Why has the United States been so economically successful? Are the fabled “1%” masters or slaves? Why do redistributionist schemes always fail? It’s because of capitalism and creativity, and freedom is key to allowing that creativity to flower.
George Gilder offers some excellent thoughts in Unleash the Mind.
His article crystallizes a number of critical ideas that should be on the minds of everyone considering economic policy this election season.
Read and enjoy.
It is a wonderful thing that the current (presumed) vice presidential candidate is also the author of the only federal budget plan that even tries to address our enormous federal budget deficits. Paul Ryan’s plans have generated a lot of controversy. His selection as Mitt Romney’s running mate will put our federal deficits, and any plans offered to address them center stage in the upcoming election.
This is a very good thing.
As I pointed out in , money not wealth. It is a tool to measure wealth. Wealth is produced only when people produce things of value. Government cannot control costs, health care, or anything else without controlling people. Government can take from producers and distribute to those in need only so long as those producing continue to produce, and are willing to have their wealth redistributed.
In the popular view, Medicare is a medical “insurance” program, but it is not. It is an entitlement program loosely tied to a tax on wages. As Medicare attempts to fund without limit the needs of its beneficiaries, it drives rising costs, and repeatedly tries to squeeze health care providers in a futile effort to keep costs in check. The cost of Medicare in 2011 was $492 billion, and rising fast. Medicare payroll taxes in 2011 were only $192 billion.
The fact is that “medicare as we know it” is already doomed. The collision of 77 million retiring baby boomers with the doctors fleeing medicare guarantees its demise. Medicare has been in deficit since 2008. Its illusory “trust fund” will be spent in as little as 4 years – 2016. Those getting Medicare benefits have always relied on young workers to pay for their benefits, but the accounting gimmicks will soon end, and the costs will explode.
I want to emphasize the obvious. All the “insurance” in the world, and all the law, and all the “guarantees” will not provide any health care. Health care is only provided by doctors, and nurses and hospitals and drug companies. Right now, the costs of providing care are rising, and the rewards for providers are shrinking. Econ 101 tells you that you will soon have fewer doctors, nurses and hospitals.
Medicare is attempting the impossible – keep costs low, while providing unlimited, quality care to a growing demographic. It is the illusion of free care for the elderly. It is a lie.
Medicare as we know it is already dead. The conversation about whether and how to replace it is vital. As Paul Ryan says, the current Medicare program is unsustainable, but we have made promises as a nation to our seniors that we should keep.
Let the conversation begin.
Thomas Martin is an excellent writer. He wrote this article about Just and Unjust Laws.
I recently came upon a very cute poem. It was prompted by a speech given by Harry Truman in St Paul on November 3, 1949. President Truman’s speech sounds familiar, and was given before the federal government had acquired such a large role in our lives. That was 60 years, and many trillions of dollars of “welfare” spending ago:
We hold that our great natural resources should be protected and developed for the benefit of all our people, and not exploited for private greed.
We believe that old people and the disabled should have an assured income to keep them from being dependent on charity.
We believe that families should have protection against loss of income resulting from accident, illness, or unemployment.
We hold that our citizens should have decent housing at prices they can afford to pay.
(more of the speech can be found here: http://www.snopes.com/photos/politics/welfareode.asp )
The poem goes like this:
Ode to the Welfare State
Father, must I go to work?
No, my lacky son.
We’re living now on Easy Street
On dough from Washington.We’ve left it up to Uncle Sam,
So don’t get exercised.
Nobody has to give a damn-
We’ve all been subsidized.But if Sam treats us all so well
And feeds us milk and honey,
Please daddy, tell what the hell
He’s going to use for money.Don’t worry bub, there’s not a hitch
In this here noble plan-
He simply soaks the filthy rich
And helps the common man.But father, won’t there come a time
When they run out of cash
And we have left them not a dime
When things will go to smash?My faith in you is shrinking son,
You nosy little brat
You do too much damn thinking son,
To be a Democrat.
Thomas Sowell is a wonderful writer and great economist. His column Big Lies in Politics is another example of his thoughtful clarity.
The “left” frequently reminds us that there are disparities between rich and poor. This is presented as strictly bad, even though simple common sense argues otherwise. Mr Sowell provides logic and data explaining that even to the extent the “disparities” exist, they are not what they are appear to be.
In my youth, I was taught to admire and emulate the successful and the ambitious. Henry Ford, Thomas Edison, Howard Hughes and others were held up to me as great men to be studied and emulated. They were not simply rich. They were great men. They made huge contributions to society. They invented things. They built things. They transformed their industries, and our lives. They were successful in the broad sense of the word. They had flaws, to be sure, but theirs was an example to be followed.
In more recent years, a different ideology seems to have taken hold. We have different heroes. Today, our young people seem to be taught that the successful and the ambitious are the beneficiaries of unfair advantage. The traditional heroes are still studied, but what is taught is their errors and excesses. Businessmen are criticized, not admired. Today’s preferred heroes are those who spend the wealth that others earn. They are those who “fight the system” for environmental causes or agitate for “social justice”.
Somewhere in this shift we lost something else, too. We lost the honor accorded the average american worker. Whether a truck driver, teacher, doctor or dancer, standing on your own two feet and earning your own way was the mark of an adult, and a source of self-respect for a contributing citizen.
Today, respect for the independent, self-supporting member of society has been lost. Young people today are no longer taught to take pride in the simple virtue of working hard to support themselves and their families. Honor is given only to work that is “selfless” – usually political or social advocacy – never to the straightforward goal of advancing your own status and condition.
All this may have changed July 13th. President Obama made a speech.
I believe that President Obama did not intend to revitalize our respect for dormant ideals. I believe that he intended to criticize those who actually dared to take pride in their accomplishments. I believe that he wanted to indulge in the collective sneer that I see brandished by his compatriots whenever the great accomplishments of individuals or the private sector are discussed.
It was not to be.
President Obama uttered what are now the famous words.
If you’ve got a business — you didn’t build that. Somebody else made that happen.
My blog post – – and many, many others, like this one reveal the strength of the reaction. The last two weeks have been saturated with reaction.
The conversation has started, and it’s about time.
Mr Obama intended to remind us that the oversight and assistance of the government is the core of the american ideal, and essential to any progress or success.
Instead, he reawakened us to the fact that it is the decency and diligence of every individual citizen that makes us a great nation. It is the courage of the entrepreneur, who risks and sacrifices time and treasure to build our nation, one business at a time. It is the honor we give to each other for our accomplishments that inspires us to keep striving. Mr. Obama reminded us that his constant refrain that we cannot make it “on our own” is dead wrong.
Thank you, Mr. President for reminding us what we value, what is important, and why we are a people who have a government, not the other way around.
A central idea in modern economic policy debate is the Keynesian view that government must borrow and spend to “prime the pump” when the economy encounters a downturn. Keynesian economics has been dogma since the 1930s, and is the ideological lynchpin of almost all economic decision making in Washington today.
More recent economic research has cast doubt on whether Keynes’ theories were right. Some hold the almost heretical view that the efforts of the federal government during the 1930s actually worsened the depression. (read here and here)
Unfortunately, economics does not easily allow “experiments” but fortunately, we can compare the results of various economies in the past, and try to correlate national results with their governments’ economic policies.
Such a study can be found here, under “Austerity Works. It’s Time to Give It a Try“.
Logic and common sense have always suggested that borrowing your way to prosperity was foolish, but the supposed Keynesian success with the depression of the 1930s argued otherwise. Up until now, Keynesians have dominated in policy circles.
With recent academic work, new analyses of the depression of the 1930s, and empirical evidence from around the world, we may well find that logic and common sense were right after all.
I find the Mauldin Newsletter insightful and informative. He often comes up with fascinating tidbits of economic information. Knowing what is going on in the world is important.
Saturday’s newsletter highlighted the economic condition of France, which recently elected a socialist president. (facebook – in french) His election promises were simple. Less austerity. More stimulus. Deficits are not important. Regulate business. Tax the rich.
He won.
Mr. Hollande is now implementing his plan. The top tax rate on “the wealthy” is now going to 75% in France, in addition to an increased wealth tax. His administration is contacting businesses that are planning layoffs and telling them that they must negotiate any job cuts with the government before they can proceed. The retirement age is being lowered to 60 (from 62).
I predict that there will be flight of business, capital, and talent from France. History will tell us if I am right.
This is where Mr. Obama keeps suggesting the United States should go.
Watch France. We’ll see how well it works out.