Balancing the Budget

It is still possible to avoid the budgetary collapse of the federal, state, and local governments. All it would take is politicians of courage and integrity, which is why it is unavoidable that this country will experience said budgetary collapse.

Saving government budgets will require a mix of both tax increases and spending cuts, but it will have to be different from all former mixes of tax increases and spending cuts. In the past the governments would offer the people a deal, wherein taxes are raised now and three years down the road the spending cuts would kick in. Democrats would make this offer, promising to reverse course and cut spending. Republicans would make a big show about how they are reluctantly accepting the deal, because they want to vote for tax increases but want to tell their constituents that they do not want to vote for tax increases. Three years later, everything is changed and the spending cuts do not happen. Some people have forgotten the deal. Republicans act shocked that the Democrats betrayed them. Sometimes there are some minor reductions in the rate of increase.

A real effort to balance the budget would by necessity include real spending cuts. The whole dollar amount of the budget would have to be smaller than the whole dollar amount the previous year. It would not be inflation adjusted dollars, it must be nominal dollars.

A second point would be to refuse the phony deal of "taxes now and cuts later." Any effort to balance the budget based on a combination of tax increases and spending cuts must have spending cuts come first. Politicians are loathe to cut spending, and always look for an excuse not to. By putting it first, and not implementing any tax increases until spending is cut forces them to act in a responsible manner in spite of their own wishes.

A third point of difference between a real effort to balance the budget and phony past attempts at reform would be the ratio of tax increases to spending cuts. In past deals, the alleged rate would be dollar for dollar, one dollar of tax increases for one dollar of spending cuts, although the cuts never actually materialized. In order to balance the budgets now, it would require probably about twelve dollars of cuts for every dollar of increased taxes, perhaps more. A ratio of twelve-to-one is a good place to start though, considering the need to pay off the enormous accumulated debt. Government spending is currently about 30% of GDP, and taxes are currently about 18% of GDP; impelementing a twelve-to-one ratio will result in 18% for spending and 19% for taxes, a small but real surplus.

Admittedly, for those who have grown dependent on government, cuts of that magnitude would be painful. And for those who actually pay the taxes, even that much more of a tax increase would also be painful. For the former there is little cause for sympathy, but the latter will eventually see a benefit. As the debt is actually reduced the value of the dollar will increase, giving the country the relief of a much needed deflation. Unlike the phony investments by government, this would be an investment that would eventually pay off.

This would require great personal courage on the part of elected officials; they would have to make the tough choices and take responsibility for their decisions. That is why the budgets will collapse instead. It is important to offer this advice, although it will never be followed, because an accusation often hurled at libertarians is that they do nothing but criticize and never offer any suggestions. Libertarians do offer plenty of suggestions, but most libertarian suggestions are anathema to statists and thus "don't count."

Bush Never Cut Taxes

Recently there was much discussion on the extension of the Bush tax cuts. Republicans and Democrats were both giving President Bush credit for cutting taxes when president, and Republicans were accusing the Democrats and President Obama of trying to raise taxes.

Leaving aside the fact that the tax cuts were actually the result of hundreds of congressmen in addition to President Bush and giving him credit, and leaving aside the debate over whether the expiration of the tax cuts constitute a tax increase there is still one big problem with the whole debate. Under President Bush taxes never went down. President Bush never cut taxes.

That is because as any Austrian economist can tell you, Total Taxes are always equal to Total Spending. It is true that some taxes were cut under President Bush, but that only means that other taxes went up even more.

What confuses the average person is that Total Taxes is the sum of Direct Taxes and Indirect Taxes. Deficit spending is therefore considered a tax. It can be paid by higher interest rates as the government crowds out other borrowers, or it can be paid by inflation as the government taxes away the wealth of those who hold cash. In both cases value is being transferred from the private sector to the public sector, and that is a tax.

Taxes shot up under President Bush, which is why the Tea Party Movement started in late 2007. The Tea Party movement has always had government spending as a major focus.

Now the debate is coming up as to whether or not the debt ceiling will be raised. A portion of the Republican takeover of the House of Representatives was based on Tea Party support. If the Republicans raise the debt ceiling, that will be an increase in taxes, which will be a repudiation of the support that got them elected.

A Failed False Flag?

Many people across the blogosphere have commented that they had been expecting an attack similar to the one that recently took place in Arizona. The expected attack is, of course, against a prominent Democrat.

It was so expected that after the attack on Congresswoman Giffords, and before any facts were made available, progressives were blaming the Tea Party, Republicans, Libertarians, and other associated ideologies whose common theme is that they aren’t Progressive. But others who were expecting an attack were only expecting that those parties would be blamed, not that they would be responsible.

Some were expecting a false flag attack, when someone would either set up or fail to impede an attack on a Democrat specifically in order to blame it on their opposition.

The problem with a false flag attack is that in the current information age, false flag attacks of this nature are a lot harder to pull off. It is a lot easier for anyone to do their own journalism and try to investigate the back-story of any event. It is a lot easier for those who have relevant information to spread it.

Within hours of the shooter being identified, it was revealed via Twitter that Loughner was considered politically left-liberal by those who knew him, a supporter of Obama and Palin.

Another reason to suspect a false flag operation is who the target was. Congresswoman Giffords was one of nineteen Democrats who voted against Pelosi. She had a history of bucking her party in other ways, such as not being against the Arizona immigration law or being better than many of her peers on the topic of gun control.

If this were a false flag, she would be an ideal target because not only would it be an attack against a Democrat, it would have the side benefit of removing a Democrat who isn't following the party line.

If this were a false flag, one would expect there to be a recent history of comments that appear to be "right wing," such as an incoherent rant about how money should be backed by gold or silver. The rant would sound exactly as one would expect if the person making the rant knew nothing about the topic and was trying to make a point he didn’t believe in. It would sound much like Loughner’s Youtube rant about sound currency.

Of course, there is no evidence that this is a false flag operation.

People are inherenlty people

Libertarians are often accused of seeing people as inherently noble, far more virtuous than they really are, and as a result of this overly generous view of humanity it is said that libertarians come to the unrealistic conclusion about how little government is needed. Or, if the topic is gun control, libertarians are accused of seeing people as monsters, inherently dangerous, which is why libertarians allegedly need to be so heavily armed in order to feel safe in a world where everybody is a threat.

And, unfortunately all too often, the same person will make both of those arguments. And given that contradiction, it is easy to deduce that the person making those arguments is not interested in what the real view is that libertarians have.

Libertarians view people as, essentially, people. Given that almost every libertarian is versed in the basics of economics that means that libertarians believe that people respond to incentives. Give people an incentive to be good and that will increase the odds that people will be good, and give people an incentive to be corrupt and that will increase the odds that people will be corrupt.

That is why libertarians are such staunch advocates of the free market. It is a system of incentives that bring out the best in people. That is also why libertarians are such staunch opponents of government, as it is a system of incentives that bring out the worst in people.

It doesn’t involve thinking that people are inherently good and therefore the free market works, and it doesn’t involve thinking that people are inherently bad and therefore the government doesn’t work. It involves thinking that people are inherently people.