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Communicating to the Left, and Beyond

May 29, 2009

Communicating to the Left, and Beyond

By Jon Lauro

1. The Big picture

What most from the left fail to understand about libertarians and some on the right is that smaller government types do not want the government to have an “energy” policy per se. We do not want the government controlling health care, jobs, the economy, or the bedroom. Most liberals when they hear this picture a future dystopia where babies are left homeless in the streets and medical care in unknown, while global warming has destroyed all but Mt. Everest. This what would happen if the government did not caress us from cradle to grave. I am here to tell you, this is not the future that is in store for us. Simple because the government does not control it does not mean it will turn to chaos. I would actually propose the opposite is true! Everything the government touches turn to crap. So then what would happen to healthcare, the energy crisis, or the economy, without government control? It is simple. Take out your cell phone. That is what will happen. You are probably reading this on your Personal Computer; something of that magnitude may arise as well. The services will get cheaper, innovations will arise, and most of the problems will be solved, not because some government told us to, but because we as free human beings without centralized restrictions unlocked our human spirit and created something special. I know most on the left will think what I am thinking of is some utopian future where the free market takes care of us all. The thing is, one only has to look at our history to see it already has. The free market has made this country the greatest country on earth. Government does not need to be there to give us insurance deals, or houses, or cars, or any service. Free enterprise will naturally take care of that. If there is a need, that need will be met.

2. Economic Theory, Keynes.

Currently in the Obama Administration most liberals (and conservatives in the Bush-era) would say that Obama is doing all the right things. He is helping homeowners, propping up whole sectors of the economy, and giving everyone a stimulus! The fact of the matter is that his Keynesian economic theories are out dated. They have proven to not work and are dragging us ever deeper into an economic apocalypse. What do I mean by Keynesian economic theory? Well this refers to the economist John Maynard Keynes. He proposed that government spending helps stimulate the economy and gets it back on track and proposed a need for a strong central bank (Federal Reserve). The problem with this is that there is only a certain amount of money out there being circulated. The more the government redistributes it the more heavily it goes against the free market. When the government distorts markets more mistakes are made further hurting the economy, not helping. This also ties into the Austrian Business Cycle that so perfectly describes how the economy is in shambles. The Federal Reserve wrongly forced interest rates low. This made people think there was more saving out there to build and start long-term projects for. When in fact there were no savings. When the realization came that all this over-production was happening and people did not want long-term projects and that they were spending their money now instead of in the future, the whole system collapsed. The phony economy came to an end. So what is the way out? More government spending to distort the market? Or let the bad decision be liquidated so we can clean the bad investments away and start anew. This will not happen. Most on the left and President Obama see the need to spend our way out of debt. An out-dated theory used by those who want to expand government and serve special interest.

3. George W. Bush.

As a Libertarian, I disagreed with President Bush on so many issues. I felt he was not a true fiscal conservative and proposed “abandoning the free market in order to save the free market”, which makes no sense what–so-ever. As criticism is being raised about President Obama, most liberals will fire back in saying “It takes time to un-do what Bush did!” Or that “what, are you saying you wanted a McCain instead? He wouldn’t have done any better!” The fact of the matter is that most others and I did not want either. We wanted a true leader who understood freedom and the U.S. Constitution. Not an agenda pushing big government type. (Yes, both Obama and McCain are in that category). Barack Obama could have done many things by now. So I would advise those on the Left to stop defending President Obama under the legacy that President Bush left. Turn the page and look at what Barack Obama is doing.

4. Change?

First and foremost, the Iraq war could have been ended. Instead Barack Obama seems to be adamant on spreading this war into Pakistan.  Our hawkish foreign policy is still the same, we are still spending way too much, and our liberties are still being ripped apart. President Obama still believes the Patriot Act is fine, and that we need to find a way “within” the law to hold people indefinitely. He is trying to change the law to fit his needs. This is no change. This is all happening under President Obama, not President Bush.

Common myths about he current economic crisis, and liberal economics

Did lack of regulation cause the economic collapse

Will or has the Obama Stimulus Plan work?

Did the New Deal help?

What is wrong with John Maynard Keynes view on economics?

Other essays by Jon Lauro

The New Deal, Did It Work?

End The Fed

Preferred websites for researching

www.lewrockwell.co

www.mises.org

www.campaignforliberty.com

www.cato.org

The New Deal – Did it work?

April 30, 2009

The New Deal

At this moment the government is working to try and end our current economic woes. Much of the governments solutions deriving from the Great Depressions’ New Deal, are debatable.  I think it would be great to search the records and find the effect the New Deal really had. If the New Deal helped, great; we are on the road to a steady recovery. If not, we need to change course. If the New Deal had no effect, perhaps it was just a waste of money? This question is crucial, and cutting through partisan bias will be hard, but like John Adams said, “Facts are stubborn things; and whatever may be our wishes, our inclination, or the dictates of our passions, they cannot alter the state of facts and evidence” (269).
When most people think of the New Deal, they think it was a single push to revive the economy. The New Deal was actually split into two New Deals. The first New Deal  in many ways was started by President Herbert Hoover. In June 1932 Hoover ordered the Reconstruction Finance Corporation (RFC) to give 300 million dollars in relief to banks (Hamby 14). Franklin Delano Roosevelt (FDR), came into office the same year promising to help everyday people. The first New Deal was aimed at immediate relief and lasted until 1934. The second New Deal was rung in with the passing of the Social Security Act in 1935. The goal of the second New Deal was to focus less on short term emergency relief and more on long term relief (Hamby 26). During both New Deals there were distinct functions the programs had. The New Deal programs were either for relief, recovery, or reform (Taylor 1). The two  major areas of concern during the whole New Deal were the extremely low prices of goods, and the high unemployment rate.
To battle the low prices FDR created the Agricultural Adjustment Act   (AAA) in 1933, funded by taxing food and clothing (Folsom, 125). The AAA stopped farmers from planting crops so the price of their crops could rise and thus equalize the low prices of goods. The problem with this is that millions of people were already starving and less production means less jobs feeding the unemployment statistic. According to the CATO Institutes “Tax & Budget” bulletin, the AAA plowed under a total of 10 million acres of crops, and slaughtered 6 million pigs.  This solution was also tried not only for farmers, but for the whole economy as well. So there after Congress passed the National Industrial Recovery Act (NIRA) in 1933 to force low production on businessmen; Those who did comply with the new reforms were fined and sometimes arrested. (Edwards 2)
Not only did the government try many ways to prop up prices, they also tried to prop up wages. NIRA created codes or standards for every business, making the cost of employment higher. The Social Security Act, and minimum wage rules retarded any employment boom that might have come naturally, hurting the cost of production and employment (Edwards 2).
With the interference government was taking into the economy stunting and even hurting unemployment, there were many things the government did to try and create jobs. The Civil Works Administration was created in 1933 and employed 4 million people with things like “Shovel ready” jobs. Along with this work program, the Tennessee Valley Authority was created to build dams in the Tennessee Valley area. In total the TVA had built 20 dams (Taylor 2). Jim Powell, Author of FDR’s Folly has a different view about the TVA,

“Receiving TVA-subsidized electricity gave Tennessee valley farmers an incentive to remain in agriculture . . . people left farming for manufacturing and     later for service industries at a slower rate than was the case in bordering states”     (149).

It did not stop there. To make way to build these dams, the government forced over 15,000 people out of their homes. Tenants who did not own land were not compensated (Powell 151).
On top of all of these efforts, the government and especially FDR was not fond of deficit financing. All the New Deal spending was supported by taxes. The taxes during the New Deal crippled businessman and slowed down any inevitable recovery. Prior to FDR becoming President, excise taxes (a tax on commodities manufactured in the United States) was only applied to cigars and cigarettes. During the 30’s FDR more than doubled excise taxes. As Burton Folsom describes in his book “New Deal or Raw Deal”, the new taxes really overlaid a wide array of commodities.

” . . . new excise taxes included duties on cars, movie tickets, radios,     phonographs,     telephone calls (long distance), telegrams, cosmetics, cameras,     bank checks, stock transfers, yachts, jewelry, furs, and a new one per cent     gallon     tax on gasoline” (122).

From 1929-1935 income tax revenue fell 50% while excise tax revenue doubled (Folsom 125). These excise taxes also contributed to the high unemployment rate because of the high taxes on production. Excise taxes are the worst kind of tax due to it’s ability to affect everyone, especially the middle and lower class. FDR was not afraid to tax the rich either. In 1935 FDR proposed a bill to tax the top incomes up to almost 80%. This was the highest that has ever been seen in American history (Folsom 128).  As the New Deal began to wind down, so did the taxes.
So what effect did all of this have on the overall economy? It seems it did not have much of an effect; Since the two main problems of the Great Depression were unemployment and low prices. The unemployment rate stayed on average about 17.2 percent up until 1939. (Dilorenzo 1). There even seemed to be a depression within the depression in 1937 when GDP fell. Overall it seems the spending is not what hurt the economy the most. The taxes and failed programs is what stagnated the economy over the decade.
If the New Deal did not help, how did the United States get out of the Great Depression? Some economists say that the entry into WWII and massive government spending ended the Great Depression. This theory seems to not make sense because those unemployed are still around, they just got conscripted into the army. This reflects with the unemployment rate falling in the early 1940’s. The stock market prices were also still below that of the years before 1939 (Folsom 246). Others say it ended in 1945 when the troops came home. During the time leading up to the war, FDR relieved the burden of taxes, and after he tragically died,  businessmen in general felt more comfortable with Truman in office ( Folsom 248).
So how does all of this relate to today’s economy? In many ways there are parallels. We have tried deficit spending, stimulus packages, and New Deal like programs to help our economy. Over a year of all this spending, and nothing has changed. This current crisis is no where near that of the Great Depression, but if we want to get on our feet any time soon it seems that we should abandon the myth that the New Deal helped. The government is trying to do all it can to get us out of this economic slump. Perhaps those in government should take a lesson from the likes of John Adams and our Founders; A time when doing the right thing was done rather than doing the easy thing.

– Jon Lauro

Amazing video – How much money are we spending?

April 10, 2009

Essay: End The Fed

March 31, 2009

End The Fed

In 1913 Congress passed the ‘Federal Reserve Act’, creating a quasi public-private institution were bankers, free of government scrutiny, regulate the money supply. The purpose of this institution is to smoothen out the boom and bust cycle of the economy. In the face of political pressure, the Federal Reserve promotes and creates the boom while trying to fight off the inevitable bust. This process is easy to do politically but ultimately destroys the economy by not letting the bad debt liquidate. At the end of the day, who wants to go through a recession? That question is easy to answer whilst the boom is in full steam. Legally speaking the Federal Reserve is unconstitutional; article one section eight of the Constitution explicitly says Congress has the authority to coin and regulate money. The moral hazard of The Federal Reserves role of being the lender of last resort, taking the risk out of economics, ultimately allows people to do to many risky things that end up causing a huge financial mess. All the Federal Reserve does is manipulate the market and it is time it should be abolished.

The Federal Reserve by law controls our monetary policy. Since the Federal Reserve is a government “bank” they “help” other banks by giving them loans. Since they play the role of government “bank” and also set their own loans’ interest rates. The Fed is not a real bank used by the public, they have no savings and have nothing to base a correct interest rate off of.

Typically private banks set their interest rates on the amount of savings that bank has. The more savings, the more capitol is there and more loans can be issued. This process would be fine and create economic growth. What the Fed does is artificially manipulates its interest rate. They have no savings and therefore have to create a formula to determine what the correct rate should be. This process is a lot like keeping the economy balanced. If you start going to fast you bring the interest rate up, to slow down and you lower the interest rate to speed up. The problem is you have no idea how much real capitol is out there. When the interest rate is low, the banks have an incentive in getting loans. The more loans the banks get the more they can therefore loan. If all of this loaning is going on without sufficient savings; there will not be enough savings or capitol to complete the projects started.  When you start the project it creates a temporary boom, but when you find out the project cannot be finished it falls through and the bust occurs. This is in essence a small-scale cycle of what the Fed does to the economy, a paradigm of false booms that creates the horrible busts.

Along with the role of being the government “bank” the Fed also is the “lender of last resort” This concept sounds really good, and sells well politically but you have to look at all the consequences of such a role. The Federal Deposit Insurance Corporation (FDIC) protects your deposits in case the bank goes under. This program is funded at the expense of the taxpayer and takes the risk of lending by the bank out of the equation. In this day and age more people spend more time shopping and researching for a T.V. than a bank. This is because everybody feels safe wherever he or she puts his or her money. The problem is that when you take the risk out, the banks do riskier things. It creates a market where banks care less about their balance sheets and deposits and just want to make as many loans as they can to make money. Risk is needed in a free economy, this ensures people act responsibly and those who do not, fail.

There are a large number of people out there who say the Fed is needed to play these roles in order to have stability. I have been studying economics for about a year now and the most important thing that I have learned is that the key to a prosperous economy is freedom, and the free allocation of capitol. Some fear the free market is too risky on it’s own and they often point to the great depression as the grand example of the failures of the free market. I fear that many people have a great misunderstanding of the great depression. Most have learned that Hoover was a very hands-off, Laissez-faire guy during a downturn in the late 1920’s. Due to his inaction the recession turned into a depression and Roosevelt came in and saved the day with all of his government programs. This story has actually been blurred throughout the years. Hoover actually imposed crippling tariffs, and increased government spending. According to “FDR’s Folloy: How Roosevelt And His New Deal Prolonged The Great Depression” by CATO senior fellow Jim Powell, Hoover actually setup a program called the Reconstruction Finance Corporation. This program would help rescue banks. These actions were the exact opposite of what the government did during the downturn before that followed WWI. Nobody has heard of the recession of 1920 because the government did nothing to help and the market fixed itself and returned to normal within a year or two. People do not have trust in the free market; they think it is some willy-nilly roller coaster ride. What they fail to see is that it is more like a complex ecosystem that always finds balance. There is a reaction for ever action.

Freedom and the Constitution go hand in hand. To uphold the free economy you need to strictly follow the Constitution. The constitutional argument, not surprisingly would have the least amount of potency considering most members of Congress do not even read the Constitution or uphold it correctly. The Constitution explicitly says that Congress shall regulate and coin money (Article 1; Section 8). People often think that since Congress voted to create the Fed that it is constitutional. That is like saying if the President told the Supreme Court “Hey guys, this war on terror is really tough, you are all commanders in chief now” it would be OK. When the Constitution is explicit about a power, that power should not be infringed upon. Congress does so much it is not supposed to do, at least do what the Constitution tells you.

You would think since Congress created it, Congress could regulate it. That is not the case either. The Fed is free from public scrutiny, cannot be audited, does not have to answer to Congress or the President, and is run by a small circle of Bankers. Some say the Fed is as “Federal” as “Federal Express”, yet as secret as the “CIA”. You would think that a group like this would at least be at the whim of the Congress.

As an alternative to this mess I simply ask the Congress to do what is constitutionally, and morally right. Congress should regulate and coin our money themselves, tie the dollar down to a commodity and stop this politically charged business cycle. Stop playing with the market, and start being responsible. The power to create and destroy wealth is the most powerful tool is the modern world; it ought to be given to the People as it was intended. It is time to ‘End The Fed’

– Jon Lauro

Some Videos Worth Watching:

March 21, 2009

Constitution Revolution

March 13, 2009

What If…

March 10, 2009

You MUST watch this video, it is a speech Ron Paul gave in Congress, articulated by an amazing video and music.