About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Saturday, October 29, 2011

Would You Rather Live In A Lifeboat Or On The Frontier?

I encourage every American to read the transcript of today's weekly radio address of President Obama. I'll paste it below my comments.

Mr. Obama begins his address by pointing out the growing disparity in income between the "wealthiest few" in America and the "average middle class family." He points out that this disparity is growing "during a period where the cost of everything from health care to college has skyrocketed." He goes on to point out that he has proposed a set of "common-sense jobs proposals" that will "boost the economy right away," that "will cut taxes for virtually every middle class family and small business in America." He lambastes Republicans for "not paying attention" to his jobs proposal. Because they have supported some of the proposals in the past, he implies these Republicans are merely callous and cold-hearted.

Nevermind the fact that Senate Democrats have time and again rejected the President's proposal. Clearly, in this case Republicans are at fault because they have rejected raising taxes. You see, according to the President, his jobs bill is "paid for by asking folks who are making more than a million dollars a year to contribute a little more in taxes," the very same "wealthiest few" whose income is growing by leaps and bounds! Obviously, these Republicans don't care as much about the middle class as the President does. Obviously, these Republicans are bought and paid for by the "wealthiest few."

I have discussed the President's proposed jobs bill previously. It is not the panacea the President purports it to be. I will not rehash the jobs bill here. I want to discuss a larger issue: the President's assumption that taxing the "wealthiest few" is a necessary and proper means of improving the lot of the middle class. The President said:

Now, in this country, we don’t begrudge anyone wealth or success — we encourage it. We celebrate it. But America is better off when everyone has had the chance to get ahead — not just those at the top of the income scale. The more Americans who prosper, the more America prospers.

Rebuilding an economy where everyone has the chance to succeed will take time.
The President's clear implication is that the "wealthiest few" have increased their income at the expense of everyone else. This makes sense of course only if one regards living in society and trading with his fellow citizens as a zero sum game. As I've said before, everything Mr. Obama says and does indicates he believes that the country is a lifeboat in which we're all rowing, struggling to get ahead. Egalitarianism makes perfect sense in such a lifeboat. Why should some do the bulk of the rowing while others enjoy the bulk of the rations? All are traveling in the same direction, at the same speed, why should a lucky few have advantage over the rest?

Is Mr. Obama's lifeboat view of this country realistic? I think not.

Despite the rules and regulations, taxes and subsidies that plague Americans, individuals in this country are still largely free to trade goods and services as they wish. Economics teaches us that in a free and voluntary trade both parties to the trade benefit. This is obviously true because if both parties did not benefit, one of the other party would refuse the trade. This truth contradicts the Obama lifeboat vision of American society. In order for that vision to be accurate, trades could not benefit each party. One party to a trade would have to benefit at the expense of the other.

But let's examine the matter of trading and benefitting from another angle. If the US economy were heavily regulated, and if lobbyists of the "wealthiest few" could persuade (or bribe) those who legislate the regulations to skew them in favor of the "wealthiest few," then trades affected by the regulations would not be free and voluntary. One party -- the influential party -- would benefit and the other party would not benefit, or would benefit to a far lesser extent.

Mr. Obama says middle class incomes are not increasing at the same pace as incomes of the "wealthiest few." He says that "the cost of everything from health care to college" is skyrocketing, causing a further burden on the middle class. Could it be that the disparity in the growth of middle class incomes and the incomes of the "wealthiest few" is due to government rules, regulations, taxes and subsidies that favor one group over the other? Could it be that the reason the cost of everything is rising because of the influence of the fat cats on the Federal Reserve and politicians who regulate the nation's banks?

I'm sure Mr. Obama doesn't believe so because his jobs proposal does not eliminate political meddling in the market place. On the contrary, his proposals amount to a half trillion dollars of new meddling! So, instead of solving the problem, Mr. Obama is further complicating it.

Now, it could be argued that Mr. Obama is simply righting wrongs of past administrations that favored the "wealthiest few" to the exclusion of the middle class. But only a man who views the "free" market as a lifeboat would attempt to solve such an inequity by taking from the favored party and giving what is taken to the disfavored party. A man who truly believed that trading parties both benefit in a market which is truly "free" would do everything possible to remove government intervention in the marketplace.

I view the free and thinking residents of this country not as captives in a lifeboat, captained by a fair and generous President, but as pioneers in the frontier where opportunities abound and prosperity is available to all who are willing to trade freely and voluntarily with their fellow citizens. The lifeboat analogy implies that the quantity of goods and services aboard the lifeboat are limited and finate. Hence, they must be shared and rationed. However, if individuals are set free to trade as they wish, all parties will benefit. The quantity of goods and services will increase to satisfy the growing appetites of all.

It cannot be denied that in such a frontier view of American society there will be an inevitable disparity in income between individuals. Some will be relatively rich; others, relatively poor. This disparity will arise naturally in the free, frontier market because some individuals are risk takers and others are not. Some are creative, ambitious and hard working. Others, not so much. The bottom line is that those who are exceptionally adept at satisfying the demands of market participants will be exceptionally patronized by those participants and will become exceptionally wealthy. However, in a frontier economy the exceptional wealth of some does not inhibit or detract from the wealth which can be earned by others because total wealth is not static, limited and finite as it is in the lifeboat economy. In fact, by expertly satisfying market demand, the "wealthiest few" in the market can make prosperity and success easier to obtain for the rest of the traders.

In today's weekend address President Obama said he wants an America where more Americans prosper. He desires an America where every American has "the chance to get ahead" and "the chance to succeed." He doesn't realize that his vision of America as a lifeboat economy does not allow for every American to get ahead and succeed. He doesn't realize that by heaping more rules, regulations, subsidies and taxes on an already heavily regulated and taxed market he will make his own goals impossible to achieve. To achieve his goals, he should do the exact opposite: eliminate rules, regulations, subsidies and taxes. Allow free men to trade their way to unlimited prosperity.

The critical question for Americans is: Do you share Obama's vision or mine? Would you rather live in society as a mere survivor in a lifeboat economy wherein prosperity is capped and fairly rationed? Or would you rather live as a free and resourceful pioneer in a frontier economy where prosperity is limited only by your own ambition, invention, talents and effort?

Below is the transcript of the Presidents entire radio address to the nation. Decide for yourself...

This week, a new economic report confirmed what most Americans already believe to be true: over the past three decades, the middle class has lost ground while the wealthiest few have become even wealthier. In fact, the average income for the top one percent of Americans has risen almost seven times faster than the income of the average middle class family. And this has happened during a period where the cost of everything from health care to college has skyrocketed.

Now, in this country, we don’t begrudge anyone wealth or success — we encourage it. We celebrate it. But America is better off when everyone has had the chance to get ahead — not just those at the top of the income scale. The more Americans who prosper, the more America prospers.

Rebuilding an economy where everyone has the chance to succeed will take time. Our economic problems were decades in the making, and they won’t be solved overnight. But there are steps we can take right now to put people back to work and restore some of the security that middle-class Americans have lost over the last few decades.

Right now, Congress can pass a set of common-sense jobs proposals that independent economists tell us will boost the economy right away. Proposals that will put more teachers, veterans, construction workers and first responders back on the job. Proposals that will cut taxes for virtually every middle class family and small business in America. These are the same kinds of proposals that both Democrats and Republicans have supported in the past. And they should stop playing politics and act on them now.

These jobs proposals are also paid for by asking folks who are making more than a million dollars a year to contribute a little more in taxes. These are the same folks who have seen their incomes go up so much, and I believe this is a contribution they’re willing to make. One survey found that nearly 7 in 10 millionaires are willing to step up and pay a little more in order to help the economy.

Unfortunately, Republicans in Congress aren’t paying attention. They’re not getting the message. Over and over, they have refused to even debate the same kind of jobs proposals that Republicans have supported in the past — proposals that today are supported, not just by Democrats, but by Independents and Republicans all across America. And yet, somehow, they found time this week to debate things like whether or not we should mint coins to celebrate the Baseball Hall of Fame. Meanwhile, they’re only scheduled to work three more weeks between now and the end of the year.
The truth is, we can no longer wait for Congress to do its job. The middle-class families who’ve been struggling for years are tired of waiting. They need help now. So where Congress won’t act, I will.

This week, we announced a new policy that will help families whose home values have fallen refinance their mortgages and save thousands of dollars. We’re making it easier for veterans to get jobs putting their skills to work in hospitals and community health centers. We reformed the student loan process so more young people can get out of debt faster. And we’re going to keep announcing more changes like these on a regular basis.

These steps will make a difference. But they won’t take the place of the bold action we need from Congress to get this economy moving again. That’s why I need all of you to make your voices heard. Tell Congress to stop playing politics and start taking action on jobs. If we want to rebuild an economy where every American has the chance to get ahead, we need every American to get involved. That’s how real change has always happened, and that’s how it’ll happen today.

Thank you.

1 comment:

skudrunner said...

A leader inspires people to greatness. Obama can't run on his record, can't inspire so he does what community leaders do best, create division. Instead of trying to lead the American public to achieve greatness he demeans those who have achieved greatness.

He speaks against the rich and the "evil" corporations while at the same time holding out his hand for their money. He leads the uninspired to be non-achievers and to expect all things given to them because it is not their fault they have nothing, it is the rich who have taken it from them.

Corporations are like animals. When threatened animals retreat and now with corporations when they are threatened, they retreat, save their money, don't hire because they don't know what is going to be taken from them tomorrow.

Buy votes by selling a car company to the union who in turn sells it to a foreign company and opens factories in foreign countries. Invest in a solar company that is only a sham but take the campaign contributions. After all of that complain that the other party does not want to create American jobs.

All of this happens because the media is committed to seeing another for years. The forth estate is running hard to downplay anything bad he has done. The problem they face is they can't find much good to report. Lets go after Cain because he isn't black enough or lets support the OWS crowd because, even though they haven't a clue, they are after the rich.