OVERNIGHT SOLUTION TO THE NATION'S ECONOMIC WOES
Attorney Jonathan Emord
October 19, 2009
It is indeed ironic that while our State Department professes the benefits of a democratic republic and free enterprise to the world, at home our leaders work feverishly to expand federal government control over the market and proclaim government largesse as the saving grace for the entire American economy (most notably Wall Street, the mortgage industry, the automobile industry, and, soon, the health care industry). At root, the doomsayers who dominate the Democratic and Republican parties have questioned the power of the only engine of human progress ever to uplift the standard of living of mankind, the free market. They, whose prophets include the President, contend that our economic woes emanate from a wild, unruly, and unregulated marketplace that has to be chastened and channeled by an omnipresent regulatory state for an ill-defined public interest to prevail.
That view stands against the history of human progress. It saddles each of us (and each generation to come) with an enormous tab for a mammoth, disproven experiment in social engineering. Democrats and Republicans alike trip over one another in a headlong rush to come up with the latest plan for the federal government to spend money. We no longer have a party divide on the issue of government spending. The divide that exists is over where to spend funds, not whether to spend them.
There is an alternative to this highly paternalistic and historically failed approach to problem solving. It is the alternative view, understood to be a moral imperative by the primary author of it, that Scottish philosopher Adam Smith in his rebuttal to mercantilism, The Wealth of Nations. To paraphrase Smith, it is not by the benevolence of the butcher or the baker by which we obtain our meat and bread but by the pursuit of their own self interest. In short, self interest in the market causes those who would profit to find ingenious means to improve the human condition, for which others are willing to pay. For the benefit arising from invention, the inventor is given a just reward, profit. If the inventor is allowed to keep the lion’s share of that profit, he or she will have an incentive to invent yet again, and, if he or she guesses correctly, will hit upon yet another item that best suits the needs of consumers, lifting their standard of living in the process.
Rather than place faith in the market which has proven its profound power to transform and uplift, the present administration places boundless faith in government. Government is that great parasite that the Founding Fathers viewed as a necessary evil, one to be limited and checked so as to avoid its intrusion into our daily affairs. As government has grown exponentially, it has proven itself in every nation incapable of solving the vast majority of the human problems that its political rulers expropriate private funds to solve.
We are led to believe that $13 trillion and growing must be spent by the federal government, together with all of the market distortions and inflationary effects that spending brings, to lift America out of recession. But no amount of federal spending will lift us out of recession; only entrepreneurship can do that (and only if government gives the entrepreneur the freedom from regulation necessary to achieve it). From neither the Democratic nor the Republican leadership is there uttered a peep about resorting to the market for a solution to our woes rather than to government. There is no shortage of faith in governmental authority as the universal elixir, the solution to every problem. By contrast, there is a dire (and to my mind baffling) shortage of faith in the market when it, not government, is the historic force that has brought the people of the world who have embraced it from wretched squalor to riches.
With the exception of that wise friend of the Constitution, Ron Paul, there is virtually no Congressman or Senator who will defend either a free market or individual liberty against the all-consuming authority of the state. Pause for a moment and consider the wisdom of a Seventeenth Century Scottish Poet Samuel Butler (author of Hudibras). His poem about authority should be mandatory reading for the President, his cabinet, the agency heads, all Congressmen, and all Senators who view this nation as in their service (rather than the other way around):
And makes mere sots of magistrates,
The fumes of it invade the brain,
And make men giddy, proud, and vain,
By this the fool commands the wise,
The noble with the base complies,
The sot assumes the rule of wit,
And cowards make the base submit.
There is an alternative to expending tens of trillions of dollars in a headlong rush to make everything private public. That alternative is simple, and were it followed would launch the American economy to heights the likes of which we have never seen. It would end the credit crunch, yield full employment, hasten the invention of all sorts of new products, and raise our nation to unparalleled prosperity, becoming again the economic marvel of the world. It would also halt in its tracks the progress of China in making the Chinese Renminbi the global reserve currency in place of the dollar. That alternative would, however, deflate the power of the President, Congress, and the heads of the independent regulatory agencies. They could no longer crow about how they had rescued the American economy from disaster and, more importantly, they could no longer control economic outcomes with political deal-making. What is the alternative?
It is profoundly simple: Declare a two year moratorium on all federal income tax for individuals and businesses and exempt all interest and dividends from federal tax for a decade. With that single move, money would flood into the economy. Savings and investments would rise precipitously. Employers flush with capital they did not anticipate keeping would expand their businesses and would offer new products to consumers. Consumers flush with money they did not anticipate keeping would now be liberated to spend that money. We would witness an enormous economic boom, a market miracle, and it would occur almost overnight. The credit crunch would disappear. Bad debt would be discounted with less economic injury.
The only losers from a tax moratorium would be the people who so jealously depend on spending your money for you, the officials who run government. Agencies dependent on the funds might have to be downsized or eliminated altogether. Politicians to whom rent seekers now grovel in their effort to receive a share of federal largesse would no longer be there to puff up the egos and coffers of those in power. The party would be over at the White House and on Capitol Hill but it would start anew in every home and office across the country.
In time, I suspect we will all learn that faith in government to solve market problems is heresy not only because it proceeds in ignorance of the true source of economic growth worldwide, the free market, but also because it proceeds on the thoroughly repudiated notion that those in political power will spend others money in the interest of those others rather than in their own self interest.
© 2009 Jonathan W. Emord - All Rights Reserved