The Real State of the Union

The Real State of the Union

President Obama gave his 7th State of the Union speech  last night, January 21st 2015. After hearing these speeches year after year, president after president I have come to see them not as projections of what the actual state of the nation is, but rather an advertisement for things the president thinks he did well,

“ ...more of our people are insured than ever before...”

Well yeah, they kind of have to be, remember you made them criminals if they didn’t buy insurance.

Not mentioned in last nights remarks is the reality of the real state of the union.

What about the National Debt?

The Outstanding Public Debt as of 21 Jan 2015 at 06:03:20 PM GMT is:

The estimated population of the United States is 319,850,520

so each citizen's share of this debt is $56,565.23.

The National Debt has continued to increase an average of

$2.40 billion per day since September 30, 2012!

Or maybe the amount of new regulations?

A little over 75,000 pages of new burdensome and restrictive regulations were imposed on US businesses. Each one a hinderance to the growth and expansion of businesses.

No mention of the prison population.

More than 1.57 million inmates sat behind bars in federal, state, and county prisons and jails around the country as of December 31, 2013. Many from victimless crimes.

We could go on with the rising tax rates, poverty levels, inflation, wasteful spending, the drug war, real wars and their destructive nature, the rate of returning soldiers committing suicide, the rate of bankruptcy and homelessness, the NSA…. And so on and so on.

The State of the Union has become nothing more than promises of future action and commercialization of past actions, not to give a statistical breakdown of how the nation is functioning.

Why America Doesn't have a "Free Market Capitalist" Economic System

I say quite often that America does not have a Free Market Capitalist economic system and sometimes the befuddled looks I get from those that hear this provokes them to question what I mean by it. The answer is simple and can be broken down into two parts, the two definitions of what is being asked.

"What is a Free Market?" and "What is Capitalism?"

The answers to these two questions together with an understanding of the current mode of economic activity gives a clear indication that the statement, "America does not have a Free Market economic system" is true.

So what is a free market economic system?
Free Market principles point to an economic system where business are unfettered by regulation, licensing, special fees and taxation, a system where all manner of salable goods are on the market without prohibition or exclusion. It is a system where the buying habits of those consumers would drive the manufacturers and distributors to produce or stock items that were valued by customers and discontinue or remove goods that have lost favor or marketability and sales numbers. This provides that customers are able to actually drive the economy by their buying habits and wants, without the interference of an outside entity.

This would of course be in contrast to the current system of high regulation, increasing taxation, special licencing, educational requirements and so on the American system is plagued by. Economists who advocate this idea of unfettered markets, also see that allowing prices and wages to form naturally and the availability and manufacture of goods to lie in the interest of those who have the capability to produce and the want to produce in trade for profit is a nearly unfailing concept in the ways of maximum efficiency of producers as well as maximum favorable market conditions for consumers.

With this some may say that the deregulation of businesses will (could/would) lead to businesses being able to skirt environmental concerns, livable wages, price gouging, and so on. In response to this one can argue on the case of environmental concerns that the information that a retailer or manufacturer was damaging the environment, the consumers voice could be heard by lowering or altogether abandoning or boycotting the product, manufacturer and retailers and distributors. When profits and sales decrease a signal is sent that certain practices are not favorable or condoned. This is the aspect of "market self regulation".

On the issue of wages. Wages should be set by employer and employee. If in the scenario an employer is offering too little pay the potential employee can ask for more or refuse. By no means should the wage of any person be determined by anyone other than the laborer and the job provider. In the system we have now wages are set by government decree, in an attempt to make a fair wage government actually provides yet another hurdle for a prospective employee to jump in order to gain employment. If the set wage is too high for the business, they will refuse to hire. Minimum wage laws also hinder the ability of these businesses to adjust wages based on experience of each employee, there is always a floor that they cannot overcome. Again a control on the level of wages offered by businesses is not a Free Market principle. It is a system of control.

Pricing controls work similar to wage controls, being that wages are prices and vice-versa, it stands that any interference in the marketable value being set by someone other than the seller negates the definition of free market practice.

So what is Capitalism?

Capitalism is defined many ways depending on the social structure lense those defining it look through. To make this easier we can go with two differing opinions, one from Wikipedia (which I use because of it's high use of editing from other editors) and then a definition from the website WorldSocialism.org (including this one because it highlights the idea that the word has different meanings depending on who you ask and how they define it).
According to Wikipedia Capitalism is "is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit. Central characteristics of capitalism include capital accumulation, competitive markets and wage labor.  In a capitalist economy, the parties to a transaction typically determine the prices at which assets, goods, and services are exchanged."  This is the definition, or close to it, that most non socialists agree upon.

With this definition in mind we can see that there are a large number of businesses and services that are not privately owned, ran, or funded but are so called public services and are controlled by government, whether county, state, or federal, and are funded through taxation instead of consumerism. This leads me, to say that we may define America as a mixed economy, but definitely not a pure Capitalist economy.

According to the website WorldSocialism.org though Capitalism is something to be feared and abhorred based on their claim of worker exploitation. The definition they detail is,"Capitalism is the social system which now exists in all countries of the world. Under this system, the means for producing and distributing goods (the land, factories, technology, transport system etc) are owned by a small minority of people. We refer to this group of people as the capitalist class. The majority of people must sell their ability to work in return for a wage or salary (who we refer to as the working class.)"

They go on to say,"The working class are paid to produce goods and services which are then sold for a profit. The profit is gained by the capitalist class because they can make more money by selling what we have produced than we cost to buy on the labor market. In this sense, the working class are exploited by the capitalist class. The capitalists live off the profits they obtain from exploiting the working class whilst reinvesting some of their profits for the further accumulation of wealth."

And with this in mind we can ask the socialist this question, "isn't the worker also a capitalist, as they value their time and effort less than the wage they are paid? If they did not value the wage more than the time or effort they would not work, as in a socialist society, goods are given freely based upon need and taken based upon production, or better said by their economic muse Karl Marx, "From each according to his ability, to each according to his need". This proclaims that no matter how productive you are, your effort is only for the benefit for the others who wish not to work or do not perform as you do. What incentive does that leave to work hard, or even harder? What incentive does that leave to work at all? What incentive does that leave to create, to innovate, or to improve upon goods? If there is no benefit for someone to excel at a good or service it will be done at a minimum speed and quality.


With that being said we can look at the American economy as a partial capitalist economy and a partial socialist economy. There are many areas that the State has complete control over production or service. Roads, Schools, Protection Services, Old Age Insurance are a few of the largest and easiest to see. In that the capitalist is still beholden to government entities in order to start or continue in their business. We can also see THAT is in no way a "free market" system.

Breaking Bad toys Being Pulled by Toys R Us.

A story popped up last week where a Florida mother was concerned about a product she had seen on the shelves of Toys R Us while shopping with her children. The subjectively offensive products were figurines of characters in AMC's hit TV show Breaking Bad. From the Newspaper U-T San Diego's website,"Susan Schrivjer of Fort Myers was not happy when she found the meth-making mastermind Walter White doll alongside the partner-in-crime Jesse Pinkman doll on toy store shelves not far from Barbies and Disney characters."  

Now while this may seem like a pretty easy case for people to hash against Toys R Us, what it shows to me is that a consumer driven market economy is in effect working as it should.
Let me explain, when businesses get word that their customers are upset about a product or service or even a remark made by an employee or CEO they let that company know by differing means, that company, when made aware of these feelings or demands can choose whether or not to cave to pressure or stand by their decision. Toys R Us decided to cave to the demands of the petition signers. This is the markets way of self regulation and also of effective competition breeding. When one store will take down a product or get rid of a service, a competitor can move in to offer them.

I think this whole story has been blown way out of proportion and a real look at the market effectiveness we can see that it can be a good indication that consumer driven markets are working as they should.

Now I'm off to buy some Breaking Bad collectible figurines... Not really... I don't like the show.

More "Security" Without The State?

Down with the Police State! No More Police! Things like this get thrown out a lot by social libertarians and anarchists alike, even getting the attention and involvement of a few Republicans and Democrats who see the brutality of the police without noticing the monopoly of force they impose on the regular. There is however an aspect of ridding ourselves of this compulsory reactionary force of police missed by a majority of people; the fact that without the police of today, the ones who are paid for through compulsory and mandatory taxation, without recourse or ability to address grievances, we COULD have more security personnel.

Crazy aspect right? Not really. Many of the advocates of ending the Police State and the obligatory manner in which they are funded and operate are also proponents of private property and the rights of the owners. Under this idea the owners of every property, whether commercial or residential COULD have the possibility to hire their own private security services. Under this model every store you walk into in a mall type setting could have their own security officers, from different service providers. Also, in the residential sense, each home COULD have their own services being provided, not much unlike security systems installed in their homes already, but enlarged or advanced to include property security, investigations in the instance of property violations, and preventative security measures to reduce or preclude any attempt violations of property.

Local story of an prior law enforcement officer starting a private security firm. Click Here.

As the police today are for the most part becoming an aggressive force, one that needs to be checked by the people. Market provided services and funded by voluntary means COULD provided a service of security while ridding the public of compulsory funded, hyper-aggressive and increasingly militarized agents of the government. I stress the word COULD in this because without a doubt, this is only in theory but I feel should be at least recognized and investigated as an alternative. It is also only a COULD because as security is a personal value assessed by individuals, it is up to the owners of each property to make the choice to have security or not.

On Wage Slavery

I think "Wage Slavery" is a false term.

Wages are what employees gain from their service and labor to their employer. It is an act of voluntary exchange on the part of both parties. If wages were not gained by this service then slavery would exist, in the presence of wages though it is merely employment by mutual terms.

Slavery, historically, is the position of a person who through compulsion is held against their will and forced (by threat of violence)to work for the gain of the "slaveholder or slave master".

Using the word wages in conjunction with the word slavery does two things. One it lowers the definition of wages to the negative connotation of being forced to work for the benefit of another without ANY reimbursement. Secondly it tends to negate the real horrors of real slavery that has happened and is still happening around the world.  

The term "wage slavery" defined deals with those wages that are so low that a person who is employed relies on them just for basic survival. Of course wages should be used in the pursuit of survival and any wants left to be pursued, if that is the want of the wage earner. One cannot force a person to use their own property in any other way that they do not wish. 

Hereto we must interject on the reverse side of this issue. Mandatory wage and Minimum wage laws handed down from government bureaus and departments. These laws force businesses and businesses owners to provide wages beyond that of market value or personal labor value. These laws almost always lead to higher prices in market goods as the mandatory minimum wages are offset in the businessman's pursuit to maintain certain levels of profit. 

Wage Slavery is a false point being made by those that wish to direct the affairs of businesses that do not affect them in the personal way.

Ending the Federal Reserve may be easier than it sounds.

Ending the Federal Reserve is less about Government policy and more about you and your personal economy. I was asked the other day how I saw the ending of the Federal Reserve being able to be accomplished. I answered that through government action you may see it in the next 100 years or so (don't hold your breath though), but to handle the idea sooner I think it is less about attacking them or trying to destroy them as much as it is to make them irrelevant.

Getting rid of their power is as easy as making their product and/or service as completely irrelevant as possible.
The rise in cryptography and the cryptocurrencies wave of enthusiasts and entrepreneurs is a great starting place for this idea. Since cryptocurrencies work around the federal dollar and international currency as well it decentralizes their monopoly of currency. Once enough people are convinced or shown the amazing technological benefits to cryptocurrencies over the Fiat dollar bill we can start to widen the gap of mandated currency and free market currency. Crypto is not the only way this can be done but is used as a single example of what can be done to end Centralized Banking cartels.

Money is a tool and it is in no way a government invention. Money or currency has existed for thousands of years and has taken countless shapes and forms. Sea shells, cows and chickens, arrowheads, blankets, property, even other human beings have been used as a means of trade and currency between peoples, though I do not condone the use of humans for this it shows the wide array of means to people's commercial ends.

So the real question that needs to be answered is this. How do YOU plan of destabilizing and decentralizing their mandated paper and coin currency? There are ways and means to obtain this goal, one just needs to commit to them in a rational and educated way.

Mises Daily: An International View of Drug Prohibition: An Interview with Mark Thornton

Mark Thornton, Mises Institute Senior Fellow, recently traveled to the United Kingdom to take part in Oxford University’s Oxford Union Debates.

Mises Institute: Why were you invited to debate at Oxford?

Mark Thornton: The Oxford Union can pretty much get whoever they want to debate, including presidents, prime ministers, Mother Theresa, the Dalai Lama, and even Julian Assange, so I was honored that they invited me. I met several students in the Oxford Union and at Oxford University who were familiar with my work on the drug war and at the Mises Institute. Each side of the debate generally consists of a student presenter and three experts. The debate is similar in structure to the House of Commons and has been that way since 1823.

MI: What was your basic line of argumentation and how was it received? How did the other side justify the drug war?

MT: My opening joke, which came at the expense of the American public, was very well received and my arguments were also very well received. My argument was that the war on drugs has no benefits, just costs and negative unintended consequences. These include drug-addict crime, drug-dealer violence, bribery and corruption, and the increase in drug potency to deadly levels. I gave them the theory of how to connect those dots and some history of how the dots connected. I then described ten benefits of legalizing drugs that fit into the three categories of making us safer, making us healthier, and improving human welfare. I ended my presentation with four examples of what happens when drug laws are liberalized. One example was an experiment where heroin addicts were provided with doses of pharmaceutical-grade heroin. The result was a dramatic drop in their criminality, a large increase in their employment, and an increase of those seeking treatment. Another example was the needle-exchange policy. Countries with liberal needle-exchange policies (free needles on demand) have very low HIV/AIDS and other needle-borne disease transmission rates and countries with very strict needle policies (only available by prescription) have very high transmission rates. I received a very enthusiastic response from the audience.

The three experts on the pro-drug-war side made the following arguments. The first expert said that there was no war on drugs and that prohibition had never really been tried. The second expert’s argument was that drugs were bad — that’s it! She was a drug addict herself and revealed that she wanted a marijuana leaf tattooed on the back of her hand when she was young, but the tattoo artist refused because she was not 18 years old at the time. What makes her think that businesses will sell cocaine to 14 year olds if it was legalized? The final expert argued that if we legalize drugs then eventually almost everyone will be hard-core drug addicts. As you can see the other side’s arguments were mostly misinformation and fear tactics.

MI: We know that here in the US, drug legalization efforts have progressed significantly in many states, especially in Colorado and Washington. What was the view of these developments in the United Kingdom?

MT: Everyone I talked to about drug policy was aware of developments in Colorado and Washington and several people questioned me about them. My general impression was that people were hopeful that the US had broken its hard-core attitude against drugs. More generally, public opinion in the UK and Europe also seems to be moving toward more liberalized drug policy. This does not necessarily entail full drug legalization, but rather a policy where hard drugs are addressed as a medical problem, not a law enforcement problem, and where cannabis is regulated in a similar manner to alcohol and tobacco.

MI: Through the news media and popular culture we all have a certain image of what the drug war looks like here in America, with gangs and smugglers and drug runners. Has the drug war manifested itself differently in Europe or are things more or less the same there?

MT: Like the United States, Europe is a large, illegal drug-consuming region, rather than producing region, with similar laws against drugs. South America also produces much of the drugs that are smuggled into Europe.So naturally the problems are very similar. Part of that similarity is also driven by international treaties that forces countries to conform to certain legal norms with respect to illegal drugs. So yes, they have smugglers, gangs that sell drugs at the retail level, organized crime, bribery, and corruption, etc. There are some obvious exceptions such as cannabis coffee shops in the Netherlands. There are some noteworthy experiments as well, such as the decriminalization of all drugs in Portugal. It would not be incorrect to say that Portugal’s reform was an act of desperation, but one should remember that the US was equally desperate when we repealed alcohol prohibition in the depths of the Great Depression.

MI: Has the fight against the drug war become a worldwide movement, or are successful efforts cropping up in only a few countries?

MT: Both. Successful efforts are cropping up in only a few countries; however, I think there has been a worldwide ideological movement in favor of more liberal drugs laws. The balance in favor of more liberal drug laws in both Europe and the Western Hemisphere is starting to become apparent. Medical marijuana and decriminalized recreational marijuana are very acceptable throughout much of the developed world. The people of Mexico, Central America, and the drug-producing countries of South America have been devastated by the war on drugs and are desperate for a solution. It may seem as if the victories are sporadic and isolated, but I believe when history looks back on our recent past and near-term future that it will label the period the “End of the War on Drugs,” in much the same way we have the “End of the Cold War” and the “End of Communism.” At least that is my hope.

MI: When we think of illegal drugs, we generally mean cocaine, opium, and marijuana. But there is increasing attention being paid to prescription drugs in this country. Is this a growing issue in other countries as well?

MT: This problem was predictable as I showed in my book, The Economics of Prohibition. As the war on drugs has progressed with more enforcement capabilities and greater penalties, the black market has responded with higher potency and more potent and dangerous drug types. When I was writing back in the 1980s, the progression was increasingly higher potency cannabis, to cocaine, crack, and heroin. Since that time crystal meth, ecstasy, and prescription opiates have been added to the mix. More recently, new chemical drugs have been invented that are technically legal. I wonder if today’s drug warriors had a button to push that could dial us back in time, prior to government intervention in drugs, and have a situation where people smoked low-potency pot and opium on the fringes of society and drank Coca-Cola (which contained cocaine rather than caffeine), would they push that button?

OxyContin (oxycondone) and Vicodin are opiate painkillers that are killing thousands of people in the US each year. Both are often wrongly viewed by addicts as safer alternatives to heroin. The use of the drug has already spread to Europe and elsewhere, and so have the deaths.

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

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Image source: iStockphoto.

Mark Thornton is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises,The Bastiat Collection, and An Essay on Economic Theory. Send him mail. See Mark Thornton's article archives.

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Introducing the Mises Curriculum!

The Mises Institute has always promoted scholarship and education in the pursuit of liberty. Ideas have always been at the heart of our mission.

That’s why we decided in 2010 to make world-class instruction in the ideas of liberty only a mouse-click away for people around the world. So we started Mises Academy, the first — and best — Austrian economics online learning platform in the world. Next we added a broader range of liberty-focused courses to the Academy. Since then we’ve delivered dozens of in-depth, high-caliber live courses to thousands of students around the world.

The 50+ courses in the Mises Curriculum at the Mises Institute will guide you through Austrian economics, from the action axiom to advanced monetary theory, and through libertarian political philosophy, from the non-aggression principle to advanced libertarian legal theory. Also included are courses on history, philosophy, and even logic.

Course design and lectures are by the soundest thinkers and the top scholars in the Misesian/Rothbardian tradition: Joseph Salerno, Peter Klein, David Gordon, Robert Murphy, Thomas DiLorenzo, and others. You’ll get the real deal: thoroughly praxeological and completely free-market economics, as well as principled, radical, and uncompromising libertarian theory.

For a mere $99/year, you can get full access to all of these courses, including hours of lectures recorded in both video and audio, hyperlinked syllabi of online readings, professor-written quizzes, certificates of completion, and more. Work through whole courses from start to finish, or fill in gaps in your understanding by zeroing in on particular lectures and lessons from multiple courses.

Ideas Have Consequences

Ludwig von Mises demonstrated that all governments, and the social order itself, depend onideology, which he defined as “the totality of our doctrines concerning individual conduct and social relations,” and which includes both doctrines that concern ends, like political philosophies, and doctrines that concern means, like economic theories. Therefore, it is ultimately ideology that is what gives a state the widespread influence, or “might,” as Mises called it, that it needs to rule.

Thus, contrary to Mao’s famous dictum, political power flows not from the barrel of a gun but from ideas. In fact, Mao’s own rise to power, and that of many like him, was ultimately due in large part to the fact that the idea of a planned society, including its purest form, socialism, had captured the hearts, minds, and imaginations of entire generations, from the mid-nineteenth century onward. Its time had come, however fleetingly, and many regimes that tried to stop the march of socialist ideas with force utterly failed. It was only widespread disenchantment with socialism that halted the march.

Moreover, freedom from political power is also ultimately based on ideas. When the time does come for the ideas of liberty — libertarian political philosophy and sound economics — it won’t be, as The New York Times recently put it, a “libertarian moment.” It will be, as Ron Paul clarified, a “libertarian transition.” And the state, for all its weapons and cages, will be powerless to stop it, because the ideas of liberty are the negation of the ideas upon which the state’s power rests.

It was the ideas of the political philosophers of liberalism and of the laissez-faire economists that were ultimately responsible for the limited flowering of liberty that occurred prior to the rise of the modern managerial state.

And it is the ideas of thinkers like Mises and Murray Rothbard, propagated by institutions like the Mises Institute and individuals like you, which can give moral leaders like Ron Paul the “might” to sway the public to choose liberty. That is the battle of ideas before us.

We have always developed courses with systematic, long-term study in mind, intent on building an archive of courses that constitutes a thorough Austro-libertarian curriculum. And we are now making that treasury of truth-teaching available as one amazing resource: The Mises Curriculum.

If you would like to thoroughly prepare yourself to help us make liberty become the idea whose time has come, I can think of no better way to do it. For more information, and to register, go to Mises.org/Curriculum.

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

Comment on this article. When commenting, please post a concise, civil, and informative comment. Comment Policy.

The Mises Institute works to advance the Austrian School of economics and the Misesian tradition, and defends the market economy, private property, sound money, and peaceful international relations, while opposing state intervention. See Mises Institute's article archives.

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On Police Body Cameras

There is a lot of commentary and discussion coming from the Ferguson MO story that revolves around the idea that Police Officers should be required to wear body cameras while on duty. I want to give a brief account of my own thoughts on this issue as it pertains to the need and the effects of pursuing this endeavor.

In response to the Ferguson story, where a young man was fatally shot by an Officer it has raised new concerns for law enforcement and renewed debate over the role, scope  and authority of the Police in America. In the discussion there has risen voices of both complacency and of concern.

The first is the voice of many people who defend the actions and the means of todays police forces. In that defense many will call for any actions necessary for police to "do their job" and will subjugate others to fund their ideas by the use of government and a ballot box. In these claims, the newest want is that of cameras to be worn by all officers, to record at all times, and the video to be made available to the public upon request. This idea is one of accountability and in that respect I would agree. Transparency and accountability is something that has been too long gone from government, even at the police or local sheriff level. Those that do not agree with the means or justifiable excuses by these departments should agree that accountability is needed and wanted in all government positions.

The other aspect of this idea is that of the economic impact it will have. As the calls for police issued cameras are thrown around an important thought has escaped the discussion altogether. The way police departments and law enforcement agencies are funded is through taxation, and in that, all new equipment purchased will be made through these funds. As someone who advocates for an end to legalized plunder (taxation) this idea goes against my own opinion and belief. I have said it time and again that whatever cannot be done through voluntary means should never be forced upon people. For those who call on their local and state police and law enforcement agencies to be equipped with cameras a fundraiser or donation from concerned citizens would be a rather better way to handle this. The subjective value theory again makes an appearance here. If those who do not see a relative value for the cameras (and other services and products for that matter) the forced extortion of them serves as a punishment by which they are victimized by a majority of people who "want without conscience or consequence". These new victims are the result of a economic fallacy that what is publically funded is publically endorsed, even though those that do not endorse the idea will be subjected to its use against them. When any dissent from the idea or even the forced acceptance and funding of the idea is exposed it is usually met with some variance of the phrase, "it is for the betterment of the community and you get to experience it through safer streets and accountable officers." But with this again the value placed on the idea by one does not always carry over to others. This idea of "social positives" through third parties or alternate means is the same argument made in relations to public schools and public welfare programs.

Another caveat to add to this is a comparison of costs to savings. When a police officer receives a compliant or if an officer has to go to court the ultimate financier is the taxpayer. All legal matters are paid for through their funding by the citizens. If these cameras were to have a positive impact of the number of incidences (meaning the number of incidences declines) leading to costly court battles and time lost, lawyers fees and compensation or settlements in and out of court (also paid for by the taxpayer) , the cost to savings benefit should be considered.

In the case of body cameras for police officers the idea to make these agencies and officers accountable and transparent is a noble goal that loses its appeal in the economic light of forced compliance and mandated funding.

Radio Show I did over the Weekend.

I was asked to come onto a radio show by the host and talk about the blog and about other things, current news, a bit into the economics of police and the increasing militarization of police forces across the country as well as subsidies and the alter effects of taxation. It is a short 30 minute show and the host and I were able to get through a lot of topics and issues.

Take a minute to listen to a spot I did with Rakkur Crowley on his radio program Austrian Circle. You can find his entire playlist on the Voluntary Virtues Network Youtube channel.


https://s3.amazonaws.com/AustrianCircle/Podcasts/Austrian+Circle+Travis+Wilson+web.mp3

Bolstering Bad Business

There should be a separation of business and government. When, like now, that separation doesn’t exist, bad things can and will happen. It is no secret that government run programs often fall victim to the worst in economic practices. We do not have to look far to see many recent examples of government bolstering bad businesses. With that in mind, two interesting articles came across my newsfeed this week and both are related in effect and cause. The two also show a failure in economic practices, and both deserve to be answered with some sort of rational economic thinking.

The first article I read showed that Amtrak, the mass transit rail program created by Congress in 1970, has been running huge deficits every year, supported by taxpayer subsidies. These subsidies have allowed a failing business to continue to operate on bad principles and creates a form of corporate welfare; all paid for out of taxpayers’ pockets. Altogether, taxpayers foot an average $1 Billion dollars annually into this program and it is only getting worse. One thing is for certain, if the business was made to live on its own revenue, like private business, it would either find a way to rid itself of detrimental wasteful lines or it would have gone out of business long ago.

The other was about the United States Postal Service and their quarterly loss of $2 BILLION. I am sure most of us can remember the price of stamps and services when we were younger, and I am sure we all remember almost every single time they were raised. But what makes this different than just rising with the rate of inflation, set and attempted to be managed by the Federal Reserve, is the annual rise in prices and services is met with an increasing deficit and an increasing annual subsidy from the taxpayer’s pocket.

Simple economics suggests that whenever a business receives bailouts or subsidies from government it is at the expense of not only the taxpayers but also at the expense of the market economy. As anyone should be able to see, the use of government subsidies coming from the pockets and paychecks of the American Taxpayer bolsters bad businesses and deepens a negative effect on sound economic principles. 

Top Ten Countries and Military Spending

According to the Stockholm International Peace Research Institute these are the top ten countries in relations to military spending. The US is again on top of this list as it has been for years. Even with its steady decline in spending due to budget cuts it still sits at over 3 times that of the number 2 spender China. All of this money is extracted from its citizens through taxation and sits as one of the top expenses in these countries.

Below is the list of the top ten countries and their military spending numbers. Although the Stockholm Institute does not give the break down per capita I have done those numbers and added them underneath each countries stats.

No. 10: Brazil
Military expenditure: $36.2 billion
Expenditure as pct. of GDP: 1.4 percent (tied, 62nd lowest)
1-yr. spending change: -3.9 percent (26th lowest)
Total arms imports: $254 million (24th highest)
Total arms exports: $36 million (12th lowest)
Population: 198.7 Million
Per Capita Spending: 183.00 Yearly


No. 9: India
Military expenditure: $49.1 billion
Expenditure as pct. of GDP: 2.5 percent (31st highest)
1-yr. spending change: -0.7 percent (46th lowest)
Total arms imports: $5.6 billion (the highest)
Total arms exports: $10 million (10th lowest)
Population: 1.237 Billion
Per Capita Spending: 40.91Yearly



No. 8: Germany
Military expenditure: $49.3 billion
Expenditure as pct. of GDP: 1.4 percent (tied, 62nd lowest)
1-yr. spending change: 0.0 percent (53rd lowest)
Total arms imports: $129 million (36th highest)
Total arms exports: $972 million (6th highest)
Population: 81.9 Million
Per Capita Spending: 601.95 Yearly





No. 7: United Kingdom
Military expenditure: $56.2 billion
Expenditure as pct. of GDP: 2.3 percent (34th highest)
1-yr. spending change: -2.6 percent (34th lowest)
Total arms imports: $438 million (15th highest)
Total arms exports: $1.4 billion (5th highest)
Population: 63.23 Million
Per Capita Spending: 903.10 Yearly



No. 6: Japan
Military expenditure: $59.4 billion
Expenditure as pct. of GDP: 1.0 percent (31st lowest)
1-yr. spending change: -0.2 percent (52nd lowest)
Total arms imports: $145 million (34th highest)
Total arms exports: N/A
Population: 127.6 Million
Per Capita Spending: 465.51 Yearly



No. 5: France
Military expenditure: $62.3 billion
Expenditure as pct. of GDP: 2.2 percent (39th highest)
1-yr. spending change: -2.3 percent (35th lowest)
Total arms imports: $43 million (55th highest)
Total arms exports: $1.5 billion (4th highest)
Population: 65.7 Million
Per Capita Spending: 948.24 Yearly



No. 4: Saudi Arabia
Military expenditure: $62.8 billion
Expenditure as pct. of GDP: 9.3 percent (2nd highest)
1-yr. spending change: 14.3 percent (16th highest)
Total arms imports: $1.5 billion (4th highest)
Total arms exports: N/A
Population: 28.29 Million
Per Capita Spending: 2219.86 Yearly



No. 3: Russia
Military expenditure: $84.9 billion
Expenditure as pct. of GDP: 4.1 percent (10th highest)
1-yr. spending change: 4.8 percent (48th highest)
Total arms imports: $148 million (33rd highest)
Total arms exports: $8.3 billion (the highest)
Population: 143.5 Million
Per Capita Spending: 591.63 Yearly



No. 2: China
Military expenditure: $171.4 billion
Expenditure as pct. of GDP: 2.0 percent (45th highest)
1-yr. spending change: 7.4 percent (36th highest)
Total arms imports: $1.5 billion (3rd highest)
Total arms exports: $1.8 billion (3rd highest)
Population:1.35 Billion
Per Capita Spending: 126.96 Yearly



No. 1: United States
Military expenditure: $618.7 billion
Expenditure as pct. of GDP: 3.8 percent (14th highest)
1-yr. spending change: -7.8 percent (12th lowest)
Total arms imports: $759 million (8th highest)
Total arms exports: $6.2 billion (2nd highest)
Population: 313.9 Million
Per Capita Spending: 1971.00 Yearly

As a total these top ten spenders on military combined equals One Trillion Two Hundred Fifty Billion Three Hundred Million, 251,300,000,000 trillion. 

The United States alone spends $100 per person in the WORLD.

These are absolutely staggering numbers. Ones that are unsustainable and unneeded. It is sad to see the worlds citizens be taken for what is a fortune in their own hands, to be taken for the sole purpose of running a governments military. A military that destroys wealth, property, and lives.  

Robert Murphy: Contrasting Views of the Great Depression. Mises University 2014

This year (2014) Mises University has started. This is a short video featuring Economist and Author Robert Murphy. Here he is explaining the Contrasting views of the Great Depression. Going through the differing schools of economic thought and giving examples of typical or "normal"  thoughts on the cause of, effects of and the eventual relief of one of the greatest and longest lasting economic depressions The United States and parts of the World felt.

Robert Murphy is an associated scholar of the Mises Institute, where he teaches at the Mises Academy.He runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, theStudy Guide to "Man, Economy, and State with Power and Market," the "Human Action" Study Guide,The Politically Incorrect Guide to the Great Depression and the New Deal, and his newest book,Lessons for the Young Economist. 

On Immigration: Legal and Illegal

Immigration seems to be the brightest blip on the map right now, and it seems it is the most popular topic among people. Immigration by itself doesn't seem to be the real issue, at the heart of it is the economics of Immigration. That is what needs to be addressed. Together and separately, the economics aspect, at least for some, can resolve these issues in a mutually beneficial way. This is not to say that other aspects of the issue are not important, the supposed health risks for example cannot be simply eradicated by economics, but addressing the issue at the root helps us to get past the emotional reactions and allows us to clearly define and resolve the issue completely.

Immigration is nothing new. The moving of people from one place to another for various reasons has been a mainstay of human life since the beginning. A chance to increase the quality of life or to advance knowledge or social rank have been the previous reasons for migration of people from homelands. For centuries this was the way cities and towns, and eventually states and countries grew. From the dust of the immigrant workers, nations grew to their current levels. But now it seems, this belief has been replaced with fear, misunderstanding, ignorance, nationalism and hate. Could the solutions to what some call a crisis be found in economics?

While the media portray a rising tide in illegal immigration, statistics shows another story.

According to statistics from Pew Hispanic Research and the Department of Homeland Security the estimates of Unauthorized or "Illegal" immigrants has remained roughly unchanged from the past year but has seen a relative decline since the recession began in 2008. Looking over the graphs provided on that page we can also see that the rise in Immigration happened between 2002 and 2007, adding almost 4 million more immigrants between those years. Fig 1.

While the current fuss is being made during the Obama Presidential administration the real blame should go to the prior administration. Under President George W. Bush an average of 4 million immigrants found their way to the US. But where was the outrage then?

There wasn't one. Why? The economy seemed stronger under Bush due in part due to the Housing Market Bubble that eventually, in late 2007, burst. This false prosperity brought in a higher demand and a need for more workers. Immigrants filled the void of low-skilled workers as native born citizens took over higher skilled positions. In 2007 unauthorized immigrants made up a total of 5.5% of the labor force in the US. And very few minded having these immigrants come here at the time, because a financial strain was not being put onto American workers, and jobs were plentiful and expanding. These points will not be made in the current discussion on Immigration.

The additional production gave way for American and Legal immigrants to take up higher skilled jobs while "illegals" took in the lower skilled jobs. Immigrants play a large part in the unskilled and low skilled workforce, in part to the barrier in language and education or experience. These "illegals" will take lower paying jobs due to these shortcomings, where citizens and legal immigrants will tend to be drawn to higher skilled jobs with higher pay ranges.

After the "They Took Our Jobs" line the next line will be "They took our Government Handouts"

Another issue in the immigration debate is that "illegal" immigrants use government programs more than they put into them through taxation, since most believe illegals are not taxed this would make sense. Next we can look at the claim that illegal immigrants do not pay taxes. This claim has been around for years, I even at one time believed it. First the point should be noted that ALL Federal, State, and Local "Welfare Programs" are funded by taxation, it is a redistribution of wealth.

Are they really costing more than they put in?

According to Shikha Dalmia in her 2006 article at Reason Foundation more than 8 million of the then 11 million immigrants actually paid into social security, medicaid and other taxes. But how is that you say...


In 1996 a welfare reform bill was passed. In this bill were "restrictions on benefits for noncitizens accounted for 44% of this total, and food stamp revisions for 43%. The 105th Congress rescinded and modified some 1996 budget cuts, restoring SSI, Medicaid and food stamp benefits to many aliens at an estimated 5-year cost of $12.3 billion. Further, Congress in 1997 created Welfare-to-Work (WtW) grants ($2.7 billion in estimated outlays for 2 years) to help states move severely disadvantaged TANF recipients into jobs, and it boosted funding for food stamp employment and training."

Another thing that happened is a bill that allowed the IRS to issue identification numbers for those illegal aliens that did not have social security numbers. This reform does two things, it allows those aliens to pay into the system to be in accordance to what citizens do in a hope it is seen as favorable if and when they file for legal statuses. Number two, it adds those tax monies into a system that because they do not have an official Social Security number, they cannot benefit from. This adds millions of dollars into the federal coffers. Damlia writing, "Last year, the revenues from these fake numbers — that the Social Security administration stashes in the "earnings suspense file" — added up to 10 percent of the Social Security surplus. The file is growing, on average, by more than $50 billion a year.

Her statement is pointing to the 2005 numbers. 

This data points to the fact that overall immigrants are not a drain on any programs but actually contribute. Add to this that even illegal immigrants pay sales taxes, adding millions more to their local community coffers. Roads, Schools and other services in and around their homes are partially contributed to through this tax. More info on taxes paid by illegal immigrants click here.

So how can we solve the Issue through Economics?

Can we simply abolish the Welfare State?

In order to tackle this we have to look at the statistics of those receiving this assistance and address it properly. Many have been saying for decades that the welfare state needs to be completely dissolved and regulations restricting voluntary aid programs given their chance to return. Prior to the 1930's the welfare state did not exist, it was before this that private organizations were the main source for any form of welfare or aid. Donations given by Individuals and Businesses alike kept Americans fed and housed on a larger scale than today. So where did this go? After government aid programs began the amount of funds used in voluntary donations were extracted by taxation and those who gave some were able to give less. This caused the great plethora of charities, to be replaced by bureaus and departments, each getting larger and larger, taking more and more to run their offices, less and less aid actually made it to those that needed it.

Where does that lead us to today?

Spending on largest Welfare Programs Federal Spending 2003-2013*[33]
Federal Programs	Spending 2003*	Spending 2013*
Medicaid Grants to States	$201,389	$266,565
Food Stamps (SNAP)	61,717	82,603
Earned Income Tax Credit (EITC)	40,027	55,123
Supplemental Security Income (SSI)	38,315	50,544
Housing assistance	37,205	49,739
Child Nutrition Program (CHIP)	13,558	20,842
Support Payments to States, TANF	28,980	20,842
Feeding Programs (WIC & CSFP)	5,695	6,671
Low Income Home Energy Assistance	2,542	3,704
Notes: * Spending in millions of dollars

Would abolishing the Welfare State actually have any effect on the economic issue of Immigration? It could, in a way, rid the system of an incentive to the minority that use the system without contributing. Taking away that incentive could cause many to rethink the opportunity costs of coming in illegally.

Benjamin W. Powell writes "Before, immigrants assimilated into a culture of hard work and self-reliance. Those who failed here often had to go home. Few go home today because of failure today. Instead, they are taught to assimilate into a system of government reliance where failure and laziness are not punished. The post-1965 immigration wave is the first that has come once we had a welfare state in place. Unfortunately, that welfare state not only makes them less productive, it also teaches them to undermine our old culture that made America successful."

Since there would be no guaranteed way for them to live off of the state, many may just decide to go the legal route or choose another place to move to.

Getting the Government out of businesses and allowing the markets to work properly could be the greatest and most needed change in policies. Deregulation, Getting rid of barriers to work, Abolishing minimum wage laws, stop with the corporate welfare programs, price controls, sending false signals and creating bubbles and busts in markets would easily give everyone, Immigrant or Natural Citizen, a better chance at building wealth and prosperity. Add along with this the ability for all people to keep 100% of their earned wages and abolish taxation, all taxation. Leading us into a voluntary state, a way for the preferences, wants and needs of everyone to be met by competitive businesses and entrepreneurs.

Speaking of legal immigration, one way to reduce the amount of illegal migrations is to make the legalization process easier to navigate and less costly. Those persons not willing to wait months on end and pay in thousands of dollars usually opt for the illegal route knowing the risk of deportation is lower than shelling out money and time. Reducing the time it takes to get through the legalization system and the amount of money put into legalization could drastically reduce the amount of people who enter illegally. 

The real issue of the Illegal Immigration debate isn't at all about the moving of people into a certain geographical area, but rather the implications and effects those people have in current models of operation. Looking at the issue form a reasonable economic standpoint can lead to real sustainable answer rather than the tug of war political party lines being offered now. Turning America into a thriving economy can give incentive to those wishing to better themselves, their families and their new homes as well.

Here is another post I wrote dealing with Borders and US Marine Tahmoorsi being held in a Mexican Jail.

More reading on this issue.
http://www.cato.org/policy-report/septemberoctober-2013/tear-down-wall-immigration-versus-welfare

http://www.fee.org/the_freeman/detail/immigration-friend-or-foe

http://www.fee.org/files/docLib/547_24.pdf


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