Government is taking us a long way down the Road to Serfdom. That doesn’t just mean that more of us must work for the government. It means that we are changing from independent, self-responsible people into a submissive flock. The welfare state kills the creative spirit.
F.A. Hayek, an Austrian economist living in Britain, wrote “The Road to Serfdom” in 1944 as a warning that central economic planning would extinguish freedom.
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Hayek meant that governments can’t plan economies without planning people’s lives. After all, an economy is just individuals engaging in exchanges. The scientific-sounding language of President Obama’s economic planning hides the fact that people must shelve their own plans in favor of government’s single plan.
At the beginning of “The Road to Serfdom,” Hayek acknowledges that mere material wealth is not all that’s at stake when the government controls our lives: “The most important change … is a psychological change, an alteration in the character of the people.”
This shouldn’t be controversial. If government relieves us of the responsibility of living by bailing us out, character will atrophy. The welfare state, however good its intentions of creating material equality, can’t help but make us dependent. That changes the psychology of society.
According to the Tax Foundation, 60 percent of the population now gets more in government benefits than it pays in taxes. What does it say about a society in which more than half the people live at the expense of the rest?
Dennis Kneale, CNBC Media & Technology Editor:
In so doing, the President has shed his usual, becalmed visage of judicious intelligence and what-me-worry confidence. In its place is an unpleasant portrait of a sulking, vengeful politician lashing out at Goldman Sachs, J.P. Morgan Chase, Bank of America, Citigroup and their brethren on Wall Street—the only target that, his polls say, might resonate with the voters who are forsaking him.
The Obama folks “don’t accept that banks perform a necessary function in the system: to get the economy going again,” says one senior executive at a Wall Street giant. “This business has a social benefit, and it’s how we make money. The two are not exclusive.”
Yet the White House is deaf to complaints that burdensome new rules would hurt bank profits and hamper the recovery. “When you tell them that reduces our profits, they just don’t care,” this exec complains.
That’s the big problem: All of us, especially the Obama Posse, should care a lot about profits at the banks. Healthy banks provide the fuel for a healthy economy. They line up hundreds of billions of dollars a year in syndicated loans for businesses and directly loan out hundreds of billions more.
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Obama’s new proposal to ban banks from trading for their own accounts cracks down on a practice that contributed, in no way whatsoever, to the housing bubble and the tumultuous tumble that followed. A recent Goldman Sachs report shows that, simply put, faulty and loose bank lending practices caused 98 percent of all losses, not the banks’ proprietary trading.
Emphasis in bold added by yours truly. This is class warfare on the part of the Obama administration, plain and simple.
There is no more reliable rule than the 95 percent rule: 95 percent of what you read about economics and finance is either wrong or irrelevant.
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[T]he most repeated statement about the cause of the U.S. Great Depression is that it was caused by the October 1929 stock market crash. How could that be? By April 1930, the stock market had recovered to its pre-crash level. What is not taught in history books is the Great Depression was caused by a massive government failure. The most important part of that failure were the actions by the Federal Reserve Bank that led to the contraction of the money supply by 25 percent. Then, in the name of saving jobs, Congress enacted the Smoot-Hawley Act in June 1930, which increased U.S. tariffs by more than 50 percent. Other nations retaliated and world trade collapsed. U.S. unemployment rose from 8 percent in 1930 to 25 percent in 1933. In 1932, the Herbert Hoover administration and a Democratic Congress imposed the largest tax increase in U.S. history, raising the top tax rate on income from 25 percent to 63 percent. The Roosevelt administration followed these destructive policies with New Deal legislation that massively regulated the economy and extended the Great Depression to after World War II.
Have today’s politicians and their economic advisers learned anything from yesteryear’s policy that turned what would have been a short, sharp downturn in the economy into a 16-year affair? The answer is very little.