TGIF: Year-End Downers

One always hopes to end the year on a high note, but politically speaking, at least, that is difficult again in 2022. One searches in vain for advances in individual liberty and setbacks for power.

Sure, with the receding of the pandemic, life has returned to normal in many respects. But the ratchet effect that Robert Higgs identified still is the rule. After a rise in government power in response to a crisis (real or imagined), the drop-back is never complete because those who wield power have had their appetite whetted. The precedent itself presents a new threat. If the federal and state governments could so easily shut down virtually all of society (because of a virus that threatened mainly old and sick people), they could do so again. What's even more ominous is how so-called public-health officials and other government agents stigmatized dissenters, no matter how good their credentials, who might have stoked public opposition to the historic infringement of their liberty.

Other political fronts are no more encouraging. The central government is spending obscene amounts of money, so it obviously doesn't need a pandemic to get away with it. Congress has allocated $858 billion to the Pentagon, which is apparently more than the Biden administration asked for. Some $44 billion more is in the offing in support of Ukraine against Russia, bringing the year's total to over $100 billion. (Russia's war is indefensible, but the U.S. and Ukrainian governments are not blameless.)

This military spending has bipartisan support, prompting a two-part question: why do so many "responsible" people 1) think bipartisanship is dead and 2) wish for its resurrection? In an important way, politics is not polarized nearly enough! What we need is a more pronounced polarization over opposing principles: liberty and power.

Need I point out that all that spending has bad consequences? The government will borrow a goodly portion of what it spends, and the Federal Reserve will then create money to buy up that debt. The conjured-up money will join the previously created fiat money in chasing the existing supply of goods and services, pushing prices up even more. That's inflation, which already is eating our purchasing power and savings. Interest rates are prices, by the way, which means they will rise too now that lenders expect money to be worth less in the future. This increases the government's (and our) cost of borrowing. So interest on the debt will grow, requiring more borrowing, and so on. Bad outcomes breed more bad outcomes.

Imagine if the politicians and bureaucrats did not have our best interests at heart!

For the record, as Eric Boehm at Reason reports, "The government spent $501 billion in November but collected just $252 billion in revenue, meaning that about 50 cents of every dollar spent were borrowed."

But that's not all. "And now Congress is gearing up to spend even more," Boehm writes. That's because before year's end, Congress will send Biden a $1.7 trillion omnibus (translation: everything-including-the-kitchen-sink) spending bill. 

All of this comes as the current occupant of the White House insists that the budget deficit is declining. Boehm writes,

That was always misleading, as the falling deficit was entirely the result of one-time, emergency COVID-19 spending coming off the books. The underlying figures showed all along that the deficit situation was continuing to worsen, and that President Joe Biden's policies were adding trillions of dollars to the deficit over the long term.

November's spending and revenue figures should put an end to these silly games. We're only two months into the fiscal year, but the federal government is now on pace to run a deficit of about $1.9 trillion, which would be the largest nonpandemic budget deficit ever and a huge increase from the $1.38 trillion deficit in the fiscal year that ended on September 30.

Excuse me, $1.9 trillion? In nominal terms, that's bigger than Bill Clinton's final budget. Not that it would be preferable for the government to raise taxes, mind you. What is needed are massive spending cuts via the elimination of entire departments, programs, and missions. Let's start with the military by liquidating the empire.

Enough of that bit of depressing news. Let's turn to something else: the revelation that Twitter (and presumably all the social media) worked closely with the FBI, Department of Homeland Security, Pentagon, and other government agencies to monitor our posts and promote their own propaganda. First Amendment violations surely occurred. Government officials need not have commanded Twitter to suppress posts they did not like. They didn't even have to wink. They're government officials, after all.

It wasn't all about keeping information about Hunter Biden's laptop and dissenting views on COVID-19 away from the public, though. The Pentagon used Twitter to spread its propaganda about Russia, China, Iran, and other subjects through covert accounts. It identified many of these accounts for Twitter so they would be protected, and for years several Twitter accommodated the U.S. military's campaign to mislead the public.

Because Twitter's new chief, Elon Musk, made these disclosures possible, one might think this is a welcome high note on which to end the year. Maybe. On the other hand, Musk does not inspire confidence. His vacillations and murky definition of "free-speech absolutist" suggest he has no clear idea of how he sees the platform. The whole thing seems so half-baked.

I could mention Congress's failure to stop the war in Yemen (damn Bernie Sanders), the threatening rise of national conservatism, and the heavy yoke of wokeism, but I'll stop. Let's rest up to resume the battle. Happy Holidays!

My latest column for the American Institute for Economic Research is "To Really Cut Taxes, We Must Cut Government Spending."

Meanwhile on the Fiscal Front...

Here's what's going on: Congress and the government agencies incurred expenses with the intention of paying the bills with a credit card that they knew would be maxed out before payment was due unless the credit limit was raised. They could do this because of their fallback position: the threat of violence against the taxpayers. You and I can't engage in such behavior without paying a penalty.

Op-ed: Cutting Government Would Boost Economy

Budget sequestration is as modest a step toward cutting Leviathan as one can imagine. Further progress will be difficult as long as people believe that slashing the size of government conflicts with reviving the economy. Nothing could be further from the truth.

Read it here.

What Sequestration Amounts to

Source: Congressional Budget Office

HT: Cato Institute

Big Bad Sequestration

Latest scribblings

Op-ed: "The Minimum Wage Harms the Most Vulnerable"
TGIF: "What Support for the Minimum Wage Reveals"
Op-ed: "The American People Need Real Spending Cuts"

Budget Cutting, Washington-Style

HT: John Stossel

Op-Ed: A Cheer and a Half for the Tea Party.

Were it not for the Tea Party, the debt-ceiling controversy might never have taken place. Kudos on that count alone.

The rest of the op-ed, "A Cheer and a Half for the Tea Party," is here.

The Debt Controversy

Here are a couple of things I published yesterday on the debt controversy:

TGIF: Bondholders and Victims

Op-Ed: The Debt-Limit Crisis

TGIF: Had Enough Yet?

It’s hard to be optimistic that the mountebanks running the government will do anything sensible in the near future. Until there is a deep rethinking about government, the public will not accept the near-term drastic budget cutting required to head off a fiscal crisis, much less the longer-term structural steps needed to prevent a repetition of what we’ve been through. People will need to understand that while the wish for “social security” in an uncertain world is entirely reasonable, the route to it is not Medicare, Medicaid, and Social Security – which tether people to the political class — but freed markets and voluntary mutual aid.

Finally, the fiscal problem needs more than a fiscal solution. People would be less attracted to government succor if the barriers that raise the cost of initiative and independence – including self-employment taxes, medical care restrictions, occupational licensing, land restrictions, and protection of entrenched economic interests from competition – were removed, freeing individuals to find their most satisfying places in the market without having to kowtow to power and privilege.

The rest of TGIF is here.

Op-ed: Republican Phonies

It’s time for some honesty from the Republicans. Either give up the empire and the conceit of “American exceptionalism” or give up the rhetoric of fiscal responsibility. Stop playing the American people for fools.

Read the full op-ed here.

TGIF: Budget Mice

Getting started on the task of dramatically shrinking government’s spending — that is, control of resources — will require much bigger thinking. Entitlements and “security” (which is far more likely to create insecurity) must be on the chopping block.

If not they are not on the block, then the opposition is just performing a vacuous pantomime aimed at only one thing: procuring political power.

The of TGIF: "Budget Mice" is here.

Don't Hold Your Breath for the Spending Cuts

Republicans last night made it clear that there will be no spending cuts to write home about. Various GOP members of Congress said they would like an across-the-board cut in "discretionary spending." This is spending that is explicitly authorized each year, as opposed to so-called mandatory (entitlement) spending that is on automatic pilot and whose level depends on how many people become eligible for Social Security, Medicare, and food stamps.

Discretionary spending constitutes just one-third of the federal budget, so the Republican sights are fixed on only that much spending ... except that the party vows not to touch military and "homeland security" spending.

With so much spending off limits, the potential for cuts is not great.

Therefore I ask: Except for those expecting new patronage and consulting jobs, why is anyone excited about last night's election results?

Military Keynesians Are the Worst Keynesians of All

From the National Journal this week:

Two wars are not enough.

America's economic outlook is so grim, and political solutions are so utterly absent, that only another large-scale war might be enough to lift the nation out of chronic high unemployment and slow growth, two prominent economists, a conservative and a liberal, said today.

Nobelist Paul Krugman, a New York Times columnist, and Harvard's Martin Feldstein, the former chairman of President Reagan's Council of Economic Advisers, achieved an unnerving degree of consensus about the future during an economic forum in Washington. Their views were shared by a third economist, Jan Hatzius of Goldman Sachs, who said the only economic scenarios he could visualize were either "pretty bad" or "very bad." ...

Krugman and Feldstein, though often on opposite sides of the political fence on fiscal and tax policy, both appeared to share the view that political paralysis in Washington has rendered the necessary fiscal and monetary stimulus out of the question. Only a high-impact "exogenous" shock like a major war -- something similar to what Krugman called the "coordinated fiscal expansion known as World War II" -- would be enough to break the cycle. "I don't think we're about to launch a war against anybody," Feldstein said with tongue-in-cheek regret at the left-leaning forum, "America's Fiscal Choices," sponsored by four think tanks. "But Paul is right. That was the fiscal move that got us out" of the last downturn comparable to this one, the Great Depression.

Krugman is the leading Progressive Keynesian, Feldstein the leading conservative Keynesian. (That is not a contradiction in terms. See my article on the subject.) What unites them? Military Keynesianism.

Both mistakenly think World War II ended the Great Depression, a claim soundly debunked by Robert Higgs. (See Art Carden's discussion.) How could the war have ended the Depression? The economy was mostly devoted to making things that would blow up and destroy other things -- including life. Living standards certainly did not rise during the war: The purchase of consumer goods was restricted through an elaborate rationing system. Government directed production. It owned the economy.

Economists point to improved wartime aggregates, such as GNP, investment, or employment. But who cares about statistical aggregates? They only shroud what's going on at ground level. Government spending is a component of GNP; so increases bore no necessary relationship to individual well-being. Ten million men were drafted into the military, so what did the improved unemployment rate have to do with consumer welfare? Besides, Higgs shows the statistics are suspect for a variety of reasons.

Economists often give reckless advice to governments. But when they declare that only a major war will lift the economy out of recession, we really need to start worrying. Military Keynesianism kills.

(See Steve Horwitz's recent column on the subject.)

Op-ed: Is Greece the Future of America?

It may be possible to look into America’s future. How? Watch what’s going on in Greece.

My latest op-ed is here.

Government Spending Is No Cure for Recession

Mario Rizzo debunks the claim that government spending is as good economically as private spending here. Definitely worth reading.

Mr. Obama, What About Tomorrow?

The Obama administration’s $275 billion bailout for mortgage lenders and troubled borrowers once again shows that “tomorrow-be-damned” thinking still rules the White House. President Obama has clearly dumped the Clinton administration’s theme song, “Don’t Stop Thinking about Tomorrow.” (Not that Clinton or his successor took the lyric to heart.)

The rest of this week's op-ed, "Mr. Obama, What about Tomorrow?" is at The Future of Freedom Foundation website.

The S-Word

So the S-word has surfaced in the presidential campaign. One candidate accuses the other candidate of being a socialist because he would raise taxes on the wealthy while "cutting taxes" for, among others, workers who pay no income taxes. The accused laughs it off, saying next he'll be called a communist for sharing his toys in kindergarten. (Of course, then he was sharing his own toys.) Meanwhile, the first candidate -- the one hurling around the "socialism" charge -- says if elected he'll buy up shaky mortgages and send checks to people who pay no income taxes so they can get medical insurance. I'm beginning to understand how Alice felt.

The rest of this week's TGIF, "The S-Word," is at the Foundation for Economic Education website.

Our Enemy the State

Don Boudreaux at Cafe Hayek reprints a priceless letter from today's Washington Post. I can't resist:

America's Red Ink

Sunday, December 24, 2006; B06

The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity's total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years.

If this announcement related to a private company, the news would have been on the front page of major newspapers. Unfortunately, such was not the case -- even though the entity is the U.S. government.

To put the figures in perspective, $50 trillion is $440,000 per American household and is more than nine times as much as the median household income.

The only way elected officials will be able to make the tough choices necessary to put our nation on a more prudent and sustainable long-term fiscal path is if opinion leaders state the facts and speak the truth to the American people.

The Government Accountability Office is working with the Concord Coalition, the Brookings Institution, the Heritage Foundation and others to help educate the public about the facts in a professional, nonpartisan way. We hope the media and other opinion leaders do their part to save the future for our children and grandchildren.

DAVID M. WALKER

Comptroller General of the United States

Government Accountability Office

Washington