Deficit and the Command Economy View 20110714-1

View 683 Thursday July 14, 2011

The Deficit Dance continues. The President petulantly demands his tax increases so that he can continue his Obama Stash gifts and convert more of the nation to the command economy which more and more appears to be a goal. The Republicans are told that he won’t accept a temporary measure nor will he accept cuts without tax increases nor, apparently, will he accept anything other than what he wants. “Don’t call my bluff,” he warns. That is not what most poker players would say, but the meaning is clear: he is, he says, willing to let the nation go into default if the Republicans do not “compromise” by becoming his tax collectors, and do what he could not do when there were Democratic Majorities in both Houses of Congress: raise enough taxes to reduce the deficit while allowing the government to grow larger and spend more.

Regarding the command economy:

The Command Economy

Dear Jerry,

Things are bad, but let me suggest that exaggeration is not a very good strategy. For example, when I google "command economy", I get links to definitions such as:

Noun: An economy in which production, investment, prices, and incomes are determined centrally by a government.

and this:

An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy. Also called a centrally planned economy.

We just don’t have that – not even close. As to the semantics of "non-discretionary", I can see how the August 2011 – at least – social security payments might be meaningfully considered non-discretionary even by someone who advocates – as I do – not only the end of Social Security, but the whole federal "safety net".

By the way, where were McConnell and Boehner when Bush was running up three trillion dollars of costs in Iraq? (And yes, I know, that is liberal economist Joseph Stiglitz’s number, but I would not want to bet against it.) I would also like to see the whole mess fixed with only cuts, but those two turke… I mean, distinguished members of Congress, have zero credibility with me.

Gordon Sollars

I won’t attempt to answer the question about where were McConnell and Boehner during the Bush Administration. I opposed all the overseas adventures from the Bush I Gulf War on, and whatever slight influence I had on spending ended when Newt ceased to be Speaker; it’s not my job to be an apologist for what happened after The Millennium. I do note that it hardly matters who got us into this mess: the question is how we get out of it.

I will note that the two definitions of command economy appear to be precisely where we are headed: tax money by definition is allocated to spending where it would not have been spent if left to those who were taxed. Presumably they would have invested the money, if only by leaving it in a checking account, as one of my software genius geek friends did with everything he had until he married and his wife straightened things out. Even if merely left in a bank account the money was invested by the bankers, presumably in order to make a profit. The government appears mad on fixing wages – minimum wage, NLRB rulings that Boeing can’t move its plants, ObamaCare – and on setting prices for many items. Government certainly dictated the conditions of mortgages, Fannie Mae poured money into the housing market and made mortgage money available to many who otherwise would not have it, driving up prices and creating the boom that became a bubble. Government regulations dictate the minimum prices for many goods – only large companies can afford compliance.

Adam Smith warned that the greatest enemies of capitalism are capitalists who will use government to restrict competitors from entering the market. And the Iron Law dictates that government will expand its functions without limit if allowed to. More and more regulations are applied. Thousands of pages of regulations. That, I put it to you, is moving toward a full command economy. Government tells us what kinds of cars we can drive, even what kind of light bulbs we can buy. How is that not a command economy?

And yes: I have been in favor of some national investments, particularly in long term projects where there is little immediate return on investment. Someone must look out for our grandchildren. Someone should speak for the Grand Canyon. I am not a laissez faire capitalist. My views are far closer to those of Wilhelm Roepke (A Humane Economy) than of anyone else. I know where unrestricted economic freedom can lead. But that is a long way off: we are not facing a problem of too much economic freedom but of too little. It is time for an economic miracle. That means less command economy.

Freedom is not free. An economy is never fully free, and since there is usually a black market – blatt men in the old Soviet economy – an economy is seldom fully under central command. Lenin was forced to bring in the New Economic Policy – deliberately allowing some economic freedom from the Soviet planned economy – because the planned economy was not producing prosperity. And of course planned economies often do wonders in targeted industries. The Soviet Union became an industrialized society, and built a war machine. East Germany continued for years. They had to build a wall to keep its people from fleeing to West Germany, but there was an economy. It just wasn’t much of one.

Command economies do not produce prosperity. Free economies trend to prosperity, but free people will spend money in ways that offend and disgust others. Freedom is not free.

And Obama intends that the Deficit Dance will move us further toward a command economy, with government commanding more of the economy. That will result in less prosperity.

Don’t call my bluff, says the President.

Note: The Bastille was a royal fortress used as a prison for aristocrats held under royal warrants. The garrison was mostly elderly and included many partially disabled soldiers on pension. On Bastille Day 1789 there were seven prisoners in the Bastille, all aristocrats: four forgers, two madmen, and a young man sometimes described as a follower of de Sade who had challenged the finest swordsman in France to a duel, and had been locked up at his father’s request so he wouldn’t be skewered. The madmen were privileged to be confined in the Bastille where they were waited on and treated as eccentrics by the elderly military who comprised the staff. When the Bastille fell, the garrison was slaughtered to a man. The forgers were liberated and vanished. The madmen were sent to the snake pits. The young aristocrat joined the Revolution as Citizen Liberte or some such, and eventually went to the guillotine during one of the perturbations following the Revolution. The revolution eventually ended at the tomb of Napoleon, as I said in my photo tour of Paris. [When I wrote that I noted that Van Loon once said that those who want to understand Napoleon’s attraction should listen to a good artist rendering Heine’s poem Die Beiden Grenadiere as set to Schumann’s music. That was before You-Tube. Now it’s easy to hear a good performance.]

The Bastille, in short, was symbolic. Bastille Day is to France what the Fourth of July is to America, but the differences between the are profound. Over time, though, that is changing, as American exceptionalism succumbs to the ideology Rousseau. Liberty, Equality, Fraternity are all laudable goals, but they can be incompatible. Freedom is not free, free men are not equal, equal men are not free, and only in religion are all men brothers. But that is another story.

See also my comments on Bastille Day from a few years ago.

I wish France a Happy Bastille Day.