Archives July 2018

The most popular flavors of the national debate in America today: immigration, healthcare, the Federal debt, and the budding trade war. The American welfare state is the common denominator in each of these quandaries and is the political quagmire which will derail any viable solution for these hot button issues.

The modern American welfare state was effectively borne of the New Deal. It came into being with President Franklin Roosevelt’s words, “Necessitous men are not free men.” It was grand-sired by Woodrow Wilson’s intellectual rejection of the US Constitution. Thanks to a widely misconstrued understanding of the “general welfare” and “charity,” the welfare state has grown into the largest seen in human history. Welfare programs and mandatory interest payments are expected to absorb roughly 60% of total federal spending (excel) this year – more than doubling the estimated 2018 deficit (.pdf). Thus, it’s no wonder this economic millstone has translated into so many different problems.

Illegal immigration, as much as it invades the daily news cycle, is more a correlative symptom of the welfare state than a problem in and of itself. Welfare spending has grown in a series of plateaus. The first began in the 1930s with FDR’s New Deal, and the second coincided with LBJ’s Great Society in the 1960s.

Shortly before, during, and immediately following the New Deal era, there was a decrease in legitimate immigration (which is important as illegal immigration estimations tend to correlate with actual measured immigration numbers). This decrease likely due to the Johnson-Reed Act of 1924 coupled with the U.S. job market during and immediately after the Great Depression. If you also include a series of large, global wars, which were often fought with conscripted soldiers, the first two-thirds of the 20^th century would obviously not be the most popular time to move to the US.

Starting at about 1970, after the Great Society programs had taken hold and as the Vietnam War began to wind down, immigration (both legitimate and unauthorized) began to dramatically increase. There was a similar rate of growth in Medicaid vendor payments during this same period of time. Although concurrent growth does not necessitate correlation or causality, it seems that Medicaid spending and immigration at least correlate relative to incentives to immigrate among specifically the low-skilled. As it turns out, people immigrate to take advantage of better opportunities, including “free” money and public services.

Speaking of “free” public services, in the second entitlement plateau of the 1960s, LBJ’s Great Society policies included the guaranteed health insurance program – again referring to Medicaid. Healthcare costs subsequently began to skyrocket, more than doubling as a percentage of GDP by 2014 (excel). However, Medicaid creates a moral hazard, or the “lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance.”

Insurance is particularly affected by moral hazard, and government-backed insurance especially so. These perverse incentives have led to considerable waste and excess within healthcare markets, which were exacerbated further by the activities of insurance companies and the more recent Affordable Care Act. The welfare state strikes again! But this time it has negatively affected the average American’s ability to access healthcare. In other words, the welfare state doesn’t simply add spice to the daily news cycle, it might actually kill you.

So, logically, everyone has accepted the welfare state as the culprit, right? Unfortunately, this has not been the case. Even conservatives are joining the fray in hopes of expanding it further by restricting free trade through tariffs. As we have all been told, America is not getting a “fair deal” on the world market. U.S. manufacturing has “suffered greatly” at the hands of the Chinese and others who have taken advantage of the US through trade deals, confiscation of intellectual property, and monetary manipulation. All of this is seemingly despite an increase in American manufacturing productivity to the tune of approximately 80% since 1990.

Rather than seeking to address the problem, numerous allegedly “fiscally responsible” and “pro free-market” conservatives have begun to harrumph for tariffs – import taxes that increase the market price of particular goods within the American market. To be clear, these are increased prices that only Americans will pay to subsidize a small portion of American industrial companies like steel and aluminum manufacturers. This is what traditional “free-market” conservatives refer to as “corporate welfare.”

As each new story passes by, it is amazing so few people are addressing the very real problem – the American welfare state. I am hard pressed to find a major story in the news today which does not connect with this quite ubiquitous concern. Where are the intrepid, fiscally responsible conservatives? Where are the sharp, unyielding libertarians or economically sane moderate progressives? There is an objective truth here which certainly applies: all solutions fail which fail to address the problem.

To celebrate American Independence, as well as our new website, here is the reason for the season: the Declaration of Independence. Let’s pay particular attention to why the Founders thought this was the best course of action upon which to gamble their lives, fortunes, and sacred honor.

Spoiler Alert: Taxation was neither the first, nor the most consequential of those causes listed below.

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the Powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shown, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their Public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative Powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of new Appropriations of Lands.

He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary Powers.

He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our legislature.

He has affected to render the Military independent of and superior to the Civil Power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For quartering large bodies of armed troops among us:

For protecting them, by a mock Trial, from Punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us in many cases, of the benefits of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences:

For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:

For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with Power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us.

He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the Lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to complete the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince, whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free People.

Nor have We been wanting in attention to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the United States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good people of these Colonies, solemnly publish and de clare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the Protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

– Thanks to the Foundation for Economic Education for posting this important document every Independence Day.