matters that we begin to deal with these issues – soon. If we don't begin to solve these core financial problems, they will certainly destroy our country.
Today, our national federal debt far exceeds $15 trillion. This alone is not a serious problem. The interest we pay on these debts is small – thanks to the trust of our creditors, who, for the moment, continue to believe America is a safe bet.
So… what's the problem? The main problem is the amount of debt we owe continues to increase at a faster and faster pace. This is exceptionally dangerous for two simple reasons. First, there's simple math. When numbers compound, the result is geometric expansion. And that's happening right now with our national debt because we continue to borrow money to pay the interest. And we have done so for about 40 years. Think about it this way: How big would your debts be today if you'd been using credit cards to pay your mortgage for the last several decades?
Even worse, our debts are compounding at an accelerating pace because we lack the political ability to limit the federal government's spending. Please understand… I'm not pointing the finger at any politician or either political party. I'm simply pointing out a fact: This year's $3.6 trillion federal budget is 20% larger than the entire 2008 budget.
And while our government has grown at a record pace, our economy hasn't. It has hardly grown at all. Thus, this will be the fourth year in a row we set a record for deficit spending. Never before in peacetime has our government borrowed this much money. And now, it's borrowing record amounts every year.
This combination of borrowing record amounts of money (during peacetime) and continuing to borrow the money we need to pay the interest is setting the stage for a massive increase in total federal debt levels. Why is this happening? Don't our leaders realize they can't continue on this path?
Well… the problem isn't so simple to fix. What we face isn't a $15 trillion problem. It's actually much, much bigger…
The $15.3 trillion we owe today is really only a minor down payment on promises the federal government made to its most important creditors – the American people. Not yet included in our debt totals are the $15 trillion shortfall in Social Security (thanks to the Democrats), the $20 trillion unfunded prescription drug benefit (thanks to the Republicans), or the $115 trillion unfunded Medicare liability (thanks to the Democrats and Republicans).
Most people ignore these looming liabilities because they obviously will never be paid. In fact, the federal government's total obligations today – including all future obligations – is more than $1 million per taxpayer. And that's if you assume all 112 million taxpayers really count. (They don't. Only about 50 million people in the U.S. pay any substantial amount of federal income taxes.)
But here's the funny part… While everyone seems ready to ignore these obligations, we've already begun to pay them. Our spending on Medicare and Social Security already greatly exceeds the $800 billion in payroll taxes we're collecting to pay these benefits. (Total spending on Social Security and Medicare last year was more than $1.5 trillion.) And that means our actual debts will continue to compound faster and faster every year, assuming nothing is done to curtail these benefits.
I want to make sure you understand this fact: It doesn't matter how much (or how little) Congress chooses to cut its discretionary budget. The promises we've already made to Americans in the form of Social Security and Medicare guarantee that our debts will continue to compound faster and faster, every year. How do I know?
Once again… let's return to basic math. Right now, we're spending (at the federal level) $2.4 trillion per year on transfer payments and interest on our national debt. That doesn't include any of the other functions of the government – nothing else. Meanwhile, we are only collecting $2.3 trillion a year in income, payroll, and corporate taxes.
Let me make sure you understand this: Even if we cut every other government program – including the entire military budget – the federal revenue collected still wouldn't be enough to merely cover the costs of our direct transfer payments. Not even close. And every year, these payments will automatically grow.
Here's another way to look at the same basic numbers, but on a macro scale. Right now, total government spending in the U.S. equals $7 trillion per year. (That's federal, state, and local.) Total interest paid in the U.S. economy on all debts, public and private, equals $3.7 trillion. The size of our total economy is only $15 trillion. Thus, we are currently spending $10 trillion (out of $15 trillion) on our government and debt. This is unprecedented in all of American history. This financial structure is unsustainable – and extremely unstable, given our debt levels.
There's the bigger problem (yes, it gets worse). The political solution to our soaring deficits will most likely be higher taxes. Yes, technically that's a prediction… And I promised no predictions in this piece. But let's face it. You will never see the federal government make dramatic, meaningful cuts to its promised benefits – not when half the country pays no federal taxes and more than 40 million people are on food stamps. So it's not really a prediction – it's a political reality. Will higher taxes save us?
No. You cannot squeeze blood from a stone. The federal debt isn't the largest obligation we suffer under. Americans hold nearly $1 trillion in credit card debt. We hold nearly $1 trillion in student loans. Total personal debt in America is larger ($15.9 trillion) than all of the federal debt. In total – adding up all of our debts, public and private – Americans owe close to $700,000 per family. It is not possible to finance our federal government's spending via taxes because the American people are broke. Total debt levels in America are the highest – by far – of any developed nation.
Tax the rich, you say. Well, of course. But marginal rates in many places are already greater than 50%. Tax rates this high don't work… They actually reduce tax revenues as people move their economic activities elsewhere to avoid taxes… or even simply forgo working.
Don't forget, the very wealthy can simply leave. James Cameron – director of blockbuster movies Titanic and Avatar – recently did just that, buying a 2,500-acre farm in [New Zealand]. John Malone, chairman of Liberty Media, likewise told the Wall Street Journal that he bought a farm on the Canadian border specifically so that he could leave the country whenever he wanted. "We own 18 miles on the border, so we can cross. Anytime we want to, we can get away."
Think I'm exaggerating the risks of real capital flight from the U.S.? Well… let's look at the facts. According to the latest IRS report, the number of Americans renouncing their U.S. citizenship has increased ninefold since 2008.
How then will the government's spending be financed? Well, I promised no predictions. Not today. But I will remind you that since 2008, the Federal Reserve has expanded the monetary base from roughly $800 billion to nearly $3 trillion. That, again, is a fact. Feel free to draw your own conclusions about what the Federal Reserve is likely to do in the future if the U.S. Treasury is faced with a financial need that can't be met.
You may do whatever you'd like with [this essay]. Feel free to pass it around to your friends – or anyone else who may be interested in these ideas. Be prepared for lots of nonsense about making the rich pay their "fair share" and pie-in-the-sky projections about how the entitlement system could easily be reformed.
I have subscribed to several of Porter Stansberry's investment newsletters for years. During the last half decade, Porter has consistently predicted major economic trends, including the collapse of General Motors, Fannie Mae, Freddie Mac and several other projections that lost him thousands of subscribers.
As you will see below, this important article has been released from copyright by Porter to anyone who wants to reproduce and distribute it. I encourage you to learn more about Porter's work and take seriously what this man has to say. He crystalizes the fundamental economic problems of America that have been caused by decades, even lifetimes, of uncontrolled government growth at the expense of the freedom and prosperity upon which this country was built.
You will also notice that Porter, like me, blames both Democrats and Republicans for today's sorry state of affairs. In December 2011, I reproduced Porter's earlier piece on the END of AMERICA, also released without copyright for the widest possible distribution.
You may also like to read some of my blog posts over the last year, revealing how bad the economy is and why no politician is likely to do anything about it. The two most relevant to this post are linked below Porter's December article.
Porter's December 2011 Corruption of America article
Craig's Contrasting Government and Market Incentives
Craig's introduction to Jeffrey Tucker's article (click on graph to see how Republicans grow government faster than Democrats before Obama)
Porter Stansberry: These facts show the "End of America" is coming
Tuesday, February 07, 2012
From Porter Stansberry in the S&A Digest:
Most people still don't understand the risks we face as a nation because of our feckless leaders and their reckless ignorance of basic economics.
What follows are facts. Nothing in this essay will be conjecture or opinion. I will make no forecast – at least not in this essay. So please, stop the political name-calling... and grow up. The problems we face are ours. All of ours. It doesn't matter how we got here. It only matters that we begin to deal with these issues – soon. If we don't begin to solve these core financial problems, they will certainly destroy our country.
Today, our national federal debt far exceeds $15 trillion. This alone is not a serious problem. The interest we pay on these debts is small – thanks to the trust of our creditors, who, for the moment, continue to believe America is a safe bet.
So… what's the problem? The main problem is the amount of debt we owe continues to increase at a faster and faster pace. This is exceptionally dangerous for two simple reasons. First, there's simple math. When numbers compound, the result is geometric expansion. And that's happening right now with our national debt because we continue to borrow money to pay the interest. And we have done so for about 40 years. Think about it this way: How big would your debts be today if you'd been using credit cards to pay your mortgage for the last several decades?
Even worse, our debts are compounding at an accelerating pace because we lack the political ability to limit the federal government's spending. Please understand… I'm not pointing the finger at any politician or either political party. I'm simply pointing out a fact: This year's $3.6 trillion federal budget is 20% larger than the entire 2008 budget.
And while our government has grown at a record pace, our economy hasn't. It has hardly grown at all. Thus, this will be the fourth year in a row we set a record for deficit spending. Never before in peacetime has our government borrowed this much money. And now, it's borrowing record amounts every year.
This combination of borrowing record amounts of money (during peacetime) and continuing to borrow the money we need to pay the interest is setting the stage for a massive increase in total federal debt levels. Why is this happening? Don't our leaders realize they can't continue on this path?
Well… the problem isn't so simple to fix. What we face isn't a $15 trillion problem. It's actually much, much bigger…
The $15.3 trillion we owe today is really only a minor down payment on promises the federal government made to its most important creditors – the American people. Not yet included in our debt totals are the $15 trillion shortfall in Social Security (thanks to the Democrats), the $20 trillion unfunded prescription drug benefit (thanks to the Republicans), or the $115 trillion unfunded Medicare liability (thanks to the Democrats and Republicans).
Most people ignore these looming liabilities because they obviously will never be paid. In fact, the federal government's total obligations today – including all future obligations – is more than $1 million per taxpayer. And that's if you assume all 112 million taxpayers really count. (They don't. Only about 50 million people in the U.S. pay any substantial amount of federal income taxes.)
But here's the funny part… While everyone seems ready to ignore these obligations, we've already begun to pay them. Our spending on Medicare and Social Security already greatly exceeds the $800 billion in payroll taxes we're collecting to pay these benefits. (Total spending on Social Security and Medicare last year was more than $1.5 trillion.) And that means our actual debts will continue to compound faster and faster every year, assuming nothing is done to curtail these benefits.
I want to make sure you understand this fact: It doesn't matter how much (or how little) Congress chooses to cut its discretionary budget. The promises we've already made to Americans in the form of Social Security and Medicare guarantee that our debts will continue to compound faster and faster, every year. How do I know?
Once again… let's return to basic math. Right now, we're spending (at the federal level) $2.4 trillion per year on transfer payments and interest on our national debt. That doesn't include any of the other functions of the government – nothing else. Meanwhile, we are only collecting $2.3 trillion a year in income, payroll, and corporate taxes.
Let me make sure you understand this: Even if we cut every other government program – including the entire military budget – the federal revenue collected still wouldn't be enough to merely cover the costs of our direct transfer payments. Not even close. And every year, these payments will automatically grow.
Here's another way to look at the same basic numbers, but on a macro scale. Right now, total government spending in the U.S. equals $7 trillion per year. (That's federal, state, and local.) Total interest paid in the U.S. economy on all debts, public and private, equals $3.7 trillion. The size of our total economy is only $15 trillion. Thus, we are currently spending $10 trillion (out of $15 trillion) on our government and debt. This is unprecedented in all of American history. This financial structure is unsustainable – and extremely unstable, given our debt levels.
There's the bigger problem (yes, it gets worse). The political solution to our soaring deficits will most likely be higher taxes. Yes, technically that's a prediction… And I promised no predictions in this piece. But let's face it. You will never see the federal government make dramatic, meaningful cuts to its promised benefits – not when half the country pays no federal taxes and more than 40 million people are on food stamps. So it's not really a prediction – it's a political reality. Will higher taxes save us?
No. You cannot squeeze blood from a stone. The federal debt isn't the largest obligation we suffer under. Americans hold nearly $1 trillion in credit card debt. We hold nearly $1 trillion in student loans. Total personal debt in America is larger ($15.9 trillion) than all of the federal debt. In total – adding up all of our debts, public and private – Americans owe close to $700,000 per family. It is not possible to finance our federal government's spending via taxes because the American people are broke. Total debt levels in America are the highest – by far – of any developed nation.
Tax the rich, you say. Well, of course. But marginal rates in many places are already greater than 50%. Tax rates this high don't work… They actually reduce tax revenues as people move their economic activities elsewhere to avoid taxes… or even simply forgo working.
Don't forget, the very wealthy can simply leave. James Cameron – director of blockbuster movies Titanic and Avatar – recently did just that, buying a 2,500-acre farm in [New Zealand]. John Malone, chairman of Liberty Media, likewise told the Wall Street Journal that he bought a farm on the Canadian border specifically so that he could leave the country whenever he wanted. "We own 18 miles on the border, so we can cross. Anytime we want to, we can get away."
Think I'm exaggerating the risks of real capital flight from the U.S.? Well… let's look at the facts. According to the latest IRS report, the number of Americans renouncing their U.S. citizenship has increased ninefold since 2008.
How then will the government's spending be financed? Well, I promised no predictions. Not today. But I will remind you that since 2008, the Federal Reserve has expanded the monetary base from roughly $800 billion to nearly $3 trillion. That, again, is a fact. Feel free to draw your own conclusions about what the Federal Reserve is likely to do in the future if the U.S. Treasury is faced with a financial need that can't be met.
You may do whatever you'd like with [this essay]. Feel free to pass it around to your friends – or anyone else who may be interested in these ideas. Be prepared for lots of nonsense about making the rich pay their "fair share" and pie-in-the-sky projections about how the entitlement system could easily be reformed.
Saturday, February 11, 2012
WHY FACEBOOK WORKS, AND DEMOCRACY DOES NOT
Introduction by James Craig Green
Friday's article by Jeffrey Tucker of the Mises Institute summarizes my entire belief system which has evolved over the last three decades. Actually, it extends back several years earlier, to the mid-seventies, with my complete frustration and discontent with government, politics and the insanely destructive nature of their coercive law.
Listed below is the best article I have read in many, many years. It explains why government is so destructive because of its anti-freedom democratic process. As I have written extensively elsewhere, it also explains why government as we know it is unsustainable, non-representative and inherently destructive. I have made this point in several of my blog posts over the last year or so, including the following from May 2011:
PRIVATE PROPERTY PUBLIC PLUNDER
MARKETS WORK - GOVERNMENTS DON'T
WHO BENEFITS AND WHO PAYS FOR GOVERNMENT?
I wish I had written the article below, because it summarizes my entire belief system when it comes to government, politics, markets, and above all - FREEDOM - which all governments want to destroy.
James Craig Green
****************
WHY FACEBOOK WORKS, AND DEMOCRACY DOES NOT
Whiskey & Gunpowder
by Jeffrey Tucker
February 10, 2012
Auburn, Alabama, U.S.A.
This year, Facebook will reach 1 billion users -- or one-seventh of the human population. It has elicited more participation than any single government in the world other than India and China, and it will probably surpass them in a year or two. And whereas many people are fleeing their governments as they are able, more and more people are joining Facebook voluntarily.
What is the logic, the driving force, the agent of change?
Yes, the software works fine, and yes, the managers and owners have entrepreneurial minds. But the real secret to Facebook is its internal human gears -- the individual users -- which turn out to mirror the way society itself forms and develops.
The best way to see and understand this is to compare the workings of Facebook with the workings of the democratic political process. Watching Facebook's development has been fun, productive, fascinating, useful and progressive. The election season, in contrast, has been divisive, burdensome, wasteful, acrimonious and wholly confusing.
That's because Facebook and democracy work on entirely different principles.
Facebook is based on the principle of free association. You join or decline to join. You can have one friend or thousands. It is up to you. You share the information you want to share and keep other things from public view. You use the platform only to your advantage while declining to use it for some other purpose.
The contribution you make on Facebook extends from the things you know best: yourself, your interests, your activities, your ideas. The principle of individualism -- you are the best manager of your life -- is the gear that moves the machine. Just as no two people are alike, no two people have the same experience with the platform. All things are customized according to your interests and desires.
But of course, you are interested in others too, so you ask for a connection. If they agree, you link up and form something mutually satisfying. You choose to include and exclude, gradually forming your own unique community based on any selection criteria you want. The networks grow and grow from these principles of individualism and choice. It is a constantly evolving, cooperative process -- exactly the one that Hans-Hermann Hoppe describes as the basis of society itself.
Democratic elections seem to be about choice in some way, but it is a choice over who will rule the whole mob. It provides the same user experience for everyone, regardless of individual desire. You are forced into the system by virtue of having been born into it. Sure, you can choose to vote, but you can't choose whether to be ruled by the voting results.
In this democratic system, you are automatically given 220 million "friends" whether you like it or not. These fake "friends" are given to you because of a geographic boundary drawn by government leaders long ago. These "friends" are posting on your wall constantly. Your news feed is relentless series of demands. You cannot delete their posts or mark them as spam. Revenue is not extracted from advertising but collected as you use the system.
Nothing is truly voluntary in an election. You are bound by the results regardless. This creates absurdities. This is incredibly apparent in the Republican nominating process. If people under 30 prevailed, Ron Paul would win. If religious families with several kids prevailed, Rick Santorum would win. If chamber of commerce members prevailed, Mitt Romney would be victor. It all comes down to demographics, but there can be only one winner under this system.
Therefore, an election must be a struggle between people, a fight, a wrangling around, a push to assert your will and overcome the interests and desires of others. In the end, we are assured that no matter the outcome, we should be happy because we all participated. The individual must give way to the collective.
We are told that this means that the system worked. But in what sense does it work? It only means that the well-organized minority prevailed over the diffused majority. This is about as peaceful as the kid's game "king of the mountain."
Facebook has nothing to do with this nonsense. Your communities are your own creation, an extension of your will and its harmony with the will of others. The communities grow based on the principle of mutual advantage. If you make a mistake, you can undisplay your friend's posts or you can unfriend him. This hurts feelings, sure, but it is not violent: It doesn't loot or kill.
Your friends in Facebook can be from anywhere. They "check in" and plot their journeys. Whether your friend lives in or moves to Beijing or Buenos Aires doesn't matter. Facebook makes possible what we might call geographically noncontiguous human associations. Language differences can be barriers to communication, but even they can be overcome.
Democracy is hyperbound by geography. You vote in an assigned spot. Your vote is assembled together with those of others in your county to produce a single result, and therefore, your actual wishes are instantly merged. They are merged again at another geographic level, and then at the state level and, finally, at the national level. By that time, your own preferences are vaporized.
Sometimes people get sick of Facebook. They suddenly find it tedious, childish, time wasting, even invasive. Fine. You can bail out. Go to your system preferences and turn off all notifications and take a sabbatical. People might complain, but it is your choice to be there or not. You can even delete your account entirely with no real downside. Then you can sign up again later if you so desire or join some other system of social networking.
Try doing that to democracy. You can't unsubscribe. You are automatically in for life, and not even changing your location or moving out of the country changes that. It is even extremely hard to delete your account by renouncing your citizenship. The leaders of the democracy will still hound you.
We can learn from Facebook and all other social networks that the Internet has brought us. These are more than websites; they are models of social organization that transcend old forms. Make the rest of life more like a social network and we will begin to see real progress in the course of civilization. Persist in the old model of forced democratic community and we will continue to see decline.
Regards,
Jeffrey Tucker
Executive editor, Laissez Faire Books
Friday's article by Jeffrey Tucker of the Mises Institute summarizes my entire belief system which has evolved over the last three decades. Actually, it extends back several years earlier, to the mid-seventies, with my complete frustration and discontent with government, politics and the insanely destructive nature of their coercive law.
Listed below is the best article I have read in many, many years. It explains why government is so destructive because of its anti-freedom democratic process. As I have written extensively elsewhere, it also explains why government as we know it is unsustainable, non-representative and inherently destructive. I have made this point in several of my blog posts over the last year or so, including the following from May 2011:
PRIVATE PROPERTY PUBLIC PLUNDER
MARKETS WORK - GOVERNMENTS DON'T
WHO BENEFITS AND WHO PAYS FOR GOVERNMENT?
I wish I had written the article below, because it summarizes my entire belief system when it comes to government, politics, markets, and above all - FREEDOM - which all governments want to destroy.
James Craig Green
****************
WHY FACEBOOK WORKS, AND DEMOCRACY DOES NOT
Whiskey & Gunpowder
by Jeffrey Tucker
February 10, 2012
Auburn, Alabama, U.S.A.
This year, Facebook will reach 1 billion users -- or one-seventh of the human population. It has elicited more participation than any single government in the world other than India and China, and it will probably surpass them in a year or two. And whereas many people are fleeing their governments as they are able, more and more people are joining Facebook voluntarily.
What is the logic, the driving force, the agent of change?
Yes, the software works fine, and yes, the managers and owners have entrepreneurial minds. But the real secret to Facebook is its internal human gears -- the individual users -- which turn out to mirror the way society itself forms and develops.
The best way to see and understand this is to compare the workings of Facebook with the workings of the democratic political process. Watching Facebook's development has been fun, productive, fascinating, useful and progressive. The election season, in contrast, has been divisive, burdensome, wasteful, acrimonious and wholly confusing.
That's because Facebook and democracy work on entirely different principles.
Facebook is based on the principle of free association. You join or decline to join. You can have one friend or thousands. It is up to you. You share the information you want to share and keep other things from public view. You use the platform only to your advantage while declining to use it for some other purpose.
The contribution you make on Facebook extends from the things you know best: yourself, your interests, your activities, your ideas. The principle of individualism -- you are the best manager of your life -- is the gear that moves the machine. Just as no two people are alike, no two people have the same experience with the platform. All things are customized according to your interests and desires.
But of course, you are interested in others too, so you ask for a connection. If they agree, you link up and form something mutually satisfying. You choose to include and exclude, gradually forming your own unique community based on any selection criteria you want. The networks grow and grow from these principles of individualism and choice. It is a constantly evolving, cooperative process -- exactly the one that Hans-Hermann Hoppe describes as the basis of society itself.
Democratic elections seem to be about choice in some way, but it is a choice over who will rule the whole mob. It provides the same user experience for everyone, regardless of individual desire. You are forced into the system by virtue of having been born into it. Sure, you can choose to vote, but you can't choose whether to be ruled by the voting results.
In this democratic system, you are automatically given 220 million "friends" whether you like it or not. These fake "friends" are given to you because of a geographic boundary drawn by government leaders long ago. These "friends" are posting on your wall constantly. Your news feed is relentless series of demands. You cannot delete their posts or mark them as spam. Revenue is not extracted from advertising but collected as you use the system.
Nothing is truly voluntary in an election. You are bound by the results regardless. This creates absurdities. This is incredibly apparent in the Republican nominating process. If people under 30 prevailed, Ron Paul would win. If religious families with several kids prevailed, Rick Santorum would win. If chamber of commerce members prevailed, Mitt Romney would be victor. It all comes down to demographics, but there can be only one winner under this system.
Therefore, an election must be a struggle between people, a fight, a wrangling around, a push to assert your will and overcome the interests and desires of others. In the end, we are assured that no matter the outcome, we should be happy because we all participated. The individual must give way to the collective.
We are told that this means that the system worked. But in what sense does it work? It only means that the well-organized minority prevailed over the diffused majority. This is about as peaceful as the kid's game "king of the mountain."
Facebook has nothing to do with this nonsense. Your communities are your own creation, an extension of your will and its harmony with the will of others. The communities grow based on the principle of mutual advantage. If you make a mistake, you can undisplay your friend's posts or you can unfriend him. This hurts feelings, sure, but it is not violent: It doesn't loot or kill.
Your friends in Facebook can be from anywhere. They "check in" and plot their journeys. Whether your friend lives in or moves to Beijing or Buenos Aires doesn't matter. Facebook makes possible what we might call geographically noncontiguous human associations. Language differences can be barriers to communication, but even they can be overcome.
Democracy is hyperbound by geography. You vote in an assigned spot. Your vote is assembled together with those of others in your county to produce a single result, and therefore, your actual wishes are instantly merged. They are merged again at another geographic level, and then at the state level and, finally, at the national level. By that time, your own preferences are vaporized.
Sometimes people get sick of Facebook. They suddenly find it tedious, childish, time wasting, even invasive. Fine. You can bail out. Go to your system preferences and turn off all notifications and take a sabbatical. People might complain, but it is your choice to be there or not. You can even delete your account entirely with no real downside. Then you can sign up again later if you so desire or join some other system of social networking.
Try doing that to democracy. You can't unsubscribe. You are automatically in for life, and not even changing your location or moving out of the country changes that. It is even extremely hard to delete your account by renouncing your citizenship. The leaders of the democracy will still hound you.
We can learn from Facebook and all other social networks that the Internet has brought us. These are more than websites; they are models of social organization that transcend old forms. Make the rest of life more like a social network and we will begin to see real progress in the course of civilization. Persist in the old model of forced democratic community and we will continue to see decline.
Regards,
Jeffrey Tucker
Executive editor, Laissez Faire Books
Monday, February 6, 2012
NINETY-NINE YEARS OF EVIL
By Jeffrey Tucker
Whiskey and Gunpowder Newsletter
Feb 3rd, 2012
Today is the 99th anniversary of the signing of the 16th Amendment to the Constitution. It enshrined into law an idea that stands in total contradiction to the driving force behind the American Revolution and the whole idea of freedom itself.
The great “old right” commentator Frank Chodorov once described the income tax as the root of all evil. His target was not the tax itself, but the principle behind it. Since its implementation in 1913, he wrote, “The government says to the citizen: ‘Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide.’”
He really does have a point. That’s evil. When Congress ratified the 16th Amendment on Feb. 3, 1913, there was a sense in which all private income in the U.S. was nationalized. What was not taxed from then on was a favor granted unto us, and continues to be so.
This is implied in the text of the amendment itself: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
Where are the limits? There weren’t any. There was some discussion about putting a limit on the tax, but it seemed unnecessary. Only 1% of the income earners would end up paying about 1% to the government. Everyone else was initially untouched. Who really cares that the rich have to pay a bit more, right? They can afford it.
This perspective totally misunderstand the true nature of government, which always wants more money and more power and will stop at nothing to get both. The 16th Amendment was more than a modern additive to an antique document. It was a new philosophy of the fiscal life of the entire country.
Today, the ruling elite no longer bother with things like amendments. But back in those days, it was different. The amendment was made necessary because of previous court decisions that stated what was once considered a bottom-line presumption of the free society: Government cannot tax personal property. What you make is your own. You get to keep the product of your labors. Government can tax sales, perhaps, or raise money through tariffs on goods coming in and out of the country. But your bank account is off-limits.
The amendment changed that idea. In the beginning, it applied to very few people. This was one reason it passed. It was pitched as a replacement tax, not a new money raiser. After all the havoc caused by the divisive tariffs of the 19th century, this sounded like a great deal to many people, particularly Southerners and Westerners fed up with paying such high prices for manufactured goods while seeing their trading relations with foreign consumers disrupted.
People who supported it — and they were not so much the left but the right-wing populists of the time — imagined that the tax would hit the robber baron class of industrialists in the North. And that it did. Their fortunes began to dwindle, and their confidence in their ability to amass and retain intergenerational fortunes began to wane.
We all know the stories of how the grandchildren of the Gilded Age tycoons squandered their family heritage in the 1920s and failed to carry on the tradition. Well, it is hardly surprising. The government put a timetable and limit on accumulation. Private families and individuals would no longer be permitted to exist except in subjugation to the taxing state. The kids left their private estates to live in the cities, put off marriage, stopped bothering with all that hearth and home stuff. Time horizons shortened, and the Jazz Age began.
Class warfare was part of the deal from the beginning. The income tax turned the social fabric of the country into a giant lifetime boat, with everyone arguing about who had to be thrown overboard so that others might live.
The demon in the beginning was the rich. That remained true until the 1930s, when FDR changed the deal. Suddenly, the income would be collected, but taxed in a different way. It would be taken from everyone, but a portion would be given back late in life as a permanent income stream. Thus was the payroll tax born. This tax today is far more significant than the income tax.
The class warfare unleashed 99 years ago continues today. One side wants to tax the rich. The other side finds it appalling that the percentage of people who pay no income tax has risen from 30% to nearly 50% in this period of economic downturn. Now we see the appalling spectacle of Republicans regarding this as a disgrace that must change. They have joined the political classes that seek advancement by hurting people.
It’s extremely strange that the payroll tax is rarely considered in this debate. The poor, the middle class and the rich are all being hammered by payroll taxes that fund failed programs that provide no security and few benefits at all.
It’s impossible to take seriously the claims that the income tax doesn’t harm wealth creation. When Congress wants to discourage something — smoking, imports, selling stocks or whatever — they know what to do: Tax it. Tax income, and on the margin, you discourage people from earning it.
Tax debates are always about “reform” — which always means a slight shift in who pays what, with an eye to raising ever more money for the government. A far better solution would be to forget the whole thing and return to the original idea of a free society: You get to keep what you earn or inherent. That means nothing short of abolishing the great mistake of 1913. Forget the flat tax. The only just solution is no tax on incomes ever.
But let’s say that one day we actually become safe from the income tax collectors and something like blessed peace arrives. There is still another problem that emerged in 1913. Congress created the Federal Reserve, which eventually developed the power to create — on its own — all the money that government would ever need, even without taxing.
For the practical running of the affairs of the state, the Fed is far worse than the income tax. It creates the more-insidious tax of inflation. In a strange way, it has made all the debates about taxation superfluous. Denying the government revenue does nothing to curb its appetites for our liberties and property. The Fed has managed to make it impossible to starve the beast.
Chodorov was correct about the evil of the income tax. Its passage signaled the beginning of a century of despotism. Our property is no longer safe. Our income is not our own. We are legally obligated to turn over whatever our masters say we owe them. You can fudge this point: None of this is compatible with the old liberal idea of freedom.
You doubt it? Listen to Thomas Jefferson from his inaugural address of 1801. What he said then remains true today:
“…what more is necessary to make us a happy and a prosperous people? Still one more thing, fellow citizens — a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement and shall not take from the mouth of labor the bread it has earned.”
Regards,
Jeffrey Tucker
Whiskey and Gunpowder Newsletter
Feb 3rd, 2012
Today is the 99th anniversary of the signing of the 16th Amendment to the Constitution. It enshrined into law an idea that stands in total contradiction to the driving force behind the American Revolution and the whole idea of freedom itself.
The great “old right” commentator Frank Chodorov once described the income tax as the root of all evil. His target was not the tax itself, but the principle behind it. Since its implementation in 1913, he wrote, “The government says to the citizen: ‘Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide.’”
He really does have a point. That’s evil. When Congress ratified the 16th Amendment on Feb. 3, 1913, there was a sense in which all private income in the U.S. was nationalized. What was not taxed from then on was a favor granted unto us, and continues to be so.
This is implied in the text of the amendment itself: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
Where are the limits? There weren’t any. There was some discussion about putting a limit on the tax, but it seemed unnecessary. Only 1% of the income earners would end up paying about 1% to the government. Everyone else was initially untouched. Who really cares that the rich have to pay a bit more, right? They can afford it.
This perspective totally misunderstand the true nature of government, which always wants more money and more power and will stop at nothing to get both. The 16th Amendment was more than a modern additive to an antique document. It was a new philosophy of the fiscal life of the entire country.
Today, the ruling elite no longer bother with things like amendments. But back in those days, it was different. The amendment was made necessary because of previous court decisions that stated what was once considered a bottom-line presumption of the free society: Government cannot tax personal property. What you make is your own. You get to keep the product of your labors. Government can tax sales, perhaps, or raise money through tariffs on goods coming in and out of the country. But your bank account is off-limits.
The amendment changed that idea. In the beginning, it applied to very few people. This was one reason it passed. It was pitched as a replacement tax, not a new money raiser. After all the havoc caused by the divisive tariffs of the 19th century, this sounded like a great deal to many people, particularly Southerners and Westerners fed up with paying such high prices for manufactured goods while seeing their trading relations with foreign consumers disrupted.
People who supported it — and they were not so much the left but the right-wing populists of the time — imagined that the tax would hit the robber baron class of industrialists in the North. And that it did. Their fortunes began to dwindle, and their confidence in their ability to amass and retain intergenerational fortunes began to wane.
We all know the stories of how the grandchildren of the Gilded Age tycoons squandered their family heritage in the 1920s and failed to carry on the tradition. Well, it is hardly surprising. The government put a timetable and limit on accumulation. Private families and individuals would no longer be permitted to exist except in subjugation to the taxing state. The kids left their private estates to live in the cities, put off marriage, stopped bothering with all that hearth and home stuff. Time horizons shortened, and the Jazz Age began.
Class warfare was part of the deal from the beginning. The income tax turned the social fabric of the country into a giant lifetime boat, with everyone arguing about who had to be thrown overboard so that others might live.
The demon in the beginning was the rich. That remained true until the 1930s, when FDR changed the deal. Suddenly, the income would be collected, but taxed in a different way. It would be taken from everyone, but a portion would be given back late in life as a permanent income stream. Thus was the payroll tax born. This tax today is far more significant than the income tax.
The class warfare unleashed 99 years ago continues today. One side wants to tax the rich. The other side finds it appalling that the percentage of people who pay no income tax has risen from 30% to nearly 50% in this period of economic downturn. Now we see the appalling spectacle of Republicans regarding this as a disgrace that must change. They have joined the political classes that seek advancement by hurting people.
It’s extremely strange that the payroll tax is rarely considered in this debate. The poor, the middle class and the rich are all being hammered by payroll taxes that fund failed programs that provide no security and few benefits at all.
It’s impossible to take seriously the claims that the income tax doesn’t harm wealth creation. When Congress wants to discourage something — smoking, imports, selling stocks or whatever — they know what to do: Tax it. Tax income, and on the margin, you discourage people from earning it.
Tax debates are always about “reform” — which always means a slight shift in who pays what, with an eye to raising ever more money for the government. A far better solution would be to forget the whole thing and return to the original idea of a free society: You get to keep what you earn or inherent. That means nothing short of abolishing the great mistake of 1913. Forget the flat tax. The only just solution is no tax on incomes ever.
But let’s say that one day we actually become safe from the income tax collectors and something like blessed peace arrives. There is still another problem that emerged in 1913. Congress created the Federal Reserve, which eventually developed the power to create — on its own — all the money that government would ever need, even without taxing.
For the practical running of the affairs of the state, the Fed is far worse than the income tax. It creates the more-insidious tax of inflation. In a strange way, it has made all the debates about taxation superfluous. Denying the government revenue does nothing to curb its appetites for our liberties and property. The Fed has managed to make it impossible to starve the beast.
Chodorov was correct about the evil of the income tax. Its passage signaled the beginning of a century of despotism. Our property is no longer safe. Our income is not our own. We are legally obligated to turn over whatever our masters say we owe them. You can fudge this point: None of this is compatible with the old liberal idea of freedom.
You doubt it? Listen to Thomas Jefferson from his inaugural address of 1801. What he said then remains true today:
“…what more is necessary to make us a happy and a prosperous people? Still one more thing, fellow citizens — a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement and shall not take from the mouth of labor the bread it has earned.”
Regards,
Jeffrey Tucker
Thursday, February 2, 2012
FREEDOM AND LIBERTY PROJECT
by James Craig Green
I recently discovered a great source of mostly short, educational videos that cover many aspects of market economics. I hope you enjoy the following videos I linked from the Learn Liberty Project at http://www.learnliberty.org/ which is produced by the Institute for Humane Studies. After a brief introductory video, I have arranged a dozen episodes into three groups - Economics and Social Organization, Principles of Markets and Freedom and the Tradeoffs and Balances that must be made to efficiently allocate scarce resources. If some or all of these strike a chord with you, please visit the website at the link above, which contains 145 videos on a variety of subjects.
Click on each video title below to watch each topic for the time listed, typically 2-4 minutes. After the video plays, click the "back" button at the upper left of the screen to return to this page for the next video. If another video has already started, you may have to click "back" more than once to return here.
INTRODUCTION:
Democracy, Tyranny and Liberty (2:36 min)
Aeon Scoble presents the case that democracy can be extremely dangerous, due to the "tyranny of the majority" and should therefore be limited by law. It is competitive market production that creates wealth; not democracy.
ECONOMICS AND SOCIAL COOPERATION
1 - Broken Window Fallacy (3:05 min)
Art Carden explains Frederic Bastiat's elegant broken window example to illustrate the fallacy of ignoring what is not seen (because it was prevented) to correct the false idea that property destruction can boost an economy. (Remember the Cash for Clunkers program in which the government destroyed perfectly good cars in exchange for printing money for new loans, producing a NET LOSS to the economy; not a gain?)
2 - Economics on One Foot (2:14 min)
In a takeoff on Henry Hazlitt's "Economics in One Lesson," Art Carden explains market incentives, efficient allocation of resources and achieving balances between supply and demand through price adjustments. Government regulation inhibits this process by destroying the communication between supply and demand.
3 - Social Cooperation: Why Thieves Hate Free Markets (3:03 min)
Aeon Skoble explains the efficient but uncommanded market processes that coordinate supply, demand and production when markets are free to adjust to multiple changes. One important aspect of this is that merchants rely on, and receive, cooperation from their competitors when it comes to mutually beneficial policies such as trading information on "customers" who steal.
4 - Tragedy of the Commons (3:20 min)
Sean Mulholland explains Garrett Hardin's 1968 Classic that shows how lack of property rights leads to overuse of resources. For example, grazing cattle on public property involves perverse incentives not commonly understood. None of the parties using the property have incentives to conserve pasture, since no one can prevent others from using it. Private property in pasture land allows owners to exclude others from the property so it can be managed for long term benefits, including the prevention of overgrazing.
PRINCIPLES OF MARKETS AND FREEDOM
5 - Adam Smith: The Invisible Hand (2:33 min)
James Otteson explains Adam Smith's "invisible hand" in which networks of producers cooperate through the magic of market prices, which allow flexible, productive communication between vast networks of people in a spontaneous ballet of creativity and coordination. This results from private property, which unintentionally maximizes social benefits.
6 - Subjective Value (3:51 min)
Don Boudreaux explains the role of individual differences in the maximization of value. Following the Austrian School of Economics, Professor Boudreaux demonstrates the advantages that markets have over planned economies such as those found in the former Soviet Union, Cuba and North Korea. He compares two T-shirts, each with an image of a famous historical character. Although the two products cost the same to produce, the one the sells best is the one whose image is admired by the most people.
7 - Unintended Consequences (4:33 min)
Don Boudreax discusses various unintended consequences that arise during any productive process, and explains how markets adjust prices to bring supply and demand back into balance after inevitable, unexpected, distortions. Unlike government agencies, individual players in a network of related processes act to resolve distortions, motivated by the self-directed creativity that incentives and freedom encourage.
8 - Free Trade vs. Protectionism (3:12 min)
Don Boudreaux compares the results of command economies, in which price communication between supply and demand are manipulated and controlled, with markets that allow for more efficient adjustments.
TRADEOFFS AND BALANCES
9 - Economic vs. Civil Liberties (2:40 min)
Aeon Skoble explains how both economic and civil liberties complement each other to maximize freedom and productive effort.
10 - The Story of Broke Response (3:46 min)
Art Carden criticizes contradictory views resulting from political bias in the area of government subsidies. Each subsidy benefits some special interest at the expense of others, always resulting in making the economy worse; not better. Both liberals and conservatives favor subsidies for their constitutents but oppose those to their political rivals without seeing the contradiction in their positions.
11 - What Motivated Adam Smith? (1:31 min)
James Otteson explains Adam Smith's concern for the poor as his motivation for writing The Wealth Of Nations.
12 - Are Entrepreneurs Modern Day Heroes? (2:07 min)
Law Professor Donna Matias explains how entrepreneurs are heroes, because they identify and fill unmet needs.
I recently discovered a great source of mostly short, educational videos that cover many aspects of market economics. I hope you enjoy the following videos I linked from the Learn Liberty Project at http://www.learnliberty.org/ which is produced by the Institute for Humane Studies. After a brief introductory video, I have arranged a dozen episodes into three groups - Economics and Social Organization, Principles of Markets and Freedom and the Tradeoffs and Balances that must be made to efficiently allocate scarce resources. If some or all of these strike a chord with you, please visit the website at the link above, which contains 145 videos on a variety of subjects.
Click on each video title below to watch each topic for the time listed, typically 2-4 minutes. After the video plays, click the "back" button at the upper left of the screen to return to this page for the next video. If another video has already started, you may have to click "back" more than once to return here.
INTRODUCTION:
Democracy, Tyranny and Liberty (2:36 min)
Aeon Scoble presents the case that democracy can be extremely dangerous, due to the "tyranny of the majority" and should therefore be limited by law. It is competitive market production that creates wealth; not democracy.
ECONOMICS AND SOCIAL COOPERATION
1 - Broken Window Fallacy (3:05 min)
Art Carden explains Frederic Bastiat's elegant broken window example to illustrate the fallacy of ignoring what is not seen (because it was prevented) to correct the false idea that property destruction can boost an economy. (Remember the Cash for Clunkers program in which the government destroyed perfectly good cars in exchange for printing money for new loans, producing a NET LOSS to the economy; not a gain?)
2 - Economics on One Foot (2:14 min)
In a takeoff on Henry Hazlitt's "Economics in One Lesson," Art Carden explains market incentives, efficient allocation of resources and achieving balances between supply and demand through price adjustments. Government regulation inhibits this process by destroying the communication between supply and demand.
3 - Social Cooperation: Why Thieves Hate Free Markets (3:03 min)
Aeon Skoble explains the efficient but uncommanded market processes that coordinate supply, demand and production when markets are free to adjust to multiple changes. One important aspect of this is that merchants rely on, and receive, cooperation from their competitors when it comes to mutually beneficial policies such as trading information on "customers" who steal.
4 - Tragedy of the Commons (3:20 min)
Sean Mulholland explains Garrett Hardin's 1968 Classic that shows how lack of property rights leads to overuse of resources. For example, grazing cattle on public property involves perverse incentives not commonly understood. None of the parties using the property have incentives to conserve pasture, since no one can prevent others from using it. Private property in pasture land allows owners to exclude others from the property so it can be managed for long term benefits, including the prevention of overgrazing.
PRINCIPLES OF MARKETS AND FREEDOM
5 - Adam Smith: The Invisible Hand (2:33 min)
James Otteson explains Adam Smith's "invisible hand" in which networks of producers cooperate through the magic of market prices, which allow flexible, productive communication between vast networks of people in a spontaneous ballet of creativity and coordination. This results from private property, which unintentionally maximizes social benefits.
6 - Subjective Value (3:51 min)
Don Boudreaux explains the role of individual differences in the maximization of value. Following the Austrian School of Economics, Professor Boudreaux demonstrates the advantages that markets have over planned economies such as those found in the former Soviet Union, Cuba and North Korea. He compares two T-shirts, each with an image of a famous historical character. Although the two products cost the same to produce, the one the sells best is the one whose image is admired by the most people.
7 - Unintended Consequences (4:33 min)
Don Boudreax discusses various unintended consequences that arise during any productive process, and explains how markets adjust prices to bring supply and demand back into balance after inevitable, unexpected, distortions. Unlike government agencies, individual players in a network of related processes act to resolve distortions, motivated by the self-directed creativity that incentives and freedom encourage.
8 - Free Trade vs. Protectionism (3:12 min)
Don Boudreaux compares the results of command economies, in which price communication between supply and demand are manipulated and controlled, with markets that allow for more efficient adjustments.
TRADEOFFS AND BALANCES
9 - Economic vs. Civil Liberties (2:40 min)
Aeon Skoble explains how both economic and civil liberties complement each other to maximize freedom and productive effort.
10 - The Story of Broke Response (3:46 min)
Art Carden criticizes contradictory views resulting from political bias in the area of government subsidies. Each subsidy benefits some special interest at the expense of others, always resulting in making the economy worse; not better. Both liberals and conservatives favor subsidies for their constitutents but oppose those to their political rivals without seeing the contradiction in their positions.
11 - What Motivated Adam Smith? (1:31 min)
James Otteson explains Adam Smith's concern for the poor as his motivation for writing The Wealth Of Nations.
12 - Are Entrepreneurs Modern Day Heroes? (2:07 min)
Law Professor Donna Matias explains how entrepreneurs are heroes, because they identify and fill unmet needs.
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