The Free Market
In the wake of the financial crisis and the subsequent recession, many have tried to pin the blame on the boogieman of Deregulation as the cause. Now I've explained many times before why this is wrong because the boom-bust cycle is caused by the manipulation of money and credit by the Federal Reserve. Here I will show why deregulation was not the cause for other reasons.
The problem with the notion that deregulation caused the recession is that it assumes that the state is capable of figuring out what exactly to regulate. This assumption lacks support because there is no evidence that anyone in the government knew that a recession was even going to happen. Where are all the reports by government agencies claiming that a bust is sure to come and that, due to lack of proper regulatory power, they were powerless to stop it? How can government regulators prevent a recession they couldn't see coming? It's easy now to look back and claim if they had prohibited derivatives or prohibited the kinds of bank mergers allowed by the partial repeal of Glass-Steagal that everything would have been fine, but where were the people claiming this would be a problem ten years ago?
I cannot stress this enough. Not only were they blind to the coming recession, but they were adamantly positive in their outlook. The Treasury Secretary in March of 2008 said that "Our banks are strong. They're going to be strong for many, many years." The Chairman of the Federal Reserve said in May, 2007 that “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” Even mere weeks before the collapse both these men assured us that the economy was sound and that maybe Fannie and Freddie might need a little help, but otherwise, the fundamentals were sound. These are the top regulators of the financial and banking systems. Bernanke was named Time Man of the Year and re-appointed by Barack Obama, yet he failed to see or prevent the collapse.
To me it seems the height of naivete to think that these regulators, given more power, could have prevented anything--they didn't think anything was wrong! How could they know which regulations were needed when they never saw what the problems were?
One more thing. When I said that no one in the government knew that a recession was coming I was wrong. There was one man who knew and his name is Ron Paul. From September 6, 2001:
Here's the Libertarian solution for stopping massacres. It costs the taxpayers no money, works everywhere, deters violent crime, is employed in as little as five seconds, is easy to learn, requires no police, and most importantly, protects innocent lives.
I just wanted to say happy secession day to all of you here at ljworld.
The Court's holding on Obamacare's constitutionality was praised by many on the left, yet they may not be aware of the full implications. The holding was that under the commerce clause the bill was unconstitutional, but under the taxing power of Congress it passed the test. Can you imagine any other scenarios where such a precedent might have an effect? What if Congress passed a small tax on letters to the editor. Now clearly restricting free speech is unconstitutional, but what about a small tax? The Court just ruled that a small tax is within Congress's power when a direct mandate was not.
Democrats hold the White House and the Senate today, but someday the Republicans may hold all the elective branches of government again. What else could they tax? What about an abortion tax? What about a gay tax? What about a tax on people who speak out against the war? Why wouldn't such a law be ruled as constitutional under the same legal theory that the Court found Obamacare to be constitutional?
Did the Court just open a can of worms?
Well, I've read around about this decision and the details of the bill and apparently there is a loophole in the law that will sow the seeds of its own destruction. We all know the most controversial part of the law which requires that everyone purchase health insurance or else pay a penalty. The Supreme Court ruled that this law was constitutional because this penalty is a tax. They ruled that Congress cannot mandate that people buy health insurance, but that they can tax you if you do not. They ruled that this is a tax and not a penalty because the tax is so small. Vertigo has mentioned a figure around $95 several times in the forums. Now obviously $95 is a lot less per year than it would cost to buy health insurance. The Court did say, however, that if the tax was so high and burdensome that it would basically ruin you if you did not buy health insurance, that would be unconstitutional since that would be forcing people to buy health insurance via the tax code. Here are some more key facts: the bill has several features which are meant to protect people from not having insurance such as no longer allowing insurance companies to deny coverage based on pre-existing conditions. One more thing, the IRS is not allowed to use aggressive methods in collecting the penalty/tax for not buying health insurance.
So, what's the loophole? Don't buy insurance, don't pay the penalty, and then only buy insurance when you get sick since they can't deny you coverage. The penalty/tax is so small that it's a lot cheaper than buying insurance, and the IRS is likely not going to be able to collect it from you anyway. Not only that, you can wait until you are sick and then buy insurance and be fully covered. And here's the kicker: since the Court ruled that the law is constitutional only so long as the penalty/tax remains small enough to be considered to not force people to choose to buy health insurance, they can't raise it without risking the bill being overturned!
Obviously this is not going to work if enough people exploit this loophole since then there won't be enough healthy people paying insurance premiums to pay for the care of the sick. The government will have to step in to cover the costs and they won't be able to raise the penalty to force people into the system. The insurance companies will still have to cover tons of extra costs and will likely go out of business without government help.
I typed up a post, and the filter would not let it go through. I couldn't find any reason why, so I broke down the post and posted it sentence by sentence to see which one was objectionable. Here's the sentence that the filter would not allow to be posted:
"Obama's policies haven't saved us from depression, they are pushing us into depression."
It wasn't too long ago that there were laws still in effect that outlawed homosexuality. The liberal argument in favor of abolishing these laws was simple and powerful: what consenting adults do is none of the State's business. Unfortunately, many liberals do not extend this logic to the realm of economic actions between consenting adults. For these same people, letting two consenting adults agree on a wage level below the one proscribed by the State is simply out of the question.
How can liberals repair this obvious inconsistency? One possible argument might be that the State can interfere in the economic realm in order to protect people from their own bad decisions. However this argument proves too much, as then the State could logically put everyone in a cage to make sure they only ate the right things and only did non-dangerous things. Logically such an excuse only leads to the totalitarian state, and as such is rejected.
Yet this inconsistency persists, even in other issues of civil liberties as compared to economic liberties. Of course the conservative has it the other way around, claiming economic liberties to be protected but not the civil liberties. Libertarians are the only ones who remain consistent with regard to all liberty in that we should be at liberty to act as we will without aggressing upon another person's rights.
Politicians have been ignoring the problem or putting band-aids over for a while now, but it will undoubtedly start to have a larger and larger effect over the next decade. This problem is the massive national debt, including the unfunded entitlement liabilities. Both together total over $100 trillion, an impossibly large number that will never be paid for. For the first time in many Americans' lives, we will see massive cuts to government spending. Not the kind of "cuts" we've had lately, where there is no decrease in spending but just a decrease in the rate of spending growth. No, there will have to be huge spending cuts. There is no amount of tax increase that can pay for this spending, it will have to be done.
Government, particularly the Federal government, will have to start shrinking for the first time in decades. There is no way around this. People will not understand why, and accusations will fly about supposedly unnecessary austerity measures meant only to protect the wealthy, as we are seeing right now. But over time people will begin to see that it is the idea of government as benefactor that is the real problem. The promises made could never have been fulfilled and thus were lies from the start. This mass deception will reveal to the people that the emperors have no clothes, and they will lose faith in government as the solution to every problem.
The pain of it cannot be avoided, but it could be lessened if reasonable people accepted this truth that massive spending cuts must be made. The sooner it is done the lesser the pain will be. For those that dogmatically believe in government entitlement programs, if you don't want your entire system to completely collapse and cause the populace to completely reject it, you should be at the forefront advocating for immediate massive cuts. As for me, I know that the sooner it all collapses the better. A long, drawn-out collapse will take that much longer to repair. Better to rip the band-aid off now and get it done with.
I hear a lot of myths and misconceptions about libertarianism and free market capitalism around here, so I decided to put them in a list for easy reference.
Government is society. This is by far the most common misconception I hear. The usual way this comes out is in an accusation that if I don't want the government to do something, I must not want that thing done at all. This is of course, absurd. It's like saying that because I don't want the state to maintain a state religion that I'm for no one being allowed to follow a religion. Government is a minority part of society. It is a separate and distinct group of people. Saying the government does X is a convenient metaphor since it is actually persons A, B and C who are part of the government minority who are doing X.
Laissez-Faire, free market capitalism means anyone can do any terrible thing they want. This comes about occasionally as people have a false idea about what free market capitalism is. It is primarily a system of property rights protections, not a free-for-all. As such, crimes like theft and fraud are still against the law. People and firms cannot just do as they please. In addition, firms cannot pollute anywhere they want as that would be an invasion of other people's property rights. In some ways, capitalism would be a far stricter regulation upon people's behavior. This is of course in addition to economic and social regulations which also act as a check upon actions.
You want the poor and old to die in the streets, or some other bad outcome. This comes about from a complete denial of the possibility that there might be other ways to achieve similar results. People think like this because they have been living under government control of such things as health care and education that they cannot conceive of a world in which the government did not supply these services. If the government provided everyone with "free" shoes and I advocated an end to this, these very same people will decry, how will the poor get shoes? This is simply because the institutions that would replace the government bureaucracies don't exist and so people cannot imagine what life would be like without government providing certain services. Thus they see only one possible outcome and anyone who desires such changes must, in their minds, desire the only possible outcome imaginable to the myth-believer.
Your ideas are utopian. None of my ideas require a perfect world/conditions to exist nor do they claim to create a perfect world. In fact, they are based on the fact that the world is not perfect, that resources are scarce, that disputes will commonly arise. It is never the case that I am claiming that liberty will create perfection, only that my system is better than other systems. There will still be crime, disease, poverty and the like. I only claim that libertarianism can reduce these undesirable things better than other systems. No political/economic system can eliminate them.
You care only about the wealthy and not the poor and unfortunate. This is similar to number three in that since people disagree with me about the outcomes of my ideas, they believe that I want the outcomes to come about that they think will happen. In reality I believe my ideas will be beneficial to everyone in society, from top to bottom. It is certainly fair to disagree with me about the outcomes of my ideas, but it is not fair to impugn my motives.
You only want X because X personally benefits you. This often comes up regarding taxation, as in I only want to end taxation because of personal greed, or in regards to some other policy which it is presumed must highly benefit me. This is wrong for two reasons. First, my views are based on a wide-reaching moral philosophy of personal rights. It would be highly inconsistent of me to only support liberty when it didn't affect me or when I had nothing to gain. Second, my views of liberty are that increased liberty is beneficial to everyone in society. The myth seems to be that I wish to gain at someone else's expense, however I believe that my ideas will benefit everyone. It is fair to disagree about the amount and breadth of the supposed benefits, but not to impugn my motives.
You want to legalize X, so you must support X. This comes up with issues like ending drug prohibition or legalizing prostitution. Just because I think it should be legal do something doesn't mean I think it's moral or wise to do something or that I want people to engage in it. My views are based on rights and liberty, not on how I want to craft society.
Ever see the bumper sticker that says, "If you can read this, thank a teacher"? Maybe there should be another one that says, "If you hate math, thank a teacher." Why not? If teachers are going to take credit for successes, shouldn't they also take credit for failures? That's part of the problem with our education system: a lack of accountability. Failures are blamed on the child, not on the teacher or the school. Talk to an administrator in a school and you'll find out that the majority of disciplinary referrals come from a small number of teachers, yet it is always the students that are blamed for the problems. And when it comes to the issue of truancy, the questions are about whether to suspend the child or whatever else to do, but never about why the child hates going to school.