Two Thoughts on Government

This video is what the Democratic Party used to open its convention in Charlotte, NC last week:

The Government Is The Only Thing We All Belong To

Here, on the other hand, is the Preamble to our Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

So.  Do we work for government, or does government work for us?  Do we belong to government, or does government belong to us?

Ronald Reagan answered this in his inaugural address in January 1981:

We are a nation that has a government—not the other way around.

We’ll take a step toward deciding this—again—in November.

Entitlements and Dependency

William Galston had an interesting piece in Saturday’s Wall Street Journal as part of a debate concerning the role of government.  However, his title for his column shows a profound…misunderstanding…of what it is to be an American, of what it is that has made the United States so exceptional on the world stage and in history: “They’re Part of the Civic Compact.”

The very term “entitlement” displays a breathtaking move away from self-reliance and recognition of the immorality of government-mandated wealth transfers.  A man deserves something simply because he exists according to “entitlement.”  Indeed, he deserves an equal share, even though he has done nothing to earn it.  “Entitlement” and “earning,” though, are mutually exclusive conditions.  More, the man who lives on entitlements has become entirely dependent on the provider of the entitlement, his government.  He no longer is free.

Further, the title itself evinces a misreading of our history.  By way of illustration, I offer a couple of remarks by James Madison.  First, Congressman Madison had this to say concerning a bill before the 3rd Congress which was intended to provide help to French refugees from the Haitian Revolution.

I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.

Madison also had this to say in an 1831 letter to his friend, James Robertson:

With respect to the words ‘general welfare,’ I have always regarded them as qualified by the detail of powers connected with them.  To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.

Moreover, the outcome of the trend toward an entitlement state is acknowledged by Galston himself.

As far as I can tell, [Nicholas] Eberstadt’s statistics [in the companion article] accurately represent the trends on which he focuses.

An outcome of those trends?  As Eberstadt put it:

The US is now on the verge of a symbolic threshold: the point at which more than half of all American households receive and accept transfer benefits from the government.

In other words, we’re about to reach the point where half of our country is dependent on government—dependent on the other half of our country—for its subsistence.

Our duties to our fellows, especially including those who are less fortunate than us, are clear and present; they are at the foundation of our, and of our nation’s, Judeo-Christian heritage.  But our duties are individual, and they can only be discharged by each of us, or by groups of us acting in concert through our charities, our churches, or our local communities, thereby pooling our individual resources according to our own views of, and capacity for, the means of assistance.  Our duties are not collective, and they cannot be wished off onto a government for it to relieve us of our responsibilities.

Galston makes this very point,

When I do something for you that you would be hard-pressed to do for yourself and you respond by helping me with something I find difficult, we depend on one another and are the stronger for it.[]

and then he misunderstands it.  He insists instead that government must be the first entrant into this exchange and that it must be the middleman in all such exchanges.  Then he demonstrates the failure of this in practical terms, and misses his own demonstration:

In the first place, we are an aging society.  Our massive investments in public schools and universities at the height of the baby boom have given way increasingly to the funding of hospitals and nursing homes.  A second trend has exacerbated the consequences of aging: the near-disappearance of the pensions and health insurance for retirees that employers provided in the decades after World War II.  The third trend is macroeconomic.  During the generation after World War II, the economy grew briskly, and the fruits of that growth were widely shared.  Since then, growth has slowed, the distribution of gains has become more concentrated at the top, and less-educated workers have seen their wages stagnate while their benefits wither.

How could this be otherwise?  With money being withdrawn from the private economy at the alarming rate described by Eberstadt and accepted by Galston, of course growth has slowed.  Further demonstrating his confusion, he notes the transfer of private benefit-related agreements between employee and employer to a concept of entitlement from government without comment.  On top of this, he accepts the local (and state) funding of public schools and universities as in some strange way equivalent to Federal funding of health facilities while tacitly assuming that such Federal funding is somehow appropriate.

The growth of the entitlement state, with its taking of the fruits of success from those more successful, and transferring those fruits to others who did not earn them, not only truncates that success, it removes incentives from both sides: the one to work harder for more success, the other to work hard for his own success.  Indeed, this overhead cost that is this transfer prevents all participants, in Teddy Roosevelt’s words, from “showing the best that there is in him.”  And it tries to transfer the moral duties of both—the one to take care for the least among us, and the other to do all he can so as not to be a burden on others—to government.

Galston then offers Social Security as an example and uses it to deny a moral dilemma [emphasis added].

Social Security works this way [a privately purchased annuity for the benefit of the purchaser] for millions of Americans.  For many others, it is more complicated: Some can expect to receive more than the actuarial value of their contributions, others less.  Americans in the latter category are helping to fund retirement for those in the former.  In effect, some workers are relying on others for a portion of their retirement income.  But again, this quantitative premise does not imply a disturbing moral conclusion.

But he misunderstands the morality of this situation.  (As an aside, Galston conflates a privately purchased annuity for the benefit of the purchaser with a tax on some for the express purpose of transferring that money to the benefit of others.  Privatization of Social Security of any sort, though, is anathema to Progressives, which makes the conflation all the more…interesting.)  Galston’s first misunderstanding is  this.  His description ignores the original purpose of Social Security—to be supplemental income, not replacement income, with the retirees expected to continue to rely on their families for the rest of their needs (and for a shorter time than today, but demographics are a distinct matter).

Second, our modern, distorted Social Security system denigrates those family ties.  It makes the retiree dependent on a collection of strangers for his replacement income rather than on his own family for help with his retiree expenses.  At the same time, this system takes money away from a family man that he could otherwise commit to supporting his own retired parents and transfers it to a retired stranger.

Finally, by making the retiree dependent on government for his entire support (neglecting medical expenses; Medicare is of a piece with this, though), government is robbing the retiree of his opportunity to honor his own morality—the effort of being the primary source of his own sustenance.

Galston “would make a similar argument about the Earned Income Tax Credit, which supplements the earnings of low-wage workers,” but the practical and moral argument is similar here, too.

Finally, this moral failure flows directly from economic truisms: taxing a thing (and taxes, whether present or future, are the source of funds for the transfers) causes less of it to be produced, while subsidizing another causes more of that to be produced.  Taxing the fruits of labor—especially for the purpose of simply giving the collected funds to another—leads to less labor, either outright, or through poorer quality labor.  Paying people for not working lowers the incentive—the need—to seek employment.

Contra Madison, in a small way government has a (very limited) role in seeing to the sustenance of those who cannot help themselves, but only as a last resort, after private, charity and church, and local community resources have been exhausted.  But these cannot have their full effect until an overgrown, and overwrought, government gets out of our way.

Voting Rights

From The Wall Street Journal‘s Law Blog comes this hopeful sign.  A number of states have filed a Friend of the Court brief in support of South Carolina as that state prepares to defend itself against the Obama administration’s assault on its effort to protect the sanctity of the vote.  The money paragraphs in the brief speaks is this, and it needs no further comment from me.

Because Section 5 [of the Voting Rights Act of 1965] applied arbitrarily to the Covered Jurisdictions [i.e., those states subject to the VRA], none of which uses discriminatory tests or devices, and many of which have higher voter turnout, or lower disparity in minority voter turnout, than many of the uncovered jurisdictions, the Covered States are denied the fundamental principles of equal sovereignty and equal footing.  Because the VRA’s purpose is to eradicate voting discrimination for all United States citizens, treating states differently is not congruent with the Act’s purpose.

The brief, BRIEF OF ARIZONA, ALABAMA, GEORGIA, SOUTH CAROLINA, SOUTH DAKOTA, AND TEXAS AS AMICI CURIAE IN SUPPORT OF PETITIONER, can be found here.

Government Market Intervention European Style

From The Wall Street Journal we learn that that the European Central Bank wants to “manage” the interest rates on member nations’ sovereign debt instruments, and it wants to do so by entering the market for government bonds—announcing its buys and sells in a manner intended to “influence” the market’s interest rates imposed on those governments’ borrowings.  The WSJ quotes the ubiquitous “person familiar with the matter” as saying

ECB would guide investors toward a target, or range, for government bond yields of Spain and others by publicly communicating specifics about the amount of the bond purchases it conducts, as well as the details on the types of bonds it buys. For instance, if the central bank says it bought €1 billion ($1.26 billion) worth of shorter-dated Spanish bonds, it could move investors toward the yields it deems appropriate by raising or lowering purchases in subsequent weeks.

But the real thinking was revealed by the ECB’s President, Mario Draghi.  “Exceptionally high” risks are embedded in many government bonds markets, the WSJ cites him as saying, and to the extent to which these “risk premia” include a euro breakup scenario, they are “unacceptable.”  Thus, the market should sit down, shut up, and do what its betters tell them to do.  Investors’ pricings on exploding debt will not be tolerated.  Their duty is to simply keep lending at rates their Betters dictate.

Never mind that, as the Bundesbank’s Jens Weidmann puts it,

In democracies, Parliaments, not central banks, should decide about such comprehensive sharing of risks[.]

He’s not one of the Know Betters, so he’s just whispering in the wind.

***

Then we have this from Spain, in particular.  The government says it expects the Spanish economy to contract 1.7% this year, despite growing exports (from the declining euro more than any real productivity-related effects), and it will contract next year by an additional 0.5%.  Yet that same Spanish government fully intends to impose “billions of euros” in tax increases over these next two years (along with allegedly large spending cuts).  You read that right.  In a contracting economy, the government fully intends to take a ton of money out of the private sector: it intends to defund the very part of the economy that is the engine of economic prosperity—and here, of economic recovery.

***

And then there’s this.  The Obamacare Independent Payment Advisory Board, consisting of “15 philosopher kings,” is starting to be set up, although we don’t get to know who these kadi are until after the election this fall.  This Board will have the power to dictate prices to all participants in the health care industry: hospitals, doctors, insurers, patients alike.  No market forces at all here.  And yes, there will be plenty of patients: customer participation is mandatory.  Of course there’ll be fewer and fewer providers as these are driven out of business by the Board’s price controls; this will turn the Board into a Death Panel.  A third example of government market intervention European style.

Extremes

Democratic Presidential Candidate Barack Obama gave an interview to the AP in which he described Republican Presidential Candidate Mitt Romney’s positions as “extreme.”  Yet both Obama’s descriptions and his countervailing positions demonstrate pretty conclusively which of the two is extreme.

Obama had this non sequitur in his remarks about what he has “learned about [Romney] this campaign:

What we’ve also seen is Gov. Romney has not been willing to, I think, own up to some of the responsibilities that are required if you’re president of the United States. So there’s been obviously a lot of discussion about his unwillingness to release his tax returns.

Apparently honoring the law (here, concerning the required releasability of personal tax returns) is “not willing to own up to some of the responsibilities that are required if you’re president of the United States.”  But ignoring the law (vis., DOMA) is such a responsibility.  Ignoring the will of the Congress and implementing carbon cap-and-trade by Executive fiat is such a responsibility.  Ignoring the will of the Congress (the failed DREAM ACT) and implementing immigration parameters by Executive fiat is such a responsibility.  Refusing to enforce our borders while attacking states that do attempt to enforce them, using laws that ape Federal law, is such a responsibility.

Obama made this argument about Romney being short on facts in his campaign.

[T]he most prominent argument that he’s been making for why voters should vote for him is this notion that Obama took the work requirement out of welfare, and he’ll put it back.

Never mind that the explicit requirement for actual work has been withdrawn, and the states’ “flexibility” includes the option to not require work or work training.

And without a trace of irony, Obama had this to say:

Well, I think that if you don’t have a good argument for how you’re going to make things better, then you stay focused on how you can discredit the incumbent.

After accusing Romney of being responsible for the cancer death of a woman (he did say in a separate interview that he didn’t really believe that, but in that same interview, he refused to repudiate the ad that made the accusation, or to call out the SuperPAC (run by his ex-Deputy Press Secretary) for having run it).  And after accusing Romney of being a felon over Romney’s position at Bain while rescuing the Olympics—stemming from Obama’s own “misunderstanding” of SEC filings.

On those extreme positions themselves, Obama had this:

[Romney] has signed up for positions, extreme positions that are very consistent with positions that a number of House Republicans have taken.

Obama then listed the Republicans’ $5 trillion tax cut proposal, the elimination of tax credits for wind energy, and an amorphous objection to the Republicans’ Medicare proposals as those “extreme” positions.

If I understand Obama aright, then, it’s extreme to cut taxes, especially in a recession: it’s extreme to leave more of private citizens’ money in the hands of the original private citizens instead of those of whom Obama favors.

It’s extreme, in a time of enormous government spending and debt buildup, to cut spending—especially to fringe energy sources like wind power.  Obama proudly pointed out that he’s doubled the output of wind-generated electricity with his tax credits.  Let’s see: total electricity generated in the US in 2008 was nearly 3.5 Terawatts.  Wind-generated electricity in 2011 was nearly 47 Megawatts.  Obama has pushed wind energy from nearly nothing to twice nearly nothing.  And that doubling came, as he so proudly said, only with the aid of government subsidy.  Wind-generated electricity is fringe not because it’s an idiotic idea, but because it cannot compete in the free market on its own; it needs a constant propping up.

Finally, it’s extreme to take steps to reform Medicare so as to preserve it for tomorrow’s seniors, while leaving it alone for today’s seniors and near-seniors (who have no chance of adjusting to any changes).

But what are Obama’s plans?  He’s carefully nebulous about those, but we can look to his record and see his plans.

Obama intends to ratchet up the taxes on Americans of whom he disapproves.  He intends to ratchet up his spendinginvesting in his favored companies and in his favored unions.  He already has taken the (not at all extreme, he says) measure of removing $700 billion from the present form of Medicare in putting it into his Obamacare to pay for that.

Who’s extreme?