Letting Tax Cuts Expire Will Not Balance the Budget
(This chart originally came out before the decision was made in Dec of 2010 to extend the tax cuts, but it is important now to look at this subject again since they will again expire at the end of 2012!!!)
Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute about the Laffer Curve. In a year and half (end of 2012) the Bush Tax Cuts will expire. However, is that wise? Not if you understand the Laffer Curve.
Some argue for allowing the 2001 and 2003 tax cuts to expire, including subjecting the middle class to the alternative minimum tax in order to balance the budget. Under this scenario, unaffordable deficit spending would still continue, and economic growth and job creation would suffer.
The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More
Authors
Emily GoffResearch Assistant
Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor
A balanced-budget amendment would deprive policymakers of the flexibility they need to address national security and economic emergencies.
A fair point. Statesmen should have the ability to “address national security and economic emergencies.” But the same day’s paperincluded this graphic on the growth of the national debt:
Does this look like the record of policymakers making sensible decisions, running surpluses in good year and deficits when they have to “address national security and economic emergencies”? Of course not. Once Keynesianism gave policymakers permission to run deficits, they spent with abandon year after year. And that’s why it makes sense to impose rules on them, even rules that leave less flexibility than would be ideal if you had ideal statesmen. Indeed, the debt ceiling itself should be that kind of rule, one that limits the amount of debt policymakers can run up. But it has obviously failed.
We’ve become so used to these stunning, incomprehensible, unfathomable levels of deficits and debt — and to the once-rare concept of trillions of dollars — that we forget how new all this debt is. In 1980, after 190 years of federal spending, the national debt was “only” $1 trillion. Now, just 30 years later, it’s sailing past $14 trillion.
Historian John Steele Gordon points out how unnecessary our situation is:
There have always been two reasons for adding to the national debt. One is to fight wars. The second is to counteract recessions. But while the national debt in 1982 was 35% of GDP, after a quarter century of nearly uninterrupted economic growth and the end of the Cold War the debt-to-GDP ratio has more than doubled.
It is hard to escape the idea that this happened only because Democrats and Republicans alike never said no to any significant interest group. Despite a genuine economic emergency, the stimulus bill is more about dispensing goodies to Democratic interest groups than stimulating the economy. Even Sen. Charles Schumer (D., N.Y.) — no deficit hawk when his party is in the majority — called it “porky.”
Annual federal spending rose by a trillion dollars when Republicans controlled the government from 2001 to 2007. It has risen another trillion during the Bush-Obama response to the financial crisis. So spending every year is now twice what it was when Bill Clinton left office. Republicans and Democrats alike should be able to find wasteful, extravagant, and unnecessary programs to cut back or eliminate. They could find some of them here in this report by Chris Edwards.
In the Kentucky Resolutions, Thomas Jefferson wrote, “In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.” Just so. When it becomes clear that Congress as a body cannot be trusted with the management of the public fisc, then bind them down with the chains of the Constitution, even — or especially — chains that deny them the flexibility they have heretofore abused.
There is considerable academic research on the growth-maximizing level of government spending. Based on a good bit of research, I’m fairly confident that Cato’s Richard Rahn was the first to popularize this concept, so we are going to make him famous (sort of like Art Laffer) in this new video explaining that there is a spending version of the Laffer Curve and that it shows how government is far too large and that this means less prosperity.
He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.
Francis Schaeffer observes in How Should We Then Live: The Rise And Decline Of Western Thought And Culturethat evolutionary theory in the form of humanistic thought has reduced everything to the level of a component in a great universal machine.
Of this outlook, Schaeffer writes, “In one form of reductionism, man is explained by reducing him to the smallest particles which make up his body. Man is seen as being only the molecule or the energy particle, more complex but not intrinsically different (164).”
To prove such an observation is more than Evangelical hyperbole, Schaeffer quotes Harvard University Chemistry Professor George Wald who said, “Four hundred years ago there was a collection of molecules named Shakespeare which produced Hamlet(164).”
In order to remain consistent, those holding to such a perspective have to concede such a masterpiece is not so much the result of creative insight as it is a fortuitous case of gas. And to any naturalist offended by my remarks, they cannot very well complain about them since by their own worldview, I had no control over what I wrote.
After I read that I had the opportunity three times in the 1990’s to correspond with Dr. George Wald of Harvard. In one of his letters he suggested that Atheism and Buddhism are the same thing. I tend to agree. Below is a futher discussion of Buddhism.
For centuries, Buddhism has been the dominant religion of the Eastern world. With the rise of the Asian population in the United States, Buddhism has had a tremendous impact on this country as well. Presently, there are an estimated 300 million Buddhists in the world and 500 thousand in the United States.{1} It remains the dominant religion in the state of Hawaii, and many prominent Americans have accepted this religion, including the former governor of California, Jerry Brown,{2} Tina Turner, Phil Jackson (coach of the Los Angeles Lakers), Richard Gere, and Steven Seagal. The Dalai Lama has become a prominent spiritual figure for many throughout the world.
The Origin of Buddhism
Buddhism began as an offspring of Hinduism in the country of India. The founder was Siddhartha Gautama. It is not easy to give an accurate historical account of the life of Gautama since no biography was recorded until five hundred years after his death. Today, much of his life story is clouded in myths and legends which arose after his death. Even the best historians of our day have several different–and even contradictory–accounts of Gautama’s life.
Siddhartha Gautama was born in approximately 560 B.C. in northern India. His father, Suddhodana, was the ruler over a district near the Himalayas which is today the country of Nepal. Suddhodana sheltered his son from the outside world and confined him to the palace where he surrounded Gautama with pleasures and wealth.
Despite his father’s efforts, however, Gautama one day saw the darker side of life on a trip he took outside the palace walls. He saw four things that forever changed his life: an old man, a sick man, a dead man, and an ascetic. Deeply distressed by the suffering he saw, he decided to leave the luxury of palace life and begin a quest to find the answer to the problem of pain and human suffering.
Gautama left his family and traveled the country seeking wisdom. He studied the Hindu scriptures under Brahmin priests, but became disillusioned with the teachings of Hinduism. He then devoted himself to a life of extreme asceticism in the jungle. He soon concluded, however, that asceticism did not lead to peace and self-realization but merely weakened the mind and body.
Gautama eventually turned to a life of meditation. While deep in meditation under a fig tree known as the Bohdi tree (meaning, “tree of wisdom”), Gautama experienced the highest degree of God-consciousness called nirvana. Gautama then became known as Buddha, the “enlightened one.” He believed he had found the answers to the questions of pain and suffering. His message now needed to be proclaimed to the whole world.
As he began his teaching ministry, he gained a quick audience with the people of India since many had become disillusioned with Hinduism. By the time of his death at age 80, Buddhism had become a major force in India.
Expansion and Development of Buddhism
Buddhism remained mostly in India for three centuries until King Ashoka, who ruled India from 274-232 B.C., converted to Buddhism. Ashoka sent missionaries throughout the world, and Buddhism spread to all of Asia.
Even before its expansion, two distinct branches developed, a conservative and a liberal school of thought. The conservative school is labeled Theravada, and it became the dominant form of Buddhism in Southeast Asia. Thus, it is also called Southern Buddhism. Southern Buddhism has remained closer to the original form of Buddhism. This school follows the Pali Canon of scripture, which, although written centuries after Gautamas death, contains the most accurate recording of his teachings.
The liberal school is Mahayana Buddhism, which traveled to the north into China, Japan, Korea, and Tibet, and is also called Northern Buddhism. As it spread north, it adopted and incorporated beliefs and practices from the local religions of the land. The two branches of Buddhism are so different they appear to be two different religions rather than two branches of the same tree. Here are a few differences.
Theravada Buddhism sees Buddha as a man. Gautama never claimed to be deity, but rather a “way shower.” Mahayana Buddhism, however, worships Buddha as a manifestation of the divine Buddha essence. Since Gautama, many other manifestations or bodhisattvas have appeared. An example is Tibetan Buddhism, which worships the spiritual leader the Dalai Lama as a bodhisattva.
Theravada adheres to the Pali Canon and Buddhas earliest teachings. Since Mahayana believes there have been many manifestations, this branch incorporates many other texts written by the bodhisattvas as part of their canon.
Theravada teaches that each person must attain salvation through their own effort, and this requires one to relinquish earthly desires and live a monastic life. Therefore, only those few who have chosen this lifestyle will attain nirvana. Mahayana teaches that salvation comes through the grace of the bodhisattvas and so many may attain salvation.
Divine beings do not have a place in Theravada. The primary focus is on the individual attaining enlightenment, and a divine being, or speculations of such, only hinders the process. Therefore, several sects of this branch are atheistic. Mahayana, on the other hand, has many diverse views of God since this branch is inclusive, and has adopted the beliefs and practices of various religions. Many schools are pantheistic in their worldview while others are animistic. Buddha is worshipped as a divine being. Some schools pay homage to a particular bodhisattva sent to their people. Other schools have a mixture of gods whom they worship. For example, Japanese Buddhism blended with Shintoism and includes worship of the Shinto gods with the teachings and worship of Buddha.
When speaking with a Buddhist, it is important to understand what branch of Buddhism they are talking about. The two branches are dramatically different. Even within Mahayana Buddhism, the sects can be as different as Theravada is to Mahayana.
The Way of Salvation
The main question Gautama, the founder of Buddhism, sought to answer was, “Why is there pain and suffering?” His belief in reincarnation (the belief that after death one returns to earthly life in a higher or lower form of life according to his good or bad deeds) prompted a second question that also needed to be answered: “How does one break this rebirth cycle?” The basic teachings of Buddhism, therefore, focus on what Gautama believed to be the answer to these questions. These basic tenets are found in the Four Noble Truths and in the Eight-fold Path. Let us begin with the Four Noble Truths.
The First Noble Truth is that there is pain and suffering in the world. Gautama realized that pain and suffering are omnipresent in all of nature and human life. To exist means to encounter suffering. Birth is painful and so is death. Sickness and old age are painful. Throughout life, all living things encounter suffering.
The Second Noble Truth relates to the cause of suffering. Gautama believed the root cause of suffering is desire. It is the craving for wealth, happiness, and other forms of selfish enjoyment which cause suffering. These cravings can never be satisfied for they are rooted in ignorance.
The Third Noble Truth is the end of all suffering. Suffering will cease when a person can rid himself of all desires.
The Fourth Noble Truth is the extinguishing of all desire by following the Eight-fold path. “The Eight-fold path is a system of therapy designed to develop habits which will release people from the restrictions caused by ignorance and craving.”{3}
Here are the eight steps in following the Eight-fold path. The first is the Right View. One must accept the Four Noble Truths. Step two is the Right Resolve. One must renounce all desires and any thoughts like lust, bitterness, and cruelty, and must harm no living creature. Step three is the Right Speech. One must speak only truth. There can be no lying, slander, or vain talk. Step four is the Right Behavior. One must abstain from sexual immorality, stealing, and all killing.
Step five is the Right Occupation. One must work in an occupation that benefits others and harms no one. Step six is the Right Effort. One must seek to eliminate any evil qualities within and prevent any new ones from arising. One should seek to attain good and moral qualities and develop those already possessed. Seek to grow in maturity and perfection until universal love is attained. Step seven is the Right Contemplation. One must be observant, contemplative, and free of desire and sorrow. The eighth is the Right Meditation. After freeing oneself of all desires and evil, a person must concentrate his efforts in meditation so that he can overcome any sensation of pleasure or pain and enter a state of transcending consciousness and attain a state of perfection. Buddhists believe that through self-effort one can attain the eternal state of nirvana.
In Buddhism, ones path to nirvana relies on the effort and discipline of the individual. By contrast, Jesus taught our goal is not a state of non-conscious being, but an eternal relationship with God. There is nothing one can do to earn a right relationship with God. Instead, we must receive His gift of grace, the sacrificial death of His Son, Jesus Christ and this restores our relationship with our creator.
Karma, Samsara, and Nirvana
Three important concepts in understanding Buddhism are karma, samsara, and nirvana.
Karmarefers to the law of cause and effect in a person’s life, reaping what one has sown. Buddhists believe that every person must go through a process of birth and rebirth until he reaches the state of nirvana in which he breaks this cycle. According to the law of karma, “You are what you are and do what you do, as a result of what you were and did in a previous incarnation, which in turn was the inevitable outcome of what you were and did in still earlier incarnations.”{4} For a Buddhist, what one will be in the next life depends on one’s actions in this present life. Unlike Hindus, Buddha believed that a person can break the rebirth cycle no matter what class he is born into.
The second key concept is the law of samsara or transmigration. This is one of the most perplexing and difficult concepts in Buddhism to understand. The law of Samsara holds that everything is in a birth and rebirth cycle. Buddha taught that people do not have individual souls. The existence of an individual self or ego is an illusion. There is no eternal substance of a person, which goes through the rebirth cycle. What is it then that goes through the cycle if not the individual soul? What goes through the rebirth cycle is only a set of feelings, impressions, present moments, and the karma that is passed on. “In other words, as one process leads to another, … so one’s human personality in one existence is the direct cause of the type of individuality which appears in the next.”{5} The new individual in the next life will not be exactly the same person, but there will be several similarities. Just how close in identity they will be is not known.
The third key concept is nirvana. The term means “the blowing out” of existence. Nirvana is very different from the Christian concept of heaven. Nirvana is not a place like heaven, but rather an eternal state of being. It is the state in which the law of karma and the rebirth cycle come to an end. It is the end of suffering; a state where there are no desires and the individual consciousness comes to an end. Although to our Western minds this may sound like annihilation, Buddhists would object to such a notion. Gautama never gave an exact description of nirvana, but his closest reply was this. “There is disciples, a condition, where there is neither earth nor water, neither air nor light, neither limitless space, nor limitless time, neither any kind of being, neither ideation nor non-ideation, neither this world nor that world. There is neither arising nor passing-away, nor dying, neither cause nor effect, neither change nor standstill.”{6}
In contrast to the idea of reincarnation, the Bible teaches in Hebrews 9:27 that “man is destined to die once and after that to face judgment.” A major diverging point between Buddhism and Christianity is that the Bible refutes the idea of reincarnation. The Bible also teaches that in the eternal state, we are fully conscious and glorified individuals whose relationship with God comes to its perfect maturity.
Jesus and Gautama
There is much I admire in the life and teachings of Gautama. Being raised in the Japanese Buddhist culture, I appreciate the ethical teachings, the arts, and architecture influenced by Buddhism. As I studied the life and teachings of Gautama and of Jesus, I discovered some dramatic differences.
First, Buddha did not claim to be divine. Theravada remains true to his teaching that he was just a man. The idea that he was divine was developed in Mahayana Buddhism 700 years after his death. Furthermore, Northern Buddhism teaches that there have been other manifestations of the Buddha or bodhisattvas and some believe Jesus to be one as well. However, Jesus did not claim to be one of many manifestations of God; He claimed to be the one and only Son of God. This teaching was not the creation of his followers but a principle He taught from the beginning of His ministry. In fact, the salvation He preached was dependent on understanding His divine nature.
Second, Buddha claimed to be a way shower. He showed the way to nirvana, but it was up to each follower to find his or her own path. Christ did not come to show the way; He claimed to be the way. While Buddhism teaches that salvation comes through Buddhas teachings, Christ taught salvation is found in Him. When Jesus said, “I am the way the truth and the life” (John 14:6), He was saying He alone is the one who can give eternal life, for He is the source of truth and life. Not only did He make the way possible, He promises to forever be with and empower all who follow Him to live the life that pleases God.
Third, Buddha taught that the way to eliminate suffering and attain enlightenment was to eliminate all desire. Christ taught that one should not eliminate all desire but that one must have the right desire. He stated, “Blessed are they who hunger and thirst for righteousness for they shall be satisfied.” Christ taught that we should desire to know Him above all other wants.
Fourth, Buddha performed no miracles in his lifetime. Christ affirmed His claims to be divine through the miracles He performed. He demonstrated authority over every realm of creation: the spiritual realm, nature, sickness, and death. These miracles confirmed the claims that He was more than a good teacher, but God incarnate.
Finally, Buddha is buried in a grave in Kusinara at the foot of the Himalaya Mountains. Christ, however, is alive. He alone conquered sin and the grave. His death paid the price for sin, and His resurrection makes it possible for all people to enter into a personal and eternal relationship with God.
After a comparative study, I came to realize Buddha was a great teacher who lived a noble life, but Christ is the unique revelation of God who is to be worshipped as our eternal Lord and Savior.
Notes
1. Isamu Yamamoto, Buddhism, Taoism and Other Eastern Religions, (Grand Rapids, Mich.: Zondervan Publishing, 1998), p. 23.
2. Walter Martin, Kingdom of the Cults (Minneapolis: Bethany House 1985), p. 261.
3. Kenneth Boa, Cults, World Religions, and the Occult (Wheaton, Ill.: Victor Books, (1977) p. 35
4. Davis Taylor and Clark Offner, The World’s Religions, Norman Anderson, ed. (Downers Grove, Ill.: InterVarsity, 1975), p. 174.
5. John Noss, Man’s Religions (New York: Macmillan Company, 1968), p. 182.
6. Taylor and Offner, The World’s Religions, p. 177.
Patrick Zukeran is a Hawaii-based research associate with Probe Ministries. He has a B.A. in Religion from Point Loma Nazarene University, a Th.M. from Dallas Theological Seminary, and a D.Min. from Southern Evangelical Seminary. He is an author, radio talk show host, and a national and international speaker on apologetics, cults, world religions, Bible, theology, and current issues. His nationally syndicated radio talk show “Evidence and Answers” is broadcast on the KTLW Network (covering the West Coast), through all of Asia (through World Harvest Radio), and on the web at evidenceandanswers.org. Before joining Probe, Pat served for twelve years as an Associate Pastor. He can be reached at pzukeran@probe.org.
E P I S O D E 1 0 How Should We Then Live 10#1 FINAL CHOICES I. Authoritarianism the Only Humanistic Social Option One man or an elite giving authoritative arbitrary absolutes. A. Society is sole absolute in absence of other absolutes. B. But society has to be led by an elite: John Kenneth […]
E P I S O D E 9 How Should We Then Live 9#1 T h e Age of Personal Peace and Afflunce I. By the Early 1960s People Were Bombarded From Every Side by Modern Man’s Humanistic Thought II. Modern Form of Humanistic Thought Leads to Pessimism Regarding a Meaning for Life and for Fixed […]
E P I S O D E 8 How Should We Then Live 8#1 I saw this film series in 1979 and it had a major impact on me. T h e Age of FRAGMENTATION I. Art As a Vehicle Of Modern Thought A. Impressionism (Monet, Renoir, Pissarro, Sisley, Degas) and Post-Impressionism (Cézanne, Van Gogh, Gauguin, […]
E P I S O D E 7 How Should We Then Live 7#1 I am thrilled to get this film series with you. I saw it first in 1979 and it had such a big impact on me. Today’s episode is where we see modern humanist man act on his belief that we live […]
In the short film above you can see that it was the kindness of the two “haves” to the other “havenots” that allowed everyone to eat. However, the article below shows that the best way to help people is give them a job instead of a one time gift.
Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist. Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it. …the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough… In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”
But why, to address Leander Kahney’s criticism, should we assume that Mr. Jobs has done nothing for the poor? He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.
To give credit where credit is due, the article does present this counterargument. It reports that Mr. Jobs told friends, “that he could do more good focusing his energy on continuing to expand Apple than on philanthropy.”
This is a critical point. Do we want highly talented entrepreneurs and investors dropping out of the private sector and giving their money away after they’ve reached a certain point, say $5 billion? Or do we want them to focus on creating more wealth and prosperity?
Interestingly, Warren Buffett used to understand this point (before he started arguing that politicians could more effectively spend his money). And Carlos Slim Helu still does:
Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation. And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”
None of this is to say that charitable giving is wrong. I’m proud to say that my employer, the Cato Institute, refuses to accept money from government. This means we are completely dependent on private philanthropy.
But those of us who work at Cato understand that creating wealth—maximizing the size of the economic pie—is the most important priority. And if the pie is big, generous people then have more ability to make contributions to worthy causes such as school choice scholarship funds, the Salvation Army, or (ahem) America’s best think tank.
Steve Jobs was raised as a conservative Lutheran but he chose to leave those beliefs behind. Below is a very good article on his life. COVER STORY ARTICLE | Issue: “Steve Jobs 1955-2011″ October 22, 2011 A god of our age Who was Steve Jobs? A revered technology pioneer and a relentless innovator, the Apple […]
COUNTER-DEMONSTRATION: At Kappa Sigma house in Fayetteville. The Drew Wilson photo above went viral last night — at least in Arkansas e-mail and social media users — after the Fayetteville Flyer posted it in coverage of an Occupy Northwest Arkansas demonstration in Fayetteville. The 1 percent banner was unfurled briefly on the Kappa Sigma frat […]
(If you want to check out other posts I have done about about Steve Jobs:Some say Steve Jobs was an atheist , Steve Jobs and Adoption , What is the eternal impact of Steve Jobs’ life? ,Steve Jobs versus President Obama: Who created more jobs? ,Steve Jobs’ view of death and what the Bible has to say about it ,8 things you might not know about Steve Jobs ,Steve […]
(If you want to check out other posts I have done about about Steve Jobs:Some say Steve Jobs was an atheist , Steve Jobs and Adoption , What is the eternal impact of Steve Jobs’ life? ,Steve Jobs versus President Obama: Who created more jobs? ,Steve Jobs’ view of death and what the Bible has to say about it ,8 things you might not know about Steve Jobs ,Steve […]
It is strange that the New Yorker Magazine did no research. (If you want to check out other posts I have done about about Steve Jobs:Some say Steve Jobs was an atheist , Steve Jobs and Adoption , What is the eternal impact of Steve Jobs’ life? ,Steve Jobs versus President Obama: Who created more jobs? ,Steve Jobs’ view of death and what the Bible […]
Next year is the 100th anniversary of Milton Friedman’s birth and I get on the computer today and read an article published today on the National Review Online and it quotes Milton Friedman.
Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
If you are looking for a single statement that defines the essence of the modern welfare state, look no further than Secretary of Energy Steven Chu’s defense of the administration’s efforts to ban incandescent light bulbs. “We are taking away a choice that continues to let people waste their own money,” Chu said, quite satisfied with government’s efforts to protect Americans from their own choices.
Contrast this with Milton Friedman’s view that
those of us who believe in freedom must believe also in the freedom of individuals to make their own mistakes. If a man knowingly prefers to live for today, to use his resources for current enjoyment, deliberately choosing a penurious old age, by what right do we prevent him from doing so? We may argue with him, seek to persuade him that he is wrong, but are we entitled to use coercion to prevent him from doing what he chooses to do? Is there not always the possibility that he is right and we are wrong? Humility is the distinguishing characteristic of the believer in freedom, arrogance of the paternalist.
For too long, both liberals and too many conservatives have attempted to impose on people the government’s standards of what is best for them rather than leaving them to their own decisions, merely because those decisions may be mistaken. That is the real legacy of the welfare state as expanded by President Obama and as it has been practiced on a bipartisan basis for the last half century or more: We are, quite simply, less free.
Once you accept the paternalistic premise, there is no end to government interference.
In some cases, the restrictions on liberty are tangible and easily seen. As the economy becomes more and more socialized, so too do the consequences of individuals’ behavior. This, in turn, creates an incentive for the state to control that behavior. After all, if individual decisions impose a collective cost, it is only rational for those bearing that cost to demand input on those decisions. Thus, the nanny state seeks to restrict all manner of private consensual activity, whether it is eating fast foods and smoking or having consensual sex or driving without a seat belt.
But there are other equally important, if less obvious, ways that the welfare state restricts liberty. Government-run health-care systems, for example, impose a minimum amount that you must spend on health care, either through taxes or through insurance mandates, as with the Patient Protection and Affordable Care Act. They determine which medical conditions and eventualities you must insure against, even if you would prefer not to cover such conditions. Thus, they turn individual moral decisions, such as whether to buy insurance that covers abortion, contraception, or drug-abuse treatment, into political questions. And in some government-run systems they deny people the right to purchase the health care they want even with their own money.
By the same token, government-run anti-poverty programs limit your ability to support the charity of your choice. Money you pay in taxes to support government charity is money that you cannot donate to private charity. Yet the charitable activities chosen by the government may not be the ones that you would have chosen, or even the ones most needed. Indeed, the government’s charitable decisions are likely to be driven by politics, favoring those constituencies with the greatest voting power or those causes that capture the public imagination because they are on television or in the newspapers.
Government-run schools automatically pit the values of one group of parents against the values of other groups. How many textbook controversies or debates about what to teach about homosexuality, whether students may pray, or phonics versus whole language could be avoided if parents could choose the school their child attended?
Social Security may or may not be a Ponzi scheme, but it prevents people — especially poor people — from saving and investing for their own retirement in ways that would allow them to build real, inheritable wealth.
Beyond the programs themselves, there is the simple fact that every dollar that the welfare state consumes to pay for itself is one fewer dollar that individuals have to spend the way that they want to, however that may be. As the French economist Frederic Bastiat put it in his parable of the shopkeeper with the broken window, “He would, perhaps, have replaced his old shoes, or added another book to his library.” Or to put it in today’s context, he might have purchased health care, saved for his retirement, or donated to charity. He might have started a business and hired workers. Or he might have spent it entirely on pleasure or frivolities. He might even have bought energy-inefficient light bulbs.
Whatever he might have done, he is now deprived of that choice. He is, in fact, less free.
Once paternalism is accepted in principle, there is no limit to the actions that government may take in controlling our lives and restricting liberty. The ultimate result, as Friedman writes, is “dictatorship, benevolent and maybe majoritarian, but dictatorship nonetheless.”
As we debate the ever-expanding welfare state and all its consequences — joblessness, a crushing debt burden on our children and grandchildren, and the loss of opportunity for the neediest among us — let us not forget the other casualty of big government: freedom.
Sooner or later, there will be a giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a European-style social welfare state. But that’s exactly why the VAT is a terrible idea.
I explain why in a column for Reuters. The entire thing is worth reading, but here’s an excerpt of some key points.
Many Washington insiders are claiming that America needs a value-added tax (VAT) to get rid of red ink. …And President Obama says that a VAT is “something that has worked for other countries.” Every single one of these assertions is demonstrably false. …One of the many problems with a VAT is that it is a hidden levy. …VATs are imposed at each stage of the production process and thus get embedded in the price of goods. And because the VAT is hidden from consumers, politicians find they are an easy source of new revenue – which is one reason why the average VAT rate in Europe is now more than 20 percent! …Western European nations first began imposing VATs about 40 years ago, and the result has been bigger government, permanent deficits and more debt. According to the Economist Intelligence Unit, public debt is equal to 74 percent of GDP in Western Europe, compared to 64 percent of GDP in the United States (and the gap was much bigger before the Bush-Obama spending spree doubled America’s debt burden). The most important comparison is not debt, but rather the burden of government spending. …you don’t cure an alcoholic by giving him keys to a liquor store, you don’t promote fiscal responsibility by giving government a new source of revenue. …To be sure, we would have a better tax system if proponents got rid of the income tax and replaced it with a VAT. But that’s not what’s being discussed. At best, some proponents claim we could reduce other taxes in exchange for a VAT. Once again, though, the evidence from Europe shows this is a naive hope. The tax burden on personal and corporate income is much higher today than it was in the pre-VAT era. …When President Obama said the VAT is “something that has worked for other countries,” he should have specified that the tax is good for the politicians of those nations, but not for the people. The political elite got more money that they use to buy votes, and they got a new tax code, enabling them to auction off loopholes to special interest groups.
You can see some amusing — but also painfully accurate — cartoons about the VAT by clicking here, here, and here.
For further information on why the VAT is a horrible proposal, including lots of specific numbers and comparisons between the United States and Western Europe, here’s a video from the Center for Freedom and Prosperity.
Politico reports here that a group of celebrities, including former Baptist pastor Mike Huckabee, shouted a four-letter obscenity for cameras in a promotion to speak up against famine. Bleeps and labels to cover mouths obscure the actual word.
In the PSA, our celebrity supporters shout out one four letter word that the majority of viewers will find offensive, in order to shine a light on something only a minority seems to be offended by. I know the tone is a bit rough for ONE — that’s no accident. If it feels like a punch in the face, then good — mission accomplished. It’s time for a wakeup call and here’s the alarm. Love it? Great. Hate it? OK. Just don’t ignore it.
I’m not sure I believe Huck did precisely as described.
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One of the key parts of the solution is economic growth. It is not the bailout, welfare approach of President Obama who Bono supported in 2008. Here is the first part of an excellent article from the Cato Institute:
Ending Mass Poverty
by Ian Vásquez
September 2001
Ian Vásquez is director of the Cato Institute’s Project on Global Economic Liberty. This essay originally appeared on the U.S. Department of State’s electronic journal, Economic Perspectives (September 2001).
Economic growth is the “only path to end mass poverty,” says economist Ian Vásquez, who argues that redistribution or traditional poverty reduction programs have done little to relieve poverty. Vásquez writes that the higher the degree of economic freedom — which consists of personal choice, protection of private property, and freedom of exchange — the greater the reduction in poverty. Extending the system of property rights protection to include the property of poor people would be one of the most important poverty reduction strategies a nation could take, he says.
The historical record is clear: the single, most effective way to reduce world poverty is economic growth. Western countries began discovering this around 1820 when they broke with the historical norm of low growth and initiated an era of dramatic advances in material well-being. Living standards tripled in Europe and quadrupled in the United States in that century, improving at an even faster pace in the next 100 years. Economic growth thus eliminated mass poverty in what is today considered the developed world. Taking the long view, growth has also reduced poverty in other parts of the world: in 1820, about 75 percent of humanity lived on less than a dollar per day; today about 20 percent live under that amount.
Even a short-term view confirms that the recent acceleration of growth in many developing countries has reduced poverty, measured the same way. In the past 10 years, the percentage of poor people in the developing world fell from 29 to 24 percent. Despite that progress, however, the number of poor people has remained stubbornly high at around 1,200 million. And geographically, reductions in poverty have been uneven.
This mixed performance has prompted many observers to ask what factors other than growth reduce poverty and if growth is enough to accomplish that goal. Market reforms themselves have been questioned as a way of helping the poor. After all, many developing countries have liberalized their economies to varying degrees in the past decade.
But it would be a colossal mistake to lose focus on market-based growth and concentrate instead on redistribution or traditional poverty reduction programs that have done little by comparison to relieve poverty. Keeping the right focus is important for three reasons — there is, in fact, a strong relationship between growth and poverty reduction, economic freedom causes growth, and most developing countries can still do much more in the way of policies and institutional reforms to help the poor.
The Importance of Growth
The pattern of poverty reduction we see around the world should not be surprising. It generally follows the relationship found by a recent World Bank study that looked at growth in 65 developing countries during the 1980s and 1990s. The share of people in poverty, defined as those living on less than a dollar per day, almost always declined in countries that experienced growth and increased in countries that experienced economic contractions. The faster the growth, the study found, the faster the poverty reduction, and vice versa. For example, an economic expansion in per capita income of 8.2 percent translated into a 6.1 reduction in the poverty rate. A contraction of 1.9 percent in output led to an increase of 1.5 percent in the poverty rate.
That relationship explains why some countries and regions have done better than others. “Between 1987 and 1998, there was only one region of the world that saw a dramatic fall in both the number of people and the proportion of the population living on less than a dollar a day. That region was East Asia,” observes economist Martin Wolf. “But this was also the only region to see consistent and rapid growth in real incomes per head.”
High growth allowed East Asia to reduce the share of its poor during this period from 26 to 15 percent and the number of poor from 417 million to 278 million people. With annual growth rates of nearly 9 percent since 1979, when it began introducing market reforms, China alone has pulled more than 100 million people out of poverty. The more modest but increasing growth rate in India during the past decade means that the outlook of the poor in the two countries that make up half of the developing world’s population is noticeably improving.
Elsewhere the performance is less encouraging but follows the same pattern. Poverty rates rose in Eastern Europe and Central Asia, where economic activity declined sharply, and stayed the same in Latin America and sub-Saharan Africa, where growth was low or negligible.
Even within regions there are variations. Thus Mexico’s per capita growth rates of 1.5 percent in the 1990s did not affect the share of people living in destitution, while Chile’s 7 percent average growth rate from 1987 to 1998 reduced the poverty rate from 45 to 22 percent, according to the Institute for Liberty and Development based in Santiago.
Likewise, Vietnam stands out in Southeast Asia. With that country’s per capita growth rates averaging about 6 percent in the 1990s, the World Bank reports that those living under the poverty line declined from 58 to 37 percent between 1993 and 1998. And Uganda’s per capita growth of more than 4 percent in the 1990s reduced the share of people living below a minimum poverty line from 56 percent to 44 percent between 1992 and 1997. The Centre for the Study of African Economies at Oxford University concluded that “general growth accounts for most of the fall in poverty.”
The dramatic impact of growth cannot be understated, even when differences in productivity rates are apparently small. To illustrate, Harvard economist Robert Barro notes that per capita income in the United States grew at an average 1.75 percent per year from 1870 to 1990, making Americans the richest people in the world. Had this country grown just one percentage point slower during that time period, U.S. per capita income levels would be about the same as Mexico’s. Had the growth rate been just one percentage point higher, average U.S. income would be $60,841 — three times the actual level.
U2 performs Pride: In the name of Love, a song about Martin Luther King, at President-elect Barack Obama’s Inaugural concert on the Lincoln Memorial in Washington D.C. Bono told the estimated 600,000 there that on Tuesday “that dream comes to pass.” Jan. 18, 2009
John Podesta of the Center for American Progress had a column in Politico yesterday asserting that “closing the budget gap entirely on the spending side would require draconian programmatic cuts.” He went on to complain that there are some people who “refuse to look at the revenue side of the ledger – while insisting that we dig the hole $830 billion deeper over the next decade by extending the Bush tax cuts.”
Not surprisingly, Mr. Podesta is totally wrong. It’s actually not that challenging to balance the budget. And it doesn’t even require any spending cuts, though it would be a very good idea to dramatically downsize the federal government. Here’s a chart showing this year’s spending and revenue totals. It then shows the Congressional Budget Office’s estimate of how much revenues will grow, assuming all the 2001 and 2003 tax cuts are made permanent and assuming that the alternative minimum tax is adjusted for inflation. As you can see, balancing the budget is a simple matter of limiting the annual growth of federal spending.
So how is it that Mr. Podesta can spout sky-is-falling rhetoric about “draconian” cuts when all that’s needed is fiscal restraint? The answer is that politicians in Washington have concocted a self-serving budget process that automatically assumes that all previously-planned spending increases should occur. So if the politicians put us on a path to make government 8 percent bigger next year and there is a proposal to instead limit spending growth to 3 percent, that 3 percent increase gets portrayed as a 5 percent cut.
This is a great scam, at least for the political class. They get to buy more votes by boosting the burden of government spending, but they get to tell voters that they’re being fiscally responsible. And they get to claim that they have no choice but to raise taxes because there’s no other way to balance the budget. In the real world, though, this translates into bigger government and puts us on a path to a Greek-style fiscal nightmare.
The goal of fiscal policy should be smaller government, not fiscal balance. Deficits are just a symptom of a government that is too large, as I have explained elsewhere. But the good news is that spending discipline is the right answer, regardless of the objective. I explained this in more detail for a piece in today’s Philadelphia Inquirer. Here’s an excerpt.
According to the Congressional Budget Office, the federal government this year is spending almost $3.5 trillion. Tax receipts are estimated to be less than $2.2 trillion, which means a projected deficit of about $1.35 trillion. So can we balance the budget when there is that much red ink? And is it possible to eliminate deficits while also extending the 2001 and 2003 tax cuts? The answer is yes. …It’s a simple matter of mathematics. The Congressional Budget Office estimates that tax revenue will grow by an average of 7.3 percent annually over the next 10 years. Reducing the budget deficit is easy – so long as politicians increase overall spending by less than that amount. And with inflation projected to be about 2 percent over the same period, this is an ideal environment for some long-overdue fiscal discipline. If spending is simply capped at the current level with a hard freeze, the budget is balanced by 2016. If we limit spending growth to 1 percent each year, the budget is balanced in 2017. And if we allow 2 percent annual spending growth – letting the budget keep pace with inflation, the budget balances in 2020. …Interest groups that are used to big budget increases will be upset if spending growth is limited to 1 or 2 percent each year. It means entitlements will need to be reformed. It means we might need to get rid of programs and departments that are not legitimate functions of the federal government. You better believe that these changes will cause a lot of squealing by lobbyists and other insiders. But that complaining will be a sign that fiscal policy is finally heading in the right direction. The key thing to understand is that there is no need for tax increases. Politicians might not balance the budget if we say no to all tax increases. But the experience in Europe shows that oppressive tax burdens are not a recipe for fiscal balance either. Milton Friedman was correct many years ago when he warned that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”
Reckless spending increases under both Bush and Obama have resulted in unprecedented deficits. Congress will soon be forced to increase the nation’s debt limit by an astounding $1.8 trillion. Government borrowing has become such a big issue that some politicians are proposing a deficit reduction commission, which may mean they are like alcoholics trying for a self-imposed intervention.
But all this fretting about deficits and debt is misplaced. Government borrowing is a bad thing, of course, but this video explains that the real problem is excessive government spending.
Fixating on the deficit allows politicians to pull a bait and switch, since they can raise taxes, claim they are solving the problem, when all they are doing is replacing debt-financed spending with tax-financed spending. At best, that’s merely taking a different route to the wrong destination. The more likely result is that the tax increases will weaken the economy, further exacerbating America’s fiscal position.
Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056
Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates
Patrick Zukeran
The Daily Hatch 