December 15, 2018

21 Months Later, Nothing in DC Has Changed Under Trump

Publication1Despite 21 straight months of screaming headlines from both anti-Trump and pro-Trump media, virtually nothing about Washington, DC and it’s empire has changed.

There are still US troops and their suppliers voraciously consuming taxes all over the world. Not a single regulatory agency has been eliminated or significantly cut. Entitlements continue their headlong sprint towards fiscal oblivion. And federal spending continues to outpace inflation, faster under Republicans, as usual.

And honestly, neither Republicans nor Democrats voted against any of that.

Trump was able to win the 2016 election not because he was going to radically change Washington, DC, but because he was going to superficially change its marketing from “progressive” to “conservative.” To be fair, he never promised to cut anything. On the contrary, he promised not to touch Social Security or Medicare and to increase spending on the military. He’s kept both promises.

He did promise to eliminate two regulations for every new one, but that is a very vague promise. Suppose there was one regulation that said all construction workers had to wear hard hats and another regulation that said they all had to wear safety googles. Repealing both regulations and replacing them with one that says, “All construction workers must wear hard hats and safety goggles” is perfectly consistent with Trump’s promise. Is that what his regulators are doing? It’s hard to tell. It appears the federal register is smaller, but is the economy fundamentally less regulated? What happened to getting rid of whole federal departments, as Republicans promised to do just six years ago?

The truth is the so-called Swamp continues because most Americans don’t really want to drain it, despite overwhelming evidence that everything it does creates large-scale human misery. Just ask any ten neighbors if they’d support cutting Social Security or Medicare, much less eliminating either, or cutting the military by even 30% (which would still leave it by far the largest in the world). Ask them if they’d support getting rid of the Departments of Education, Agriculture, or even the completely useless Department of Commerce.

When push comes to shove, they won’t even support getting rid of the TSA, which is Oh-fer in seventeen years on preventing actual terrorist attacks and still has a well over 90% fail rate in detecting dangerous items on its own tests. That’s not to mention the nightmarish surveillance state, five years after Edward Snowden exposed it. Americans are only upset about it when it spies on politicians – a completely backwards position in a supposedly free country.

The mid-term elections are approaching and the usual “this is the last chance to save the republic” rhetoric is already reaching a fever pitch. In reality, nothing about the republic has changed or will change until a critical mass of Americans truly want less government. Right now, that’s hard to imagine considering who wins elections.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The Three Types of Government Spending

U.S._federal_government_spending,_2010-2014Any objection whatsoever to some new, tax-funded government program elicits a consistent response from liberals or progressives. “You just don’t want to pay your fair share,” or “I guess we won’t see you driving on any of those government roads or calling the government police or fire departments.” The underlying assumption is that taxation is an all or nothing proposition. Either there is nothing that the government can collect taxes for or there is nothing that the government cannot collect taxes for. There are no principles upon which to base an answer to the question, “Is this a legitimate function of government?”

While there are probably thousands of different services that governments spend money on, they can generally be divided into three broad categories: security, public services, and wealth redistribution. Libertarians[1] argue that the only legitimate government spending is on security. Conservatives generally approve of security and some public services with their rhetoric while engaging in all three types of spending when in public office. Liberals generally endorse all three types of spending with both their rhetoric and their actions while in public office.

“Security” includes all government functions which attempt to defend citizens from aggression against their rights by other human beings. These would include the military, various police forces, and the civil and criminal courts. These are the functions of government whose purpose is to secure the individual rights of life, liberty, property, etc.

It is important to remember that even if these are legitimate functions of government, it does not mean that they cannot be abused. For example, a small suburban village in a low-crime area may not need more than the county sheriff for a police force, but may instead bear a tax burden of village, town, county, state, and even federal police forces. However, these debates revolve around how efficiently the services are being provided, not whether they should be provided by the government at all.

“Public services” generally refers to services provided to all members of society. What makes a service a “public service” is that it can be reasonably assumed that every member of the society has an equal opportunity to utilize it. Examples include roads, bridges, public libraries, garbage collection services, and fire departments. Libertarians argue that these are goods and services that the private sector can provide. Their objection to providing them with tax dollars is that those who do not consent to purchase them are still forced to pay. While this is also true of security services, libertarians acquiesce to those on the assumption that it would be impossible to exercise property rights without a government in place to defend them.

Certainly, a bridge between a new suburb and the city may improve commerce for the entire city. However, it is not necessary to protect anyone’s rights. Therefore, libertarians argue that those who want to build the bridge should provide the capital for it themselves and are perfectly within their rights to charge a fee to those who wish to use the bridge. Conservatives have traditionally argued that these services can be funded by the government and provided by private corporations under government contracts. Liberals generally support public services as well, although they sometimes object to them being provided by private firms.

Like security services, public services are prone to abuse and corruption, even if one accepts that they are legitimate functions of government. Public funds are often wasted on services that are not needed or services that are poorly rendered because they are provided by politically-connected government employees or private firms, rather than by the most qualified. Consider the “bridges to nowhere,” the roadwork construction projects that never end, or the multitude of scandals where it was discovered that $500 was spent on a single nail or some other gross abuse of public funds occurred.

The third category of government spending is wealth redistribution. Wealth redistribution collects taxes from one group of people in order to provide services to another group. What makes this type of government spending different from public services is the fact that the goods or services provided do not benefit all members of society equally. For example, health benefits under Medicaid are paid for by all taxpayers but are only available to people whose income is under a defined eligibility level. Thus, those funds are literally taken from one group and redistributed to another. Both libertarians and conservatives argue that this is nothing more than legalized theft, although conservatives have often led or acquiesced to expansion of this type of spending once in office. President Bush’s expansion of Medicare is one of the most recent examples. Liberals and progressives generally support this type of spending, arguing that it is each person’s moral responsibility to “contribute.”

In order to have an informed debate about a new government program, one must identify which category the proposed program belongs in. Too often the distinctions between these categories are blurred by both critics and proponents. Most often, a program that would properly be categorized as wealth redistribution is represented as a public service in an effort to persuade those that must pay for it that it is their civic duty to do so.

Read the rest at Euro Pacific Capital…

 

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

>The Government Bubble Heads for a Blow-Off Top

>I have a friend that tends to express his ideas about everything in the jargon of a securities trader. Of course, this is probably because he has been a very successful trader, both in bull and bear markets, for many years. “Every trend in history, even liberty, can be charted like a stock,” he has often observed. I tend to agree.

As any trader will tell you, bull markets do not go straight up and bear markets do not go straight down. Rather, they tend to meander in the direction that they are headed. During a long-term bull market, a trend will have major pull-backs and long periods of consolidation. It is the experienced trader that knows how to “buy low and sell high,” taking advantage of the back and forth action of a stock or a sector on its journey. However, even wiser is the investor that can spot the trend at the beginning and keep buying lows without having to attempt to time the market and sell at all. The legendary Jim Rogers has often said that he is “the world’s worst short-term trader.” He would rather buy something that he can own forever than buy with the intention of having to sell.

Gold has been the most spectacular bull market over the past decade. Like all trends, it had periods of dramatic rise, followed by sharp pullbacks that gave back a portion of the gains, and then long periods of consolidation. Once a consolidation was over, another dramatic rise in price followed. The first run began at the beginning of the decade, with gold selling under $300 per ounce. It ran up to over $700 per ounce in 2006 before pulling back sharply under $600. The price then consolidated there for an entire year before the next leg up began. That second leg ran all of the way over $1,000 per ounce before pulling back to the low $700’s. Again, there was a long consolidation before this latest run, which will take gold we know not where.

All of the movements in the price have explainable reasons. When the fundamentals are stronger than the actual price of the security or commodity, investors begin buying. Once the price starts to move up, traders begin wading in to make profits on the movement of the price, both up and down. At any given time, there are those who are long and those who are short. Contrary to the nonsense you hear from government officials and their kept economists, short sellers play a vital role in keeping the market healthy. When a stock, commodity, or sector beings to fall in price, short sellers help stabilize that price because they have to buy the stock that they sold short to cover their short sales.

You will often hear the wisest of investors say that a trend is about to reverse when there is no longer any disagreement about it. When everyone is positive on a stock or a bull market, it is about to go down. When everyone is negative, it is about to make a run up. When all of society agreed that the NASDAQ would never go down – when every conversation in every coffee shop, supermarket, or dinner party revolved around the wonderful opportunities in technology stocks, wise investors knew it was time to get out.

Of course, this is not some sort of market magic or voodoo. It is simple cause and effect. When there are few sellers in a market and many buyers, the price is going to be inflated far beyond its value. From an opposite standpoint, when short sellers are forced out of the market in a “short squeeze,” there is now nothing to stop the price from falling precipitously once it starts to fall. With no short sellers covering their shorts, the price falls like a stone. Thus, at the end of long bull market, a bubble usually develops, characterized by a final, parabolic “blow off top,” followed by an equally dramatic drop in price.

The past 100 years has been a bull market for government. While the seeds of the run were sown in the mid-19th century, the bull market in government really began at the turn of the 20th century. The first signs of the bull could be spotted as early as the (Teddy) Roosevelt administration, but the real advances came under Woodrow Wilson. The income tax, the Federal Reserve, and the 17th Amendment were advances in government that made gold’s move from $275 to $700 look tame.

There was then a period of consolidation during the so-called Roaring Twenties. It was not so much a pull-back of government as a slow-down in the pace of its growth. Under three Republican presidents, the government bull market consolidated as Americans convinced themselves that they had restored a free market (because the Republicans said they did, despite their actual support of big government fundamentals).

The next big move came during the Great Depression. While the stock market and the real economy went south, government went on another tear as FDR fully instituted the modern welfare state, the fascist regulatory structure, and took America to war. After 16 years of absolute misery, even the most enthusiastic government bull must have thought it was time for a pullback. It was brief, but it came.

Americans again elected a Republican president in the 1950’s and convinced themselves that they had restored the American system and rejected the big government philosophy of FDR and his liberals. However, this, too, was only another consolidation. In actuality, it was Eisenhower that paved the way for LBJ’s Great Society by creating the Department of Health, Education, and Welfare (now the Department of Health and Human Services). The 1950’s are fondly remembered as a period of (mostly) peace and prosperity for America. It was only another consolidation period for government’s century-long bull run.

The next great move came during the 1960’s, when LBJ again lead a tremendous run up for government. Medicare and Medicaid, the other two entitlement monsters that will eventually combine with Social Security to bankrupt the United States, were born during this fabulous period for big government. The move ran right through a two-term Republican presidency (counting Ford’s mop-up after Nixon’s resignation) and into the Carter administration.

Most bull markets have two legs. Some have three, but usually no more than that. It seemed like that axiom would hold true for government as Ronald Reagan gave his first inaugural address. “In this crisis,” he told us, “government is not the solution to our problems – government is the problem.” It was the greatest inaugural speech of the 20th century. The government bull market was over. Or so we thought.

We now know that government didn’t get smaller during the Reagan years, but much bigger. However, there was at least a feeling of negativity about government during the Reagan-Bush years that even forced Bill Clinton to pass himself off as a free-market friendly centrist. It was another consolidation period, with a seemingly impossible fourth leg to follow.

We are in the midst of that fourth leg now, as government makes a more precipitous run up than at any time in history. In a few short years, the government will have nationalized the banking, auto, and health care industries. There are no more government bears to be found anywhere, either among Republican or Democratic politicians or (let’s face it) among 99% of the citizenry. Outside of a tiny constituency of libertarians, paleo-conservatives, and anarchists, there are absolutely no non-believers in government left. The rise is accelerating too fast for any protest or community organizing to stop. It’s a short squeeze as the government bull stampedes.

While this might be a terrifying period for anyone remotely interested in living his own life, there is much reason to be hopeful. As most bull markets eventually do, government is experiencing a blow-off top. The curve has bent straight up, with nary a short to be found in any political party or in any bowling alley or church social. Americans have convinced themselves that government either “should” or “must” do something about absolutely everything. We should expect the run to pick up speed, as government invades every aspect of our lives. Never before – not even in the most barbarous ages – has government made such enormous claims upon the life, liberty, or property of its subjects. Medieval serfs were taxed less. Ancient slaves were freer. Not even the brutal Romans killed with such efficiency and on such a scale.

For all of these reasons, it is about to end. With almost uncontested faith in government, its role has expanded so far beyond what it is actually able to deliver that soon we will see a fall that will make the real estate meltdown look like a mild pullback. Having rode the last leg of the move and squeezed out the last of the shorts, government is about to remind everyone that it not only should not be providing what it is attempting to provide, but that it cannot provide it.

At the moment that the whole world has accepted that government will centrally plan all of the economy, take care of its citizens from cradle to grave, and rule a worldwide military empire –all with money that comes from nowhere – at that very moment the age of government will end. The end is going to come fast, too, just like the end of the bull markets in technology stocks and real estate. Ben Bernanke will still be telling government bulls that there is nothing to worry about long past the moment when his time is up. That’s how fast it’s going to be.  As in any market, the moment when every bear is gone is the moment that the bull run is over.

This will not be a pleasant experience. No correction ever is. Fortunes will be lost (albeit mostly fortunes dishonestly made), but innocent people will be hurt, too. All of society will come to the realization that government really can’t provide anything, beyond the brute force that is only justified in self defense. It may take a generation to repair the damage. It’s going to be rough.

However, we should remember one thing. When a bubble deflates, the capital that is not destroyed seeks another refuge. When the NASDAQ melted down and the U.S. dollar began to implode, the smart money fled to gold. It will be no different during the bursting of the government bubble. With a precipitous fall in government, there is an equally dramatic rise in its opposite – liberty.

Americans will have to forego the ill-gotten gains provided by government and do with less while they rebuild. That is unavoidable. While the NASDAQ bubble actually started on a real foundation, the fundamentals of the government bubble were never real. It was all an illusion and it is five minutes from ending.

It’s going to be great.

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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© Thomas Mullen 2010