Over at Matt Yglesias’ new
blog Moneybox, Via Meadia’s research team came
across a smart post from earlier in the week that
cuts through the complaining and over-analyzing of
the story about Mitt Romney’s upgraded beach house,
and gets at a real problem most people have missed:
to put on an addition at your house, you shouldn’t
need a lobbyist.
Romney’s house sounds tacky
and extravagant, but it’s not some kind of public
safety hazard in urgent need of regulation. You
shouldn’t need dedicated lobbyists to get permission
to build buildings on property you legitimately own.
At the end of the day, Romney is going to be able to
hire the lobbyist and get his mansion built. But
these same hurdles afflict people who might be
interested in affordable housing for low-income
people or simply regular old market rate structures
for the middle class.
Exactly right. The country’s
most populous state is strangling itself in red
tape. And if you need to hire a lobbyist to
negotiate the permit process for building a home,
ask yourself what starting a business or building a
factory will involve.
Here at the other end of the
country we have the same kind of trouble; people
have to hire “facilitators” to push all the
paperwork through all the bureaucracies needed to
get simple and very ordinary jobs done. Every year,
there are new requirements, new fees, new mandates
as New York City works systematically to destroy its
economic base and drive the middle class into the
The biggest victims: the
middle class and the poor. It’s hard
to quantify the jobs lost, the revenue foregone, the
opportunities killed by the bureaucratic monstrosity
the Golden State has spawned, but in California as
elsewhere, the blue social model is killing hope.
A leading U.S. demographer and
‘Truman Democrat’ talks about what is driving the
middle class out of the Golden State.
‘California is God’s best
moment,” says Joel Kotkin. “It’s the best place in
the world to live.” Or at least it used to be.
Mr. Kotkin, one of the
nation’s premier demographers, left his native New
York City in 1971 to enroll at the University of
California, Berkeley. The state was a far-out
paradise for hipsters who had grown up listening to
the Mamas & the Papas’ iconic “California
Dreamin’“ and the Beach Boys’ “California Girls.”
But it also attracted young, ambitious people “who
had a lot of dreams, wanted to build big companies.”
Think Intel, Apple and Hewlett-Packard.
Now, however, the Golden
State’s fastest-growing entity is government and its
biggest product is red tape. The first thing that
comes to many American minds when you mention
California isn’t Hollywood or tanned girls on a
beach, but Greece. Many progressives in California
take that as a compliment since Greeks are
ostensibly happier. But as Mr. Kotkin notes,
Californians are increasingly pursuing happiness
Nearly four million more
people have left the Golden State in the last two
decades than have come from other states. This is a
sharp reversal from the 1980s, when 100,000 more
Americans were settling in California each year than
were leaving. According to Mr. Kotkin, most of those
leaving are between the ages of 5 and 14 or 34 to
45. In other words, young families.
The scruffy-looking urban
studies professor at Chapman University in Orange,
Calif., has been studying and writing on demographic
and geographic trends for 30 years. Part of
California’s dysfunction, he says, stems from state
and local government restrictions on development.
These policies have artificially limited housing
supply and put a premium on real estate in coastal
“Basically, if you don’t own
a piece of Facebook or Google and you haven’t robbed
a bank and don’t have rich parents, then your
chances of being able to buy a house or raise a
family in the Bay Area or in most of coastal
California is pretty weak,” says Mr. Kotkin.
While many middle-class
families have moved inland, those regions don’t have
the same allure or amenities as the coast. People
might as well move to Nevada or Texas, where housing
and everything else is cheaper and there’s no income
And things will only get
worse in the coming years as Democratic Gov. Jerry
Brown and his green cadre implement their “smart
growth” plans to cram the proletariat into
high-density housing. “What I find reprehensible
beyond belief is that the people pushing
[high-density housing] themselves live in
single-family homes and often drive very fancy cars,
but want everyone else to live like my grandmother
did in Brownsville in Brooklyn in the 1920s,” Mr.
“The new regime”—his name for
progressive apparatchiks who run California’s
government—”wants to destroy the essential reason
why people move to California in order to protect
their own lifestyles.”
Housing is merely one front
of what he calls the “progressive war on the middle
class.” Another is the cap-and-trade law AB32, which
will raise the cost of energy and drive out
manufacturing jobs without making even a dent in
global carbon emissions. Then there are the
renewable portfolio standards, which mandate that a
third of the state’s energy come from renewable
sources like wind and the sun by 2020. California’s
electricity prices are already 50% higher than the
Oh, and don’t forget the $100
billion bullet train. Mr. Kotkin calls the
runaway-cost train “classic California.” “Where
[Brown] with the state going bankrupt is even
thinking about an expenditure like this is beyond
comprehension. When the schools are falling apart,
when the roads are falling apart, the bridges are
unsafe, the state economy is in free fall. We’re
still doing much worse than the rest of the country,
we’ve got this growing permanent welfare class, and
high-speed rail is going to solve this?”
Mr. Kotkin describes himself
as an old-fashioned Truman Democrat. In fact, he
voted for Mr. Brown—who previously served as
governor, secretary of state and attorney
general—because he believed Mr. Brown “was
interesting and thought outside the box.”
But “Jerry’s been a big
disappointment,” Mr. Kotkin says. “I’ve known Jerry
for 35 years, and he’s smart, but he just can’t seem
to be a paradigm breaker. And of course, it’s
because he really believes in this green stuff.”
In the governor’s dreams,
green jobs will replace all of the “tangible jobs”
that the state’s losing in agriculture,
manufacturing, warehousing and construction. But
“green energy doesn’t create enough energy!” Mr.
Kotkin exclaims. “And it drives up the price of
energy, which then drives out other things.”
Notwithstanding all of the subsidies the state
lavishes on renewables, green jobs only make up
about 2% of California’s private-sector work
force—no more than they do in Texas.
Of course, there are plenty
of jobs to be had in energy, just not the type the
new California regime wants. An estimated 25 billion
barrels of oil are sitting untapped in the vast
Monterey and Bakersfield shale deposits. “You see
the great tragedy of California is that we have all
this oil and gas, we won’t use it,” Mr. Kotkin says.
“We have the richest farm land in the world, and
we’re trying to strangle it.” He’s referring to how
water restrictions aimed at protecting the delta
smelt fish are endangering Central Valley farmers.
Meanwhile, taxes are harming
the private economy. According to the Tax
Foundation, California has the 48th-worst business
tax climate. Its income tax is steeply progressive.
Millionaires pay a top rate of 10.3%, the
third-highest in the country. But middle-class
workers—those who earn more than $48,000—pay a top
rate of 9.3%, which is higher than what millionaires
pay in 47 states.
And Democrats want to raise
taxes even more. Mind you, the November ballot
initiative that Mr. Brown is spearheading would
primarily hit those whom Democrats call
“millionaires” (i.e., people who make more than
$250,000 a year). Some Republicans have warned that
it will cause a millionaire march out of the state,
but Mr. Kotkin says that “people who are at the very
high end of the food chain, they’re still going to
be in Napa. They’re still going to be in Silicon
Valley. They’re still going to be in West L.A.”
That said, “It’s really going
to hit the small business owners and the young
family that’s trying to accumulate enough to raise a
family, maybe send their kids to private school.
It’ll kick them in the teeth.”
A worker in Wichita might not
consider those earning $250,000 a year middle class,
but “if you’re a guy working for a Silicon Valley
company and you’re married and you’re thinking about
having your first kid, and your family makes 250-k a
year, you can’t buy a closet in the Bay Area,” Mr.
Kotkin says. “But for 250-k a year, you can live
pretty damn well in Salt Lake City. And you might be
able to send your kids to public schools and own a
three-bedroom, four-bath house.”
According to Mr. Kotkin,
these upwardly mobile families are fleeing in
droves. As a result, California is turning into a
two-and-a-half-class society. On top are the
“entrenched incumbents” who inherited their wealth
or came to California early and made their money.
Then there’s a shrunken middle class of public
employees and, miles below, a permanent welfare
class. As it stands today, about 40% of Californians
don’t pay any income tax and a quarter are on
It’s “a very scary political
dynamic,” he says. “One day somebody’s going to put
on the ballot, let’s take every penny over $100,000
a year, and you’ll get it through because there’s no
real restraint. What you’ve done by exempting people
from paying taxes is that they feel no
responsibility. That’s certainly a big part of it.
And the welfare recipients,
he emphasizes, “aren’t leaving. Why would they? They
get much better benefits in California or New York
than if they go to Texas. In Texas the expectation
is that people work.”
California used to be more
like Texas—a jobs magnet. What happened? For one,
says the demographer, Californians are now voting
more based on social issues and less on fiscal ones
than they did when Ronald Reagan was governor 40
years ago. Environmentalists are also more powerful
than they used to be. And Mr. Brown facilitated the
public-union takeover of the statehouse by allowing
state workers to collectively bargain during his
first stint as governor in 1977.
Mr. Kotkin also notes that
demographic changes are playing a role. As
progressive policies drive out moderate and
conservative members of the middle class,
California’s politics become even more left-wing.
It’s a classic case of natural selection, and
increasingly the only ones fit to survive in
California are the very rich and those who rely on
government spending. In a nutshell, “the state is
run for the very rich, the very poor, and the public
So if California’s no longer
the Golden land of opportunity for middle-class
dreamers, what is?
Mr. Kotkin lists four “growth
corridors”: the Gulf Coast, the Great Plains, the
Intermountain West, and the Southeast. All of these
regions have lower costs of living, lower taxes,
relatively relaxed regulatory environments, and
critical natural resources such as oil and natural
Take Salt Lake City. “Almost
all of the major tech companies have moved stuff to
Salt Lake City.” That includes Twitter, Adobe, eBay
Then there’s Texas, which is
on a mission to steal California’s tech hegemony.
Apple just announced that it’s building a $304
million campus and adding 3,600 jobs in Austin.
Facebook established operations there last year, and
eBay plans to add 1,000 new jobs there too.
Even Hollywood is doing more
of its filming on the Gulf Coast. “New Orleans is
supposedly going to pass New York as the
second-largest film center. They have great
incentives, and New Orleans is the best bargain for
urban living in the United States. It’s got great
food, great music, and it’s inexpensive.”
What about the Midwest and
the Rust Belt? Can they recover from their
“What those areas have is
they’ve got a good work ethic,” Mr. Kotkin says.
“There’s an established skill base for industry.
They’re very affordable, and they’ve got some nice
places to live. Indianapolis has become a very nice
city.” He concedes that such places will have a hard
time eclipsing California or Texas because they’re
not as well endowed by nature. But as the Golden
State is proving, natural endowments do not
guarantee permanent prosperity.
Ms. Finley is the assistant
editor of OpinionJournal.com and a Journal editorial
Thomas Sowell is not only one
of the finest columnists in the business, he’s a
prolific author, a brilliant economist, and he has
an incomparable knack for simplifying complex
concepts that few other human beings can match.
Enjoy the distilled wisdom!
25) “Since this is an era
when many people are concerned about ‘fairness’ and
‘social justice,’ what is your ‘fair share’ of what
someone else has worked for?”
24) “Imagine a political
system so radical as to promise to move more of the
poorest 20% of the population into the richest 20%
than remain in the poorest bracket within the
decade? You don’t need to imagine it. It’s called
the United States of America.”
23) “Four things have almost
invariably followed the imposition of controls to
keep prices below the level they would reach under
supply and demand in a free market: (1) increased
use of the product or service whose price is
controlled, (2) Reduced supply of the same product
or service, (3) quality deterioration, (4) black
22) “What sense would it make
to classify a man as handicapped because he is in a
wheelchair today, if he is expected to be walking
again in a month and competing in track meets before
the year is out? Yet Americans are given ‘class’
labels on the basis of their transient location in
the income stream. If most Americans do not stay in
the same broad income bracket for even a decade,
their repeatedly changing ‘class’ makes class itself
a nebulous concept.”
21) “There are few talents
more richly rewarded with both wealth and power, in
countries around the world, than the ability to
convince backward people that their problems are
caused by other people who are more advanced.”
20) “The poverty rate among
black married couples has been in single digits ever
since 1994. You would never learn that from most of
the media. Similarly you look at those blacks that
have gone on to college or finished college, the
incarceration rate is some tiny fraction of what it
is among those blacks who have dropped out of high
school. So it’s not being black; it’s a way of life.
Unfortunately, the way of life is being celebrated
not only in rap music, but among the intelligentsia,
is a way of life that leads to a lot of very big
problems for most people.”
19) “The first lesson of
economics is scarcity: there is never enough of
anything to fully satisfy all those who want it. The
first lesson of politics is to disregard the first
lesson of economics.”
18) “Each new generation born
is in effect an invasion of civilization by little
barbarians, who must be civilized before it is too
17) “The vision of the
anointed is one in which ills as poverty,
irresponsible sex, and crime derive primarily from
‘society,’ rather than from individual choices and
behavior. To believe in personal responsibility
would be to destroy the whole special role of the
anointed, whose vision casts them in the role of
rescuers of people treated unfairly by ‘society’.”
16) “No one will really
understand politics until they understand that
politicians are not trying to solve our problems.
They are trying to solve their own problems — of
which getting elected and re-elected are number one
and number two. Whatever is number three is far
15) “Life has many good
things. The problem is that most of these good
things can be gotten only by sacrificing other good
things. We all recognize this in our daily lives. It
is only in politics that this simple, common sense
fact is routinely ignored.”
14) “There is usually only a
limited amount of damage that can be done by dull or
stupid people. For creating a truly monumental
disaster, you need people with high IQs.”
13) “Civilization has been
aptly called a ‘thin crust over a volcano.’ The
anointed are constantly picking at that crust.”
12) “We seem to be moving
steadily in the direction of a society where no one
is responsible for what he himself did, but we are
all responsible for what somebody else did, either
in the present or in the past.”
11) “For the anointed,
traditions are likely to be seen as the dead hand of
the past, relics of a less enlightened age, and not
as the distilled experience of millions who faced
similar human vicissitudes before.”
10) “It is hard to imagine a
more stupid or more dangerous way of making
decisions than by putting those decisions in the
hands of people who pay no price for being wrong.”
9) “Intellect is not wisdom.”
8) “The charge is often made
against the intelligentsia and other members of the
anointed that their theories and the policies based
on them lack common sense. But the very commonness
of common sense makes it unlikely to have any appeal
to the anointed. How can they be wiser and nobler
than everyone else while agreeing with everyone
7) “Much of the social
history of the Western world, over the past three
decades, has been a history of replacing what worked
with what sounded good.”
6) “Experience trumps
5) “The problem isn’t that
Johnny can’t read. The problem isn’t even that
Johnny can’t think. The problem is that Johnny
doesn’t know what thinking is; he confuses it with
4) “One of the consequences
of such notions as ‘entitlements’ is that people who
have contributed nothing to society feel that
society owes them something, apparently just for
being nice enough to grace us with their presence.”
3) “Weighing benefits against
costs is the way most people make decisions — and
the way most businesses make decisions, if they want
to stay in business. Only in government is any
benefit, however small, considered to be worth any
cost, however large.”
2) “In short, killing the
goose that lays the golden egg is a viable political
strategy, so long as the goose does not die before
the next election and no one traces the politicians’
fingerprints on the murder weapon.”
1) “There are no solutions;
there are only trade-offs.”
The Fed doesn’t expand the money
supply by dropping cash from helicopters. It does
so through capital transfers to the largest banks.
A major issue in this year’s
presidential campaign is the growing disparity
between rich and poor, the 1% versus the 99%. While
the president’s solutions differ from those of his
likely Republican opponent, they both ignore a
principal source of this growing disparity.
The source is not runaway
entrepreneurial capitalism, which rewards those who
best serve the consumer in product and price. (Would
we really want it any other way?) There is another
force that has turned a natural divide into a chasm:
the Federal Reserve. The relentless expansion of
credit by the Fed creates artificial disparities
based on political privilege and economic power.
David Hume, the 18th-century
Scottish philosopher, pointed out that when money is
inserted into the economy (from a government
printing press or, as in Hume’s time, the
importation of gold and silver), it is not
distributed evenly but “confined to the coffers of a
few persons, who immediately seek to employ it to
In the 20th century, the
economists of the Austrian school built upon this
fact as their central monetary tenet. Ludwig von
Mises and his students demonstrated how an increase
in money supply is beneficial to those who get it
first and is detrimental to those who get it last.
Monetary inflation is a process, not a static
effect. To think of it only in terms of aggregate
price levels (which is all Fed Chairman Ben Bernanke
seems capable of) is to ignore this pernicious
process and the imbalance and economic dislocation
that it creates.
As Mises protégé Murray
Rothbard explained, monetary inflation is akin to
counterfeiting, which necessitates that some benefit
and others don’t. After all, if everyone
counterfeited in proportion to their wealth, there
would be no real economic benefit to anyone.
Similarly, the expansion of credit is uneven in the
economy, which results in wealth redistribution. To
borrow a visual from another Mises student,
Friedrich von Hayek, the Fed’s money creation does
not flow evenly like water into a tank, but rather
oozes like honey into a saucer, dolloping one area
first and only then very slowly dribbling to the
The Fed doesn’t expand the
money supply by uniformly dropping cash from
helicopters over the hapless masses. Rather, it
directs capital transfers to the largest banks
(whether by overpaying them for their financial
assets or by lending to them on the cheap),
minimizes their borrowing costs, and lowers their
reserve requirements. All of these actions result in
immediate handouts to the financial elite first,
with the hope that they will subsequently unleash
this fresh capital onto the unsuspecting markets,
raising demand and prices wherever they do.
The Fed, having gone on an
unprecedented credit expansion spree, has benefited
the recipients who were first in line at the trough:
banks (imagine borrowing for free and then buying up
assets that you know the Fed is aggressively buying
with you) and those favored entities and individuals
deemed most creditworthy. Flush with capital, these
recipients have proceeded to bid up the prices of
assets and resources, while everyone else has
watched their purchasing power decline.
At some point, of course, the
honey flow stops—but not before much malinvestment.
Such malinvestment is precisely what we saw in the
historic 1990s equity and subsequent real-estate
bubbles (and what we’re likely seeing again today in
overheated credit and equity markets), culminating
in painful liquidation.
The Fed is transferring
immense wealth from the middle class to the most
affluent, from the least privileged to the most
privileged. This coercive redistribution has been a
far more egregious source of disparity than the
president’s presumption of tax unfairness (if there
is anything unfair about approximately half of a
population paying zero income taxes) or
Pitting economic classes
against each other is a divisive tactic that
benefits no one. Yet if there is any upside, it is
perhaps a closer examination of the true causes of
the problem. Before we start down the path of
arguing about the merits of redistributing wealth to
benefit the many, why not first stop redistributing
it to the most privileged?
Mr. Spitznagel is the founder
and chief investment officer of the hedge fund
Universa Investments L.P., based in Santa Monica,
I’m suspicious of superstitions, like
astrology or the belief that “green jobs will fix
the environment and the economy.” I understand the
appeal of such beliefs. People crave simple
answers and want to believe that some higher power
determines our fates.
The most socially destructive superstition
of all is the intuitively appealing belief that
problems are best solved by government.
Opinion polls suggest that Americans are
dissatisfied with government. Yet whenever another
crisis hits, the natural human instinct is to say,
“Why doesn’t the government do something?”
And politicians appear to be
problem-solvers. We believe them when they say,
“Yes, we can!”
In 2008, when Barack Obama’s supporters
shouted, “Yes, we can!” they expressed faith in
the power of government to solve problems. Some
acted as if Obama were a magical politician whose
election would end poverty and inequality and
bring us to “the moment when the rise of the
oceans began to slow and our planet began to
At least now people have come to understand
that presidents -- including this president --
can’t perform miracles.
In other words: No, they can’t! -- which
happens to be the title of my new book.
Free people, however, do perform miracles,
which is why “No’s” subtitle is: “Why Government
Fails -- But Individuals Succeed.”
Those who believe an elite group of central
planners can accomplish more than free people need
some economics. I hope my book helps.
People vastly overestimate the ability of
central planners to improve on the independent
action of diverse individuals. What I’ve learned
watching regulators is that they almost always
make things worse. If regulators did nothing, the
self-correcting mechanisms of the market would
mitigate most problems with more finesse. And less
But people don’t get that. People
instinctively say, “There ought to be a law.”
If Americans keep voting for politicians who
want to spend more money and pass more laws, the
result will not be a country with fewer problems
but a country that is governed by piecemeal
socialism. We can debate the meaning of the word
“socialism,” but there’s no doubt that we’d be
less prosperous and less free.
Economists tend to focus on the “prosperous”
part of that statement. But the “free” part, which
sounds vague, is just as important. Individuals
and their freedom matter. Objecting to
restrictions on individual choice is not just an
arbitrary cultural attitude, it’s a moral
objection. If control over our own lives is
diminished -- if we cannot tell the mob, or even
just our neighbors, to leave us alone -- something
changes in our character.
Every time we call for the government to fix
some problem, we accelerate the growth of
government. If we do not change the way we think,
we will end up socialists by default, even if no
one calls us that.
Pity us poor humans. Our brains really
weren’t designed to do economic reasoning any more
than they were designed to do particle physics. We
evolved to hunt, seek mates, and keep track of our
allies and enemies. Your ancestors must have been
pretty good at those activities, or you would not
be alive to read this.
Those evolved skills still govern human
activities (modernized versions include
game-playing, dating, gossiping). We’re hardwired
to smash foes, turn on the charisma and form
political coalitions. We’re not wired to reason
out how impersonal market forces solve problems.
But it’s mostly those impersonal forces -- say,
the pursuit of profit by some pharmaceutical
company -- that give us better lives.
Learning to think in economic terms -- and
to resist the pro-central-planning impulse -- is
our only hope of rescuing America from a
No one can be trusted to manage the economy.
I began by criticizing Obama, but Republicans may
be little better. Both parties share the fatal
conceit of believing that their grandiose plans
will solve America’s problems. They won’t.
But cheer up: Saying that government is not
the way to solve problems is not saying that
humanity cannot solve its problems. What I’ve
finally learned is this: Despite the obstacles
created by governments, voluntary networks of
private individuals -- through voluntary exchange
-- solve all sorts of challenges.
When NBC’s “Today” show played the audio of
George Zimmerman’s call to a Sanford, Fla., police
dispatcher about Trayvon
Martin, the editors made him appear to be a racist
who says: “This guy looks like he’s up to no good.
He looks black.” What Zimmerman actually said was:
“This guy looks like he’s up to no good or he’s on
drugs or something. It’s raining, and he’s just
walking around, looking about.” The 911 officer
responded by asking, “OK, and this guy -- is he
black, white or Hispanic?” Zimmerman replied, “He
looks black.” NBC says it’s investigating the
doctoring of the audio, but there’s nothing to
investigate; its objective was to inflame
In his Associated Press article titled “Old
photos may be deceptive in Fla. shooting case,”
Matt Sedensky pointed
out that the photos carried by the major media
were several years old and showed Zimmerman
looking fat and mean and Martin looking like a
sweet young kid.
Jesse Jackson told the Los Angeles Times
that “blacks are under attack” and that
“targeting, arresting, convicting blacks and
ultimately killing us is big business,” adding
that Martin is “a martyr.” President Barack Obama
chimed in by saying, “If I had a son, he’d look
Let’s look at some non-news cases. On March
14 in Tulsa, Okla., a white couple suffered a home
invasion by Tyrone Woodfork,
a 20-year-old black man. Ninety-year-old Bob
Strait suffered a broken jaw and broken ribs in
the attack. His 85-year-old wife, Nancy, was
sexually assaulted and battered to death, ending
their 65-year marriage.
On March 4, two black Kansas City, Mo.,
youths doused a 13-year-old boy in gasoline and
set him on fire, telling him, “You get what you
deserve, white boy.” Last summer, Chicago Mayor Rahm Emanuel ordered an
emergency shutdown of the beaches in Chicago
because mobs of blacks were terrorizing white
Several years ago, in Knoxville, Tenn., a
young white couple was kidnapped by four blacks.
The girl was forced to witness her boyfriend’s
rape, torture and subsequent murder before she was
raped, tortured and murdered. Before disposing of
her body, the three men and one woman poured
bleach or some other cleaning agent down her
throat in an effort to destroy DNA evidence. A
jury found the four guilty, and they were
sentenced, but because of the judge’s drug use, a
retrial is being considered.
None of those black-on-white atrocities made
anywhere near the news that the Trayvon Martin case made,
and it’s deliberate. Editors for the Los Angeles
Times, The New York Times and the Chicago Tribune
admitted to deliberately censoring information
about black crime for political reasons, in an
effort to “guard against subjecting an entire
group of people to suspicion.”
One doesn’t have to be a liberal,
conservative, Democrat or Republican to see the
danger posed by America’s race hustlers, who are
stacking up piles of combustible racial kindling
and ready for a racial arsonist to set it ablaze.
Recruiters for white hate groups must love
President Obama’s demagoguery in saying that a son
of his would look like Trayvon
but not saying that Melissa Coon’s 13-year-old
son, who was set on fire, could have looked like a
son of his. After all, the president is just as
much white as he is black.
Even if the president and his liberal allies
in the media and assorted civil rights hustlers
don’t care much about blacks murdering whites,
what about blacks murdering blacks? During a
mid-March weekend in Chicago, 49 people were shot,
10 fatally, including a 6-year-old black girl,
making for more than 100 murders this year.
Philadelphia isn’t far behind, with murder
clipping along at one a day since the beginning of
2012. Have we heard Obama make a statement about
this carnage or that most homicide victims are
black and that their murderers are black? No, and
we won’t, because black-on-black crime, like
black-on-white crime, does not fit the liberal
narrative of the continuing problem of white
Let’s stipulate: Activists on the left are
free to exercise their rights of speech and
assembly to boycott businesses whose politics they
oppose. Conversely, activists on the right are
free to exercise the power of their pocketbooks
and refrain from supporting businesses that shun
So, what are you waiting for, conservatives?
There are coordinated shakedowns taking place
right now that involve some of America’s most
prominent companies who’ve chosen to surrender to
progressive bullying and race-card opportunism.
Silence is complicity.
On Tuesday, McDonald’s told liberal magazine
Mother Jones that the company had “decided to cut
ties with ALEC, the corporate-backed group that
drafts pro-free-market legislation for state
lawmakers around the country.” The fast-food
conglomerate follows in the feckless footsteps of
Pepsi, Coca-Cola, Intuit (maker of Quick and
Quicken Books software) and Kraft Foods -- which
have all withdrawn support for ALEC after
drum-banging from Color of Change.
That’s the minority community activist
outfit founded by former Obama green jobs czar and
radical Occupy Wall Street supporter Van Jones.
Since leaving the White House, Jones has been
occupied with railing against capitalism while
cashing in on book sales from corporate media
But I digress.
For years, progressives have sought to take
down the American Legislative Exchange Council
(ALEC), a four-decade-old association of state
legislators who believe in “the Jeffersonian
principles of free markets, limited government,
federalism, and individual liberty.” ALEC’s
veteran policy experts have successfully teamed
with public officials and the private sector on
crafting model state bills covering everything
from education reform and health care to pensions,
public safety and civil justice.
Among the group’s greatest heresies in the
eyes of the left: support for voter ID laws to
protect election integrity, immigration
enforcement measures and self-defense legislation
to strengthen Second Amendment rights.
The idea that private businesses and public
servants could work together voluntarily on public
policy is too much for Big Labor and Big
Government racketeers. Last fall, leftists from
People for the American Way, the Center for Media
and Democracy, the Arizona AFL-CIO, AFSCME, the
American Federation of Teachers, the Arizona
Education Association and Progress Now (a militant
group backed by billionaire George Soros) ambushed
an ALEC meeting in Arizona to intimidate
legislators and corporate backers. In February,
the Occupy movement turned from demonizing Wall
Street bankers to attacking the policy wonks of
ALEC as wretched symbols of “profit and greed.”
And now ALEC’s race-hustling enemies are
piggybacking on the Trayvon
Martin shooting in Florida. They’re shamelessly
blaming ALEC for the tragedy by claiming the group
wrote the state’s “Stand Your Ground” self-defense
law. But as ALEC points out:
“(The) law was the basis for the American
Legislative Exchange Council’s model legislation,
not the other way around. Moreover, it is unclear
whether that law could apply to this case at all.
“Stand Your Ground” or the “Castle Doctrine” is
designed to protect people who defend themselves
from imminent death and great bodily harm. ... In
the end, we will always respect people who
disagree with us in matters of policy, but it is
simply wrong to try to score political points by
taking advantage of a great tragedy like Trayvon Martin’s death.”
Color of Change is ratcheting up pressure on
ATT, one of ALEC’s corporate board members, to
abandon the group or be forever branded as racists
with blood on their hands. These campaigns are of
a piece with the pressure campaigns against
advertisers of conservative talk radio giant Rush
Limbaugh. (Not coincidentally, many of the same
groups are involved in both.) The Hush Rush mob
has succeeded in finagling anti-free speech
declarations from the likes of Arby’s restaurant
chain and Walgreens drugstores -- two companies
that have never been sponsors of Limbaugh’s show,
but which announced last week that they won’t
advertise in his time slot on local station ad
buys. Note: These are bit cancellations of an ad
buy; there’s no loss of money. It’s pure,
progressive gesture politics, astro-turfed by
Soros-funded groups, to create the fake appearance
of an anti-Rush advertising stampede -- and
ultimately, to chill conservative dissent.
McDonald’s, Pepsi, Coca-Cola, Intuit, Kraft,
Arby’s and Walgreens have shown their true colors:
appeasement yellow. It’s time for conservatives to
stand their ground and stop showing these
corporate cowards their money.
new government studies make it harder for unions
to deny the need for reform.
One year ago, Wisconsin Gov. Scott Walker
signed legislation increasing the pension and
health contributions of public-sector employees
and restricting their collective-bargaining power.
The governor set off a firestorm that continues
today, with a recall effort being waged against
him and his allies.
In Ohio, Gov. John Kasich signed similar
legislation only to see it repealed in a statewide
referendum last November. And nationwide, as
governors and legislators seek to rein in labor
costs, public-employee unions are protesting that
their members are actually underpaid. But a
growing body of evidence strongly suggests that
their protests have no basis in fact.
When the public pay debate began to simmer
two years ago, we were among the few analysts to
show that many public employees—federal, state and
local, including public school teachers—are paid
more than what their skills would merit in the
private economy. Our core insight was that
public-sector pensions are several times more
generous than typical private-sector plans, but
this generosity is obscured by accounting
assumptions that allow governments to contribute
far less to pension plans than private employers
Public pensions calculate annual
contributions based on assumed investment returns
of around 8%. However, they must pay full benefits
even if those returns don’t pan out. In effect,
public employees as a group are guaranteed an 8%
return on both their own contributions and those
made by their employers—at a time when
private-sector workers with 401(k) plans receive a
yield of only 2%-3% on comparatively riskless
investments such as U.S. Treasurys.
The difference in retirement benefits is stark.
Most prior analyses of public-sector
compensation were severely understated because
they looked only at how much governments
contributed to pension funds—not how much
governments were on the hook to pay out. This
meant that state and local government finances
were in much worse shape than people long
Public-employee unions and left-leaning
think tanks dismissed our analyses—”lies” and “scapegoating” were some of
their choice descriptors. Their reaction came
despite the fact that nearly all financial
economists, including Nobel Prize winners and the
Federal Reserve Board, shared our critique of
public-pension accounting. Now several government
agencies have weighed in with analyses that
strongly support our original insight.
The Bureau of Economic Analysis has
announced that, beginning in 2013, the National
Income and Product Accounts of the United States
will calculate defined-benefit pension
liabilities—and the income flowing to employees in
those plans—on an accrual basis that reflects the
value of benefits promised, regardless of the
contributions made by employers today.
The bureau’s reasoning is a 2009 research
paper stating that “if the assets of a defined
benefit plan are insufficient to pay promised
benefits, the plan sponsor must cover the
shortfall. This obligation represents an
additional source of pension wealth for
participants in an underfunded plan.” At current
interest rates, this adjustment would roughly
double reported compensation paid through public
The Congressional Budget Office endorsed a
similar approach last month in a new report on
federal employee compensation. The report—which
congressional Democrats reportedly hoped would
debunk our 2011 paper on federal pay—found that
the federal retirement package of pensions plus
retiree health care was 3.5 times more generous
than private-sector plans, contributing to a 16%
average federal compensation premium.
Even more recently, an analysis by two
Bureau of Labor Statistics economists, published
in the winter 2012 Journal of Economic
Perspectives, concluded that the salary and
current benefits of state and local government
employees nationwide are 10% and 21% higher,
respectively, than private-sector employees doing
similar work. This study didn’t even factor in the
market value of public-pension benefits, nor did
it include the value of retiree health coverage.
Basic fairness requires that public
employees be paid for their skills at the same
market rates as the taxpayers who fund their
salaries and benefits. In some states
accommodations have been struck, but in others
further confrontation remains likely.
Reformers will have more help in those
battles ahead. Academic economists, the Federal
Reserve, the Bureau of Economic Analysis, and the
Congressional Budget Office have all thrown their
weight behind proper pension valuation. It will
now be that much harder for public-employee unions
and their advocates to deny the obvious.
Mr. Biggs is a resident scholar at the
American Enterprise Institute. Mr. Richwine is a senior
policy analyst at the Heritage Foundation.
A version of this article appeared April 11,
2012, on page A13 in some U.S. editions of The
Wall Street Journal, with the headline: Overpaid
Public Workers: The Evidence Mounts.
4/9/2012: When Government Safety Nets Break
The West’s governments are going to default,
one way or another. Politicians cannot bring
themselves to stop spending money the governments
do not have.
The deficits of the major Western
governments are now so great as to be
irreversible. The governments must now borrow
money to be used to pay interest on money already
borrowed. In the housing market, this is called a
backward-walking mortgage. It invariably spells
default. The subprime mortgages were mostly of
The West’s largest governments are therefore
Politicians no longer speak about
politically viable plans to call a halt to these
deficits. They speak as though revenues will come
from some unknown sources. They talk of reducing
the debt-to-GDP ratios in the distant future. This
is subprime mortgage thinking. It always leads to
foreclosure and bankruptcy. But this fact did not
stop lenders, 2002-2007. It does not stop them
today. Lenders lend 90-day money to the U.S.
Treasury for eight one-hundredths of a percent.
“What could go wrong?” Answer: plenty.
ETHICS OF THE WELFARE STATE
The welfare state is defended ethically as a
system of safety nets. These safety nets are
defended as ethically necessary for a good
society, meaning ethically good. Intellectuals see
business profits as legitimate mainly because
profits provide a tax base for funding the welfare
These safety nets require constant and
ever-increasing funding. They are going to lose
this funding. Why? Because of national government
There is no question that the deficits will
produce a series of fiscal crises. These crises
will initially be covered up by central bank
inflation, but the end result of that policy will
either be hyperinflation, which is a form of
concealed default, or stable money, which will be
followed by open default. There will be a default.
The political fall-out of this default will change
the nature of Western politics.
The welfare state is going to self-destruct.
It is highly unlikely that we will see the
complete destruction of the welfare state in any
nation, but it will contract on a scale not seen
since the fall of the Roman Empire. That is
because we have not seen a welfare state as
comprehensive as Rome’s until modern times.
The bigger they are, the harder they fall.
I know of no studies of the effects of the
fall of Rome on the masses of welfare recipients.
It took centuries for the system to decline. We
know that the central state in 400 A.D. could no
longer support the welfare clients that it
supported with bread and circuses in the days of
steadily replaced the central government in the
Western Empire. But for centuries, welfare clients
lived and died as clients.
Then the welfare state died. It did not
revive until the twentieth century.
What will make the coming Great Default
different from Rome’s will be the speed of its
arrival and the magnitude of the contraction.
Birth rates have fallen everywhere outside
the United States. The number of aged retirees in
every Western nation, including Japan, is
increasing relentlessly. The number of children
born is falling. The end is clear. So is the
politics of kick the can.
Unlike Rome, the West’s intellectuals have
defended the spread of the welfare state by means
of a system of ethics. It rests on a variation of
the Mosaic commandment against theft: “Thou shalt not steal, except by
majority vote.” So widespread has this revised
commandment been that the electorates in every
Western nation will not tolerate its rejection.
Yet the economics of the deficits points to the
operational failure of the welfare system.
The defenders of the welfare state will then
have to explain this widespread collapse of the
programs. How did such an ethically superior
system fail? How did it lead millions of welfare
clients to trust a self-destructive state? How did
it mislead so many addicts to government handouts?
How did it lead them into a ditch, devoid of
skills to compete in the post-default world?
Answer: because the welfare state was
ethically corrupt before it was fiscally corrupt.
It is based on theft by majority vote.
We have seen what happens to the false
messiahs of the messianic state. Western Marxists
had a solid though small market for their fat
books until the Soviet Union went bankrupt in the
late 1980s and shut down in December 1991.
Overnight, Marxism lost its academic defenders.
They became as invisible as Baghdad Bob did on the
day American troops marched in.
The Marxist system had been seen by Western
intellectuals as intellectually viable, one of
several legitimate perspectives. Then, overnight,
it was regarded as a total failure, and – even
worse for intellectuals – a fool’s quest, a bad
joke. Marxism was rejected in theory because of
its visible loss of power. The ethics of Western
Marxism – in contrast to Marx’s rejection of
ethics – had always been an illusion. Marxism had
always been what Marx had said it was: a matter of
power. Defenders who steadfastly had defended
Marxism in theory if not in actual practice were
no longer willing to do in public. They did not
want to be identified with historical losers –
losers of power.
If Marxism had been ethically based, it
would not have faded overnight just because its
power base collapsed. The true believers would
have stayed the course. But Marxism was never
about ethics. It was always about power.
So is the welfare state.
The defenders of the welfare state have come
in the name of a higher ethics. When the system
goes belly-up fiscally, these defenders will face
the same sort of existential crisis that the
Marxists faced in 1992.
They ought to be able to see that the
welfare state is a fraud, a delusion, and an
ethical monstrosity: charity with guns. They ought
to be able to see that theft is theft, with or
without majority votes. But they don’t.
So, let us look at something more practical.
Let us look at a sign: “Do not feed the dolphins.”
NOT FEED THE DOLPHINS”
It is illegal to feed dolphins in the United
States. Federal law prohibits this. I do not
recall anything in the Constitution authorizing
federal laws against feeding dolphins, but I’ll
let that pass. The fact is, people ignore the law.
They love to feed dolphins. In Tampa Bay, tourists
are big law-breakers in this regard.
Why shouldn’t people be allowed to feed
dolphins? Because, marine biologists say, giving
dolphins free food addicts them to handouts.
People are turning dolphins into welfare bums.
The federal government’s fish police see the
threat. Handouts destroy the ability of dolphins,
who are very smart fish, to survive on their own.
Mothers do not teach survival skills to their
offspring. They teach them to live off welfare.
Tourists are creating inter-generational
welfare dependence. In a 2009 article in the
“Tampa Bay Times,” we read this from a biologist
employed by the National Marine Fisheries Service.
“We are able to document lineage, from grandmother
to mother to calf, all following fishing boats and
taking thrown-back fish.”
Marine biologists, who themselves are being
fed by the federal government, understand the
threat to ecology posed by welfare economics. It
is a bad idea, they say, to addict smart fish to
handouts. But the logic of this position is not
applied to human beings, who are far more clever
than dolphins. What is gospel at the National
Marine Fishing Service is anathema at the
Department of Health and Human Services. What the
government’s experts on fish see as a threat to
the fish, the government’s experts on human beings
do not see as a threat to people.
What is the threat? Creating permanent
Every system of welfare runs the risk of
addicting the recipients to a system of handouts.
This is why there have always been restraints to
this system of outside care and feeding of
dependents. The family has always been the main
welfare institution. Parents supply children with
handouts. In-laws supply in-laws with handouts. We
expect those in charge of this system of wealth
redistribution to place limits on it. Why? Because
they own the resources. Every asset that goes to
one dependent cannot be used by the decision-maker
to fund something else.
Churches have also been sources of welfare.
The Apostle Paul made it clear that such welfare
has limits. In a deservedly famous passage, he
wrote: “For even when we were with you, this we
commanded you, that if any would not work, neither
should he eat” (2 Thessalonians 3:10). This could
be called workfare. The statement provides a model
for all welfare programs dealing with able-bodied
Paul used his own life as an example. He did
not accept funding from churches. He was a
tentmaker (Acts 18:3). He refused financial
support because he knew this would compromise his
“Neither did we eat any man’s bread for nought; but wrought with labour and travail night
and day, that we might not be chargeable to any of
you: Not because we have not power, but to make
ourselves an ensample unto you to follow us. For
even when we were with you, this we commanded you,
that if any would not work, neither should he eat.
For we hear that there are some which walk among
you disorderly, working not at all, but are
busybodies. Now them that are such we command and
exhort by our Lord Jesus Christ, that with
quietness they work, and eat their own bread” (2
Churches, like families, have limited funds.
The deacons are to exercise good judgment in using
church funds as handouts. Yet few modern churches
have formal training for deacons to give them the
judgment they need.
I used to belong to an inner-city church in
Memphis. The church’s secretary had grown up in
the neighborhood. She knew the welfare bums. She
would warn the pastor, who grew up in the Bahamas,
when one of them showed up, looking for a handout.
She knew the distinction between the deserving
poor and the undeserving poor.
Alcoholics Anonymous is famous for its
12-step program. It has become the model for other
organizations devoted to reducing addiction and
promoting deliverance. I wish that all people who
have become dependent on handouts of any kind
would recite these at weekly meetings.
1. We admitted we were powerless over
welfare addiction – that our lives had become
2. Came to believe that a Power greater than
ourselves could restore us to sanity.
3. Made a decision to turn our will and our
lives over to the care of God as we understood
4. Made a searching and fearless moral
inventory of ourselves.
5. Admitted to God, to ourselves and to
another human being the exact nature of our
6. Were entirely ready to have God remove
all these defects of character.
7. Humbly asked Him to remove our
8. Made a list of all persons we had harmed,
and became willing to make amends to them all.
9. Made direct amends to such people
wherever possible, except when to do so would
injure them or others.
10. Continued to take personal inventory and
when we were wrong promptly admitted it.
11. Sought through prayer and meditation to
improve our conscious contact with God as we
understood Him, praying only for knowledge of His
will for us and the power to carry that out.
12. Having had a spiritual awakening as the
result of these steps, we tried to carry this
message to welfare dependents and to practice
these principles in all our affairs.
The reason why this confession of faith will
never be implemented is that we live in the era of
the welfare state. The state encourages
dependence. It uses funds confiscated from some
voters to fund the lifestyles of other voters.
About half of Americans receive money from
S. government. Then there are the tens
of millions who receive money from state and local
governments. When we count the tax-supported
schools as welfare agencies, we see that welfare
handouts are the very foundation of modern
politics. The theologian R. J. Rushdoony wrote a book on
of Guilt and Pity. It’s
[Editor’s Note: It is becoming increasingly
urgent that you find a place for yourself in the
U. S. where you will be most insulated from the
growing hoard of welfare zombies. They are bound
to run amok, even as states charge more tax and
new, strange fees for fewer services for those who
are actually paying. To learn more, be sure to get
your free report on American Oases when you sign
up for Apogee
Why should this be the case? Because, as Rushdoony argued, the
modern state is messianic. Its defenders present
it as the healing state, the savior state. It has
replaced God in the thinking of modern secular
A state that does not claim the ability to
heal, the legal right to heal, and the moral
responsibility to heal is a night-watchman state.
It does not make comprehensive claims for
delivering men, so it does not make comprehensive
claims on the allegiance of men. It is limited
government, precisely because it acknowledges that
it cannot heal.
Rushdoony had another
name for the messianic state: the Moloch state. In
his Institutes of Biblical Law (1973), he wrote
While relatively little is known of Moloch,
much more is known of the concept of divine
kingship, the king as god, and the god as king, as
the divine-human link between heaven and earth.
The god-king represented man on a higher scale,
man ascended, and the worship of such a god, i.e.,
of such a Baal, was the assertion of the
continuity of heaven and earth. It was the belief
that all being was one being, and the god
therefore was an ascended man on that scale of
being. The power manifested in the political order
was thus a manifestation or apprehension and
seizure of divine power. It represented the
triumph of a man and of his people. Moloch worship
was thus a political religion. . . . Moloch
worship was thus state worship. The state was the
true and ultimate order, and religion was a
department of the state. The state claimed total
jurisdiction over man; it was therefore entitled
to total sacrifice (p. 32).
The defenders of the messianic state have
been successful for a century in persuading the
voters that the state is benign in both its
intentions and its policies. They have made the
case for a healing state indirectly. They present
the case for the state as the provider of
tax-funded safety nets. One special-interest group
at a time, the politicians and their court
prophets, meaning the intelligentsia, have
extended the safety nets.
NETS AS SNARES
Tax-funded safety nets are in fact political
snares. These safety are not deliberately designed
to create dependence, any more than Florida
tourists deliberately plan to addict dolphins to
handouts, but in both cases, this is the effect.
The welfare establishments are like zoos. The
animals are well cared for. They are well fed.
They are given medical care. What they are not
given is liberty.
Welfare clients are smarter than dolphins.
They learn how to work the system. Nancy Pelosi’s
daughter has produced a documentary
on professional welfare bums. They
were amazingly forthright with her about the
nature of their ability to work the system.
If they see that they have become ensnared
in a system that makes them dependent on the
system, they do not show it. They seem to regard
their dependence as a badge of honor, proof of
their ability to milk the system. They do not see
themselves as people wrapped in snares.
I end with the words of the newspaper
story on feeding the dolphins.
Federal law banned wild dolphin feeding in
the early 1990s, but by then the St. Andrew Bay
bunch was hooked.
They continue to approach boats three and
four at a time. And as YouTube videos attest,
people are still happy to provide dinner.
“Grab me a minnow, Patty! Feed ‘em!” yells a man in one
“They aren’t going anywhere,” another man
responds. “They’ll be here until we stop feeding
What is true of formerly independent
dolphins is equally true of formerly independent
welfare recipients. Nobody seems to care.
The tourists will keep coming to Florida.
Washington’s checks won’t.
“When the bough breaks, the cradle will
And down will come baby, cradle and all.”
A Parting Shot
“A state that does not claim the ability to
heal, the legal right to heal, and the moral
responsibility to heal is a night-watchman state.
It does not make comprehensive claims for
delivering men, so it does not make comprehensive
claims on the allegiance of men. It is limited
government, precisely because it acknowledges that
it cannot heal.”
Ah, the limited government. As durable as
the morning dew. Or the snowball in Hell.
We don’t think that the state can ever limit
itself to nightwatchman.
Not for long. It’s like the butterfly limiting
itself to the caterpillar stage. All states must
move toward their final form, growing as large,
intrusive and destructive as they possibly can
given the surrounding conditions of zeitgeist and
So the state that started out as the freest
the world had ever seen wound up using the riches
generated by its laissez faire economy to become
the world’s largest aggressor. The most rampant
fascist corporatism. The most military spending,
the biggest army and greatest number of foreign
entanglements. The one seeking to monitor every
single thing its subjects do anywhere and at any
“Just return the government to the one
prescribed by the Constitution!” you might say.
But the Constitution itself was a power grab by
the elites of the day. A “compromise” between the
desires of the monarchy-minded Alexander Hamilton
types and the existing Articles of
Confederation...which themselves did a much better
job of limiting how much central government there
could be in these United States.
Like any virus worth its capsomeres, the state will
find a toehold wherever said toehold may be and
then evolve to fit prevailing conditions.
And when conditions are right -- when the
host is rich and plump from laissez faire but
still drunk with jingoism and the mythology of the
“good, night watchman” government -- then watch
out. For such conditions will give you the
monstrosity that is Washington, D.C., with its
globe-spanning armies...its armada of flying
robots that can spy or kill and never be
seen...its data centers through which every
utterance, every whisper in the world will one day
But the state has its vulnerable heel. No
matter how much its host economy produces, the
state will always need just a wee bit more at
first...and a whole lot more in the end.
All the promises to welfare mothers and to
pensioners, to the aged, the sick...and the wars!
Economies don’t support these forced transfers and
unfunded promises. For that you need theft. For
that you need politics.
First theft in the form of taxes. Then theft
in the form of borrowing money which will never be
repaid. Then theft in the form of devaluation if
the the central bank
prints to buy the outstanding debt.
And now it’s rushing toward us all at full
speed. Get yourself out of the way. Don’t lend
this monstrous disaster of a central government
any money. Don’t bank your savings in thei central bank’s rotten
currency. And if you have to stick around on the
monster’s property (i.e. within the continental
U.S.) make sure you are geographically situated as
best as possible. For your free report on the most
fiscally sound places in America, sign
up for Apogee
Regards, Gary Gibson
editor, Whiskey & Gunpowder
A mandate that overreaches by William
Under the pretense of
preventing cost shifting, Obama is committing
Healthcare is different. That, according to
defenders of the Patient Protection and Affordable
Care Act — “Obamacare”
— is the justification for the law’s individual
requires the purchase of health insurance policies
that “offer a comprehensive package of ‘essential
benefits,’” according to the Department of Health
Services. (Lewis Scott: For The Times, April 6,
Healthcare is different, they say, because
every hospital must provide emergency treatment to
all who present themselves, regardless of their
ability to pay. This moral obligation became a
legal one under the Emergency Medical Treatment
and Active Labor Act of 1986, a law that failed to
provide a mechanism to reimburse hospitals for the
costs of caring for the poor or uninsured. Thus,
healthcare is the only commercial service people
receive even if they can’t pay for it, which means
someone else must foot the bill.
The rationale for the Obamacare
mandate is to prevent “cost shifting” — from
people who could purchase health insurance
policies but don’t to people who already have
insurance. The Daily Beast’s Michael Tomasky explains how the
costs get shifted: If “you don’t buy insurance and
you get hit by a bus and you need $10,000 in
medical care and you can’t and don’t pay for it,
that harms me, because I’m an insured taxpayer and
I’m helping to pick up your tab.”
Tomasky invokes the
19th century English philosopher John Stuart Mill
to contend that the individual mandate satisfies
the core principle of limited government in a free
society: The only justification for government to
curtail one person’s liberty is to prevent harm to
others. Curtailing my freedom not to buy health
insurance, as the individual mandate does,
prevents the harm that will be visited upon others
if they’re forced to pay for my emergency medical
care through higher premiums on the insurance
policies they carry.
This would be a good argument for a
healthcare reform that imposed a tax on people who
could buy insurance covering the kind of emergency
care that Tomasky
describes. The government could set the tax high
enough to collect revenue equal to the aggregate
cost of treating the uninsured, and then give
individuals tax rebates if they took the hint and
insured themselves against such costs.
prohibits the purchase of health insurance
policies that would do no more than prevent cost
shifting from the voluntarily uninsured to the
already insured. It requires, instead, the
purchase of health insurance policies that “offer
a comprehensive package of … ‘essential health
benefits,’” according to the Department of Health
and Human Services. Specifically, a legitimate
policy must include at least the following:
1. Ambulatory patient services
2. Emergency services
4. Maternity and newborn care
5. Mental health and substance use disorder
services, including behavioral health treatment
6. Prescription drugs
7. Rehabilitative and habilitative
services and devices
8. Laboratory services
9. Preventive and wellness services and
chronic disease management
10. Pediatric services, including oral and
As a result, Obamacare
not only makes sure there will be no upward
pressure on other people’s health insurance
premiums if my uninsured self gets hit by a bus
while I’m crossing the street, but also makes sure
they’ll suffer no such collateral damage if I’m
out for a stroll, minding my own business … and
become a heroin addict. Or learn my kids need
braces and glasses.
Because of these requirements, the Obamacare mandate doesn’t
uphold but violates the John Stuart Mill standard.
The law curtails my freedom to manage my own
finances and assess my own risks. (It’s the kind
of freedom Californians exercise all the time when
they weigh the purchase of earthquake insurance.)
And it’s curtailed not to avert harm to others but
to provide benefits for others.
Under the guise of preventing cost shifting,
that is, Obamacare
commits cost shifting. It shifts the costs of the
benefits the law confers, especially the new
requirement that insurance companies must provide
affordable health insurance to all applicants,
regardless of their medical history, to the people
who would prefer to buy the high-deductible,
catastrophic insurance policies Obamacare outlaws. The
requirement to buy a more expensive policy
covering a long list of benefits the government
says are essential, but the individual obeying the
mandate may consider excessive, increases the flow
of premium dollars to the health insurance
companies, offsetting the costs of their new
There is a technical term for the mechanism
used by the government to secure funds for
discharging obligations it considers important.
It’s called a “tax.” Hardly anyone disputes that
Congress possesses the constitutional power to
enact a tax to pay for newly conferred healthcare
benefits. Whether it possesses the authority to
mandate that Americans enter into contracts to
purchase insurance from third parties in the
furtherance of some governmental objective is, by
contrast, a contestable question.
Thus, it would have reduced Obamacare’s complexity and
constitutional jeopardy if the president had
chosen to pay for it with a tax. Obama eschewed
such candor, and resorted to the individual
mandate, in order to keep his campaign promise not
to raise any federal tax on any U.S. family making
less than $250,000.
The individual mandate is more than a bad
solution for the administration’s tax-pledge
problem, however. Both the mandate and the tax
promise are symptoms of modern liberalism’s core
defect: chronic disingenuousness about its
agenda’s costs and how those costs will be paid.
It was always absurd, even insulting, for Obama to
claim he could fulfill his many campaign promises
about healthcare, green jobs, infrastructure
investments, expanding education and on and on,
while exempting 97% of all Americans from any tax
increase. The individual mandate compounds that
problem, and that dishonesty, by paying for
Obama’s central domestic achievement with a tax
that pretends it’s not a tax.
is a senior editor of the Claremont Review of
Books, the author of “Never Enough: America’s
Limitless Welfare State,” and a visiting scholar
at Claremont McKenna College’s Salvatori Center.