Survivalist’s Guide to ‘Obammunism’ & Beyond
by Ilana Mercer: The
Goods on Grain and the Big Agra-Government Alliance
lies are safe from his scrutiny," writes Lew Rockwell about
economist Thomas J. DiLorenzo’s latest book. What follows is my
conversation with professor DiLorenzo about Organized
Crime: The Unvarnished Truth About Government, and the
timeless economic truths to which it speaks.
MERCER: A microscopic decrease in the increase in government
spending has sent our overlords in DC into apoplexy. A cut in oink-sector
spending, they’re claiming, will destroy the chances of an economic
recovery. It is the exact opposite. You point this out in the chapter
on "The Myth of Government Job Creation": "Government
spending increases unemployment because it crowds out so much private
sector job creation" (p. 202). Explain with reference to the
zero-sum nature of government spending the cost of a government
job, and Bastiat’s "What-Is-Seen-and-What-Is-Not-Seen"
Every dollar that the government spends is a dollar that is not
spent (or saved) by individuals, families, businesses, and entrepreneurs.
Therefore, whenever government grows, private enterprise – the sole
source of real job creation – shrinks and unemployment there rises.
Each government job destroys several genuine, private sector jobs
because of all the bureaucracy and red tape. For example, government
may spend $200,000 to give one person a $30,000/year job. And government
"jobs" are usually involved in doing something that no
one but a few politicians ever voiced a preference for. Private
sector jobs, by contrast, cannot survive unless they are part of
an enterprise that succeeds in satisfying genuine consumer wants.
By contrast, Keynesians like Paul Krugman would have us believe
that prosperity is created whenever government takes money out of
our bank accounts (with the threat of forcing us to live in a cage
for years if we do not pay) and letting government bureaucrats squander
the money instead. Part of the Keynesian mantra is that such spending
could and should be on "anything" – it doesn’t matter,
as long as it is government that is doing the spending. The biggest
year of private sector economic growth in American economic history
was 1946 when the nation was in the middle of a two-thirds reduction
in federal government spending as the military was demobilized from
World War II. This proves that the Keyensians were always dead wrong,
but of course they and their political patrons ignore this reality.
You quip: "In Washingtonese, if one proposes a $100 billion spending
increase, and actual spending increases by 'only' $90 billion, they
call it a $10 billion budget cut." We're in the grip of exactly
this kind of a paradox. How is the "Washington Monument Syndrome"
playing out in its "sequesteria" version?
The "Washington Monument Syndrome" is an old bureaucratic
trick that is so named because the head of the National Park Service
closed down the Washington Monument – the most popular tourist attraction
in Washington, D.C. – in the 1960s after Congress refused to fully
fund his pie-in-the-sky spending wish list. Tourists from every
state, on their annual vacations, called their congressmen to complain,
forcing them to give the Park Service bureaucrat all the money he
wanted. State and local governments routinely use this sleazy gimmick
by immediately threatening to shut down police protection, garbage
collection, ambulance service, school buses, and whatever else would
impose the maximum pain on the public whenever there is talk of
fiscal responsibility. The Obama administration has taken this to
buffoonish extremes by threatening to close down airports, etc.,
were government spending to increase by about one percentage point
less than they wish over the next ten years. No one in Washington
has proposed cutting a single cent out of the federal budget despite
the fact that the surest route to economic recovery would be to
chop federal spending in half, and then in half again next year.
Like tax havens, tax loopholes are ethical and efficient. Your point
about efficiencies is especially good: "The time spent by citizens
trying to legally avoid taxes is in fact a good investment of their
time." Decode the Orwellian Doublespeak of phrases like, "simplifying
the tax laws " and "revenue neutrality."
Politicians and statist economists intentionally confuse the public
when they refer to proposed tax increases as "tax reform"
and to tax cuts as "wasteful" or "unnecessarily complicated."
I have long agreed with Milton Friedman’s dictum that the cause
of freedom and prosperity is always served by any tax cut, of any
kind, at any time. One has to realize that the purpose of government
is for those who run it to plunder those who do not. Depriving political
parasites of revenue is always and everywhere a good idea. The rhetoric
of "revenue neutrality" really means that under no circumstances
should government – unlike everyone else in society – ever, ever
spend a penny less next year than this year. Any tax reform should
therefore never, ever, end up putting more money in the pockets
of the public at the expense of the political parasite class.
Expect the "compassion of the IRS and the efficiency of the
post office" from Obama’s health care plan, you forewarn. But
as Obama’s army of harpies at CNN would argue, his politburo of
proctologists has involved itself in the insurance industry merely
to enhance markets. Or, to "bring down costs." Dispense
with this idiotic notion.
Government intervention always causes costs to rise and quality
to decline. This has always been true; it has especially been true
in the field of health care in places like Canada and Great Britain
where healthcare was nationalized long ago. There is no reason to
believe that the socialists in the Obama administration are better
at socialism than were the Soviets, the Eastern Europeans, the Chinese,
the Cuban government, or anyone else. The absence of a market feedback
mechanism based on profits and losses guarantees government failure.
Public choice economists refer to a "bureaucratic rule of two"
with regard to governmental provision of any type of service, based
on hundreds of empirical articles that show that, on average, a
government takeover of any function will double the per-unit cost
of providing the product or service.
You write: "At the heart of the U.S. government’s continued
takeover of the health care sector of the economy was a law passed
during the Obama administration that would eventually drive the
private health insurance industry out of business and transform
it into a de facto nationalized industry." Elaborate.
Since, as you repeatedly warn, the natural laws of economics cannot
be repealed, what will these health care exchanges achieve? How
will they invariably be funded? What will be the cost to business?
To the millions who’re losing coverage? Who will ultimately fork
out for the per-head fee imposed on medical plans?
The Obama version of health-care socialism forces insurance companies
to cover people with expensive diseases without charging them higher
rates to compensate for the additional risk. This effectively will
force the insurance companies to pay out billions in health care
costs, and then the Obammunists will impose price controls on the
industry because that’s what socialists always do once they intervene
in a market by forcing businesses to offer something for nothing,
thereby driving demand through the roof. The price controls will
cause massive bankruptcy, at which point the argument will be made
that what is needed is "single-payer healthcare," a euphemism
for health-care socialism or government-run monopoly. In the meantime,
they seem to be imposing hundreds of relatively small, hidden taxes
to come up with the revenue to keep the scheme going.
Obamacare Survival Guide is a best-seller on Amazon. The
market is producing survivalist literature to help Americans navigate
the treacherous shoals of this law. What does it tell you? Like
me, you must know plenty of Obama-heads (doctors too) who shrugged
off the idea that further centralizing health care a modest
healthcare expansion totaling $2 trillion, I believe would
cost them anything at all. As The Lancet recently confirmed,
in the UK’s National Health Service funding is inversely related
to patient outcomes. You speak of "inputs" and "outputs."
I cited a study by the late Milton Friedman entitled "Inputs
and Outputs in Medical Care," published by the Hoover Institution
some twenty years ago. In it the Nobel laureate economist showed
that, historically, as government became more and more involved
in health care by taking over hospitals and funding Medicare and
Medicaid, inputs – in terms of money spent – skyrocketed while "output"
in terms of patients served declined. He spoke of something called
"Gammon’s Law," named after a British physician named
Max Gammon, who noticed that with healthcare socialism in England,
increased "inputs" in the form of massive amounts of money
spent always seemed to disappear "as though through a black
hole" with little or nothing to show for it in terms of health
You touch briefly on the "private component of GDP." Free-market
thinkers get that the private economy alone produces wealth. But
no. GDP is a political construct, defined, tracked and manipulated
by the D.C. political machine. Unpack the GDP gambit for us, down
to its deceptive components.
Including government spending in the definition of GDP was a creation
of John Maynard Keynes, who defined it as C (Private Consumption)
+ I (Private Investment) + G (Government Purchases) + X-M (Net Exports).
In so doing, Keynesians concluded that the most prosperous year
in American economic history – 1946 – was actually a year of revival
of the Great Depression with a precipitous drop in economic activity
because of the huge decline in federal government spending after
World War II. Of course, this was NOT a year of depression but an
explosion of private investment, consumption, and job creation.
About that elusive economic recovery: My colleague Vox Day (who
sadly called it a day on WND) argued that, "The Great Depression
2.0 will be worse than its predecessor." Day chalked that up to
today’s unprecedented levels of debt, consumption and credit, private
and public. It’s a hunch. But I think you’ll disagree.
No one can predict something like this, especially since today’s
economy is vastly different from the 1930s. Capital markets are
much more sophisticated, for one thing, although government regulators
by the thousands do their best to destroy them – and with them what’s
left of American capitalism. Predictions like this always ignore
the resilience of entrepreneurs. As the Austrian Business Cycle
theory of Mises and Hayek contends, it is the boom period where
all the damage is done in the form of "malinvestment"
– in the latest bust this was mostly in real estate. During the
recession or depression is when entrepreneurs are forced to become
more efficient, more inventive, more creative – or else. This is
how the Japanese recovered from something much worse than a depression
– long years of war and the dropping of atomic bombs on their country
– in a little over a decade.
Best of Ilana Mercer