Saturday, April 30, 2011

Waking Up to Economic Realities

by Ron Paul


Last week the financial markets were roiled by Standard & Poor’s announcement that they will change their outlook on the fiscal health of the United States over the next two years from “stable” to “negative.” The administration decried this decision as political. However, it seems the only political thing about this decision is the fact that it took so long. The Washington Post recently reported that the White House and the Treasury Department put tremendous pressure on S&P not to do this. However, if S&P made its ratings based on political pressures rather than economic reality, it would cease to have any relevance to the business community. Even if S&P delayed its announcement that U.S. government bond market would be downgraded, at some point it would become obvious that the finances of this country are out of control and our leadership is out of touch. All credibility would be lost if S&P simply continued to assign U.S. debt a AAA rating.


S&P noted in its announcement that negotiations among leaders in Washington to address deficit concerns did not sound promising, and expressed skepticism that politicians could agree to any viable budget compromise. Of course this has been obvious for years but in the midst of the current debate over raising the debt limit it is perhaps the wake-up call that Washington needs.



For decades politicians and government officials have been able to maintain their denial about our real financial situation, patching the system together by passing emergency and supplemental funding bills, issuing more debt, and allowing the Federal Reserve and foreign creditors to paper over deficits with more monetary expansion. I’ve said many times the real day of reckoning comes when fiscal and monetary tricks no longer work and there are no buyers for our debt.


Even the most conservative budget that has been proposed by Republican leadership requires raising the debt ceiling by an additional $9 trillion by 2021. This demonstrates absolutely that no one in power right now has any real intention of addressing our spending problems or paying down the debt. They simply expect to continue to borrow and run up more debt forever, without limit. Yet they always imagine our dollar will have value no matter how many we print. This expectation is foolish and naïve. I guarantee that those buying our debt are not foolish and naïve enough to go along with this charade forever.


The S&P announcement may just be the harbinger of economic realities acting as a restraint on government expansion. Government is not anxious to cap its own growth, in spite of misnomers like “debt limit” or “deficit reduction.” Government will continue to grow like a cancer, sapping our country of its wealth and freedom until the laws of economics no longer can be ignored.

Sunday, April 24, 2011

Obligations

For the past several weeks and for the next several months, there will be wrangling in Washington about the budget. We all know the mess we’re in. The fact that Standard and Poors downgraded their outlook for the United States to negative is proof that we have gone way too far in debt. The fact that the last deal the Republicans made cut less than one hundred million dollars in real terms over the next six months, coupled with the speech the president gave, demonstrated to all that the Republicans either don’t have the guts or desire to stop the president from his plan to continue to spend in ways beyond reckless.



In this debate on the budget, several terms are always thrown around, the conversation is always pretty much the same. Both sides say cuts need to be made. Democrats want to cut defense, Republicans want to axe NPR. The new twist this time around is that both sides are giving lip service to restructuring entitlements. Certainly congressman Ryan it to be commended for his attempt to reform that third rail of politics, the third rail that is breaking the collective bank. However, both sides still believe that the programs are essential to our country and society. Both sides talk about our "obligations" to our seniors, the poor, the sick and whomever else they desire to give someone else’s hard earned money to. This is the language of the collectivists. If we ever question whether it is right to take more of our money, if we the people ever entertain the thought that maybe we have given enough, we are reminded of our "obligations" to provide for the old, the poor and of course, the children. Certainly the only proper way to ensure this provision is through government and government bureaucracy. It is only the wise oligarchs who have degrees from Harvard who can justly ensure that we give our "fair share" and that it is applied properly in the fulfillment of our obligations. Are we really "obligated" to take care of everyone else? Does everyone else have a right to our property, the fruits of our labor? It is time we understood what exactly our "obligations" are before we allow the politicians to continue to use this idea to shame us into their scheme of redistribution.



What is an obligation? Webster’s Dictionary defines it this way. An obligation is the "binding power of a promise or legal contract, indebtedness for a favor or kindness, a duty." Something that is obligatory is "binding either legally or morally, it is compulsory." The sense we get from the definition is that an obligation is either the result of a contract between two parties or as a result of the action of one party that was enough of a benefit to another to place some sense of reciprocal action upon them. The first is easy to understand. When we enter into a contract or make a promise, it is our moral duty-obligation-to fulfill it. You can look at the morality of this two ways. If you are religious, it is God who has laid down the moral code; you shall not lie-not do what you have promised, or you can recognize that without people keeping their promises there is no way society can function; language becomes meaningless because the words are disconnected from any action in the real world and we will be reduced to each against everyone. Either way, adhering to the terms of our contract or our promise is imperative in a functioning society.



I would propose that there are two kinds of obligations, positive and negative. I define positive obligations are as those in which we must act to fulfill morally or legally. These obligations are rightful claims on our wealth or person because of promises we have made voluntarily through contract or relationship for which society has the right to expect our compliance. If we do not fulfill these obligations, society or the state has the right to punish us. If we fail to fulfill the terms of a contract, we can be sued or prosecuted for fraud. If we are known to lie, society can shun us or otherwise demonstrate its displeasure.



Under that part of the definition, are the politicians right? Do I have an obligation to allow them to take the fruits of my labor and give it to another just because they are old, sick, poor or whatever? As I sit in Maryland, do I have an obligation to pay the pension of a senior citizen living in Arizona, the emergency room bill of a poor person in Chicago, or for a hot meal for the homeless guy in Dallas, none of whom I have ever met or will ever meet? Have I entered into a legal contract with any one of them, have I made promises to them for which the power of the state can be utilized to force my performance? No, of course not. It is, in reality, an absurd notion. My property cannot be legally obligated to three hundred million of my fellows, or morally, to the six billion other people in the world. I would quickly be reduced to the very state of the ones to whom I am supposedly obligated, or worse. How can I be obligated to support another individual just because they have reached a certain age and chose not to save for their own twilight years? How can I be obligated to pick up the pieces for a teen age mother who made bad choices? How can I be obligated to pay for the medical care of the obese man who had no self control? Under what sense of justice, fairness and morality can I be forced to pay for the bad choices other people have made, or even their bad luck?



This, of course, is the collectivist ideal, steal from those who produce and give it to those who do not until all are equally poor and miserable. The problem is, when you confiscate everything from the producers to give to those who have made bad choices or are just lazy, the moochers, the producer will stop producing because they gain no benefit from their efforts. The incentive for productive activity ceases, which is destructive to any society. When that happens, there is nothing for the looters to give the moochers. The moochers, who know nothing of productive activity by definition, find themselves in very dire straights when the money affording them their free ride is no longer coming in. The will be like abandoned children who have no idea how to provide for themselves. The looters will become more and brutal in their desire to extract their lifeblood from anyone they think has anything, reducing both the producers and the moochers to slavery and in so doing, finding themselves impoverished as well. There is no way enforcing obligations that do not exist can lead to a just and moral society. In fact, inventing obligations for the sole purpose of stealing the property of another is immoral on its face.



What about the "obligations" we enter into by virtue of our citizenship? Does the Constitution legally obligate us to one another? No, not at all. The constitution is a contract between "we the people" and our government. The constitution is primarily a document that limits the power of government over us, recognizing the natural rights that we have and severely restricting the government in its authority over us. It says nothing about our obligations to one another nor can those obligations be "invented" from the document because the tenth amendment is clear. "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Let us look at the other part of the definition, the "indebtedness for a kindness"? Has the aforementioned senior citizen, poor person or sick individual done any "kindness" to me, much less one which would morally require my positive response? Of course not. How could they, I’ve never even met them. If there is no relationship there can be no obligation and even within a relationship, obligations are strictly defined because they are legal constructs. There are only a few relationships that in any way rise to the above standard and those are family relationships. I would propose that children have an obligation to their parents to the extent that their parents showed them "kindness" in their provision under the age of majority. I believe parents are obligated to their children because they voluntarily brought the obligation to provide for that child until the age of majority upon themselves. If someone actually performs a "kindness" that would require a response, saving your life, for instance, not out of a legal obligation that is part of a job like a doctor or fireman but at risk to their own, then a moral obligation could be imposed. Beyond that, there are no positive obligations beyond those we voluntarily and legally enter into with people we actually have a relationship with. There is no such thing in a just society as an entitlement, a claim on the wealth or person of another by virtue of their circumstances.



Finally, there is the favorite argument of many statists here in America. It goes something like this. You were fortunate enough to be born in the United States, a winner of "life’s lottery." Because of our wonderful system, you have been able to make a success of yourself, you have accumulated wealth. Therefore, it is just and right, it is your "duty" to "give back" some of that wealth to those "less fortunate." First, let’s forget this idea that that those who have wealth got it because they were "fortunate" or "lucky." With the exception of the miniscule number of people like the Kennedy’s who inherit wealth, wealth that was, at some point, the result of someone’s hard work, the vast majority of people who are "rich" are so because they worked hard. Luck has nothing to do with it. That being the case, what is it they are to "give back"? What have they "taken"? If an individual comes up with a good idea and convinces a lot of people to freely purchase the results of that idea, how can anyone claim they have "taken" anything? If I agree to trade a widget I made to you for ten dollars, once that exchange is made, our obligations are fulfilled. I delivered the widget and you delivered the money. The end. I am under no obligation to "give back" a portion of that ten dollars to you or anyone else.



Second, the people to whom this wealth is supposed to be given have also won "life’s lottery" and been born in the United States. They have the same opportunity to use the wonderful system we have to make something of themselves. If they choose to make bad choices, why should those who have taken advantage of the opportunities of the system be forced to pay those who do not. Staying out of the relatively cushy poverty found in the United States is rather simple. Anyone who does four things in life is very unlikely to be poor. Graduate from high school (education others are forced to provide under threat of confiscation of their property), don’t have children before graduation, stay off drugs and out of jail. That’s it. If a person chooses not to take advantage of our system of freedom, another should not be forced to support them.



Before you write me off as completely heartless, let me say that charity is an essential part of a good society. There are some who actually can’t take care of themselves through no fault of their own, those with genetic diseases for example. The fact is, because of our Judeo-Christian heritage, Americans are the most generous people on earth. Even after the government confiscates so much of our money to force their idea of charity upon us, we still give more to others than any other people. It is Americans that give to fund medical research or to help victims of natural disasters. It is Americans who run food drives and whatever-a-thons and put cans at convenience stores to collect change for sick children. Whether we do it for religious reasons, personal reasons or just because we innately know its the right thing to do, we give-voluntarily. It is hard to be a cheerful giver with a gun in your back. Charity should be private and voluntary. If we have extra, should we give? Yes we should; but "should" is very different than "must."



What about negative obligations? These are obligations we have to not do something, actions we must refrain from doing. By virtue of our participation in society there are negative obligations we are all bound by. We are legally and morally bound not to do things that would harm the life of our fellows, restrict their liberty or steal their property. The fulfillment of these obligations require nothing from us but our restraint. I do not have to pay money to not do something. I do not have to use some portion of my wealth to refrain from negative behavior. I do not have to pay to fulfill my negative obligations, neither society or the state can have any claim on my person or wealth in the performance of negative obligations.



That being said, there are only two legitimate functions of government, the state, in the area of obligations. The first is the aforementioned enforcement of contracts or the persecution of fraud. The second is to prosecute those who negatively impact the life, liberty or property of another through violence or theft. That’s it. We have no obligations to strangers, fellow citizens, mother earth or anyone else. No longer can we allow these politicians to use that word to guilt us into giving them more of what belongs to no one but us.



Mike Calpino

www.michaelcalpino.webs.com