Book Review: Lincoln Unmasked by Thomas J. DiLorenzo

Imagine that one day everything that you were taught as a child comes out to be a mirage of the truth. What would you do? American children in public schools, including myself, are taught that honest Abe was a great man. He freed the slaves and united a nation, right? But what if it wasn’t so black and white? What if history overlooks a lot of the ills of Abraham Lincoln?

That is what Thomas J. DiLorenzo, professor of economics at Loyola College, tries (and does) answer in his book “Lincoln Unmasked: What You’re Not Supposed To Know About Dishonest Abe.” DiLorenzo does an excellent job of taking Lincoln piece by piece and dismantling the myths of Lincoln with chapters titled “The Great Railroad Lobbyist, The Great Protectionist, & The Great Inflationist.” When most people think of Lincoln they don’t think of his monetary and trade policies. But they should.

For example, most people do not know that pre-Civil War, there was no clear central monetary system in the United States. Andrew Jackson had just finished dismantling it and Lincoln was an strong supporter of a central bank and a national currency. This, of course, would hardly interest a 3rd grader learning about honest Abe, but is it very important in thinking about the way the country as a whole raises funds. With an unlimited central bank with a national currency that was backed in nothing, government spending could go hog-wild and it did.

Another interesting tidbit about the book was the state of slavery at the start of the war and how much wheeling and dealing the so-called “Great Emancipator” did to not free slaves. DiLorenzo points out that early in the Civil War Lincoln made it clear that he did not want to ban slavery he just wanted to centralize the government and keep the states together. This is shown with evidence through his agreement to allow border states to keep slavery as long as they stayed in the Union. Along with the fact that Lincoln actually was more supportive of a deportation of former slaves then to keep them here.

The last major point to take away from this book is the destruction of states rights and federalism. When looking back one might think that it was a slow demise but DiLorenzo suggests that Lincoln murders it outright. This is an important point to debate because federalism and decentralized government is good for the nation and at some point demised. And the reader must ask themselves, is it okay for a state to leave the union peacefully? And what role does that play in keeping the federal government in check? Though this might be one of the hardest concepts for an average American reader to grasp because with the sense of patriotism that has been indoctrinated it would be hard for them to imagine the United States without 50 states.

The only negative that this book has is that it is so short and a quick read. I am sure that this was Dr. DiLorenzo’s intention to have an easy read to spread the ideas to the masses but it left the reader wanting more. It also does such an efficient job at telling the story and illustrating the point that an average American reader may reject it thinking that they found the answer too easily and will not take the time to do the research themselves.

Overall, I highly recommend this book to all who want the other side of the story and love history.

5/5

 

Lincoln #1, FDR #2,… Why not George W. Bush #3?

Most of the time when historians rank President’s I ignore it. Like back in 2009 when U.S. News reported:

“President George W. Bush is near the bottom of the heap in the latest survey of historians on presidential leadership.

Bush received an overall ranking of 36 out of 42 former presidents—in the bottom 10.Click here to find out more!

The five best presidents, according to the historians, were Abraham Lincoln, George Washington, Franklin D. Roosevelt, Theodore Roosevelt, and Harry Truman, in that order. Rounding out the top 10 were John F. Kennedy at six, Thomas Jefferson, Dwight Eisenhower, Woodrow Wilson, and Reagan.

The worst presidents, according to the survey, were James Buchanan at 42, Andrew Johnson at 41, Franklin Pierce, William Henry Harrison, Warren Harding, Millard Fillmore, George W. Bush, John Tyler, Herbert Hoover, and Rutherford B. Hayes.”

So all “its too recent for history to tell” aside, let’s look at the rankings a little closer. So some of the top picks are Abraham Lincoln and FDR, which unlike Franklin Pierce, Warren Harding, and some of the lower ranked Presidents, governed over very traumatic periods of American History.

Abraham Lincoln faced the Civil War and the south trying to leave the union. FDR faced the Great Depression and World War II. President George W. Bush also faced these types of experiences with September 11th and the ongoing wars in the middle east. So when it comes to ranking Presidents by historians they must take more into account then just their “difficulties” they faced in office.

Maybe its how they handled them. Lincoln suspends habeas corpus and jailed thousands of southern sympathizers. FDR creates massive government bureaucracies and sends thousands of italian, japanese, and german immigrants for basically being from countries in which the United States was at war with. Bush instead used Congress to help enact the Patriot Act which allowed law enforcement to bend the rule of law to “suspend suspected terrorists” indefinitely.

So why is it that Bush does not rank up there with Lincoln and FDR?

I would suggest that he wasn’t enough of a tyrant. Who are the most remembered and liked individuals? Brutus, Cato or Caesar? Napoleon or the people that exiled him? Everyone, of course, always remembers the tyrant and rewrites history to make them seem more like a saint.

If George W. Bush really wanted to become a top ranked President by historians, he should have made the Patriot Act and executive order and suspended more of American’s rights.

This is by no means a defense of George W. Bush, nor is it an attempt to say that it is unjust or unfair that he isn’t ranked higher. The point here is that historians enjoy the dictators and tyrants of society and they look down on the Presidents that did little or nothing. When, in fact, it was the founders’ intent for the federal government to be restrained. And yet, we reward the very men who begin its downfall from limited government to massive controlling government with the finest statues and monuments to be remembered forever.

So do I think George W. Bush should be ranked #3 as one of the greatest President’s? Absolutely not. Should historians? Absolutely and there is no reason for them to not to. My personal list is almost a complete reversal with FDR and Lincoln on the bottom as being two of the worst. Now if they would only let me decide who’s faces would be on our currency. Oh wait…

Pushing American History in the Wrong Way: The NEH

By Justin Williams

With Barack Obama’s new appointment of former Iowa Congressman Jim Leach to chairman of the National Endowment for the Humanities (NEH), new attention is being brought onto a program called We the People. This program is funded with the purpose for furthering the study of civics and bringing Americans together through their history.

And, perhaps not surprisingly, for Obama’s fiscal budget for 2010, it is the only NEH program that is receiving a cut.

We the People won widespread laud for doing a television documentary on the life and writings of Thomas Paine who said “Government even in its best state, is but a necessary evil, in its worst state, an intolerable one”—which may explain at least in part why the Obama Administration has cut this and increased all other NEH programs.

As with most government proposals, under the fairytale-sounding narrative, there is a paragraph that tells exactly why the Obama NEH intends to expand its own select menu of programming. And just like all the other latest proposals of the Obama administration, once you begin to scratch the surface, all the deep dark matter shows.

The NEH claims that its programs will “Strengthen humanities teaching and learning in the nation’s schools and colleges.” Under that sweet-sounding tripe, it reads that they will fund “outreach programs of Humanities Initiatives for Faculty at Historically Black, Hispanic Serving, and Tribal colleges and universities.”

And there you have it: the Obama administration believes that it can bring Americans closer together by funding only colleges and universities that historically have had only minority students. Obama has chosen to increase this while reducing a program, We the People, which “support(s) enrichment workshops for K-12 school teachers at important historical and cultural sites around the nation.” So much for “cultural sites” where the “wrong” cultures may have lived.

The NEH also believes that it could “Preserve and increase access to cultural and intellectual resources essential for the American people” by supporting programs that “preserve and provide access” to “information relating to the estimated 3,000 of the world’s 6,000-7,000 current spoken languages that are on the verge of extinction.”

In other words, the program in We the People that worked at preserving “U.S. newspapers from 1836 to 1922” was not apt at doing this. And neither apparently did providing “free sets of classic works of literature” to libraries.

Americans for Limited Government has always been a supporter of rolling back government and, of course, the budget increases for the NEH continue to add more and more to the already deep hole of U.S. national debt. But the move by the Obama administration to shift policies away from these that seem to achieve goals that bring Americans together to those that seem to discriminately fund small groups is not only wrongful; it’s shameful.

And then, of course, there is the overt attack on Thomas Paine. It begs the question, why is it that the Obama administration is not showing signs of slowing down government spending on various issues (i.e. bailouts, “stimuli,” health care, etc.) but the one program cut in the NEH is the one that supported freedom fighters—and not so coincidently—treasured “that government which governs least.”

One would have hoped that the Obama Administration after inheriting a trillion-dollar deficit would have pursued a limited government budget, in order to prevent the U.S. from going deeper and deeper in debt. No matter what the cost.

Instead, the policies seem to be more of a ploy to divide the country and skew American history. All the while, of course, Obama creates new voting blocs for the Democratic Party—while making certain that those victimized by such reckless, ruthless political chicanery remain are nary once reminded that, indeed, “These are times that try men’s souls.”

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 25, 2009 at 12:49 pm  Leave a Comment  
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Death by deficit by Tony Blankley

Today’s article of the day comes from the Washington Times:

The ancient Latin historian Livy famously described the terminal plight of the late Roman Republic. “Nec vitia nostra nec remedia pati possumus” (“We can bear neither our shortcomings nor the remedies for them”).

As I reread this phrase in Christian Meier’s biography of Julius Caesar this weekend, I couldn’t help thinking of America’s current fiscal profligacy – which has been growing for years at an ever-accelerating rate.

Of course, since last fall’s financial/economic crisis, the rate of profligacy has become supercharged. Like the Roman Republic’s lament, we think we can’t survive without deficit spending – but soon we won’t be able to survive with the deficit spending, either.

In 2012, federal debt will be higher than $15 trillion. Annual interest probably will be between $1 trillion and $1.7 trillion – depending on whether long bonds remain at about 3.5 percent or go to recent historic rates (6 percent to 7 percent). Deficits will average about $1 trillion a year: $22 trillion by 2019. Yearly interest payments then will be more than $2 trillion. That’s the good news.

That assumes the world continues to buy our Treasury notes at plausible rates. We had a slight foretaste of the future last week when 10-year U.S. Treasury bond yields shot up 60 basis points on soft demand and a Standard & Poor’s warning of a possible ratings downgrade of British bonds. The bond market may well rebel ultimately against our government’s excessive borrowing and spending (insufficiently supported by adequate national economic strength).

The “good news” of only $22 trillion in debt supported by purchasable bonds also assumes that our economy recovers this year and we then have continued steady economic growth. Of course, the more the government borrows, the less will be available for the private sector (the part of the economy that produces things). And the less available borrowing there is for investment and consumption in the economy, the slower the economy will grow – if it grows at all.

The not-so-good news on top of this astounding and growing indebtedness is that we will have to borrow even vastly more than the current budgets propose. Starting in 2017 (just eight years from now) the Medicare trust fund will be depleted. We will begin to experience a Medicare revenue shortfall that ultimately will total $35 trillion to $40 trillion over those next 60 years. Social Security’s depletion begins 20 years later and will have a shortfall of a little less than $10 trillion over the same period.

Oh, and the current budget projects that defense spending will decrease as a percentage of the federal budget. While the overall budget is slated to grow 75 percent over the next decade, defense is to grow just 17 percent. Only imminent and eternal peace would permit such low defense expenditures. The administration’s health plans also will add a currently unfunded $1.5 trillion per decade.

Not only does continued, increased government borrowing ever more sap our economy, but as the baby boomers retire, we will move from what recently were four workers to each retiree to two workers for each retiree. That means a weaker economy with fewer workers and more retirees will not produce enough to support all of government’s costs – even with massive and persistent tax increases.

And if, as seems possible, sometime in the next decade the world resists lending our government enough money (because our economy will be too small to produce enough to pay the ever-growing interest on the debt) – we finally will be forced to make choices of what to buy and what to forgo. Maybe only subsidized pain pills rather than medical treatment for old people? Just 50 percent Social Security payments? Default on federal debt payments? Or what the Chinese are already worried about – monetizing the debt leading to hyperinflation?

But the Roman Republic’s experience hints at an even more profound danger. The political tasks flowing from the growing demands of the republic’s empire were of a magnitude and type that could not be managed by its form of government. However, the Roman Republic was prepared neither to give up its growing empire nor to modify its government to deal with such challenges.

Similarly for the United States today, we are not prepared to forgo what all this soon-to-be unavailable deficit spending can buy us (health care, bank bailouts, defense spending, food stamps, etc.). Nor can our governments (and the publics who elect them) stop the spending.

Eventually for the Romans a contradiction arose between concern for the tasks that needed to be performed and concern for their form of government. The contradiction was resolved and the problems solved at the price of their republic: Came Gaius Julius Caesar.

Surely (presumably?) for the next decade, the United States will bungle onward with both our form of government and our deficit spending. But sometime soon after 2017, when Medicare’s trust fund begins its depletion (or earlier if the world stops buying our bonds) the shocking reality of being forced to do without borrowing will shape – and probably misshape – both our way of life and our form of governance.

Tony Blankley is the author of “American Grit: What It Will Take to Survive and Win in the 21st Century” and executive vice president for global affairs of the Edelman public relations firm in Washington.

Published in: on June 3, 2009 at 6:04 pm  Leave a Comment  
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The Charlotte Tea Party Speech by John Lewis (April 20, 2009)

The article(speech) of the day comes from Capitalism Magazine:

This is a slightly revised version by Dr. Lewis for printed publication. Permission is given to read this in full, wherever defenders of liberty may gather.

It is high time for a tea party in America! But to do this right, we need to understand what it means. So I want to think back for a moment to what happened over 200 years ago, at the time of the original Boston Tea Party. The Founders of this nation brought forth a radical idea. It was truly radical, practiced nowhere before this time. This idea was the Rights of Man.The Founders saw each of us as endowed with certain inalienable rights, rights that may not be separated from our nature as autonomous beings.

These inalienable rights are: · The Right to Life–the right to live your own life, to choose your own goals, and to preserve your own independent existence. · The Right to Liberty, which is the right to act to achieve your goals, without coercion by other men. · The Right to the Pursuit of Happiness, to act to achieve your own success, your own prosperity, and your own happiness, for your own sake. · And the Right to Property—the right to gain, keep, and enjoy, the material products of your efforts.

Unless I’m mistaken I don’t see anything here about a right to happiness. I see a right to the pursuit of happiness: the right to take the actions needed to attain one’s own happiness. Nor do I see any rights to things at all—no rights to food, clothing, healthcare or diapers. There is only a right to act to achieve those things. This is called freedom. These rights to act—the rights to life, to liberty, and to the pursuit of happiness—are founded on a certain view of man. Each of us is an individual, autonomous, moral being, with the right to choose his own values and capable of directing his own life. Look at the person next to you, and look in the mirror—do you see the individual sovereign human being, existing for his own sake, with the right to live, to love, and to act?

This idea—the Founders’ idea of the individual Rights of Man—led to a radical view of government. Government was not to be inherited by the force of an entrenched aristocracy as in Europe, imposed by the divine right of kings through generations of oppression, or enforced by the force of a club. Government in America was to be designed and instituted by thinking men, for a single purpose: to protect and defend the Rights of Man. This is what the American Declaration of Independence says: “To secure these rights, governments are instituted among men.” Thinking men, armed with the idea of rights, created a government limited to the protection of individual rights. (more…)

A Word on Today’s Tea Parties

Today many people around the country will get together for a unified cause. This cause was voiced on the Chicago Exchange floor by Rick Santelli. He said what everybody had been thinking at the time, that we are fed up with the spending of government and it needs to stop. We all realize that Obama is going to raise taxes, print money, and/or create debt. None of these are good, especially considering it is always in the interest of the politician to do the last two.

It is true that in early Constitutional America there were a few tax revolts for taxes that were much smaller than the ones we are complaining about today. It is true that Americans have gotten used to the way their government is. But it takes more than just getting mad once to change the way our government is run. We need to win the intellectual battle, so I challenge you to read people like Adam Smith, F.A. Hayek, Ludwig von Mises, and many others. This way we as a society can further the belief in liberty to our children and so on.

Let us not forget today and continue with this on tomorrow. Let us not delude ourselves to think that any politician will save our hard-earned money. Instead let us wake from our apathy and realize that our government is set up in a way in which politicians stay in power by spreading the costs and concentrating the benefits. This is why every district hates Congress but loves their Congressman or woman.

We have to remember where we have stepped into a world where not littering and being political correct has been placed higher than liberty. The Boston Tea Party was one where white males dressed up as Indians and threw tea into the water. Today none of you will even think about doing that because of the consequences. I am not saying do those things but I just want all the supports of these tea parties to realize exactly where we are today.

Today is important but always be thinking about tomorrow!

~PCCapitalist

Some Forgotten Presidents Shouldn’t Be by David Stokes

Today’s article of the day comes from Townhall.com:

On August 2, 1927, President Calvin Coolidge had breakfast in the White House residence with his wife, Grace, and remarked to her “I have been president four years today.” It was one of those quick, concise, directly-to-the-point sentences she had been used to hearing since they met in 1905. It was also something the American people were familiar with, having nicknamed the 30th president “Silent Cal.”

He had a 9:00 meeting with reporters in his office that morning. Before fielding a few questions, he told those gathered: “If the conference will return at 12:00, I may have a further statement to make.” Curious, but compliant, in those long-since-gone days of semi-civility between presidents and the press, the journalists found their way back at noon.

An hour or so before that conference encore, Coolidge took a pencil and wrote a message on a piece of paper. He handed it to his secretary with the instruction to take it to his stenographer and have him make several copies – enough for the newsmen who would be at the 12:00 meeting. Ever the frugal man, he suggested that the brief statement could be copied several times on the same sheet, thus only using a few sheets of paper. He told the secretary not to give the note to the stenographer, though, until about 11:50 a.m.

He really wanted to manage this story.

He asked for the pages to be brought to him uncut and before the reporters were admitted to the office, he took a pair of scissors and cut the paper into smaller slips. When he was just about ready, he told his secretary:

“I am going to hand these out myself; I am going to give them to the newspapermen, without comment, from this side of the desk. I want you to stand at the door and not permit anyone to leave until each of them has a slip, so that they may have an even chance.”

An “even chance” at a big scoop, that is.

The handwritten note from the president said: “I do not choose to run for president in nineteen twenty-eight.” Though the now classic Broadway play (made into several film versions), The Front Page, was yet a year away from being published and produced, it comes to mind with the image of dozens of reporters rushing to find telephones.

Calvin Coolidge could have been re-elected if he had wanted the job for another term. His anointed successor, Herbert Hoover, won big in 1928, though it is clear that Coolidge was less-than-enthusiastic about the “Great Engineer.” It is one of those curious “what ifs” of history – would Coolidge have dealt with the coming of the Great Depression better than his successor?

Historians tend to bunch the three Republican presidents of the 1920s – Harding, Coolidge, and Hoover – together in a way suggesting they were identical triplets separated at birth. But there were many differences – some subtle, some not so much.

Herbert Hoover, all of his speechifying about “individualism” notwithstanding, was not the fiscal conservative many today make him out to be. As Amity Shlaes has pointed out in her often-quoted-these-days book, The Forgotten Man: A New History of the Great Depression, Mr. Hoover had a strong interventionist streak in his personality. He “could not control his own sense of agency,” and “liked to jump in, and find some moral justification for doing so later.” So, in many ways, he helped to turn a recession into the Great Depression “by intervening in business, by signing into law a destructive tariff, and by assailing the stock market.”

Ironically, when closely examined, Herbert Hoover’s approach to economics had more in common with his successor than it did with the two men preceding him in the White House.

Warren G. Harding generally ranks in the bottom five when studies are done about the effectiveness of our chief executives. In fact, Hoover fares better than the man from Marion, Ohio. This is largely due to the scandals that came to light after his untimely death in San Francisco in 1923 – the affair known as Teapot Dome. Also, some of Mr. Harding’s personal behavior was less-than-presidential. That said, he might have been a saint on that front compared to president’s 35 and 42.

What is usually missed about Harding, though, is how effective he was on the issue of the economy. When he assumed the presidency in March of 1921, he inherited a mess. Woodrow Wilson had expanded the role and size of government dramatically, incurred a $25 billion dollar debt, and cracked down on political opponents – even imprisoning some (socialist activist Eugene V. Debs, etc.).

In fact, the economic problems in the 1920-1921 depression were actually worse in many ways than the Great Depression a decade later. But that downturn didn’t last as long – thankfully. Warren Harding cut federal spending and lowered taxes. And in less than two years the number of unemployed in the country fell from 4.9 million to 2.8 million, en route to a rate of 1.8 per cent by 1926 under his successor, Mr. Coolidge.

Oh – and Harding set the political prisoners free, even inviting Debs to the White House. He was a classier act than many now remember.

By the time Calvin Coolidge became president upon the death of Harding in August of 1923, the country was on its way to enjoying some great years of prosperity. He was a fiscal conservative who tried his best to stay out of the way. He knew that the government functioned best as a referee – not as a participant in the economic game – or as a team owner.

After he was elected in his own right, he told the nation in his March 4, 1925 inaugural address:

“I want the people of America to be able to work less for the government and more for themselves. I want them to have the rewards of their own industry. That is the chief meaning of freedom. Until we can re-establish a condition under which the earnings of the people can be kept by the people, we are bound to suffer a very distinct curtailment of our liberty.”

His decision not to run in 1928 – at the height of his popularity – puzzled many. But Coolidge understood the nature of leadership, and its seductions. He explained it this way:

“It is difficult for men in high office to avoid the malady of self-delusion. They are always surrounded by worshipers. They are constantly, and for the most part sincerely, assured of their greatness. They live in an artificial atmosphere of adulation and exaltation, which sooner or later impairs their judgment. They are in grave danger of becoming careless or arrogant.”

Of course, it can never been proven, but I suspect that if Calvin Coolidge had decided to run again in 1928, he might have responded to the initial shock waves of 1929-1930 differently than Hoover. Maybe, just maybe, the Great Depression would not have lasted so long. And maybe, just maybe, people who should know better these days would stop trying the same old failed “interventionist” tactics that never really worked backed then.

At any rate, Mr. Coolidge died suddenly on January 5, 1933, after Hoover had been badly beaten by Franklin Roosevelt. He did not live to see what a prolonged depression looked like, but one suspects that he would have ventured an opinion or two.

His words would have been brief and directly on point.

~PCCapitalist

Fight Bob vs. Silent Cal: A asinine lineage of the Republican party

This is no Reagan.

In the article “Fighting Bob vs. Silent Cal: The Conservtive Tradition from La Follette to Taft and Beyond” by Jeff Taylor attempts to make the argument that Ronald Reagan made a huge mistake of aligning himself with Calvin Coolidge and was closer to Robert La Follette. Taylor seems to ignore the difference between limited government and big government. He tries to align “Mr. Conservative” Robert Taft with La Follette on the basis that they were not for big business and Coolidge was. Taylor makes the argument that Coolidge veruss La Follette was the battle between croney centralized capitalism and the peoples capitalism. First, let’s go back to the Taft-La Follette connection. This is what the author himself has to say about it:

” La Follette was a preeminent “liberal” and “progressive” while Robert Taft was described as a “conservative” and “reactionary” by the press of his day. La Follette ran for president in 1924 with Socialist Party Socialist party, in U.S. history, political party formed to promote public control of the means of production and distribution. In 1898 the Social Democratic party was formed by a group led by Eugene V. Debs and Victor Berger. support while Taft condemned the New Deal and Fair Deal for being socialistic. La Follette was a leader of the Progressive Era and named his party after the movement that wanted to use government on behalf of the common people, while Taft rejected centralized, bureaucratic government.”

From Taylor’s own mouth, it seems that these two are complete opposite. Of course, the author blows if off by calling it “superficial analysis.”

Let us move past this and back to the point that Coolidge was in the hands of big business. From a glance Coolidge is very anti-union. He busted strikes while he was Governor and railed against the coal strikes during his time. This could be seen as pro-crony capitalism or anti-unions. He signed the Revenue Act of 1924 lowering personal income taxes but raising gift and estate taxes. This does not sound like pro-crony capitalism. In fact, gift and estate taxes often prevent crony capitalism. He did later sign the Revenue Act of 1926, which lowered the income tax again and some estate taxes. He was also an avid federalist, from Sobel’s book on Coolidge:

“As Governor of Massachusetts, Coolidge supported wages and hours legislation, opposed child labor, imposed economic controls during World War I, favored safety measures in factories, and even worker representation on corporate boards. Did he support these measures while president? No, because in the 1920s, such matters were considered the responsibilities of state and local governments.”

Now a brief glance at La Follette would show (besides what is above written by Taylor) that he had hardly anything in common with Reagan. He was progressive who supported social security, tariffs, and other progressive reforms.

So here is was distiguishes me from the author of this article. I cite evidence to why Calvin Coolidge was more like Reagan and La Follette is almost a complete opposite. I challenge Taylor to cite evidence that Coolidge was a support of crony capitalism. He cites Ron Paul and Pat Buchanan as current leaders that live up to the style of La Follette. I agree with him that the protectionist progressive Bucahanan is much like La Follette, but Republicans are not for free trade, as they should be. Ron Paul is for uninhibited free trade, which means without the government involvement. This is nothing like La Follette also.

If you do not believe me at the outrage of the asinine attempt at Republican lineage read it for yourself here.

~PCCapitalist

The Keynesian-Krugman Problem of War

As most of us has heard, there is an ongoing debate about Keynesian economics and whether it is in fact a good idea for the government to run deficits pursuing fiscal stimuli. In a previous article, I wrote what the economic reasoning is behind all of this. Upon further research, I have discovered an important untold part of the Keynesian viewpoint. That is which is illustrated best by Dr. Paul Krugman in his recent article discussing “What will stop the pain?”:

“What, then, will actually end the slump?

Well, the Great Depression did eventually come to an end, but that was thanks to an enormous war, something we’d rather not emulate.”

If you ask even some normal people, you will receive the answer that World War II caused us to get out of the Great Depression. This is inherently false. In fact Cullen and Fishback at NBER made this observation, ” [They] find that in the longer term counties receiving more war spending per capita during the war experienced extensive growth due to increases in population but not intensive growth, as the war spending had very small impacts on per capita measures of economic activity.”

How could this be? Most people when they think of productivity they think of labor and employment. If this was the case then World War II would be a great success. In fact, war times in general would bring a large boost to any economy, as they are a fiscal dream. Why is this not true? The fact is that the goods that they are producing are purely military and are being sent off to be destroyed. This is called the broken window fallacy, which Krugman violated after 9/11 when he said:

“…the attack opens the door to some sensible recession-fighting measures. For the last few weeks there has been a heated debate among liberals over whether to advocate the classic Keynesian response to economic slowdown, a temporary burst of public spending. There were plausible economic arguments in favor of such a move, but it was questionable whether Congress could agree on how to spend the money in time to be of any use — and there was also the certainty that conservatives would refuse to accept any such move unless it were tied to another round of irresponsible long-term tax cuts. Now it seems that we will indeed get a quick burst of public spending, however tragic the reasons.”

It is obvious here that Krugman along with other Keynesians secretly (or not so secretly) find war and destruction to be a good thing for our economy. This begs the question, why doesn’t Dr. Krugman’s plan involve increasing production of anything and blowing it up in the desert? This would be no more productive than World War II. It would just avoid all the pain and suffering.

To simplify things a bit, imagine an economy where they go to war and the factories switch from cars and tractors to tanks. While these tanks are going off to Europe to be destroyed, the prices of cars are going through the roof as supply has stopped. Sure, the inflationary wartime spending has caused people to go to work but they cannot buy anything as prices skyrocket. We have to remember the three ways that you can raise money for this. They are higher taxes, borrowing money, or inflation. Let’s not forget FDR’s ban on gold thus setting up inflation, which Truman inherited. This just acts as a tax and causes a very unstable currency. The other possible method was borrowing, which is just future tax increases. This will not create productive growth.

Many uneducated people on the right cling to this explanation because they feel it’s the only argument they have against the liberals saying it was the New Deal. Both of these groups should wake up and smell the free-market roses. It is ridiculous to think that a centrally planned economy (war-time economy) where massive amounts of people (human capital) along with materials (physical capital) is being destroy and very little non-military goods were being produced (not to mention there was rationing), somehow “stimulated” us out of a recession.

~PCCapitalist

Published in: on February 23, 2009 at 2:32 pm  Leave a Comment  
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Calvin Coolidge on the Economy & Government

Via Dr. Pete Boettke at the Austrian Economists:

~PCCapitalist

Published in: on February 17, 2009 at 1:01 pm  Leave a Comment  
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