TGIF: The Chicanery Behind Inequality Data

If self-described progressives decry anything more fiercely than poverty, it is income and wealth inequality. Some have even suggested that they would prefer low-income equality to inequality, regardless of how affluent the lowest level was. What counts is the gap.

The terms poor and low-income are relative, of course. We'd be better off talking about the poorer and lower-income. Also, it's better to be poor in America than anywhere else if we factor in immeasurables such as good prospects. However, some people don't understand the point or perhaps don't want to understand it. Reasonable people ask, "How am I doing and how can I do better?" not, "How much less am I making than Jeff Bezos and Elon Musk [but not Taylor Swift or Juan Soto]?"

So let's talk about inequality—not in the legal and political sense but in terms of income and wealth. You can't go a day without hearing politicians and commentators complain about the top 1, 10, or 20 percent. Those complaints seem to be backed up by government statisticians and parts of the economics and sociology professions. Dissenters are rarely invited on television and podcasts. The impression given, to which compassionate laypeople will be vulnerable, is that America is riddled with extreme, even obscene (so Bernie Sanders says) inequality. Is it true?

Economists Phil Gramm and Donald Boudreaux make an overwhelming case against it in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Gross inequality is one of those myths. (Last week I discussed their chapter on poverty.)

"[T]he claim that income inequality in America is high and rising on a secular basis is almost universally accepted as true," Gramm and Boudreaux report. But: "Census numbers overstate the difference between the top and bottom quintile household incomes by over 300 percent." Can they back up that claim? Let's see.

The U.S. Census Bureau tells us that in 2017 the average income of households in the richest quintile (the top 20 percent) was 16.7 times greater than the average in the lowest quintile. No one can say, without other information, whether that number is appropriate or not. But is it accurate?

"The official Census data also show," Gramm and Boudreaux continue, "that income inequality has grown on a secular basis and, by 2017, was 22.9 percent higher than in 1947." That's not all. According to the Organization for Economic Co-operation and Development, the United States has the worst record on this count among the wealthy countries—and it's been getting worse.

Let's pause for a word about the morality of income and wealth inequality. Individuals contribute unequally to the production of wealth, which improves living standards even for those who contribute little or nothing. So why would anyone expect their incomes and wealth to be equal? Now back to our regularly scheduled program.

Gramm and Boudreaux disclose a puzzle about the government's numbers: "According to the official statistics of the nation’s two leading statistical agencies, the bottom 20 percent of American households had an average income of $13,258 in 2017 yet, in that same year, consumed $26,091 of goods and services."

This fact raises the obvious question of how the bottom 20 percent of households can consume twice their income. This extraordinary gap between the official measure of income and the official measure of consumption has grown more or less steadily since 1967, when funding for the War on Poverty began to ramp up."

That indeed is a puzzle. Could it be that the government agencies do not count everything that's relevant? Write Gramm and Boudreaux:

[T]he Census Bureau does not count two-thirds of all transfer payments to the recipients as income [88 percent for the lowest quintile], instead counting only $0.9 trillion of $2.8 trillion of government transfer payments. In addition, the Census Bureau neither adjusts household income for taxes paid nor counts tax credits as income received by the recipients, even though they receive checks from the Treasury. Census does not count food stamps as income, despite beneficiaries receiving debit cards to pay for groceries. Also not counted as income are benefits received from Medicaid, under which the government pays for each beneficiary’s health care. And also uncounted as income are the transfer payments dispensed through more than one hundred other federal, state, and local programs.

In other words, the government understates the incomes of the poorest, while overstating the incomes of the richest, ignoring that America has a generous welfare state (coercively paid for) and the most progressive income tax in the world. That strikes me as a rather shoddy way of estimating income inequality.

"Because the Census Bureau excludes $1.9 trillion of transfer payments as income received and fails to count $4.4 trillion of taxes paid as income lost to taxpayers," Gramm and Boudreaux write, "the Census measure of household income ignores some 40 percent of national income, which is either gained in transfer payments or lost in taxes."

The advocates of even more confiscation and distribution do not want to acknowledge what is really going on. Why not? The resulting distortion is scandalous. The authors show that instead of the officially estimated top-versus-bottom income ratio of 16.7 to 1, the real ratio is 4 to 1, a fourth of the often-lamented official estimate.

"But even these numbers for household income," Gramm and Boudreaux write, "overstate income inequality by failing to account for differences in the number of individuals living in the average-sized household of each income quintile." The average top-level household contains more people than the bottom-level household (3.10 versus 1.69). (See the book for details.)

What has happened to inequality over time, considering that transfer payments and taxes have increased? Gramm and Boudreaux report:

Over the seventy years from 1947 to 2017, after adjusting for inflation, the real value of all transfer payments grew 212.2 percent, faster than earned personal income had grown. Taxes grew less dramatically, rising only 7 percent faster than earned income over these seventy years. Income and payroll taxes rose 21 percent faster than income. Sales, excise, and property taxes rose 8.3 percent slower than income. The net result was that the US income-tax system became significantly more progressive in the seventy years leading up to the COVID-19 pandemic as an ever-larger share of the tax burden has been shifted from low- and middle-income households onto higher-income households, reducing income inequality. [Emphasis added.]

They also show that while the standard international method for measuring inequality, the Gini coefficient, indicates an increase, "much of this increase was due simply to two very significant changes made in the way the Census Bureau collects and records data." The Bureau acknowledges that those changes distort the picture, but it does not adjust accordingly.

In fact, "the [adjusted] Gini coefficient is actually slightly lower today than it was in 1947...," Gramm and Boudreaux write. "America’s Gini coefficient falls to a level roughly in the middle of the seven largest developed countries."

I began by denying the importance of income equality to human wellbeing. As Gramm and Boudreaux explain, more equal does not mean richer: "Major developed nations that have more equal distributions of income than the United States have significantly lower incomes overall....  [They] also have larger portions of their populations that are poor." Beware a fixation on equality. Better to agitate for the repeal of government obstacles to the creation of wealth, starting with taxes on savings and investment.

A closing note for envious readers who despise the 1 percent. Gramm and Boureaux write that according to a study titled “Income Inequality in the U.S.: Using Tax Data to Measure Long-term Trends” (2024), "when all transfer payments and taxes are counted, the share of national income going to the top 1 percent of American households is about the same as it was in the mid-1960s." [Emphasis added.]

Of course, there is no such thing as "national income," as Gramm and Boufdreaux would agree. That's a statistical category. In reality, there is only your, my, and their income.

TGIF: The Poverty of Poverty Data

"Poverty has no causes; prosperity has many. As history attests, poverty is humanity’s default condition.... But prosperity is not natural; it does not just happen."

—Phil Gramm and Donald J. Boudreaux

To hear some people tell it, America is in the grip of a vast conspiracy in which billionaires get richer, the middle class stagnates at best, and the poor get poorer. Poverty and inequality, by this account, are the shame of America. How can we let this go on!

Do not fall for it. Except for the part about billionaires (those who get rich by innovatively serving consumers), the story is hokum. The middle class shrinks because its members move up, and the "poor" get richer with mass production and lower prices. If a monolithic predatory ruling class has been making war on the rest of us, it has been bloody bad at it. Do you need proof (besides the abundant evidence in your home and out the window)? Check the data! This doesn't mean all is well with the American political system—far from it. Rather, it means that the market economy and the freedom it entails can take a licking and keep on ticking—better and better as years go by. Free the market (that's us) of government shackles, including Trump's tariffs, and the pace of wealth creation for all will quicken.

Phil Gramm and Donald J. Boudreaux document the real story in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Let's see what they have to say about poverty.

Admittedly, the officially released statistics are a downer. Data compiled by many prestigious-sounding agencies and organizations, Gramm and Boudreaux write, "show that a higher percentage of Americans live in poverty than in any other developed country in the world." If true, that might be a mark against a commercial society like the United States. (Then again, it might be the government's fault.) "All of these damning conclusions," the authors continue, "are buttressed by the US Census Bureau’s official measure of poverty, which shows that the poverty rate has not declined on a secular basis for more than fifty years."

That stinks, but is it so? Actually no.

Gramm and Boudreaux, both economists, show that from 1947 to 1967—before the Great Society got into gear—the U.S. poverty rate dropped by over 50 percent. So "It seems strange that ... when the War on Poverty began and its programs were funded at significant levels, beginning in 1967, the poverty rate then remained essentially unchanged for over a half-century."

That is strange, especially because "the average bottom-quintile household has seen the inflation-adjusted value of government transfer payments rise from $9,700 per year in 1967 to $45,400 in 2017...." (That excludes the administrative costs.)

"Obviously," they write, something is wrong here."

What could be wrong? How about this? The data leave out quite a few important things.

[T]he official Census measure of poverty fails to count 88 percent of all the benefits that poor American families receive from the government as part of their income." [Emphasis added.]

Eighty-eight percent!

The omitted benefits include "refundable tax credits where the beneficiary receives a check from the Treasury, debit cards loaded with food stamp allowances, and benefits from over a hundred other major programs, including Medicaid and housing subsidies in which the government simply pays bills that are incurred by the programs’ beneficiaries." (This curious practice of omitting benefits is left over from when government benefits were mainly in cash.)

How do things look when that data is restored? Gramm and Boudreaux write, "When all transfer payments, net of the costs of making those payments, are counted as income to the recipients of the transfers":

• The 2017 overall poverty rate drops from the official 12.3 percent to 2.5 percent;
• The child poverty rate drops from the official 17.5 percent to 3.1 percent; and
• The poverty rate for seniors drops from the official 9.2 percent to 1.1 percent.

Gramm and Boudreaux account for the small percentages remaining by people who "have fallen through the cracks" because of medical and other problems. In any society, no matter how rich, some people choose poorly. The authors cite other studies that support this adjusted overall poverty rate.

Moreover, Gramm and Boudreaux point out that "the number of people who are classified as poor changes dramatically over time."

Less than a quarter of families classified as being poor have been poor for two years or more. It should also be understood that twice as many families were poor for only some part of the year as those families who were poor the entire year. Experiences such as being laid off, suffering illness, or being employed in seasonal work contribute to people alternating between being on the poverty rolls and rising off of them."

The misleading official picture, Gramm and Boudreaux note, is also exposed by the fact that, according to a different Census Bureau study, "42 percent of poor households own their own homes, the average of which has three bedrooms, one and a half baths, a garage, and a porch or patio. Of the households considered to be poor, 88 percent have air conditioning, and the average poor American family lives in a home that is larger than that of the average middle-income family in France, Germany, and Britain."

And this is impressive: "Of all American households in 2017, 66.3 percent had real incomes, after transfers and taxes, that only the top 20 percent enjoyed in 1967." That hardly looks like stagnation.

Does this mean the welfare state works? Not if the goal is to foster independence in lower-income people. But the data do tell us that the welfare state does not need expanding, as the progressives claim.

For one thing, it discourages people from working and thus encourages dependence on the coerced taxpayers. Gramm and Boudreaux write,

The explosion in poverty benefits since 1967 caused the prepandemic employment rate among the bottom 20 percent of income earners to plummet from 67 percent to 36 percent, as well as the employment rate among the second quintile of earners to fall by almost 6 percent.... The growth in the welfare program has largely delinked the bottom 20 percent of income earners from the American economy....

It is not good when working people in the second lowest quintile have only slightly higher incomes than those who work little or not at all.

What's unseen is that without the welfare state, not only would the incentive not to work disappear, but the most innovative and productive people would have more money with which to make everyone more affluent.

TGIF: Immigration Control Threatens the Rule of Law

Immigration control strikes at the heart of the rule of law. That fact is badly unappreciated, even by some libertarians. If for no other reason, people who cherish individual liberty ought to be appalled by what the Trump administration is up to. Trump did not invent this unequivocal assault on a key protector of freedom—blame Congress for that—but never has the assault been so flagrant in America.

To see this, let's look at libertarian political philosopher Jacob T. Levy's 2018 article "The Rule of Law and Risk of Lawlessness." Levy wrote the article in response to the intensification of so-called border protection in the early days of the first Trump term, when children were separated from their parents and locked in cages. (Levy and Nathan Goodman recently discussed immigration and the rule of law in this Mercatus Center podcast.)

Levy begins his article by getting down to the basics of how freedom is protected in the classical-liberal tradition. This is a crucial point because it goes to the essence of the term limited government.

In public law and politics, the core meaning of the rule of law is this: that the executive branch of the government, in control of the violent agencies of state power and the tools of punishment, shall not use them lawlessly. It shall not imprison, execute, or otherwise punish except in accordance with prospective, promulgated law and trial conducted through fair and regular procedures. The writ of habeas corpus is the most famous instantiation of this value in the Anglo-American tradition, with medieval roots that early modern, protoliberal Whigs exaggerated into a full-blown centuries-old legal rule.

Liberty is not protected by magic or by abstractions. Protection requires concrete institutions and procedures to preclude arbitrary power. That is, it requires that politicians, judges, bureaucrats, and armed agents do and not do particular things. That's what we mean by the rule of law.

Citing Montesquieu's original and radical formulation of the classical-liberal approach to liberty-protecting governance, Levy notes that the rule of law importantly "included a separation of powers that distinguished judicial trial from executive punishment and an understanding of liberty as security from extrajudicial punishment.... [T]he key insight was that despotic states punish people even though they have broken no law, or never been properly convicted of it." A separation of powers implies checks and balances.

Montesquieu heavily influenced America's founders. Limitations and flawed implementation notwithstanding, we must credit the group of men who aimed at what John Adams called "a government of laws, not men." That had to be better than regimes of the past and future, such as those in Nazi Germany and Soviet Russia, in which the rule of law was not the objective. Despite some egregious exceptions, the rule of law has served us well. We would do well to understand that.

As Levy points out, critics miss the mark when they claim that rule-of-law procedures would be consistent even with bad law. Drawing on the theorists Lon Fuller and Judith Shklar, Levy responds, "This is not how terror states and totalitarian regimes function. They deliberately leave their whole populations at the mercy of the executive with its police, secret police, and paramilitary agencies."

In other words, "[W]hile the rule of law so conceived is not sufficient for a free and liberal society, it surely is necessary—and it goes some way toward preventing some of the greatest of political evils." That must not be forgotten. "Where people are constantly subject to the whim of the police and related agencies, they are not free. Even notionally very liberal laws do little good if state violence can be inflicted and bodies imprisoned without crimes or trials."

This brings us to immigration enforcement and a crucial choice. Levy sees "a real tension between the rule of law and what happens at or outside a country’s borders." (Leave war aside for this discussion.) Will the rule of law prevail or not?

Those borderline cases could be approached through the strategy of projecting the rule of law and liberal values out onto them as far as possible. But all too often the influence goes the other way: the lawlessness of the border undermines the rule of law and civil liberty within.

This is ominous not just for "undocumented" persons, but for citizens and legal residents too. "Even at the best of times," Levy writes, "border policing veers toward lawlessness: at the point of entry, the enforcement officer makes a basically unreviewable and processless decision to exclude by armed force. And these are not the best of times."

Those who want immigration ruthlessly controlled will argue that unauthorized border crossings and visa overstays foster lawlessness. Levy challenges that claim: "This circumstance is no more corrosive of the rule of law, however, than the fact that millions of American drivers speed on the highway every day without getting a ticket." Overstaying a visa is a civil violation; crossing a border without permission is a misdemeanor.

On the contrary, he continues, "The threat of lawlessness comes instead from a president" who wants his executive-branch agencies to be free to act unimpeded by judicial review of arrests (by masked agents), detentions (in perilous facilities), and deportations (including to third countries with horrible human-rights records). Levy reminds us that the immigration courts are part of the executive branch (Article II of the Constitution). They are within the independent judiciary (Article III). As Trump put it in 2018, "When somebody comes in, we must immediately, with no Judges or Court Cases, bring [sic] them back from where they came." (Emphasis added.) Levy writes:

Mass expulsions without judicial oversight or procedural protection would be not only a violation of international law and of the U.S. Constitution (which guarantees due process to persons, not only citizens). It would also be a grave threat to the liberty-as-security of all American residents. Trump proposed to let the lawlessness of border control seep into domestic American space.

This is no mere purple prose. And it is more than a slippery-slope argument. The area of the country within 100 miles of the borders and coasts is under the jurisdiction of Customs and Border Protection (CBP). That's where two-thirds of the residents of the United States live. What does that mean? CBP "holds expanded authority in that zone to conduct searches and seizures, create checkpoints, and ask for papers, in ways that would be illegal for ordinary police," Levy writes. "The only-partial rule of law at the border has already been projected inward."

Whither the Fourth and Fifth Amendments?

Do you think the current Immigration and Customs Enforcement (ICE) raids, detentions, and deportations have no effect on peaceful life in America? What about the abduction of people who have done nothing more than look for low-skilled work at a Home Depot parking lot, or who write or say things the president dislikes? "[I]n states and localities without the protection of sanctuary status," Levy writes, "residents of Latino neighborhoods often fear calling the police even to protect themselves against violence lest the police begin checking citizenship status." This reluctance extends to seeking medical care for their children and so on. Needless to say, this toxic legal environment also licenses unscrupulous private individuals to blackmail and exploit innocent people.

Libertarians compromise themselves and their honorable philosophy when they applaud or merely ignore how "the cruelty, arbitrariness, and militarization of border policing undermine the rule of law within—through the sacrifice of civil liberties within the hundred-mile zone, the authorization of a terrorizing internal police force outside the normal boundaries of law in ICE, the imprisonment of the innocent, and the threat of deportations without due process."

With few exceptions, Americans have not had to worry about the midnight knock on the door from the secret police or extrajudicial detention and expulsion. Without exaggeration, we can say that Trump's immigration policy moves us in that direction. The terror police state can happen here.

Congress, you have some laws to repeal.

Immigration Control and the Rule of Law

If you think that immigration control does not strike at the heart of the rule of law, you need to listen to this:

The Palestinians: The Libertarian Take

Even if the Palestinians are not a People, they nevertheless are and always have been people—that is, individual human beings with natural rights, namely, the rights to life, liberty, property, and the pursuit of happiness. Like everyone else.

But individuals can come to be regarded as a People as a result of a long, continuous way of life in a particular area. This is true of the Palestinians. They are both a People and people. See this.

TGIF: Socialist Confusion

Recent polls indicate that many people under 30 view socialism and communism favorably. (For Marx, those words were synonyms.) It seems that socialism and communism are "in." What's going on?

A self-described "democratic socialist," Zohran Mamdani, won the Democratic nomination in the New York City mayoralty primary. He promises to set up city-owned nonprofit grocery stores and plans other giveaways. He favors a $30 minimum wage. He also says billionaires should not exist. Will he set up camps?

Members of Congress, such as Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, also call themselves "democratic socialists," but it's unclear what they mean by the term. When Sanders was asked what he meant by socialism, he said it was the realization that "we're all in this together." That's helpful.

Sanders, Ocasio-Cortez, and their ilk do not call for expropriating and nationalizing the means of production. (I'm not sure about Mamdani.) Instead, they want an even bigger welfare state, for instance, "Medicare for all." That's bad—the welfare state makes people poorer—but it's not socialism. They further illustrate their confusion by claiming that the Scandinavian countries are socialist, which they're not. They score high on rankings of economic freedom. That would be a strange sort of socialism, no?

This tilt toward a murkily defined socialism and communism suggests cultural and ethical considerations, not social science, are at work. These days, it's edgy and romantic to declare oneself a socialist, especially if you wear a Che Guevara T-shirt. I suppose the word democratic is intended to make socialism, the record of which is horrendous, sound humane. It does no such thing, no more than the word national makes socialism sound sweet.

At any rate, as the Cato Institute's Michael Chapman wrote this year:

A recent survey by the Cato Institute and YouGov paints a troubling picture: 62 percent of Americans aged 18–29 say they hold a “favorable view” of socialism, and 34 percent say the same of communism. This is shocking given that communism is responsible for 100 million deaths worldwide and is rooted in socialism, the same philosophy that spawned both Mussolini’s fascism and Hitler’s National Socialism. To favor socialism is to flirt with tyranny.

That is stunning, considering that free-market capitalism, however imperfectly practiced —that is, profit-motivated global investment and trade—has increased per-capita wealth and lengthened life spans worldwide by an astonishing degree over the last few hundred years. What used to be called the "Third World" got wealthier to the extent it had economic dealings with the developed world. If young people don't understand what economist and historian Deirdre McCloskey calls "the Great Enrichment," what does that say about government-run education?

What do fans of liberty and prosperity do about this? We can become better promoters of capitalism and bourgeois culture, which have enabled so many people to achieve such high living standards. In 1947 economist Ludwig von Mises, writing in Planned Chaos, said, "Nothing is more unpopular today than the free market economy, i.e., capitalism." That was shortly after World War II. Despite a few bright spots, how little things have changed! (Trump's devotion to global trade restrictions at least has brought out latent free-trade impulses in some people.)

Mises noticed something that is still true today, despite differences in detail:

Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeois” pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.

How convenient to have such a scapegoat for your problems. Unhappy? Blame capitalism. Too few people will speak up for it.

Although capitalism is the economic system of modern Western civilization, [Mises wrote,] the policies of all Western nations are guided by utterly anti-capitalistic ideas. The aim of these interventionist policies is not to preserve capitalism, but to substitute a mixed economy for it. It is assumed that this mixed economy is neither capitalism nor socialism. It is described as a third system, as far from capitalism as it is from socialism. It is alleged that it stands midway between socialism and capitalism, retaining the advantages of both and avoiding the disadvantages inherent in each.

Mises rejected the equation of interventionism with socialism.

There are many supporters of interventionism who consider it the most appropriate method of realizing—step by step—full socialism. But there are also many interventionists who are not outright socialists; they aim at the establishment of the mixed economy as a permanent system of economic management. They endeavour to restrain, to regulate and to “improve” capitalism by government interference with business and by labour unionism.

For the market to work to the advantage of all people, it is not enough that property be owned in the strict legal sense. Legal title must be accompanied by real control. When private parties nominally own property while government authorities control property, that is fascism, even if people vote now and then. (Economist Charlotte Twight has coined the term participatory fascism.)

Mises made an important point about interventionism.

If within a society based on private ownership of the means of production some of these means [such as grocery stores] are owned and operated by the government or by municipalities, this still does not make for a mixed system which would combine socialism and private ownership. As long as only certain individual enterprises are publicly controlled, the characteristics of the market economy determining economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods and labour, and as sellers of goods and services, must fit into the mechanism of the market economy. They are subject to the law of the market; they have to strive after profits or, at least, to avoid losses.

Mamdani promises that his city stores will forgo profit and charge only wholesale prices. How then will they pay their expenses, such as wages? Mises addressed that issue:

When it is attempted to mitigate or to eliminate this dependence [on the market] by covering the losses of such enterprises with subsidies out of public funds, the only result is a shifting of this dependence somewhere else. This is because the means for the subsidies have to be raised somewhere. They may be raised by collecting taxes. But the burden of such taxes has its effects on the public, not on the government collecting the tax. [Emphasis added.]

Well, Mamdani may say, he'll tax the rich. It's not that simple, Mises noted:

It is the market, and not the revenue department, which decides upon whom the burden of the tax falls and how it affects production and consumption. The market and its inescapable law are supreme.

If you tax the rich, they will produce less and take more leisure. Or they will move—harming the nonrich, who will have fewer goods, services, and amenities. And more taxes to pay. Do politicians never learn?

But, bad as that is, it is still not socialism.

The system of the hampered market economy, or interventionism, differs from socialism by the very fact that it is still market economy. The authority seeks to influence the market by the intervention of its coercive power, but it does not want to eliminate the market altogether. It desires that production and consumption should develop along lines different from those prescribed by the unhindered market, and it wants to achieve its aim by injecting into the working of the market orders, commands and prohibitions for whose enforcement the police power and its apparatus of coercion and compulsion stand ready. [Emphasis added.]

Ah yes. Behind every progressive interventionist lurks the police force. We should be little comforted that our so-called democratic socialists are not true socialists, but only interventionists on steroids.

However, all the methods of interventionism are doomed to failure. This means: the interventionist measures must needs result in conditions which from the point of view of their own advocates are more unsatisfactory than the previous state of affairs they were designed to alter.

They might hope to produce abundance at low prices, but they will fail, as theory and history have consistently demonstrated.

Minimum wage rates, whether enforced by government decree or by labour union pressure and compulsion, are useless if they fix wage rates at the market level. But if they try to raise wage rates above the level which the unhampered labour market would have determined, they result in permanent unemployment of a great part of the potential labour force.

Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling....

No less than the socialists, the interventionists despise consensual profit-driven market activity as unsightly and exploitative. This aversion is as much aesthetic as moral, but on both counts it is wrong. That Adam Smith's "system of natural liberty" has improved the lot of mankind, and will continue to do so if left unmolested, is a beautiful thing. Self-made blindness explains why so many people do not appreciate it. Workers and consumers are not victims. They are beneficiaries. The world is increasingly divided into haves and have-a-bit-mores. The have-nots have been moving on up, especially if they work at it.

Mises reminded us that capitalism is not about profits only. It's also about losses, which shines a whole different light on the matter.

In the eyes of the interventionists the mere existence of profits is objectionable. They speak of profit without dealing with its corollary, loss. They do not comprehend that profit and loss are the instruments by means of which the consumers keep a tight rein on all entrepreneurial activities. It is profit and loss that make the consumers supreme in the direction of business. It is absurd to contrast production for profit and production for use. On the unhampered market a man can earn profits only by supplying the consumers in the best and cheapest way with the goods they want to use. Profit and loss withdraw the material factors of production from the hands of the inefficient and place them in the hands of the more efficient. It is their social function to make a man the more influential in the conduct of business the better he succeeds in producing commodities for which people scramble. The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities. What made some enterprises develop into “big business” was precisely their success in filling best the demand of the masses.

Who loses when interventionists get their way? Regular people do.

TGIF: By Right or Permission?

"Trump administration approves sale of CBS parent company Paramount after concessions" —NPR

If the deal struck by Paramount and President Donald Trump sickens you, your intuitions and perhaps your principles are in good working order. Make no mistake about what's at the root of such things: ominipotent government. You need its permission for all kinds of things—so much for individual rights.

As the NPR story states, the headline termination of The Late Show (which I've never watched) came "amid a flurry of steps taken by Paramount and Skydance Media—which has been seeking to acquire the media conglomerate—to appease the Trump administration. On Thursday, federal regulators announced they had voted to approve the deal valued at $8 billion." It goes on:

Paramount paid $16 million to resolve a lawsuit filed by Trump as a private individual against CBS and 60 Minutes. Skydance CEO David Ellison promised to eliminate all U.S.-based DEI programs at Paramount and to create a new ombudsman to field complaints of ideological bias in news coverage. Skydance has not denied Trump's assertions the network will run $20 million worth of public service announcements consistent with his ideological beliefs.

Federal Communications Commission Chair Brendan Carr cited Skydance's promises to make "significant changes in the once storied CBS broadcast network."

Hang on. Paramount/CBS accepted the series of conditions—which you may or may not like—demanded by the Trump administration as the price for having its sale to Skydance Media approved ... by the same Trump administration. It's the principle, not the conditions, that matters.

What's wrong with this picture? Here's a good first crack at the answer: that's not capitalism, although this happened in that supposedly quintessentially capitalist country, the United States. In a market economy, two companies are free to combine if that's what their owners want. The offensiveness of the "settlement" is even more egregious because it involves a media company—I've heard rumors that there's a First Amendment in the Constitution. But does the First Amendment apply? Thanks to Herbert Hoover, who was secretary of commerce in the 1920s, the airwaves are treated as public property, that is, government property, in the United States, giving the state broad power to set terms on their use.

A good deal of activity in America requires government permission. Sometimes a government agency, perhaps with a push from the president, imposes conditions before saying yes. Sometimes it just says no. A government that has the power to approve or veto mergers and acquisitions has the power to set the terms of business. Bye-bye capitalism, freedom, and steady prosperity. (The Great Recession was partly caused by the government's requiring banks to make mortgage loans to bad credit risks if they wanted mergers, etc., approved.) Needless to say, bureaucrats can't know what "the market" knows because knowledge is dispersed throughout society and is often unarticulated and even inarticulable. Any system that smacks of central planning is for losers.

Donald Trump did not start this, however much he enjoys exercising the frightfully expanded powers of his office. This goes back over a century. Think of the Interstate Commerce Act of 1887, Sherman Antitrust Act of 1890, Radio Act of 1912, Federal Reserve Act of 1913, Federal Trade Commission Act of 1914, Radio Act of 1927, Federal Communications Act of 1934, Banking Act of 1935, and the Civil Aeronautics Act of 1938. They all interfere with business conduct, which means individual conduct. Businesses are associations of theoretically free people. I'm sure that's not an exhaustive list. Individual states have their own regulatory agencies too. (The Civil Aerorautics Board and Interstate Commerce Commission were abolished in the 1980s and 1990s, respectively, after a weird fit of deregulation that started under Democratic President Jimmy Carter. Go figure.)

A society is free to the extent that one needs no meddling authority's green light to engage in, in Leonard Read's phrase, "anything that's peaceful," or in Robert Nozick's phrase, "capitalist acts between consenting adults." As Timothy Sandefur of the Goldwater Institute writes, "freedom means not having to ask permission." Contrast that with totalitarian states, such as National Socialist Germany and the Bolsheviks' international socialist Soviet Union. There, the rule was, more or less, that which is not prohibited is required. As F. A. Hayek pointed out in The Road to Serfdom, in those states, one was not even free to decide how to spend one's "free time."

By the rights-not-permissions standard, America fails to live up to its reputation as a free country. Of course, this can be exaggerated. Freedom has not (yet?) been abolished, which is why we are still wealthy and getting wealthier. Persevering, enterprising people work around political obstacles, and in a traditionally private-property system, the state can't keep tabs on everything. God bless the loopholes! Less-than-full capitalism goes a long way, but not far enough.

Still, freedom has been eroding from the high, however imperfect, level it had reached in late 19th-century America. The erosion, alas, has not ceased, despite some setbacks. Rule by permission rather than by right obviously suits The Maestro, The Sun King, that is, the current resident of 1600 Pennsylvania Avenue. If you doubt that those titles fit the man, check out his latest trade deals with South Korea and Japan, according to which those countries will reportedly invest billions of dollars in the United States in ways directed by Donald Trump. (That's what he says anyway; the foreign governments aren't quite so sure.) One commentator dubbed this "Republican socialism" in contrast to Democratic socialism. Well put.

Sandefur asks:

So how have we come to the point where today you need to get the government’s permission for a wide variety of the things that you spend your daily life doing? You need a permit to build a house, own a gun, get a job, to buy some things, run businesses, pay your employees—even freedom of speech now often comes with some sort of permit requirement. We have colleges and political conventions setting up “free speech zones,” which are basically cages where you’re allowed to express your opinion.

And let's not forget mergers and acquisitions. "The most offensive part of the permission system, across the board, is how it deters innovation," Sandefur writes. That's what bureaucracies do. (See his book The Permission Society: How the Ruling Class Turns Our Freedoms into Privileges and What We Can Do About It. Also, The Institute for Justice, heroically, has been devoted to helping ordinary people challenge the "permission society" in the courts.)

The socialists of all parties will defend such government power on the grounds that people should have a say in everything that affects them. That may sound good on first hearing, but a moment's scrutiny exposes it as a recipe for total state control. What does "affect" mean? Should you have a say in which religious institution, if any, your neighbors attend? Should you have a say in what restaurant opens down the street? Should you have a say in the wage contract your business-owning neighbor offers prospective employees? These things may "affect" you.

The principle that all should have a say in whatever affects them, of course, usually means that democratic, representative government should oversee those peaceful activities. But in reality, that "power" is a joke. One vote is a drop in the ocean. The idea that you have a real say by voting periodically for politicians is a delusion. Beware "democratic socialists." They are hawking snake oil.

There is, however, one sense in which you do have a say in what affects you. In the free market you control your spending. If you don't like a product or a company, you can do business with someone else. Hence, through your buying and abstention, you and your fellow consumers determine who controls scarce resources for the production of consumer and producer goods. That's real control. It puts democratic power to shame, and it is exactly the sort of control that the socialists of all parties despise.