Herbert Hoover and Spending

I often read claims that President Hoover threw the American economy and people into the abyss of the Great Depression by reducing federal government spending: see here, here, here and so on.

As far as I can tell it is simply not true. While the President is not the only participant in regards to the budget, he certainly has some power. Indeed, there was some big spending under Hoover.

Year Nominal Billions 2010$
1929 3.127 39.87
1930 3.320 43.35
1931 3.577 51.31
1932 4.659 74.15
1933 4.598 77.12
Hoover 38.49% 77.90%
Comparison 47.04% 93.42%

Hoover was President from March 4 of 1929 through the same of 1933. Because the fiscal years during his time in office were July 1 of the previous year to June 30 of the numbered year, the budgets under Hoover are roughly 1930 to 1933. This means that under Hoover there was a 38.49% nominal increase to federal spending and a 77.90% real increase. When compared to the last Coolidge budget of 1929, federal spending was 47.04% higher in nominal terms and 93.42% higher in real terms.

That certainly isn’t a shrinking government.

The Horrors of Left and Right

I frequent the Hannity forums. It constitutes near the entirety of my experience in discussing current events, political philosophy and economic theory. I have a bit of a love-hate relationship with the forum. Unfortunately, the forum seems to me to mostly be populated by two main groups of people that have positions that I regard as, well, horrifying. Both of them are just so bad.

Those that call themselves “conservatives” and who tend to be Republicans sometimes say they want to help poor and oppressed foreigners defend themselves against the states over them, especially ones they regard as communist or terrorist supporting. Unfortunately, they seem to tend to support immigration restrictions which deny these very people an opportunity to escape these situations and an opportunity to earn funds to help those back home. Instead, they at times advocate assistance be provided by slapping economic sanctions on these states and/or going to war against them. Confusing enough, some of them say they’re free traders.

As far as I can tell it tends to result in grave crimes being committed against hundreds of thousands if not millions of the very people they claim they wish to help, as has happened with the Gulf War up to the current War on Terror. These include damaging the transportation and health infrastructure these people use, and their own property, and unjustly preventing them from engaging in voluntary exchanges in the global market and so relatively impoverishing them and making them suffer, perhaps to the point of death. It also includes displacing, maiming and murdering them as “collateral damage” with bombs, or perhaps solders occupying their neighborhoods. In the past two decades this has happened with, among others, the Gulf War, Iraq sanctions, Afghanistan and Iraq as part of the War on Terror.

Some of them also advocate “free trade only with free countries,” and so confusing state for society and suspiciously ignoring great crimes of the American state. Uncle Sam is definitely covered in the blood and treasure of both Americans and foreigners, such as hundreds of thousands of civilians in war from the firebombing of Tokyo and Dresden, and the nuking of Hiroshima and Nagasaki, and he also sure gets his hands on a lot of loot from the annual confiscation of trillions of other people’s money and from borrowing trillions by pledging repayment with other people’s money to finance such crimes among other things.

One of these crimes includes the War on Drugs, which many “conservatives” fiercely support. It has cost much blood and treasure, such as in the last five years over 30,000 Mexican deaths or more than ten times the causalities of 9/11. It has been a disaster in America as well, resulting in at least hundreds of thousands of Americans being sent to prison and a cost of at least near a trillion dollars, and arguably other damage, such as by flipping the social order with the glamorization of drugs and gangs. The burden of such in America has perhaps especially fallen on poor minorities. All because the state criminalized what would otherwise likely tend to be peaceful exchanges.

Though, there are others who simply say they want to protect America against those that they see as fundamentally evil and who want to harm or end America. Many of them can’t seem to comprehend that their obsession with a large military and interventionist foreign policy involves rights violations and economic and social consequences for innocent foreigners who may turn their attention to retaliation and even murder. Disturbingly, some of them say that those who tell the truth about the state in this area are “blaming America” and accuse them of being “America haters”.

Those that call themselves “liberals” and who tend to be Democrats often say they just want to help the poor and want to reduce income inequality so much that it is almost as if it is their fetish. They ignorantly see free trade as impoverishing, especially with poorer peoples. Of course, the free trade they oppose simply respects the right to participate in the global division of labor and social cooperation, which is simply engaging in voluntary exchanges and associations on a global scale. By opposing free trade, they are supporting barriers that make it harder for foreigners to use the human cloud and their comparative advantages to improve their conditions and so likely fuel international tensions, and raise prices at home by shielding corporations from competitors abroad. Surely this brings into question just how much they care about strangers who are poor if they are willing to commit massive rights violations against them and do grave harm to them because of some political line in the ground.

While “liberals” seem to tend to be less openly hostile to poor immigrants, they aren’t exactly open to opportunities that would be available to them on the market. They tend to support labor market restrictions such as minimum wage laws, other compensation mandates, licensing, permits, anti-discrimination laws, unionism, and so on. These things are rights violations, but they also raise the cost of hiring and erect other barriers to employment, and so discourage, and perhaps worse, the hiring of certain Americans, such as minorities, the poor, the unskilled and inexperienced, the unemployed, the young and the old. This happens because some people aren’t able to produce enough for an employer to justify their position with costs so inflated by state interventionism. These interventions also hurt people even more because the political costs and discouraged production raise prices, and the other political barriers do so as well by discouraging competition between firms.

“Liberals” are also fans of among other related things the welfare and entitlement state, both of which hit poor people hard. The payroll tax to fund such programs discourages employment even more, and the mentioned government programs subsidize poverty, nonemployment and unemployment, sickness and so on and so encourage the existence of such circumstances, and encourage dependency and special interests. Again, people are hurt even more because the subsidized demand and discouraged competition and production means higher prices. As well, they support government involvement in education and especially government schools, which involves a destructive version of socializing, high costs, stagnant quality at best, propaganda, and so on.

Some of the “liberals” also defend the bombing of civilians and infrastructure that cause war-related deaths, especially if it short and cheap compared to other interventions and involves no troops on the ground. Yet prominent government officials that are part of their movement defend the killing of potentially hundreds of thousands of children.

They also make crazy accusations somewhat similar to the “conservatives,” such as fingering as perhaps racist, agents of the wealthy and big corporations, and so on, those who oppose things such as minimum wage laws, or rather wealthy white people in Washington and other capitols telling, say, minority youths the minimum cash compensation that they may offer or accept for their labor. It is also a bit amusing that they say such things about those against state interventionism. After all, established and big, capital-intensive businesses have the status and resources to make connections in government and have economies of scale in compliance with the state. They can benefit from the power and interventionism of the state at the expense of consumers, competitors and taxpayers.

Basically, whenever I read such posts, I can’t help but think of them, in the name of the poor and oppressed, as actually calling for those very people to have their rights violated, for their unfortunate circumstances to be exacerbated and even for such to be extended to others, as well as maligning those who point this out. Perhaps they aren’t so different.

The Ragnar Hypothesis

In his article The Comedy of Libertarian Hypocrisy, Dan Agin writes that libertarians are comically inconsistent when they make use of emergency medical services because of state involvement. Indeed, even by continuing to live in this world. Murray Rothbard appears to have already largely addressed related issues. Walter Block has also developed a position for such controversies as well (here, here, here, here, here and probably more). It is called the Ragnar hypothesis by Stephan Kinsella. I’m inclined to agree with them.

Basically, my libertarian understanding is that the states of the world are institutionalized aggressions of varying degrees against people and their human rights, such as in property, association, trade, contract and so on. The attack by Agin amounts to saying that libertarians are inconsistent to not commit suicide instead of eating government subsidized food and using infrastructure provided by government, and so on. The state actually does such things with other people’s money that it has looted. Ragnar Danneskjöld of Atlas Shrugged relieved them of such property.

Unfortunately, such criminal organizations dominate the world. I’m going to have to disagree that libertarians are being inconsistent when they oppose the state and yet relieve it of ill-gotten gains (“services”). In my opinion, it seems like a reasonably good and libertarian thing to do.

Matthew Yglesias and Monetary Freedom

I rarely read Matthew Yglesias, but I came across the following by him and was shocked:

America’s current monetary policy—a fiat currency that’s freely exchangeable for other currencies and commodities—is the free market position.

I think he is wrong. After all, the current state monetary policy involves the Fed, a state created central fiat monetary authority that is also under the influence of banks. The official purpose of it is to address panics and manage employment, consumer prices, interest rates, and so on. Supposedly towards this it has been granted considerable control over the economy to say the least, such as a money monopoly and paper money, as well as other vast and discretionary powers, privileges and roles.

The federal government is also involved in other ways, such as by having implicit and explicit bailout guarantees and engaging in surprise bailouts, which the Fed seems to do as well. Both I believe also have a current role as a regulator. There is probably much more.

Basically, America’s current monetary policy is really one of corporate statism. It essentially empowers a few to impose fiat money creation and price inflation and as such to loot the people and distort the economy, perhaps to the benefit of the state, big and connected banks, and so on. It is also used to try to paper over boom-bust problems that come about due to this state interventionism and attempt at monetary and financial central planning.

These elites have secured for themselves with their political power over others the destructive position of not being as constrained like the rest of us by the need to economize when bidding for scarce resources. It is a monstrous creation that plagues the economy with the likes of greater moral hazard, malinvestment, and regime uncertainty. Though, this printing-as-wealth scheme, while not sound, doesn’t necessarily mean hyperinflation as it is often relatively restrained naturally and within the institution itself to boom-bust.

So, Yglesias is wrong. The free market position doesn’t favor this extreme statism. The free market position opposes the existence of state monetary policy and supports the separation of money and banking from the state.

Restore Freedom of Education

In another post I wasn’t too kind to state involvement in education, saying it is a great crime against children, young adults and their families. Hopefully the following helps explain my thinking.

First, compulsory education for children. The state is forcing demand for a particular version of education and socializing on the poorest and most vulnerable. This is an assault on their status as free human beings and relatively reduces the role of their parents and the rest of the family in their life in favor of violent strangers. This can’t be a good environment for children to interact with each other and adults.

Second, property gets confiscated to fund state involvement in education. This taxation is itself robbery and also discourages production. Unfortunately, the state has a prominent role in financing education with other people’s money. It has far less incentive to perform well because of the nature of the organization and relations compared to the market, so the kids get less in marketable skills and the community gets an inflated cost of education and the money just keeps flowing. In higher education it also provides incentives for greater costs and debt and lower quality by encouraging existing students to over-consume and the admittance of the under-qualified.

Third, government control over teachers and content and other related privileges for the sector. Essentially, with the unionism, bureaucracy, legislated standards, barriers to entry and so on, it is restricting the marketplace even more which makes the poor quality and high cost even worse.

Also, when it comes to the state, even just the one in America, I think it is important to remember certain things, especially with the education of children and others involved: it threatens violence to dozens of millions of people if they don’t surrender their property to the tune of trillions annually; that it uses other people’s money to bail out connected failures; that it claims the power to tell people what they can’t consume and whether they can practice many trades or professions; that it has murdered hundreds of thousands of civilians in war; and more.

This is a rather dangerous institution to support forcing itself on education, especially of children and with it pressuring them to pledge allegiance. Indeed, it is possible that the very purpose of the modern system of state involvement in education is for it to have greater control over the people. [2]

Basically, I want the separation of education and state. Abolition brings an end to the government’s role in schools, which means four things: the end of compulsory attendance; the end of government control of content; the end of government control of who teaches; and the end of the government’s practice of taxing some people to pay for other people’s children to go to school. [3] But it doesn’t bring an end to education, if anything it will enable education to flourish after decades of the state.

I’m not a planner. I’m not sure who would teach kids, what kids would be taught, how much it would cost, how it would be structured and so on. That is for people to decide through their own plans, voluntary exchange and cooperation and it is what will reform education. In comparison, the state, with what amounts to an education-industrial complex, has been unjustly crowding out and criminalizing many plans in favor of their own.

Libertarianism: Paul and Wilkinson

Will Wilkinson recently wrote A Libertarian’s Lament: Why Ron Paul Is an Embarrassment to the Creed. I rarely read him, but here are my thoughts…

First, he goes after Paul on immigration. As far as I know, Paul seems to oppose free immigration with modern state citizenship for now because of state interventionism in other areas, such as welfare, education, infrastructure and so on, and because he seems to have some exaggerated and unfortunate affection for the Constitution and the like. While admittedly not the supreme consideration of a libertarian, the reality is that the Constitution says that the federal government has power in regards to naturalization, which isn’t the same as immigration.

Interestingly enough, and thankfully, Paul says that he would pardon non-violent drug offenders from unjust legislation that criminalized their choices as consumers, yet he says “illegal” immigrants shouldn’t be “rewarded” for acting in the face of the unjust state interference with and against international labor mobility. Perhaps he has a point about citizenship, but it is unfortunate that as far as I can tell he doesn’t defend the immigrants as workers and such. The citizenship and immigration issues are not one and the same.

Anyways, I don’t think the consistent libertarian answer can be the maintenance or expansion of immigration restrictions until other state interventions are removed. It must be simply the weakening or removal of interventions when possible. If this is not the case it is troublesome for other libertarian positions. Though, granted, one set of series of weakening and repeals can perhaps be superior to another similar to how all tax cuts aren’t equal.

Second, Will Wilkinson is right that the state in America has committed grave crimes against blacks and Indians. Yet it also goes far beyond them because it has also aggressed to a horrifying extent against Confederates, Filipinos, Germans, Japanese, Vietnamese, Iraqis, and so on with warfare, but also white Americans and the rest of them with forced segregation and desegregation, taxation, bailouts, conscription, vice prohibitions, and so on, and basically everyone in the world with international barriers. Of course, the other states are guilty as well.

Third, I think Wilkinson is wrong to focus on coercion. My libertarian understanding is opposition to aggression, the initiation and continuation of unjustified violence. He is right to say that it is justifiable to commit violence against an aggressor in defense of property and self. He is wrong in claiming that it is morally permissible for a person or group to initiate violence against non-aggressors so that they have the resources to defend property and self against other aggressors. Robbery is a crime even in the pursuit of justice, and taxation is mass robbery. Of course, the state in America is far from minimalist anyways.

Fourth, he tries to justify the mass robbery that is taxation by saying poor kids benefit from it. I think the state has been aggressing against them too and making them worse off. The taxation and programs he defends deprives people of their property and discourages greater production, while the spending is wasteful and encourages dependency and corruption. It helps the state to sustain and farther expand and further concentrate the power that is denying the marginal person opportunities in the economy. Indeed, even the involvement of the state in education is a great crime against children, young adults and their families.

Basically, I think libertarianism is most prominently in opposition to the privilege of the state: the idea that state aggression is protected by a moral loophole. Unfortunately, the crime and horrors of states are not unique to America. Indeed, the states of the world are the most prominent criminals. 

Reparations are effectively owed to all others and yet the funds from taxation, the claims to lands and so on aren’t the legitimate property of the various states. I don’t think the libertarian answer can be to defend the statist solution of further tainting property claims and social relations by continuing their horrible cycle of interventionism. It must surely be opposed to the interventionism of the federal government.

In this regard, perhaps Ron Paul has his flaws, but it seems to me he is easily a relatively strong libertarian on taxation, war, drugs, money and banking, the right to discriminate, and probably more. In my opinion, Paul is a much stronger libertarian than Wilkinson thinks. As well, Wilkinson has less libertarian ground to stand on than he realizes.

Herbert Hoover and Taxation

Sylvia Nasar has an animated guide out to her book Grand Pursuit: The Story of Economic Genius. At 2:08 she says:

1931: President Herbert Hoover responds to the Great Depression with tax cuts. . .

As far as I can tell there are three significant pieces of legislation concerning taxation under Hoover: the Joint Resolution No. 133 of 1929, the Smoot-Hawley Tariff of 1930 and the Revenue Act of 1932.

It is true that there was a one year tax cut under Hoover. The Joint Resolution No. 133 of 1929 reduced the total marginal individual and corporate income tax rates by 1 percentage point for one year.

Though, there were also shocking tax increases. The most visually shocking changes due to the Revenue Act of 1932 were the increases to the total marginal rates, such as the bottom going up by a factor of more than 10 times and the top going up by a factor of more than 2.5 times. It seems to have also increased the number of tax brackets from 23 to 55.

It also permanently increased the corporate tax rate from 12% to 13.75%, with it being temporarily higher at 14.5% for 1932 and 1933. There were also excise tax increases that were prominent in revenue effects, such as a 2.5% tax on all manufactured articles.

As well, the personal exemption for single persons was reduced by $500 and $1,000 for married couples. In regards to purchasing power, $500 in 1932 has the same as $7,958.25 in 2010, and of course the adjusted $1,000 is double that. Also, an earned income credit which reduced tax liabilities by 25% for some definition of lower incomes was eliminated.

There is also the Smoot-Hawley Tariff of 1930, though there appears to be confusion as to the actual extent of the increase to the tariff level.

I am unsure of why Nasar’s video promotes her book in regards to Hoover in this way. While she is technically and narrowly correct, it ignores that it is dwarfed by the rest of what happened under Hoover concerning taxation. After all, clearly the time of President Hoover is prominent in the history of federal taxation in America not for a tiny and temporary tax cut but instead for large and long-lasting tax hikes.

Thoughts on Moral Meltdown

This is the first time I’ve come across Jakub Augstein. His article A Society on the Verge of a Meltdown looks at the moral meltdown of the rioters and looters and is, I think, wrong in many ways.

First, he attacks those who emphasize the individual as the basic unit in society and the economy. His view seems to be more top down, in that social problems and economic difficulties are inflicted on individuals. I think it is more bottom up, because society and the economy are just abstractions, complex webs of social and economic relationships that consist of flesh-and-blood, and acting and different individuals. They do not have an existence independent of them.

Second, he charges that the market lacks morality. I think there is a very strong moral case for the market, also known as the free market or capitalism, as it is simply voluntary economic exchange, and so inherently peaceful, fair, and mutually beneficial.

Third, I believe he misunderstands why society is “broken”. Unfortunately, there are indeed many “broken” people. The same therefore goes for much of society and the economy. As statists, their beliefs, advocacy and actions are far less moral throughout and overall than they realize.

Fourth, he mistakenly blames capitalism for material inequality and treats such a human condition as a grave injustice. In the market, in words of Ludwig von Mises, “It is the consumers who make some people rich and other people penniless.” Sadly, capitalism and the people have been under assault by the massive interventionism of the state. As well, humans simply aren’t equal in conditions in that people have widely varying inherent, environmental and developed differences, chances and the ability to develop relationships and opportunities to engage in exchanges.

Fifth, he embraces the notion that the true consummation of society lies inside the legislature of the state and calls for the power of the state to be used towards equality. This is definitely horrifying to me, because the members of the legislature aren’t true representatives and the state is an attempt at a territorial monopoly of unjust violence, and as such of aggression, predation and parasitism, and so when compared to voluntary arrangements it surely isn’t the apotheosis of society. Again, except in natural individual liberty people aren’t equal, and so the calls for statist attempts at any other equality come off to me as revolts against nature and reality and ultimately totalitarian and antihuman.

The truth is that the state is the most organized and violent enemies of humanity, individual rights, civil society and the market, progress, prosperity and civilization. They have beat down and herded the rest of humanity with such weapons as: propaganda, regulatory protectionism, taxation, intellectual monopoly grants, and bailouts; control over money and banking, lands, infrastructure, education and health and medical care; vice prohibitions, the police state, the military-industrial complex, conscription and wars; subsidization of poverty, unemployment, irresponsibility and sickness; barriers to international trade of goods and services, flow of capital and migration of people; and more. The state is not the answer to moral meltdown; it is capitalism that points the way to a future of greater harmony and plenty.

Jeffrey Miron and Taxation

In his article Why Warren Buffett is wrong, Jeffrey Miron writes about tax policy. While he thankfully comes out against higher tax rates for super incomes, sadly he also says:

Most importantly, singling out the super-rich distracts from the real problem: the myriad policies that make no sense in the first place because they inhibit economic growth and that simultaneously redistribute from low-income households to the middle and upper classes.

The deductibility of home mortgage interest encourages excess investment in housing. High-income taxpayers get the benefits, since low-income taxpayers own little or no housing and do not itemize deductions in any case.

The favorable tax treatment of employer-paid health insurance generates overconsumption of health care and contributes to rising health care costs. The benefits go mainly to middle- and upper-income households, since those without jobs get no employer-provided benefits.

Numerous loopholes for favored industries in the corporate tax code distort the market’s investment decisions and reward the well-funded and politically connected.

I think Miron is wrong here. The real problem and distortion is the state itself and in this instance the power of taxation. Tax breaks make it easier for some people to escape from having more of their property confiscated and blown by the state. I think this is cause for some celebration.

The only way tax breaks should end is with the elimination of the tax. Until the tax is eliminated, there needs to be more tax breaks, such as for non-employer health insurance, renters, vehicle payments, childcare, gasoline, and beyond. Admittedly, all tax cuts aren’t equal and perhaps tax rate cuts are superior.

This reminded me of an anonymous comment I once came across over at EconomicPolicyJournal: Tax law with loopholes is like the Berlin wall with doors and windows.

Follow

Get every new post delivered to your Inbox.