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« This Isn't Socialism We Are Heading To, But It May Very Well Be the Other 20th Century "ism" | Main | Interview on Wal-Mart and Katrina Research »


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I, too, was just watching the president's address before Congress. It was the grab-bag of every liberal cliche -- including taxing the rich (more than $250,000 a year) while all the "real people" will not pay a "dime" more in taxes.

Other than promises about making sure that there will be no waste or unnecessary programs (which he did not really specify) the only cuts to close the deficit gap and fund all of his grand plans for health care, education, and "green" energy development was getting out of Iraq (a worthy cause in itself), but not the "solution" to the domestic spending crisis that first Bush and now Obama is greatly magnifying.

And, by the way, it is worth emphasizing that he also presumed that if not for the "helping hand" of government, industry and commerce would have never fully developed in America -- and the country's future is dependent upon the helping hand being more active.

It typified the what Thomas Sowell called in his book, "Conflict of Visions," the unconstrained vision that thinks that resources for "good things" are unlimited, that costs and trade-offs are not inherent in the human dilemma of decision-making (even as in passing he said that "prioritizing" would be necessary), and that good intentions and noble motives can assure a remaking of the world according to a grand conception of the beautiful and "socially just."

The "unseen" (as Steve emphasized); the inherent limited nature of human knowledge and ability in a complex world; the inevitable unintended consequences in all that men try to do; the arrogance of the "statesman" who would presume to run other peoples' lives (as Adam Smith pointed out); the implicit denial of liberty and choice to the private individual as government coops greater responsibilities; and the corrupting influence of political power that has access to the peoples' wealth through taxation, borrowing and printing money -- these were never mentioned in Obama's speech tonight.

It is a throwback to the worst and more bankrupt thinking of the 20th century's social engineers. It foretells a new twilight of liberty in the 21st century.

Precisely because the future cannot be predicted with certainty and there are the unintended consequences of human action, one can only hope that forces and factors will come into play that prevent the full implementation of the worst features of this glorification of the aggressive paternalistic state.

Richard Ebeling

you say "Maybe so, but he glosses over the fact that the money being spent came from those same taxpayers and would have been spent on other things, without the waste of the transfer, were it not for government's intervention. "

but this isn't true as a general proposition right? some kinds of redistribution CAN be efficiency enhancing, right?

I will do it, but I think it will fall on deaf ears and blind eyes because Obama's, and the Dem's prime concern is not fixing the problem. They are, as Rham Emanuel said, "not going to waste a crisis" to push through their socialist agenda. They will award the groups that elected them and to hell with the rest of us! They are sending money to state government to keep the bureaucrats and their taxpayer supported bloated pensions and health care on life support. Obama has empowered so many commissions and advisory groups to make it look like it's a consensus but he has already applied his solutions. As Obama's favorite President, Abe Lincoln once said "you can fool some of the people, some of the time. You can fool some the people all of the time. But you can't fool all of the people all of the time". This Jersey boy is no fool and is not impressed by the Chicago stammering fast talker!



But good economics doesn't make for good politics, Steve!

Understood Dave. The point is more the symbolism of the protest rather than thinking it will ultimately change minds. It might, of course. And it can't hurt. But the true audience for such forms of protest isn't the recipient, rather everyone else. A little free publicity for the Bastiat essay can do only good.

"Dear Constituent,

I read the essay you sent with great interest. Rest assured that your representatives work diligently with the CIA and Homeland Security to protect our great nation from both domestic and international threats, both seen and unseen.

Congressman X"

I sent emails based on this post to everyone ... Congressman, Senators, the President, etc. I, too, am skeptical of the value, but the time required is minimal and I am curious about any possible responses.

Yes, I fear that Congress members don't care at all-- but it could give them a real shake up to realize that we are aware of these economic truths!!

I have been pushing that essay a lot lately- I linked it on the Heritage blog some months ago and then started to notice that one of here links it nearly it every day in one of our posts!

It absolutely underlies all the Keynesian fallacies being spewed every day at present. It is the core issue. I was debating a liberal friend who kept regurgitating the Keynesian talking points, until I gave him a link to that essay and then he shut right up. It is a very powerful essay. So obvious when you read it, and so devastating to the regular political lines.

The coming inflation will soon put us all in the $250,000 bracket.

"It was the grab-bag of every liberal cliche -- including taxing the rich (more than $250,000 a year)"

Thanks for the post Steve. I agree those in office have totally stepped outside their domains of expertise (whatever that may be). There's got to be a more coordinated way to voice opinions aside from sparse emails from random voters. Anyone know of a ning or facebook group which get's lots of traction?

It's possible, however, to turn economics into good politics. I submit (http://www.pgpf.org/resources/Peterson_IcebergAd_Summit.pdf)
as an example.


so it is true that all government interventions are never efficiency enhancing? Even say, in developing countries? Aren't governments well advised to intervene, in say education and public works?

i'm not talking about the stimulus bill specifically. i'm only referring to a basic principle, so i commented that that statement SEEMS a bit strong.

I set up a Facebook event (you can search for it, its called "Send Bastiat's Seen and Unseen to Congress"). Its an open group, so join and invite everyone you know!


I didn't respond because Mike's response above would be more or less my own. With respect to education and public works, I don't see government doing either better than the private sector and civil society can. In fact, I'd argue that it's even more important to get those right in the developing world, so private/civil society solutions are particularly important there. You might take a look at the work of Pauline Dixon on education in India for some evidence: http://www.ncl.ac.uk/egwest/people/pauline.html


thanks! perhaps you could dedicate a separate blog posts in austrian POV (like dr dixon's) of development economics in the future...

i went 2 her website, and i noticed that her entries deal with the helpful nature of private participation in education.

however, no where did i see an article with the title that government should get out of education completely.

if there is an argument for 100% non-participation of govt in development, then please share it. thanks!

If it's a Democrat you're sending it to, I doubt he or she will read it. There may be hope that a Republican would read it.

This whole stimulus bill that was pushed through, and all of this new spending is ridicules. It does nothing to create long term jobs. These are all short term projects that they want to do. What are all of these people working on these projects going to do once everything is fixed? They will be jobless without any where to turn and the economy will go back down. If we are going to throw money around, lets throw some into creating jobs outside of the government. One job resource that could use a jolt of life is our manufacturing industry. I was reading articles over at americanboom.com about how much of this problem could have been avoided if we had not outsourced all of our manufacturing to China. We need to stop relying on the government to bail us out and start bailing each other out. If we support companies that employ Americans then maybe they will not move to China.

I have a lengthy question in regards to this quote: "Maybe so, but he glosses over the fact that the money being spent came from those same taxpayers and would have been spent on other things, without the waste of the transfer, were it not for government's intervention. Robbing Peter to "help" Paul only damages both in the process, and certainly stimulates no economic activity."

I love the posts on this site and am against the stimulus, but I'm not entirely sure I agree with this conclusion, at least not without more data. I also did not read the cited article, because frankly, I don't have the time, so let me clear that out of the way. I am a law student with only a basic understanding of economics, so you guys can probably help me out with this hypothetical:

Let's say Peter makes $1,000,000 a year, and once the Bush tax cuts expire, the tax rate on his income above $250,000 will go up by about 3% (~$22,500). Let's say Paul makes only $30,000 per year (note: these numbers have no significance, except to show that Paul is poor relative to Peter). So to use the example in the post above, we'll assume the government "steals" $2000 from Peter (via higher taxes) and gives it to Paul, who is just barely able to cover his basic living expenses (food, rent, transportation, etc.) with his yearly income. Thus, we have transferred $2000 from Peter to Paul, assuming no transaction costs of course.

My theory is that this transfer probably DOES stimulate the economy to some extent, at least in the short term. Peter, who is wealthy, probably would not spend every last drop of his disposable income, including that last $2000 that is now in Paul's pocket. By contrast, Paul, who is poor and barely able to cover his living expenses, seems much more likely to spend all of this $2000 immediately. So in the short term at least, it would seem that by stealing from Peter to give to Paul, we are more likely to have this $2000 go directly into the economy rather than letting Peter save it. This theory is supported by the reports that most wealthy individuals are currently engaging in saving, not investment.

Of course, I do recognize the problems with my theory. First, it's clear that the transaction costs are real. Second, Peter's future use of the money is obviously more likely to go to some economy-stimulating activity (investment) versus that of Paul, who probably just uses it to pay his living expenses (or to buy a plasma TV?). Third, Peter's $2000 in unused income is probably in a bank somewhere, and that the bank could be using it for short-term investment (though I should note the banks lately have been holding on to the money rather than investing it, which is part of the reason for the stimulus).

In simplest terms, my theory is that Peter is more likely to save the money than Paul. And by saving money, there is no boost to the economy, at least in the short term. By comparison, we have Paul, who can't afford to save the money, and will almost certainly engage in spending almost immediately. There must be some kind of empirical data proving or disproving this theory.

Thoughts? I look forward to the discussion.



You implicit answer your own question: even if the rich person is saving the money (putting in the bank), it adds to economic growth by being channeled to investors who then spend it on capital. It's largely a myth that banks aren't lending right now. The data on consumer and business lending indicate no great changes. The falloff in credit is almost all in the fancy Wall Street markets directly affected by the collapse of mortgage-backed securities. So whether the rich guy has it or the poor guy, it's still contributing to growth.

Moreover, to the degree that long-run growth depends on capital formation, savings is the *better* path to such growth. Redistribution that favors consumption makes the economy look good now, but ensures a lower growth path in the future.

Sent to Ted Kennedy, John Kerry, and Barney Frank. I even managed to hold my nose long enough to praise Frank's efforts on drug and gambling freedoms.

So, any bets on whether Bastiat might sway them?

I think that it is amazing that people barely listen to what Obama is saying. They just think that he does everything right. But the stimulus package that he passed coasted billions of dollars, and people don't get that the government is broke. And I agree that the people that applaud wildly don't understand what Obama is really saying. Also, with the money that he spent with th stimulus package he could have gave every person in the U.S 20,000 dollars, and that right there would have stimulated the economy!!!!

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