Defund the IRS

Steve Forbes hits a home run in the current issue of Forbes: Because of the IRS targeting-of-conservatives scandal, which is reminiscent of the fascistic Europe that Obama and his morally diseased supporters idealize and hope to emulate, the IRS should be defunded until the scandals are resolved.

Forbes notes that the current Obama administration is wracked with scandal more significant than the Teapot Dome in the 1920s, which preceded Warren G. Harding's death, and Watergate.  For some reason the totalitarians in the Democratic Party claim that their Fuehrer did not know, a claim that they would have ridiculed in 1974 when Nixon was president.

Forbes does not go far enough, of course.  The IRS is a criminal organization that should be permanently closed, not just until the Obama scandal is investigated.  With a crooked, fascistic president in Washington, the claim that the federal government is a force for good is nonsense.

De-Coopting the Freedom Movement

Liberty Republicans need to think about strategies to counteract the cooptation of the newly revived liberty movement that Rockefeller or Progressive Republicans will attempt. The Tea Party movement's explosion shows that there is potential for success for liberty Republicans. As well, the failure of Rockefeller Republicanism under the Bush administration might well keep big government Republicans from success if we liberty Republicans refuse to cooperate with them.

Because the Tea Party movement is composed of many fine and well meaning but inexperienced activists, it is susceptible to the same tactics that coopted the libertarian movement in 1980. If a Progressive Republican calls himself a "libertarian" or a "capitalist" and offers symbolic gestures, he can sufficiently cloak his commitment to the status quo. It doesn't help that many mistakenly call the pro-freedom movement "conservative", which leads to a tacit assumption that it is the status quo to which we are committed. Nuh uh. We are moderate, but we are radical in the sense of getting to the root. The current system is extremist. The status quo is not normalcy. We represent a return to normalcy and moderation, which means a lot less government and a lot more freedom than currently.

Recently, Forbes Magazine, for instance, has been calling its pro-Wall Street, statist positions like support for the Bush-Obama bailout "libertarian". This reflects the ancient tactic of calling totalitarianism justice. Karl Popper argues that Plato was the first to do so 2,500 years ago. Some classicists dispute Popper's reading of Plato, but we can all agree that George Orwell was not the first to think of this idea, and Forbes will not be the last to apply it.

In a recent article in the Washington Post, reporters Dan Eggen and Perry Bacon, Jr. note that "the energized tea party movement...is preparing to shake up the 2010 elections". The Post article notes of the tea party movement:

"The strategy poses both an opportunity and a risk for the beleaguered Republican Party, which is seeking to take advantage of conservative discontent while still fielding candidates who appeal to independent voters." (bold added).

Websites such as Erick Erickson's RedState.com and Dick Armey's and Matt Kibbe's Freedomworks.org are aiming to engage in direct political competition via primaries with the Republican machines in various states. The article makes a crucial point:

"...political experts in both parties say it is unclear if the movement can become the kind of unified force that can win, and not just disrupt, elections... The tea party movement is splintered into hundreds of local and state-level groups that have differing rules and goals and for the most part have not participated in big-money politics. Many of the groups have been torn apart by personal feuds in recent months; one major umbrella organization, the Tea Party Patriots, has filed a lawsuit against a founding board member who signed on with a rival, the Tea Party Express. "

The Republican Liberty Caucus ought to play an integrative role. We should be thinking about how to (a) win elections; (b) prevent the professional politicians from coopting liberty Republicanism in the interest of special interest pandering; and (c) cause them to defer to libertarians' aims.

The Post article quotes Senator John Cornyn of Texas, head of the National Republican Senatorial Committee, as to the importance of "tempering our conservative approach with pragmatism." In other words, the kind of pragmatism that causes 50% of the national income invested in failed government programs that, obsessively, must not be terminated when they fail. Rather, they should be expanded when they fail. That is "moderation" in the eyes of the Washington Post and Senator Cornyn.

Given the large amounts of money that government provides to its favored interests, such as Wall Street, government employees, and the military-industrial complex, there will be a slick, well executed thrust to neutralize and manipulate the liberty movement to make it palatable. We need to devise intelligent tactics to resist it.

Question for Steve Forbes

Sharon Gitelle of the Forbes Blog Network sent the following:

Re: The Forbes Network: December 11th interactive call: Steve Forbes

Dear Mitchell,

Please join us for an interactive call with Steve Forbes, on Friday, December 11th at 3 PM Eastern time for a discussion about his new book called How Capitalism Will Save Us. (To learn more about this book please click here: http://bit.ly/WT2Um )

The expected duration of the call is 45 minutes.

Steve Forbes will be answering your questions about capitalism—please submit your question(s) to me by e-mail by Wednesday, December 9th. You will be notified by me if your question has been selected prior to the call.

My response:

Here is my question for Steve Forbes, Sharon.

In the 1870s an investment bank, Jay Cooke and Co., failed. In many respects it was similar to Citigroup and other of the Wall Street firms in that it had been heavily subsidized by the federal government throughout its life but was so incompetently run that it failed despite the large subsidies. In the case of Jay Cooke, the subsidy resulted in part from its involvement with the Civil War greenbacks (like Henry Paulson, one of its representatives, if I recall Salmon P. Chase, had been been appointed to be Secretary of treasury). In the case of Wall Street and the money center banks today, the government subsidy has taken the form of access to large amounts of artificially created money. That is, until the socialist Bush-Obama bailout, where cash was simply handed to the incompetently run American financial institutions.

In the aftermath of the Civil War, despite the subsidies it had received, Jay Cooke failed in tandem with the crash of 1873. No one was foolish or gullible enough to believe that sustaining Cooke would have helped the economy. That would have been a fool's fantasy. Following Cooke's failure and the crash there was a depression. The depression and crash were associated with the federal government's retiring of the greenbacks and deflation. During this continual deflation there were three depressions. However, real wages grew at a much faster pace than they have since 1970. Moreover, innovation occurred at a much faster pace than at any time in the history of the world, culminating with the creation of the concepts of television and radio by Nikola Tesla in 1897 and numerous inventions that were so vibrant that they continued to subsidize the American economy through the 20th century, a century of dramatically slowed creativity.

At the same time, real wages rose at an uneven clip, roughly two percent per year, more or less until the founding of the Federal Reserve Bank in 1913. As David Ames Wells points out in Recent Economic Changes (1889) the innovation and real growth of the economy was astonishing. What Wells mistakenly calls "overproduction" (see diatribe in Hazlitt's Economics in One Lesson) resulted from the dramatic innovation, as Wells points out. Of course, corporations, banks and Wall Street disliked the intense competition and deflation, which led to declining profits and hard work, but American workers saw their wages grow rapidly, as Wells pointed out.

Since the abolition of the gold standard in 1971, real wages of American workers have grown 2% over the 40 years. That's 2% in total over 40 years. In contrast, during the deflation of the late nineteenth century, real wages rose 2% per year. Yet, today's all-thumbs economics establishment claims that deflation is a major threat. It is, of course, to the banks who provide economists with endowed chairs, but it is not to workers who wish to raise their living standards. Workers did much better under deflation from 1865 to 1913 than they have under inflation from 1970 to 2009.

Thus, the 1873 failure of the major investment bank in America and the contraction of the money supply, deflation, left American workers much better off but Wall Street and corporate America less profitable. This was the period of freest markets in American history, the closest to what might be called a libertarian economy. Of course, Wall Street and the money center banks, then like now, opposed libertarianism and free market capitalism, preferring the socialist pattern that Alexander Hamilton and the Federalists advocated (Hamilton was indeed a socialist and advocated a government owned manufacturing firm that would establish American manufacturing).

Forbes has supported the bailout of Wall Street. In addition, you have echoed the all-thumbs economics establishment's obsessive fear of deflation. When I say "all-thumbs" I mean all-thumbs as far as the public is concerned, not all-thumbs as far as the government-subsidized banking interests are concerned. Politically the economists are wise servants of power.

Forbes has been on the bailout bandwagon. The bailout does not reflect libertarian or pro-free market sentiments, but sentiments in favor of the subsidization of a specific sector of the American economy through state intervention, Wall Street and banking. As I wrote to one of your columnists, and contrary to your philosophy, a libertarian America would need Wall Street as much as I need lung cancer.

Thus, it would seem that Forbes has taken not so much a free market position, but a crony capitalist or socialist position, closer to Hamiltonian Federalism, or fascism than to libertarianism, the idea that markets should be governed by a non-judgmental, objective legal standard.

Can you reconcile Forbes's position on the bailout with the views of Presidents Andrew Jackson and Grover Cleveland?

Best wishes,

Mitchell Langbert

Sharon's reply:

Great. Thank you!

Steve Forbes: Fed, Bush Administration Responsible for Current Financial Problems

Steve Forbes takes a page out of Mitchell Langbert's blog. He blames the Bush administration and the Fed for the current financial problems.