My new friends Stephen Palmer, Oliver DeMille and more have founded the Center for Social Leadership.  Their goal is much like the Team's - making a difference in our communities and nations.   Our country's need more character based leaders and organizations like this our sister organizations in our goal of Launching a Leadership Revolution.  Check out the free e-book, it is fantastic!  I am praying that God will raise up a group of fearless leaders that will stand for truth in this relative post-modern age.  God Bless, Orrin Woodward

Here is a fascinating article on a subject that all freedom loving people should read.  Independence is only maintained by an independent, responsible, and vigilant citizenry.  Think through these issues as the author, Robert Genetski shares them.  How can we, as a community, bring personal responsibility back into vogue?  We cannot demand for dependence on government and expect to remain independent for long.  If someone provides for your security, they do so at the price of your freedom.  As Patrick Henry said, “Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery?”  I do not demand for security, but I do demand an equal opportunity in my country to sink or swim based upon my efforts and the content of my character.  Let no wealthy person forbid the poor from their opportunity, and let no government forbid the wealthy from their honestly gained wealth.  Equal opportunity, not equal results has always been the ideal for true freedom loving people!  A nation of dependents cannot expect to remain Independent!  Enjoy the article and please share your thoughts. God Bless, Orrin Woodward

Excerpted from A Nation of Millionaires, by Robert J. Genetski. Copies of this 168-page book were delivered in May 1997 to nearly 10,000 state and federal policy makers, journalists, think tank representatives, and Heartland friends and donors nationwide. Additional copies are available for $8.95 pre-paid from The Heartland Institute.

For two centuries, the United States has been a beacon of hope for the rest of the world. That hope is based on what was once a novel and untested idea: that citizens could successfully govern themselves. The United States has proven democracy so successful that it has become the only legitimate model of political organization. But democracy was only one part of the Founding Fathers' unique experiment. They believed not only that individuals can be responsible for governing themselves . . . but also that individuals have a responsibility to provide for their own needs.

Government's Duty

As viewed by the Founding Fathers, government has certain responsibilities. First and foremost is the obligation to provide an environment that enables individuals to achieve their highest potential, in terms of their contributions to society and in terms of the rewards they receive for those contributions. Creating this environment involves four things: low tax burdens, free markets, protection of property rights, and a stable currency with which to conduct business.

Low taxes make it easier for people to provide for their own needs by letting them keep their hard-earned income. Free markets help maximize output, and thus earnings, by providing vital information about the value of goods and services. Markets are free when government is limited and individuals are primarily responsible for their own needs. Property rights protect the accumulation of assets from confiscation. Without such rights, individuals would have little incentive to create wealth. A stable currency is needed to provide reliable information about transactions and to prevent government from usurping resources by devaluing the currency.

In recent decades, government has obviously failed in its obligation to provide an economic environment in which individuals can achieve independence and assume responsibility. High tax rates, the seemingly unconstrained growth in government, interference with markets, a withering away of property rights, and persistent inflation have placed substantial barriers in the way of achieving independence. As the ability of individuals to provide for their own needs is eroded, economic, moral, and cultural deterioration accelerate. If recent trends persist, insecurity, injustice, and crime will become even more pervasive.

Why People Behave As They Do

Behavior is shaped by three things: values, incentives, and information. An individual's values are formed from the lessons provided by parents, teachers, friends, relatives, religious leaders, and even government. A government that is corrupt and immoral is certain to be a negative influence on its people. A judicial system that renders the concept of law meaningless by interpreting it to conform to the latest social theory hastens the erosion of moral values. When those charged with interpreting the law mold it to reflect their own preferences, they undermine respect for the law and promote lawlessness.

The inclination toward criminal activity can be overcome by a strong system of social and moral values. Still, the more society's institutions reflect a lack of values, the greater the erosion is likely to be among its people. When a society adopts policies making it more difficult to respect moral values, it dilutes those values.

Behavior also is influenced by incentives. While individuals don't always realize it, they often make decisions in response to economic pressures. For example, when an individual has little to lose, the potential gains from criminal activity seem relatively high and the penalties for getting caught appear relatively low. Applying such cost-benefit analysis to crime may seem crude, but it is both appropriate and accurate. The greater the rewards from an activity, and the lower its costs, the more people will tend to engage in it.

The commission of a crime can be a rational economic choice if the expected loss is minimal. If individuals have little income and assets to lose, and if their expected punishment is fairly mild, more of them can be expected to commit crimes. As taxes take a larger and larger bite out of people's paychecks, the ability of lower-income workers to support themselves--not to mention their families--is undermined. As the rewards for legitimate work decline, the pressures for criminal activity become even greater.

On the opposite end of the income spectrum, it doesn't make much sense for a millionaire to engage in criminal activity. Relative to his or her prospects in the legitimate economy, the potential benefits of crime are small. Moreover, the cost of getting caught is enormous: considerable lost income for time spent in court or in jail, lost assets for compensating the victims of the crime and paying court costs, and social rejection by family, friends, and the community at large.

This doesn't mean that the rich are more virtuous than the poor. Many who are poor have the social and moral upbringing to avoid the temptations of criminal activity. By contrast, those who are rich and without principles do commit crimes, but they are seldom the random, violent crimes that have become commonplace in recent years. When individuals see themselves as being or becoming rich, they have strong incentives to avoid crime, particularly violent crime.

Policies that Promote Dependency

Government policies that promote dependency seriously undermine values and incentives. These policies encourage irresponsible behavior by providing misleading information about its consequences. The influence of such policies extends well beyond the welfare population. Collectively, they have produced a nation of individuals dependent on government.

Policies that foster dependency permeate almost every aspect of our lives: retirement, health care, the legal system, welfare, and, perhaps most importantly, education. Instead of encouraging individuals to accept responsibility for their lives and their decisions, government policies discourage such behavior.

As government takes on more responsibility for the problems of its citizens, individuals feel less responsibility to provide for themselves. Moreover, their ability to do so is significantly reduced. Each time government is called on to fulfill a need, there is a cost. The more needs government attempts to fulfill, the higher the costs. Since individuals are the ones who pay for government programs, they are inevitably left with fewer resources to fulfill their own needs.

It is instructive to realize what has happened to the typical family's income over time. The most meaningful way to measure income is after taxes and after inflation. This measure is called real spendable earnings. It measures the amount of money a family has available to live on. The federal government used to calculate a similar figure, but it stopped doing so sometime around 1980 because the trend was so depressing.

Despite the lack of official figures, it is possible to estimate the trend in after-tax family income. Consider the "typical family," one whose yearly income is right in the middle of all families (that is, there are as many families earning more as earning less). After-tax income trends can be plotted for several types of families: two-income families, single-parent families, etc. Since cultural changes and financial hardships led many families to shift to two wage earners in recent decades (thus making it difficult to plot income trends over a long period of time), it is most useful to focus on the typical family where only the husband works.

In today's dollars, that family earned after-tax income of $31,000 in 1972, but just $26,000 in 1993. In that 21-year period, the family's after-tax take-home pay fell by 16 percent. As government has taken a progressively greater share of family income, families are left with less money for their basic needs, and they are made more dependent on government.

Dependency may be appropriate for young children. But as they grow and mature, even children must be given more responsibility. If they are not, they remain dependent upon their parents and never become responsible adults.

Similarly, a nation where a significant portion of the population behaves as dependents can never be a great nation. It can be only a nation of individuals who have failed to attain maturity and independence; a nation of individuals who will insist on blaming others for their problems; a nation of individuals who constantly look to government, as a child looks to a parent, to solve its problems.

In the United States, government increasingly has taken on the role of parent. Unfortunately, it has done a miserable job with its "children." Almost without fail, government has hindered the development of independence and maturity. Politicians have developed programs to "solve" the problems of their needy constituents, instead of providing the tools and assistance to enable individuals to solve their own problems.

Social Security

Our current system of Social Security gives government the power to decide how much of an "allowance" retirees should receive and how they must behave to receive it. Those who choose to work past the normal retirement age can be punished with lower allowances. Spouses who never worked may be rewarded with greater benefits than those who worked full-time. Single persons who die upon reaching retirement age have all of their allowance taken away.

By creating a class of dependent retirees, Social Security has led to resentment, indignity, and a sense of frustration and betrayal. It has caused retirees to form political pressure groups to defend what they have earned and what they thought they had been promised. Born of a program based on dependency, these political groups tend to act like children. They insist that their immediate demands be met and ignore the longer-term implications of maintaining the present system. Like children, these groups often refuse even to listen to any suggestions for altering the system.

Welfare

The tendency of government programs to create dependents extends most destructively to the current system of welfare. Unlike retirees, who have already lived productive, independent lives, welfare recipients have their lives and the lives of their children influenced by the policies of dependency. At virtually every turn, the present welfare system works to keep those who are poor from overcoming their condition. Any of the poor who decide to work and accumulate assets face the prospect of losing food stamps, housing allowances, educational grants, and a host of other potential benefits.

Instead of providing the poor with the means to solve their problems, government welfare programs aim at solving their problems for them. By penalizing constructive behavior such as thrift, deferred gratification, or the exercising of foresight regarding the future, the present system makes it extremely difficult for the poor to gain true independence.

Health Care

For many at the lower end of the income scale, the health care system creates a major incentive against legitimate work and accumulating assets. Those individuals who have few assets and little income, or those who are in prison, can receive unlimited free or nearly free treatment for serious illnesses under various government programs. Those who work hard for a living must pay heavily for the same services.

The public education system, legal system, and regulatory system also create dependency. Through them, government is called upon to educate children, ensure that the injured receive compensation, and restore or maintain the environment. All are important objectives. But a healthy society is one that provides the institutional arrangements necessary to help people solve their own problems.

A Nation of Dependents

Over the past several decades, a cycle of dependency has been created. Government policies have eroded the responsibility of individuals to provide for their own well-being, and taxation has severely limited their financial ability to do so. Government policies have replaced a nation of free, independent individuals with a nation of individuals dependent on government.

A nation of dependents can be neither great nor prosperous. To reverse the deterioration in today's society, we must fundamentally change government policies. Our efforts must be aimed at the heart of the problem, changing incentives and information to reinforce each individual's responsibility for shaping his or her own life.

Here is an excellent article from Steven Yates on America's Founding Principles.  Techniques will change, but principle never do.  In today's turbulent changes in technology and techniques, let us not forget our founding principles that provide a firm foundation to leap forward.  Enjoy the article and please share your thoughts on America's Founding Principles.  God Bless, Orrin Woodward

Exploring America’s Founding Principles:

The Need Has Never Been Greater

by Steven Yates

On September 16 our city newspaper published a special section entitled "America: What We Value As a Nation." That such sections are being published, probably in many newspapers across the land, should come as no surprise. The attacks on the World Trade Center and the Pentagon have left in their wake a sense of instability. Efforts are underway to assuage this instability by a variety of means, some good, some not so good. Journalists making efforts at articulating American values amount to one such effort, one worth evaluating.

The values identified in our section were four: generosity, service, courage, resilience.

There is abundant evidence that these are indeed values held by many if not most Americans. Generosity? Consider the lines of people outside Red Cross facilities, which here stretched half a city block. When they heard about the attacks in New York City and Washington, there were more people willing to donate blood than there were Red Cross volunteers capable of accommodating them. Americans are among the most generous people in the world. Service? Business enterprises flourish because they service markets. While profit may be the motive, the service must be a genuine one. Many other enterprises (e.g., think tanks, research institutes) provide services without earning a profit. Sometimes profit isn’t the point. Sometimes we take an action not to gain monetarily but because it is the right thing to do. Writing columns for the Internet can be regarded as a service in this sense. So can volunteering at a local Red Cross facility, for those so inclined. Courage? Consider the handful of passengers who fought to retake control of Flight 93. They knew they would probably not get out alive and that their deed might never be known, but they fought back anyway, realizing the importance of preventing that plane from reaching its destination, most likely the White House. Todd Beamer has rightly been dubbed a hero. No doubt, though, there are other Americans who would have done the same thing. A writer from whom I receive frequent emails recently spoke of courage "not [as] the absence of fear [but] the decision that something is more important than the fear." Resilence? Another American trait, which applies particularly to the U.S. economy. Presently the economy is taking a beating. It will come back. The "economy" is just the aggregate actions of millions of people: producing, selling, buying, saving, investing, and so on. Whatever else occurs, and although it may take some time, the economy will rebound from the events of September 11 – if, of course, the federal government will allow it.

This list is not wrong, therefore, but it is incomplete. It suggests that certain values are desirable, but without going to the core issue: what makes them right. The need for a complete understanding of what once made America a special place has never been greater. President Bush spoke last Thursday about our being "called to defend freedom." What does this mean? Is this more than political jingoism? Without a clear conception of what we are defending, we might find ourselves doing quite the opposite. Therefore I will endeavor to complete the list here. Hopefully it will place the above values into a larger context. My list includes: individual liberty, personal responsibility, Constitutionally limited government and the rule of law. In large measure, of course, America has drifted from each. This spells trouble, because taken together these are the principles of a free society. Since they haven’t been taught in the government schools in quite a while now, few Americans – even those who think of themselves as "conservative" – can articulate them very well. But if we cannot reassess where the country stands in light of its founding principles, then we are in more danger than ever of losing them altogether. And then the terrorists will have won. For example, if law-abiding American citizens find themselves hysterically embracing national ID cards, wiretapping, massive searches of private property by federal agents and so on, all in the name of feeling secure, then the terrorists will have destroyed that which made America great – namely, freedom!

So let us begin anew. Individual liberty is the state of affairs, within important limits, in which law-abiding citizens can live according to their own choices rather than those of someone else. If you want to obtain an education, you can. There are no significant restrictions on what you can read, or where you may travel. If you want to start a business, no one will stop you. Your business may make you rich, and no one will plunder your wealth or tell you how you must spend it. If you wish to own a gun, that is your prerogative. In a free society, you may worship God as you see fit, or not worship anything at all. This is quite unlike most of the rest of the world, and increasingly unlike the America we live in today.

Of course, individual liberty does not mean the freedom to do anything one pleases. Freedom is not anarchy. Genuine freedom recognizes bounds placed on human conduct by common morality. Moral citizens have learned to restrict their own basic impulses in specific ways. It would be fair to say that genuine freedom involves a kind of paradox (the "paradox of liberty," I sometimes call it): freedom flourishes when citizens embrace restrictions on their conduct imposed from within, to avoid their being imposed from without. The basic moral limit to individual liberty is the familiar barring of the initiation of force against others. Using force automatically means taking others’ liberties away. It is also illegitimate to defraud others, or cheat them. Sometimes all this is cashed out in the language of rights: individuals have a right to live in accordance with their own choices so long as they do not violate or forcibly interfere with others’ right to do the same. This all brings us to the second.

Personal responsibility. At base, individual liberty works under the assumption that individuals take care of themselves. The world does not take care of the individual. The ideal is that individuals take care of themselves by taking necessary actions – getting an education and then either working in an occupation for which they were educated or starting a business and supplying a market with some good. This calls for individuals to develop a sense of personal responsibility.

Of course, the ideal is not always realized and there are some obvious exceptions to it: we do not come into the world as fully formed, thinking, acting adults but as helpless babies. It is easy to cash out individualism in an excessive, atomistic fashion. We are all individuals, and all our actions are individual actions, but we are not atoms; as individuals we are members of families, formal organizations such as businesses and churches, and more loosely structured ones such as communities. In a free society there is no supervening entity (a central government, for example) whose purpose is to take care of the individual, whether to provide safety nets, guarantee good health, or whatever. But sophisticated, as opposed to atomistic, individualism embraces the fact that we are members of larger systems such as families, businesses, churches, and communities. Individuals, in their efforts to be independent, sometimes suffer setbacks, and sometimes these setbacks are personally devastating. At these times, the resources of one’s family members can prove invaluable. Within other organizations are other resources through which people can help each other, creating local "safety nets" for one another. The important point to note is at this local, community level, such actions between people who have sometimes known each other all their lives are voluntary and not forced. The benevolence between people that emerges, especially in times of crisis, is sincere, not artificial. Central government, with its army of bureaucrats coming into communities from the outside, cannot achieve the level of trust and benevolence that exists among members of a community who grew up as neighbors, played on the same sports teams, graduated from the same high schools, and so on. Moreover, bureaucracy causes harm in at least two other ways. The taxation needed to support the bureaucrats drains resources from where they may be employed more effectively, and the presence of bureaucrats may lead people who haven’t seen anything different to take for granted that providing "safety nets" is a job only bureaucrats can perform. This brings us to the third.

Constitutionally limited government. Government, as every libertarian knows, is the one institution in society with a legal monopoly on the use of force. This makes it the most dangerous institution in any society, and the one most important to limit. The Framers knew this, and while they may have wanted a government more centralized than the one defined by the Articles of Confederation, all understood well the importance of setting limits. So in what became known as the Constitutional Convention of 1787, they spelled out those limits, dividing the intended federal government into its familiar three branches, designating specific powers to each and building checks on the power of each into the others. Example: the President (executive branch) is designated Commander-in-Chief, but under Constitutionally correct government, only Congress (legislative branch) has the power to declare war.

Limitations on government are, however, fragile and must be preserved by vigilance, as Thomas Jefferson observed ("vigilance," he said, "is the price of liberty."). This is, in a nutshell, the central problem of political philosophy: not how to build the ideal society but how to control power. A Constitution is merely a written document; it won’t protect itself. The need for vigilance is one of our responsibilities, and arguably we have fallen down badly in this area. In recent years, "undeclared wars" have allowed two generations of presidents to thwart the check on the power of the executive branch. The Clinton Regime’s end runs around Congress were blatant. If Clinton wanted to bomb someone, he did. This, of course, barely scratches the surface. To see how far we have drifted from Constitutionally limited government, we have only to look at the Constitution and realize that there is nothing in it about education, for example. Nor will one find anything allowing for taxation on one’s personal income or for social security or for affirmative action or many other things now taken for granted.

The Constitution, moreover, makes no provisions for a federal government large enough and powerful enough to police the rest of the world, whether to impose "democracy" on peoples who don’t want it or for any other purpose. It does make provisions intended to ensure that the checks on government power have teeth in them. These were insisted upon by the critics of the original Constitution – the so-called Antifederalists. We owe them the Bill of Rights, the first ten amendments to the Constitution. The First Amendment grants citizens the authority to criticize official government policy without being arrested and thrown in jail; the Second, arguably, was intended as a separate check on government power by means of an armed adult citizenry (the original meaning of militia). Other amendments place additional limits on the power of government; the Ninth and Tenth, finally, underscore the rest of the document by designating that in a Constitutional republic the states are sovereign. The federal government is their servant, not their master. Moreover, the enumeration of certain rights in the Constitution and Bill of Rights was not to be taken as exhaustive of all rights, the clear implication being that rights antecede legal authority. Here we arrive, again, at a moral and metaphysical / theological basis for Constitutionally limited government. Most of the Framers, of course, believed that rights as moral claims with teeth in them can come only from God, the Author and Final Arbiter of justice in the universe.

The rule of law. The Constitution was intended to be the supreme law of the land. While cashing out what this meant took some doing, the idea was to build up – for the first time – a society whose government answered to the authority of its own founding documents as understood above. There were, of course, antecedents such as the Magna Carta. That document made specific claims on the king, John, but didn’t provide a larger philosophical framework. By and large, in the past the king was the law and could do as he pleased. The Framers of the U.S. Constitution set out to change that.

The struggle toward controlling power with something other than a greater power was long, hard, and is far from over. There is, I am firmly convinced, a minority in any population that is fascinated by power and understands people and relationships only in its terms. Many members of this minority in our population end up in politics where they can thwart the intentions of the Framers. They have had plenty of help from the academic and educational worlds, where ideologies emphasizing power have flourished. For a few years I debated the topic of power and restraints on power (mostly through the mail and eventually email) with a professor of public administration at a major northeastern university. My position: a government worthy of loyalty and support adheres to the rules it sets for itself, and does not try to micromanage everything in sight. His position: all truth and morality is determined by authority or power, so that power gets the last word in any event. He believed we ought to abandon the Constitution. His position held that science alone, with its special method, would get us past the temptations of power. As to how and why we could expect this from an institution no less a product of human beings than any other institution, he had no answer.

Today’s blog post will highlight an era in America’s history that looms larger every day.  I believe, more than ever before, that American’s must remember there founding history.  So many people will dismiss the founding documents as mere scraps of paper and irrelevant for today’s problems.  In my opinion, nothing could be further from the truth.  Principles stand the test of time and the Declaration of Independence, Federalist Papers, and The U.S. Constitution are all full of principles from thousands of years of governing principles.  Why is our culture so elitist minded that we act like nothing learned from the 18^th century could have any bearing on our decisions today?  Everyone in America can see the lack of leaders being developed in a country of nearly 300 million.  Where are the leaders with the qualities of our Founders?   We must read the Founders to see our culture’s personality based leadership style in contrast to the character based leadership of our Founders. Does this mean the Founders always lived up to their ideals?  No, but at least they had ideals to call someone a hypocrite when they didn’t live up to their professed principles.  Our modern culture has lost the ability for self examination, but no great character based leadership is possible without it! 

I recommend everyone to read the The Founding Brothers by Joseph Ellis.  If you have never read anything on the Founders, this will be a great place to start.  This was the first book that I read from Mr. Ellis and he is now one of my favorite authors on the Founders.  Maybe it is time for you to start your journey through the founding history of the U.S.  History matters!  I love living my life based upon principles and not just the latest techniques.  I don’t fulfill my principles everyday and when I don’t, I examine where I went wrong to improve the next time.  I love reading books to learn the underlying principles that our greatest men and women applied to their lives.  What do your read and why do you read it?  Learn from experience, preferably someone else’s.  Does virtuous behavior matter to you?  It certainly did for the Founders.   Is your leadership style more like  George Washington or Aaron Burr?  I am including a fantastic video of an interview with Joseph Ellis on his book - The Founding Brothers.  Please share your thoughts on Joseph Ellis’s book or share your thoughts on why the America's Founders matter today.  God Bless, Orrin Woodward

Here is a fantastic thought provoking article from Robert Murphy.  Massive government intervention is responsible for the economic mess that America is experiencing in the first place and the Obama plan adds more government intervention to allegedly get us out of the mess.  I believe the Austrian economists have a better plan.  I don’t care if you are a Democrat, Republican, Libertarian or other, read these proposals and think for yourself about this common sense approach.  America lasted nearly 150 years without an income tax, so don’t tell me that society would crumble without it.  I agree that massive government would crumble without our money, but government in America was never intended to be the behemoth that it has become.  We need honorable statesmen who will balance the budget and tell Americans to work for their own rewards and not beg for government doles.  Leadership is a tough business and if they can't stand the heat then they need to get out of the kitchen.  Robbing our future generations to pacify slothfulness will never make America great, loved, nor respected.  Immigrants flocked to America for an equal opportunity not government handouts!  Why are we robbing our future generations of their opportunities to experience the hope and ideas that made America the envy of the free world for centuries?

No one can legitimately explain why we have troops in at least 135 other countries.  Why should American taxpayers foot the bill for another sovereign country's defense needs?  We are massively going into debt while having troops in Germany, Italy, Brazil etc. (see the complete list below) that are protecting who from what?  Are you telling me that German, Italian, and Brazilian (along with the rest of the countries) cannot raise men to defend their own countries on their own dime? If a country cannot legitimately do this, then I doubt the sovereignty of the country in the first place.  Can you imagine a foreign military establishment protecting our borders?  This hasn’t happened since America was an English colony. America must balance our budget and having a defense budget that is nearly 10 times higher than the next nation is sheer madness.  Is there not anyone capable of balancing a budget (a skill set that every American working family must do) in Washington?  Read the article and please share your thoughts.  God Bless, Orrin Woodward

Foreign Countries with American Troops

Afghanistan, Albania, Algeria, Antigua, Argentina, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belgium, Belize, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burma, Burundi, Cambodia, Cameroon, Canada, Chad, Chile, China, Colombia, Congo, Costa Rica, Cote D’lvoire, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominican Republic, East Timor, Ecuador, Egypt, El Salvador, Eritrea, Estonia, Ethiopia, Fiji,  Finland, France, Georgia, Germany, Ghana, Greece, Guatemala, Guinea, Haiti, Honduras, Hungary, Iceland, India, Indonesia, Iraq, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Kuwait, Kyrgyzstan, Laos, Latvia, Lebanon, Liberia, Lithuania, Luxembourg, Macedonia, Madagascar, Malawi, Malaysia, Mali, Malta, Mexico, Mongolia, Morocco, Mozambique, Nepal, Netherlands, New Zealand, Nicaragua,  Niger, Nigeria, North Korea, Norway, Oman, Pakistan, Paraguay, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Senegal, Serbia and Montenegro, Sierra Leone, Singapore, Slovenia, Spain, South Africa, South Korea, Sri Lanka, Suriname, Sweden, Switzerland, Syria, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, United Kingdom, Uruguay, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe

Article by Robert Murphy - Faculty member of the Mises Institute

A lot of people get annoyed with Austrian economists because they tend to be so dogmatic (we prefer the term consistent) and because they cloak their strictly economic claims with self-righteousness (we prefer the term morality). After a good Austrian bashing of the latest call to steal taxpayer money and waste it on something that will make a given problem worse, the stumped critics will often shout, "Oh yeah? Well do you guys have a better idea?"

Now, in truth, someone doesn't have to have a better suggestion in order to point out that a recommended strategy will exacerbate the situation. If an allergic man has been stung by a bee, I don't know what to do except rush him to the hospital and maybe scour the cupboards looking for Benadryl. But I'm pretty sure drawing blood from his leg, in order to inject it into his arm and thus "stimulate his immune system," is a bad idea on numerous accounts — not least of which, is that I'm pretty sure an allergic reaction means your immune system needs to calm down. But the point is, if a bunch of guys hold the man down — he has to be forced to endure the procedure for his own good, don't you know — I feel perfectly qualified in yelling, "Stop!"

If you grasped that analogy, you can understand my feelings about anything Paul Krugman writes.

(All joking aside, I am pretty proud of the above analogy. But to make it even more accurate, let’s stipulate that a blind heroin addict, who has been convicted of manslaughter on three separate occasions, is the one entrusted with making the transfusion. Naturally he will use one of his own needles for the procedure.)

An Austrian Recommendation for President Obama

In one sense, the critics are right when they ask, "Oh, so we should just sit back and do nothing and let the market fix itself?" Yes, that would be a perfectly good idea. The whole reason we are in a recession in the first place is that the capital structure of the economy had become unsustainable due to the Fed's massive credit expansion following the dot-com bust and 9/11 attacks. Resources — most notably, labor — are currently idle, because the economy needs to readjust. Overextended lines such as housing and finance need to shrink, while others need to expand. (And no, I don't know what those understaffed lines are; that's why we have a price system.) Because Americans lived beyond their means for so many years, they now need to live below their means, consuming less while they rebuild their checking accounts and portfolios.

Given the diagnosis, we can be sure that efforts to borrow and spend our way back into prosperity, or massive bailouts of the banks and homeowners, are only pumping air into a flat tire with a gaping hole. And Bernanke's unbelievable injections of new funny money into the credit markets will only ensure that those failed institutions remain afloat, paralyzing true recovery in the loan market, and risking very large price inflation if Bernanke does not soon reverse course.

However, even though "nothing" would be much, much better than all of the alleged remedies being bandied about, the Austrians actually do have concrete proposals for President Obama. The following list includes items that I would have endorsed even before the crisis, but inasmuch as they would definitely help things, I offer them with sincerity to the new administration.

One last caveat: I know there are many purists who read the Mises Daily, and will be aghast at my watered-down recommendations. Yes, yes, I agree that the best thing would be for Obama, Pelosi, Reid, and all my friends to say, "You know, if you look at the history of this company, it always ends up wasting money and getting innocent people killed. I think we should just quit and go volunteer at a church instead."

But, if I said that as an Austrian recommendation, it would be dismissed as "unserious," a very grave charge indeed. Thus, the following list of recommendations are not politically impossible, just exceedingly unlikely:

Eliminate the personal and corporate income tax. Don't put in a flat tax or a fair tax or a VAT or any other cute name for a very uncute process. To make sure that individuals and corporations realize you are serious, blow up the IRS building. (Have everyone vacate the premises first, of course.) Tell all of the displaced workers that they have 9 months of full pay, plus whatever pension and health-care benefits they had contractually earned to that point. If the workers get new jobs 3 days after being laid off from the IRS, that's fine; they still get their full 9 months' pay. But if they haven't found a new job after 9 months, tough.

Unfortunately, dismantling the Social Security system will have to wait. (That means some of the IRS personnel would — sigh — have to be retained. But they would move to a different building.) Getting rid of the income tax will knock out much of the federal revenues, and taking out all payroll "contributions" would take us into the realm of "unserious." Note that in 2007, even without the personal and corporate income tax, the federal government still took in more than $1 trillion in receipts.

The loss of some $1.5 trillion in annual tax receipts sounds absurd, but the actual figure would be lower, because of "supply-side" effects. That is, the true stimulus to the economy from such an enormous tax cut would cause the revenues from other sources to grow. So long as the federal budget were cut by, say, a trillion dollars, within a few years it would be in the black.

Reducing annual federal expenditures by $1 trillion sounds inconceivable, but it actually could be phased in. The government has many assets that it could auction off into private hands, so that in the first year or two, the government could take certain programs and say, "This will have its budget cut by one-third over each of the next three years." The auction receipts would fill the gap until these phased-in reductions had fully occurred. Some of the obvious auction items would be the oil in the Strategic Petroleum Reserve (current value of about $35 billion at $50/bbl oil), as well as all of the mineral deposits (both onshore and offshore) technically owned by the federal government. It is difficult to come up with an estimate of how much the latter properties would fetch in an auction, since the proposals right now are for leasing extraction rights. But since the Outer Continental Shelf is estimated to have some 86 billion barrels of oil, presumably the government could receive many hundreds of billions of dollars — and possibly trillions — from an orderly and staggered sale over a few years of the most lucrative (and environmentally noncontroversial) lands.

Now, where to start cutting?

Eliminate the DEA and the SEC. Since the SEC failed to catch Madoff, despite nine years of warnings, I think its $950 million annual budget is obviously a waste of money. The DEA's $1.9 billion budget in 2007 also strikes me as counterproductive. Beyond the issues of violent gangs and judicial corruption, there is the fact that this is a recession and we need to cut costs. If you're afraid of your kid doing drugs, have a serious talk and then make him watch this movie. And if he's still keen on the idea, I'm not sure the DEA is going to stop him. (By the way, the DEA and SEC employees get the same deal as the laid-off IRS personnel.)

Cut the Pentagon budget in half. In FY 2008 it was (officially) some $460 billion, so that cut alone would free up $230 billion per year. This isn't an article about foreign policy, so we won't be specific about how the military could achieve such cuts. But if you're worried that the country would suddenly be overrun by Iranian tanks, the following chart should reassure you:

Top 10 Countries by Military Expenditure, 2007

Eliminate the Department of Education. That would save $68.6 billion a year, based on its latest budget. Does anyone want to argue that Americans are well educated? And incidentally, I was a college professor for a few years, so I can say from personal experience that there are way too many kids going to college. If you think "everyone should get a college degree," let me ask you this: Should everyone get a PhD? If not, then why a bachelor's degree? The more kids crammed into the school, the harder it is to teach to the truly academic, and the less of a signal the diploma provides. Plus, $68.6 billion is some serious money.

Cancel all the pending "stimulus" and other bailout packages. Tell the Big Three that small is beautiful. Tell the banks, "OK your 'short-term' loan from the Fed has expired, here are your mortgage-backed securities back, and we'll be taking our reserves. Good luck to you. This is a capitalist country, where you keep your earnings if you forecast well (we just eliminated the income tax!) and where you go bust if you don't realize real estate sometimes drops. Have a nice day." Yes, this would cause some banks to immediately go bankrupt, but the big banks aren't doing anything now anyway. The dreaded liquidation would actually wipe the slate clean so recovery could begin. As it is, trillions of dollars in capital is now locked up in undead institutions that can't make new loans but won't mark their assets at true values, since they are insolvent. And with the income tax being wiped out, the toxicity of these troubled assets would come way down.

Allow unrestricted immigration so long as the incoming folks had a secure job in which the employer (a) paid three years in advance on any state and local taxes that would accrue from the employment and (b) bought at least a $100,000 house for the immigrant and his or her family. (Yes, yes, the last point is silly, but it will help sell the package.)

Abolish the minimum wage. That — coupled with the elimination of the income tax — will take care of unemployment within 6 months.

The above steps are incomplete, and I'm sure many readers will email me with snags in them. Fair enough. But I am confident that the above would make a heck of a lot more sense than letting blind heroin addicts borrow an extra trillion dollars to "stimulate" the economy.