Fight the Right.

[Amy Sweet]

"My goal is to turn this into a one-stop reference source for almost any common political arguments you need."


I found a very simple and consise wonderful liberal website that I just wanted to share with you all. My favorite part so far is where the guy refutes the myths about liberalism, democracy, religion, ect. that we hear every day.

If you're a liberal; check it out. For some really interesting reading, check out LIberal Reasons NOt To Cellebrate Christmas: http://www.huppi.com/kangaroo/NoChristmas.html

http://www.huppi.com/kangaroo/tenets.htm

Liberals need a voice if we are to keep the Great American Debate honest. But Corporate America doesn’t like the liberal message, and refuses to fund it. That is why AM radio is filled with conservative talk-show hosts, but no liberal ones.

I have learned this lesson the hard way in my own efforts to expand, improve and promote Liberalism Resurgent. I have approached countless potential sponsors over the years. But although corporations would like to fund my site, they would also like creative control over its content. Specifically, they would like to water down its criticism of the rich.

Liberalism Resurgent hits the rich hard: it does more than accuse them of corrupting our government or exploiting the poor. It proves the rich are causing an inequality that kills hundreds of thousands of people each year. Obviously, no corporate sponsor wants to be accused of perpetuating an American Holocaust.

To maintain an independent and honest site, I cannot accept sponsorships from Corporate America. If this site is to grow and gain publicity, it needs contributions from its readers. I would like to keep Liberalism Resurgent free to the public, in order to spread its message as far as possible. But voluntary contributions will help Liberalism Resurgent grow, improve and promote its message.

http://www.huppi.com/kangaroo/Help_the_Fight.html



Just a Sampling of some of the myths explored:

COMMON POLITICAL AND RELIGIOUS MYTHS

Myths about democracy and the constitution:
Rights are natural, inalienable and self-evident.
No one has rights to my property.
There's no such thing as a "social contract."
The U.S. is not a democracy.
We should return to the original intentions of the Founding Fathers.
The Founders should be revered as secular saints.
The government violates the plain meaning of the constitution.
Current federal powers violate the 10th amendment.
Democracy elected Hitler to power.
Myths about society, individualism and collectivism:
There's no such thing as society... only individuals and families.
Early Americans built this land on rugged individualism.
The world is going to hell in a hand basket.
Myths about affirmative action:
Affirmative action means quotas.
Affirmative action denies jobs to the most qualified.
Affirmative action hasn't worked.
The end doesn't justify the means.
Affirmative action is reverse discrimination.
We should compensate specific individuals for specific wrongs, not entire groups.
Affirmative action is like setting quotas for white guys in the NBA.
Asian-Americans are a model minority.
Myths about economics:
The gold standard is a better monetary system.
The Austrian School of Economics is "apart and above" mainstream economics.
The Chicago School of Economics is a leader in the field.
The rich get rich because of their merit.
Unregulated capitalism does not exploit workers.
Income mobility makes up for income inequality.
Deregulation promotes competition.
The government's services should be privatized.
Presidents are responsible for the economy's performance.
Homo economicus is a valid assumption of human behavior.
Growth is good.
Myths about the economic history:
Carter ruined the economy; Reagan saved it.
The recession of 1982 was Carter's fault.
Forty years of liberalism have ended in failure.
Democrats in Congress created the deficit.
The U.S. has the world's highest standard of living.
Myths about education:
The high school dropout rate is climbing.
American test scores have fallen in the last 30 years.
Doubling the money spent on public education hasn't improved it.
American graduates don't have the skills needed for a high-tech economy.
Vouchers will improve our schools.
Myths about the environment:
Capitalism is the most environmentally friendly economic system.
Humans are not causing global warming.
Humans are not causing ozone depletion.
We cannot possibly cause harm to God's most magnificent creation.
We shouldn't worry; the environment will heal itself.
Liberal doomsday scenarios have always been proven wrong.
Myths about taxes:
Taxes are theft.
I earned that money; it's mine!
Tax cuts increase tax collections.
Tax cuts spur economic growth.
Tax cuts for the rich shift the tax burden upward.
A capital gains tax cut will spur economic growth.
A capital gains tax cut will help the little guy.
Myths about welfare:
There are Welfare Queens driving Welfare Cadillacs.
The poor receive the most welfare.
Welfare is to blame for runaway government spending.
People on welfare are lazy and stupid bums.
People on welfare are usually black, teenage mothers who stay on ten years at a time.
People on welfare should just find jobs.
Welfare gives people an economic incentive to avoid work.
Welfare gives mothers an economic incentive to have more children.
Welfare gives women an incentive to have children out of wedlock or break up marriages.
Welfare can be replaced by charity.
Welfare increases poverty.
Welfare traps people in poverty.
The U.S. has wasted over $5 trillion on the war on poverty.

http://www.huppi.com/kangaroo/LiberalFAQ.htm

 

[Amy Sweet]

About Steve Kangas (the guy who makes the site)

I found bits of his 'bio' humourous so I'll quote them briefly here:

I left religion at age 12, and conservatism at age 26, to become the godless pinko commie lying socialist weasel that conservatives find at right. I'm sure that liberals will recognize something of the kindly, gentle, good-humored progressive student I actually am in this photo, which makes this a political Rorschach ink-blot test (and probably about as attractive).

Going from the Army to USCS was like going from conservative heaven to liberal heaven at warp speed. There, kindly professors pointed out to me the illogic of defending life by taking it, destroying the planet for a buck and shutting down schools to build more prisons. I am now thoroughly brainwashed to believe that kindness and human decency are positive traits to be emulated and encouraged. I know this is a radical thought for a straight white male, but I suppose it proves that European traits are not really, reeeeeaallly genetic.

visited Russia in 1989, and the trip was one of the most incredible experiences of my life. The Russians are the warmest, friendliest people I've met anywhere. But their country was in the final stages of collapse, with devastating environmental problems and economic stagnation. Yet more proof, if more be needed, that dictatorships are disastrous. Long live democracy...

(What- he's a liberal and he doesn't hate democracy? It must be another one of those liberal lies. )
http://www.huppi.com/kangaroo/Aboutme.htm

 

[Op_Cit]

OK, so please tell me, how do you define theft?

 

[Amy Sweet]

Anyway, I've been reading several of the articles and have been very impressed. There are no ads and no pop ups at all. It's a very clean and well done site with top notch information.

When you're ready to get back to porn, feel free to read my novel (Found in my sigline)

Sweet.

 

[Amy Sweet]

OK, so please tell me, how do you define theft?

Glad to see you here.

Since I'm sure you know how to read, check it out for yourself:

http://www.huppi.com/kangaroo/L-taxestheft.htm

You may be suprised. (or not) but at least you may be shocked that the other side does have an actual thought process behind their beliefs

 

[Op_Cit]

I didn't ask what their explanation was for taxes (I've heard that any number of times), I asked how you defined theft.

What is your definition of theft?

 

[Amy Sweet]

taxes and theft

The "How Many Men?" Argument (1)

Suppose that one man takes your car from you at gunpoint. Is this right or wrong? Most people would say that the man who does this is a thief who is violating your property rights.

Okay, now let's suppose that it's a gang of FIVE men that forcibly takes your car from you. Still wrong? Still stealing? Yup.

Now suppose that it's ten men that stop you at gunpoint, and before anything else they take a vote. You vote against them taking your car, but the ten of them vote for it and you are outvoted, ten to one. They take the car. Still stealing?

Let's add specialization of labor. Suppose it's twenty men and one acts as negotiator for the group, one takes the vote, one oversees the vote, two hold the guns, one drives. Does that make it okay? Is it still stealing?

Suppose it's one hundred men and after forcibly taking your car they give you back a bicycle. That is, they do something nice for you. Is it still stealing?

Suppose the gang is two hundred strong and they not only give you back a bicycle but they buy a bicycle for a poor person as well. Is it still wrong? Is it still stealing?

How about if the gang has a thousand people? ten thousand? A million?

How big does this gang have to be before it becomes okay for them to vote to forcibly take your property away without your consent? When, exactly, does the immorality of theft become the alleged morality of taxation?

--------------------------------------------------------------------------------

This argument is based on a faulty premise of ownership. Suppose the gang of ten men had helped you buy the car, pitching in with a loan that covered 29 percent of the sticker price (which is about the percentage of the GDP devoted in the United States to taxes). And suppose they simply wanted return payment. By not returning the favor, it is you who become the thief. If you want a car that is 100 percent yours, simply pay the full price of one. Of course, by accepting the loan from the gang of ten men, you were able to buy a better car than you could afford in the first place…

Arguments like "taxation is theft" are extremely egoistic. It's the equivalent of saying "Everything I make is by my own effort" -- a patently false statement in an interdependent, specialized economy where the free market is supported by public goods and services. People who make arguments like this are big on taking these goods but short on seeing why they need to pay for them. It doesn't matter that they believe these public services should be privatized -- the point is that the government is nonetheless producing them, and they need to be paid for. It doesn't matter that any given individual doesn't agree with how the government is spending their money -- many people don't agree with how corporations pollute the environment, but they still pay for their merchandise. It doesn't matter that any given individual thinks some government programs are wasteful and inefficient -- so are many private bureaucracies, but their goods still demand payment. If tax opponents argue that a person doesn't have to patronize a company he disagrees with, then liberals can argue that a person doesn't have to vote for a public official he disagrees with.

Ultimately, any argument against paying taxes should be compared to its private sector equivalent, and the fallacy will become evident.

 

[Amy Sweet]

I didn't ask what their explanation was for taxes (I've heard that any number of times), I asked how you defined theft.

What is your definition of theft?

"a criminal taking of the property or services of another without consent" or payment.

under this definition, considering something *YOURS 100%* without having paid for it *100%* would be theft. Having it taken from you (when it's due) by other parties who *have* paid for it (in full or in part) would be refured to as garnisment or repossesion. (not theft)

this includes goods and services- ie- do you drive on roads? do you drink water or bathe? do you benefit from clean air legeslation? can you call the police in an emergency? these things come at a cost. the cost is taxes. Because of taxes, you pay for these things at a reduced (shared) cost, -- quite the opposite of being robbed.

 

[Op_Cit]

"a criminal taking of the property or services of another without consent" or payment.

But now you introduce another term not completely defined, while jumping to a conclusion. Before you get to that conclusoin, how do you define "criminal"?

 

[amicus]

C'mon Amy Sweet, you can do better than that.

People left Europe in droves, making a long dangerous journey across the Atlantic Ocean, just to have their, 'unalienable' rights to Life, Liberty and Property protected by a government elected by the 'consent' of, by and for the People.

The American Revolution against British rule was partially over excess taxation without representation.

There were no income taxes, federal or state, until a Constitutional Amendment, (that failed several times) enacted as the world moved into the 20th century.

Oppressive regimes throughout history and time, have confiscated the wealth of its citizens, usually for a fat emporer or Kalif or King or tyrant or Adolf and Mussollini.

Then along came the social bandits, the Marxists and Leninists, who maintained that the 'state' owned all property and indeed the lives and output of each citizen unfortunate to live in such a wonderful National Socialistic society.

This fellow you quote and your defense of him, is just silly, introductory level at the 9th grade in high school.

As if one has to remind you that 'government' produces nothing; that all wealth is generated and created by individuals and groups of individuals, (corporations, legal citizens).

We individuals will hire and pay for those police, military and court entities to protect us against you 'thieves' who feel you have a 'social right' to steal from us and redistribute our wealth.

We 'may' also fund charities, charter hospitals and libraries, mental institutions and even through cooperative effort donate to scholarships and other such organizations that better society in general.

The simple point is that I do, and you do, 'own' your body, your mind and those acquisitions you have made and the income you earn; you not only own them, you have the protected 'right' to dispose of those assets as you see fit.

It is obscene to even consider that you and your socialist buddies even think that you have the right to one moment of my life.

You do not.


Amicus...(back from a week of babysitting boogers & poo and a goddamned Beagle puppy too...)

 

[Op_Cit]

Sweet, don't forget to cite acceptance of government. For example, "If you accept representative democracy as legitimate, then you accept the rules of the game, and taxes are part of the game. Whether you use them to pave roads or to reduce children to ashes..."

And (how do you say "there it is" in french?), The Right has no place to go from there.

... but then what of those who do not accept the legitimacy of government? (Believe me, I'd like to leave, but unlike a few hundred years ago, there is no place on this Earth not claimed by a mob.) What of those who wish to be left alone?

 

[sweetnpetite]

Sweet, don't forget to cite acceptance of government. For example, "If you accept representative democracy as legitimate, then you accept the rules of the game, and taxes are part of the game. Whether you use them to pave roads or to reduce children to ashes..."

And (how do you say "there it is" in french?), The Right has no place to go from there.

... but then what of those who do not accept the legitimacy of government? (Believe me, I'd like to leave, but unlike a few hundred years ago, there is no place on this Earth not claimed by a mob.) What of those who wish to be left alone?

You have to chose from what's available. Or make something new.

There are plenty of uninhabited islands. If you wish 'to be left alone' then move to one and leave no forwarding address. But don't expect to have electricity or internet service.

Sweet.

 

[Colleen Thomas]

All governments tax. Government provides essential services and those have to be paid for. And those services, because they promote the general welfare and provide for the common defense, are carried equally by all as all theoretically benefit from them.

Other than the lunatic fringe, the right dosen't hold that taxation is bad, it holds that taxation should be limited to providing those essential services.

So when I go out and work, I should se the benefits. The amount taken from me by taxes should theoretcially cover those services that I can avial myself of. Fire, police, military defense.

The right, however, has a serious problem with services being paid for that the person taxed cannot avial himself of. The right has a serious problem iwith taxes sent out of the country, with tax monies spent on services thatt he average taxpayer dosen't benfit from.

Taxes, to liberals, are a way of redistributing wealth, giving to those who don't have by taking from those who do. The right holds that such a function is theft and those who don't have should be provided for by voluntary charity, rahter than by forced taxation.

Your author, has defined the position of the right by it's most extreme denominator and he can respond to that extreme position with ease. The more moderate and prevalent position of those n the right isn't as easy to attack and can't be summed up in simple homilies and spurious analogies.

It's a fairly sophisticated and sophistic way to keep from having to really tackle an issue.

 

[sweetnpetite]

this is one of my favorites:


Myth: We should return to the original intentions of the Founding Fathers.

Fact: The Founders were conflicted and disagreed over the issues.



Summary

Appealing to the original intentions of the Founding Fathers is mistaken for three reasons:

1. The Founders were a contentious, disagreeable lot.
2. They were often personally conflicted on the issues.
3. Times change.



Argument

The Constitutional Convention of 1787 featured lively, even heated debates among the Founders. Small states were opposed to suggestions made by large states; federalists were opposed to anti-federalists; commercial interests were opposed to competing interests. Issues that bitterly divided the Convention included the method of Congressional representation, slavery, and the proper role and authority of the president. All these issues were resolved by compromise and consensus -- the very democratic principles that many conservatives and libertarians seek to nullify by appealing to the intentions of the Founders.

After the Convention, intense debate occurred in the press about the ratification of the proposed constitution. Two famous documents, the Federalist Papers and the Anti-Federalist Papers, were written during this period to make their respective cases. The federalists wanted a stronger central government than the anti-federalists, and the fact that the federalists won this battle is still a source of embarrassment to conservatives and libertarians today.

Seven states ratified the Constitution relatively quickly, but intense opposition was encountered in the other six. New York, for example, was opposed to a strong central government, because its greater population and economic power would fare well in a more competitive, anarchic system of sovereign states. After acrimonious debate and bitter struggle, the federalists convinced Massachusetts and New Hampshire to become the 8th and 9th states to ratify the constitution. Because only 9 states were needed to approve the union, New York saw that the union was an inevitability and surrendered its opposition, becoming the 11th state to vote for ratification. The remaining two states took a full year longer to join.

Considering the acrimonious debate and fluid compromises in the ratification process, it's easy to see the constitution could have easily turned out otherwise. The anti-federalists were actually in the majority, but were stymied by their own conflicts, overconfidence and lack of sure leadership. The most criticized feature of the constitution was the lack of a bill of rights guaranteeing individual freedoms - and the federalists gave the anti-federalists this single compromise in order to win their support.

One of the most important features of our constitutional system -- one that we all take for granted today -- is judicial review, in which our Supreme Court reviews the constitutionality of Congress's laws. Although #78 of the Federalist Papers argues forcefully for judicial review, this process wasn't even included in the constitution! The Founders debated it in the Convention and voted it down. Which presents a problem to many libertarians and conservatives today: how are laws to be screened for their adherence to individual rights? Should Congress simply be trusted to pass laws that do not violate constitutional rights, as the constitution implicitly allows? Such an idea is anathema to them. Judicial review became part of the system with the Supreme Court decision in Marbury vs. Madison (1803). It was justified on the basis that the constitution leaves the door open to judicial review, by allowing it to settle all disputes to which the federal government is a party.

Inner conflicts

Conflicts occurred not only between the Founders, but within the Founders as well. Thomas Jefferson, for example, was fully aware of the contradiction between his statement that "all men are created equal" and the fact that he owned slaves. He decried a government that told farmers how to grow their crops, but promoted compulsory and public-financed education. Unfortunately, Jefferson's conflicted views allow modern pundits to find numerous Jefferson quotes to support virtually any political point they wish, especially when taken out of context. For example, conservatives love to quote the following:
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the
government of others? Or have we found angels in the forms of kings to govern him? Let history answer this question." -- Thomas Jefferson, First Inaugural Address
On the other hand, liberals love to quote the following:
"If there be any among us who would wish to dissolve this Union or to change its republican form, let them stand undisturbed as monuments of the safety with which error of opinion may be tolerated where reason is left free to combat it." -- Thomas Jefferson, First Inaugural Address
Times Change

Finally, times change, a fact admitted by the Founders themselves. They never intended for their original intentions to stand forever, and that is why they created an amendment process to the constitution. Indeed, we have already amended the constitution 26 times -- and almost always for the better, as the abolition of slavery proves. Jefferson himself was clear on the point that constitutions should change with the times:
"Some men look at constitutions with sanctimonious reverence, and deem them like the ark of the Covenant, too sacred to be touched. They ascribe to the men of the preceding age a wisdom more than human, and suppose what they did to be beyond amendment... laws and institutions must go hand in hand with the progress of the human mind... as that becomes more developed, more enlightened, as new discoveries are made, institutions must advance also, to keep pace with the times.... We might as well require a man to wear still the coat which fitted him when a boy as civilized society to remain forever under the regimen of their barbarous ancestors." -- Thomas Jefferson, on reform of the Virginia Constitution

"That our Creator made the earth for the use of the living and not of the dead; that those who exist not can have no use nor right in it, no authority or power over it; that one generation of men cannot foreclose or burden its use to another, which comes to it in its own right and by the same divine beneficence; that a preceding generation cannot bind a succeeding one by its laws or contracts; these deriving their obligation from the will of the existing majority, and that majority being removed by death, another comes in its place with a will equally free to make its own laws and contracts; these are axioms so self-evident that no explanation can make them plainer." -- Thomas Jefferson to T. Earle, 1823.
And what has changed since the 18th century? Essentially, two things:

1. Society (and with it, the economy).
2. Our understanding of society and the economy.

Our society and economy have changed as they have become larger, faster, more complex and interdependent. And this has created a need for a larger public sector. The famous British historian E.H. Carr once penned an analogy that described this process perfectly. When modern roads were first built, there were few cars to travel on them. Hence, there was almost no need for traffic laws. If you happened to meet another motorist at an intersection, you could afford to tip your hat and generously give him the right of way. However, as the roads became more heavily traveled, this sort of anarchy became less and less functional. As more cars appeared, so did the need for more traffic lights, signs, police, safety railings, drivers' education, drivers' licenses, safety and planning commissions, etc. Without them, the streets would be chaotic, and traffic fatalities would soar.

In a similar manner, the Founders created our nation when there was great simplicity and sparseness to our society and economy. They perceived -- correctly -- that the federal government could rule with a remarkably light hand. But as our society and economy have grown larger, more complex and interdependent, the need for more rules and organization has risen as well. Just one example is the stock market. The operations of Wall Street were in their infancy during the Founder's day. It's activity wasn't even significant enough to warrant government attention. However, as trading grew on Wall Street, and it became an important and central aspect of the nation's economy, corruption arose in the form of dishonest trading, insider trading and stock manipulation by millionaires. By 1934, the stock exchanges were so untrustworthy that Roosevelt created the Securities and Exchange Commission. This regulatory watchdog significantly cleaned up Wall Street by requiring the full and honest disclosure of all pertinent information on the sales of stocks. Not surprisingly, the millionaire traders decried this as a violation of the free market -- opposed to the principles of non-interventionist government that the Founders had believed in.

But society is not the only thing that has changed. So has our understanding of it. Before World War II, economic depressions were a common occurrence in America; they visited every generation or two. During the Great Depression, British economist John Maynard Keynes developed a theory about the nature and cure of depressions. Using Keynesian policies, central banks in all capital countries around the world appear to have completely eliminated the depression from the human experience. The U.S. has gone a record six decades without a depression -- thanks to the very Federal Reserve policies that earlier Founders would have decried as "interventionist."

Today's Americans do not limit themselves to 18th century medicine, 18th century science, 18th century technology or 18th century English. Why they should then limit themselves to 18th century political science and economics is therefore a challenge to conservative and libertarian thought.

http://www.huppi.com/kangaroo/L-intentions.htm

 

[amicus]

Amy Sweet....Op Cit may have...repeat, may have...had something else in mind besides anarchy:

"laissez faire, The theory or system of government that holds the autonomous character of the economic order, believing that government should intervene as little as possible in the direction of economic affairs. 2. The practice or doctrine of non interference in the affairs of others, especially with reference to individual conduct or freedom of action." (Random House, Unabridged)

This, essentially, is the foundation concept of the right wing, or the 'conservatives', you demean so easily.

Op Cit is correct in saying that the mob socialists and other do gooders, have pretty much taken over the world and that America is about the only place left with relative freedom.

And you want to take away what little we have left?

How rude.


amicus...

 

[sweetnpetite]

All governments tax. Government provides essential services and those have to be paid for. And those services, because they promote the general welfare and provide for the common defense, are carried equally by all as all theoretically benefit from them.

Other than the lunatic fringe, the right dosen't hold that taxation is bad, it holds that taxation should be limited to providing those essential services.

So when I go out and work, I should se the benefits. The amount taken from me by taxes should theoretcially cover those services that I can avial myself of. Fire, police, military defense.

The right, however, has a serious problem with services being paid for that the person taxed cannot avial himself of. The right has a serious problem iwith taxes sent out of the country, with tax monies spent on services thatt he average taxpayer dosen't benfit from.

Taxes, to liberals, are a way of redistributing wealth, giving to those who don't have by taking from those who do. The right holds that such a function is theft and those who don't have should be provided for by voluntary charity, rahter than by forced taxation.

Your author, has defined the position of the right by it's most extreme denominator and he can respond to that extreme position with ease. The more moderate and prevalent position of those n the right isn't as easy to attack and can't be summed up in simple homilies and spurious analogies.

It's a fairly sophisticated and sophistic way to keep from having to really tackle an issue.

I don't know if it's an extreme position. I've heard it from most of the self-described conservatives I know. This is a very commonly heard argument of the right, and the author is simply refuting it.

Liberals also have a problem with taxes being spent in certain ways. CERTAINLY liberals and democrats disagree with how tax money should be spent. This particular argument is mearly addressing those who make statements to the effect of taxes being theft- and does not address the differences in how liberals and conservatives wish to spend money. Regardless of weather you *agree* with how the money is spent, the government has a right to tax you. And they don't have to ask each individual if they can spend 'their money' on each item.

Rather I would argue- who mints the money? Who backs and insures the money? Who's seal is on the money? Who then does the money actually belong to? It's collection and distribution goes through the political process and we are free to agree or disagree on it's use, but in no way is it theft or anogalous to theft.

 

[cantdog]

Op Cit is correct in saying that the mob socialists and other do gooders, have pretty much taken over the world and that America is about the only place left with relative freedom......

Op Cit didn't say that. You did. You are incorrect to say that America is the only place left with relative freedom.

 

[sweetnpetite]

Amy Sweet....Op Cit may have...repeat, may have...had something else in mind besides anarchy:

"laissez faire, The theory or system of government that holds the autonomous character of the economic order, believing that government should intervene as little as possible in the direction of economic affairs. 2. The practice or doctrine of non interference in the affairs of others, especially with reference to individual conduct or freedom of action." (Random House, Unabridged)

This, essentially, is the foundation concept of the right wing, or the 'conservatives', you demean so easily.

Op Cit is correct in saying that the mob socialists and other do gooders, have pretty much taken over the world and that America is about the only place left with relative freedom.

And you want to take away what little we have left?

How rude.


amicus...

op_cit... amicus...

Talking to yourself again ami?

the governement interfairs quite a bit both on behalf of 'conservative interests' and 'liberal interests' -- it is only the one type that conservatives have a problem with.

I know a way that you can avoid the government taking any of *your* money- don't take any of the governments money! Check the $$$ bills in your pocket- are they US dollars or amicus dollars? Is that your picture on the face?

Render unto Ceaser what is Ceasars...

Mint your own money, back it with your own standard, and convince others to accept it. Perhaps you can pay someone with it to build your own personal highways, and put up your own personal electic lines. ect. ect.

 

[sweetnpetite]

Colly,

The author does address other issues of how the money is spent, according to the other claims made about it.

For example:

 

[sweetnpetite]

Myth: The poor receive the most welfare.

Fact: Corporations receive the most welfare.



Summary

Entitlement spending on households is surprisingly "flat" in the U.S. -- the spending is distributed proportionately among the various income groups. However, federal spending tilts in favor of the rich when you add corporate welfare to the mix. And this pro-wealthy favoritism becomes more pronounced when you consider who is paying for it: over the last few decades, the tax rates for the rich have sharply fallen, both in personal income and corporate taxes.



Argument

The following chart shows how entitlement spending is distributed in the U.S.:

Distributions of Federal Funds by Income Bracket, Compared to Distribution
of Households by Income Bracket, CY 1991 (1)

Percent of Percent of
Income all households all benefits
-----------------------------------------------
Under $10,000 16.4% 17.8%
$10,000 - $20,000 18.8 21.7
$20,000 - $30,000 17.0 17.2
$30,000 - $50,000 23.6 21.8
$50,000 - $100,000 19.1 15.9
Over $100,000 5.1 5.6
As you can see, federal entitlements are distributed proportionately among the income groups (with insignificant shifts towards the poor and the very rich). If taxes were flat as well under this distribution system, then Uncle Sam would simply be returning everyone's money to them -- a pointless and wasteful exercise, everyone would agree. It's only when taxes are more progressive that income is shifted downward under the above system. For this reason, the loss of tax progressivity over the last several decades means that less income is being redistributed to the poor, and Uncle Sam is increasingly engaging in a pointless exercise:

The Loss of Tax Progressivity
Effective Family Federal Tax Rate (Income and FICA) (2)

Year Median Millionaire or Top 1%
---------------------------------------
1948 5.3% 76.9%
1955 9.1 85.5
1960 12.4 85.5
1965 11.6 66.9
1970 16.1 68.6
1975 20.0 --
1977 -- 35.5
1980 23.7 31.7
1985 24.4 24.9
1989 24.4 26.7
Keep in mind the first column is for median families; poorer families pay even less, so there is still some downward distribution. But there is less downward distribution than in previous decades, namely, the 50s and 60s.

That's a critique from the tax angle; another is possible from the spending angle. The first chart is a strong argument for means-testing federal entitlements. The rich do not need the money; they've already got the most of it. Perhaps an argument exists for helping the rich out in times of dire emergency, but to give them non-emergency funds like Social Security begs a defense. Others might argue from a "trickle-down" philosophy that enriching the rich will increase investment in jobs and business, but, as statistics from the 80s reveal, the rich can enjoy exploding incomes and still invest less than ever before. The trickle-down proposal can thus be rejected on historical grounds alone.

However, the above discussion only concerns households. What happens when corporate welfare is thrown into the mix? To answer this, we must first answer three questions: what is corporate welfare? How much of it is there? And whom does it benefit?

The definition of corporate welfare

Corporate welfare can be defined as pork-barrel spending, unjustified government subsidies, and unjustified tax breaks. They qualify as welfare for the following reasons:

The difference between pork and legitimate government contracting is their corresponding value to society. When Eisenhower paved the nation with highways, the economic benefits were obvious, and few if any begrudged the highway construction companies their good fortune. But when Congress spends $500,000 to build and run a Lawrence Welk museum, the result is a waste of the taxpayer's money and a needless diversion of our nation's limited resources. And the reason such a diversion occurs is not because market forces or market signals compel such a project. It occurs because a corporate lobbyist makes a campaign contribution to a certain influential member of Congress, who returns the favor by giving him this package of squealing bacon. The result is a happy businessman who is given something for nothing. True, his project creates jobs -- but they are not economically justified. It's as if the government gave a welfare check to a poor person and said: "You have to earn this check -- go find ten of your friends and have them stand on their heads, and then pay them 50 percent of this check for doing so." It's even worse than that, because the pork contractor is consuming our nation's finite resources.

Government subsidies are judged by the same criteria. Presently the government is subsidizing the Genome Project, which is too expensive and long-term for private enterprise to invest in. Yet there is reason to believe it will probably eliminate most genetic diseases in the human race, and its social benefits and economic promise are obvious. This is not the case for the Texas wool and mohair subsidies, which cost Uncle Sam about $100 million a year for a product the Defense Department no longer wants or needs. Again, these suppliers could not make the same money on the free market, so any profits they realize are the equivalent of a welfare check. In this case, subsidy programs resemble pork -- indeed, many are pork.

Unjustified tax breaks are also welfare. Most companies pay taxes, and they receive a number of public goods and services in return. These include police and fire protection, national security, public roads, utilities, government economic data, publicly funded research and development, educated workers, etc. If a corporate lobbyist can win a $5,000 tax break, this means that the company is funding less of the government's goods and services, even though it's drawing on them just as heavily as before. In other words, society is carrying this company to a greater degree. Now, there may be good reasons for doing so; Uncle Sam may want to give tax breaks to the companies building the information superhighway, because of the enormous economic promise it holds. But most of the time, tax breaks are not given out for justified economic reasons like this. Essentially, any company with a lobbyist can bribe a tax break out of a member of Congress. Which means that the rest of society has to pick up the slack; they might as well be paying these "legal tax cheats" a welfare check.

Notice that subsidies and tax breaks are opposite sides of the same coin. No matter which a company receives, the effects are the same.

The costs of corporate welfare

The estimates vary on how much pork, unjustified subsidies and tax breaks are really out there, but moderate estimates run from $100 to $150 billion a year. Here are what various think tanks and policy groups estimate:

According to the conservative Heritage Foundation (which is basically in bed with corporate America), government could save $20 billion a year by eliminating just three dozen corporate giveaways. This is almost one year's worth of AFDC.
The Office of Management and Budget and Congress's Joint Committee on Taxation report that taxpayers pay businesses $51 billion in direct subsidies and lose another $53.3 billion in corporate tax breaks, for a total of $104.3 billion a year.
In a three-part series on corporate welfare (7/7/96), the Boston Globe writes: "The $150 billion for corporate subsidies and tax benefits eclipses the annual budget deficit of $130 billion. It's more than the $145 billion paid out annually for the core programs of the social welfare state: Aid to Families with Dependent Children (AFDC), student aid, housing, food and nutrition, and all direct public assistance (excluding Social Security and medical care)."
Ralph Nader's Center for the Study of Responsive Law has identified $167 billion in corporate tax breaks and handouts given away in 1994.
The Progressive Policy Institute, a moderate Democratic think tank, has identified $225 billion worth of questionable, special-interest spending and tax subsidies that Congress should reevaluate. It has also called for Congress to save $265 billion over 5 years by eliminating or scaling back 120 specific programs.
The Cato Institute, a Libertarian think tank, estimates that federal aid to corporations ranges from $250 to $350 billion a year. It has specifically identified 125 federal programs subsidizing private businesses that would save taxpayers $85 billion if cut.
The House Progressive Caucus, which is mostly comprised of Democratic members of Congress, has called for the elimination of $800 billion in tax subsidies and other benefits for corporations and the rich.

Corporate welfare is largely a lobbyist phenomenon. As a rule, legislators do not give away something for nothing; it is a favor they bestow on those who donate to their re-election campaigns. Not surprisingly, the meteoric rise of the corporate special interest system in 1975 (when corporate PACs were legalized) has been accompanied by an equal rise in corporate welfare. Today, the federal government is giving away more pork, subsidies and tax breaks than at any time in its history.

Despite winning more subsidies and pork, however, corporations are paying less and less in taxes. None of the above estimates includes one of the largest corporate tax breaks in history: the continually falling share of federal tax revenues paid by corporations. Over the decades, the tax burden has been shifted away from corporations and towards workers:

Source of funds for Federal Spending (3)

Personal Corporate Payroll Excise/
Decade Income Tax Income Tax Tax Estate Borrowing
----------------------------------------------------------------
1950s 42.0% 26.9% 11.5% 17.2% 2.5%
1960s 42.0 20.4 18.4 14.9 4.4
1970s 40.3 13.3 27.7 11.3 11.1
1980s 38.0 7.7 29.2 8.2 17.7
The share paid by corporations has fallen to less than a third of its former level, whereas that of the heavily regressive payroll taxes (Social Security, Medicare) has nearly tripled. Who's collecting more welfare from whom?

Who benefits from corporate welfare

Corporate welfare increases a company's profits. Lobbyists argue that this helps everybody, because those profits go to create jobs, invest in businesses, promote research and development, etc. However, none of these alleged benefits have been happening since corporate welfare began rising in 1975.

There were 24 million new jobs created in the relatively low corporate-welfare 70s. In the 80s, when corporate welfare reached full steam, only 18 million new jobs were created. (4)

Investment also fell in the 80s. Between 1970 and 1979, the rate of private investment was 18.6 percent; between 1980 and 1992, it fell to 17.4 percent. (5)

Workers have not been benefiting either -- the average hourly wage has been falling:

Average Hourly Wages (Total private industry, 1982 dollars) (6)

1978 8.40
1979 8.17
1980 7.78
1981 7.69
1982 7.68
1983 7.79
1984 7.80
1985 7.77
1986 7.81
1987 7.73
1988 7.69
1989 7.64
1990 7.52
1991 7.45
1992 7.41
1993 7.39
1994 7.40
1995 7.40
So if corporate welfare hasn't been going to jobs, investment or blue-collar wages, where has it been going? The answer: the soaring incomes of the rich. CEO pay nearly achieved orbital velocity in the last few decades:

Salaries and benefits of corporate CEOs as a multiple of the average
factory worker's (7)

1980 30 times
1991 130-140
1996 187
And that's just a snapshot of a much larger trend. Here's how much income for different income groups grew during the 80s:

Percent Increase of Combined Salaries by Income Bracket, unadjusted
for inflation (1980s) (8)

Income Bracket Percent Increase
-------------------------------------
$20,000 - 50,000 44%
200,000 - 1 million 697
Over $1 million 2,184
Inflation over the decade was roughly over 50 percent, so the income growth for the middle class didn't even keep pace with inflation. (Household income statistics, which show a rise for all income groups in the 80s, are deceptive because wives were joining their husbands in the workforce. The above measure corrects for this statistical glitch.)

Pretty clearly, corporate welfare increases the profitability of companies, thus allowing them to pay the exploding owner and management pay for which the last few decades have become notorious. Essentially, corporate welfare is a welfare check for rich individuals.

By contrast, individual welfare payments for the poor have been falling. Between 1970 and 1991, the purchasing power of benefits for the typical AFDC family fell 42 percent, primarily as a result of state and federal cuts. (9) The following chart shows just how small -- and growing smaller -- welfare payments for the poor really are:

Average Monthly Benefits (Constant Dollars, CPI-U) (10)

Program 1980 1993
-------------------------------------
AFDC (per family) $350 261
Food Stamps (per person) 42 47
Keep in mind that AFDC and food stamps are by far the largest welfare programs for the poor. (Medicare is technically larger, but 75 percent of that goes to the blind, the elderly and the otherwise disabled.)

In conclusion, the rich have been paying lower and lower rates on personal income and corporate taxes. But they receive a proportional share of personal entitlements, and they are outright favored when it comes to corporate welfare. For them to criticize welfare programs for the poor is therefore misleading at best, and hypocritical at worst.

 

[sweetnpetite]

Myth: Welfare can be replaced by charity.

Fact: Charity is too under-funded, too localized, too mismatched and too ill-suited to replace welfare.



Summary

Americans would have to make at least 10 times the donations they currently give to charity to fully replace government social spending. And there is no reason to believe that people who so bitterly hate paying taxes would gladly surrender an equal amount to charity. Arguments that charities can do the job better than government are naïve - most charities are small, highly localized and ill-suited to responding to national disasters or shifting economic trends. About 90 percent of charity funds are both collected and spent locally, which means that rich communities tend to have well-funded charities, and poor communities tend to have poorly funded ones. For this reason, only 10 percent of all charitable donations are directed to the poor. Re-allocating charity donations to the communities that need them most will incur intense political opposition from the communities that fund them.



Argument

Many conservatives argue that if government welfare were eliminated, charity would take up the slack in helping the nation's poor and needy.

In his book, The Tragedy of American Compassion, Marvin Olasky detailed many of the conservative arguments against government welfare and its damaging effects on charitable giving. He argued that what the poor needed were not anonymous welfare checks that seduced and trapped them into dependency. What they really needed was human contact: face-to-face consultations with charity workers who would take a personal interest in their plight and help them work through their problems. Olasky argued that these charity workers would not always see an automatic cash handout as the best solution to the needy person's problems. Rather, "tough love" might be needed instead: getting over a drug addiction, finding motivation to work, getting a deadbeat dad to pay child support, etc. Continuing this train of logic to its end, Olasky argued that churches were superior to government officials in dispensing moral advice; indeed, he called conversion to Christianity "the key to poverty fighting."

Olasky also articulated a second objection against welfare: that it drives away potential charitable donors who do not agree with the government's value-free giving. For example, many potential donors would like to give to the arts, but are already paying taxes that go to support objectionable art like the Mapplethorpe exhibit. Or they would like their donations handled by charities they can trust to teach traditional family values and a proper work ethic. Many conservatives would feel more inclined to give if they agreed with the philosophy of the charitable organization.

Before addressing these arguments, let's briefly review several basic facts about charitable giving in the U.S.

Charity in the United States

In 1993, Americans contributed $126 billion dollars to charity. This averages out to $880 per contributing household, or 2.1 percent of contributing household income. For all households, that works out to $646 per household, or about 1.7 percent of household income. (1) In general, the poor give a greater percentage of their income to charity than the rich. Consider:

Household income and percent given to charity (1993) (2)

Percent of income
Income level given to charity
--------------------------------------
Under $10,000 2.7%
$10,000 - 19,999 2.3
$20,000 - 29,999 2.7
$30,000 - 39,999 2.0
$40,000 - 49,999 1.3
$50,000 - 59,999 1.1
$60,000 - 74,999 2.3
$75,000 - 99,999 2.0
Over $100,000 ?
There are statistical difficulties in determining the percentage of charity donated by those in the richest group, because this group includes billionaires as well as those making "merely" $100,000 a year. However, even if better research clarifies this question, we should remember that different income groups make different types of charitable contributions anyhow. The rich tend to donate to "rich" charities; the poor tend to donate to "poor" charities.

Charity experts have long known that donors give to charities with whom they identify and from whom they might reasonably expect something in return. (Indeed, the Olasky argument above strongly suggests this.) While the very poor tend to donate more to the Salvation Army, the very rich tend to donate more to the arts, humanities and sciences. Because the rich still donate more in absolute dollars, this has caused a serious mismatch between donations and allocations. Only about 10 percent of charitable contributions are specifically directed to the poor. (3)

Furthermore, charities are highly localized. Most are small neighborhood organizations that are tied to their immediate community by their charters, service missions, support bases, and relationships with trustees. They reflect their neighborhood's values, religious preferences, interests, problems and, above all, income. As charity expert Julian Wolpert writes: "Most of the donations that charities raise go to support community churches and synagogues, Y's, museums, public radio and television, universities, and parochial schools -- the services that donors themselves use -- and these funds are largely unavailable for helping the neediest." (4) For these reasons, almost 90 percent of all charity funds are both raised and spent locally. (5) But what this means is that communities with high incomes tend to enjoy well-funded charity programs; those with low incomes tend to suffer poorly-funded ones. This is exactly backwards from the way it should be. It would be more logical to see well-funded organizations transfer their help to the communities that need it most, but their ties to the local community prevent them. Even re-allocating funds within a community is difficult. For example, if an epidemic breaks out in a local community, an educational charity cannot re-allocate its funds or resources to help out a health charity. The situation is akin to a fire department being unable to help out the police department during a crime wave.

The following chart shows how the $126 billion in charitable donations was allocated in 1993:

Allocation of charitable donations (1993) (6)

Type of Percent of
organization total collections
------------------------------------------
Church or religion 45.3%
Education 12.0
Human Service 10.0
Health 8.6
Unclassified 8.5
Arts, culture and
humanities 7.6
Public/societal benefit 4.3
Environmental/wildlife 2.5
International 1.5
Most donations go to churches, but churches are an excellent example of the localized nature of charities. And churches with even national charity campaigns hardly spend a substantial amount of their money on helping the poor. Until recently, the Seventh-day Adventist church had one of the most enviable records of charity collections of any U.S. religious denomination. Yet its department devoted to helping out the poor and needy -- the Dorcas Society -- received only a tiny fraction of the church's donations. Instead, the vast majority went to church administration, religious and educational facilities, and a remarkable world-wide missionary effort to convert other nationalities to their faith. (7)

In a thorough review of charities in the United States, Wolpert summed up the problems of replacing welfare with charity this way:

There is a serious mismatch between the location of charitable resources and needs.
There is a mismatch between the kind of programs that attract charitable donations and the kind that benefit needy people.
Charities are severely limited in their freedom to shift their efforts to the places and programs that are in the most trouble.
The voluntary hand of charity as a substitute for government entitlements might involve objectionable religious, political, and social intrusion into the lives of many people. (8)
The Liberal Response

In 1992, Hurricane Andrew devastated Southern Florida, leaving 137,000 homes destroyed or damaged and 250,000 people homeless. Imagine, for a moment, that there was no federal emergency response, and that charities and private organizations were responsible for the cleanup and recovery. Of course, most of the charities in Southern Florida were destroyed along with everything else, so local charities would be of little help. By definition, the charity response would have to come from other communities -- but, as we have seen, most charities are small and tied to their local communities, and not designed to export their help. Clearly, a disaster the size of Hurricane Andrew calls for a national response -- but how is a neighborhood charity in Seattle, Washington going to ship its few volunteers and resources all the way to Florida?

If thousands of independent, local charities from all across the nation tried to help out the victims of Hurricane Andrew, the resulting confusion, duplication of effort and the lack of a clear, overall strategy would waste much of their time and effort. In this respect, the federal government has a huge advantage over thousands of isolated, disparate charities; it can draw on deep strategic reserves and allocate them according to an organized plan. Furthermore, the operations required to fight a national disaster are far different from the ones required to fight local neighborhood problems. Small charities are not even suited for these different mission requirements.

Many conservatives -- Olasky among them -- concede that the federal government is more efficient at handling national disasters like the Great Depression. However, they argue that in a normally functioning economy, charities are sufficient to handle the everyday poverty they find.

But this is not true either. Our economy is dynamic, and hard times may hit one region one year, another region the next. Many will recall the film Roger and Me, which detailed the horrific unemployment and economic devastation that visited Flint, Michigan when General Motors closed down its auto plants and moved them to Mexico. This single business decision resulted in years of hardship -- but the city is recovering today. California is another example; it did not recover with the rest of the nation after the 1991 recession, and its poverty rate remained high. Yet, within a few years, the state returned to a booming economy.

Economic twists and turns like this are almost impossible to predict. When they do hit a region, the very charity organizations that would help it -- the local ones -- are the least able to help, since they suffer too. So a national charity organization would have to set up offices in these temporarily stricken regions, only to uproot them when good times returned and move them to the next stricken region. That is expensive, and a waste of resources. Compare that to the current federal system, which already has offices everywhere (doing more than just welfare); this makes it much simpler to divert the required funds to the appropriate regions. And as we have seen, charitable donors tend to donate only to their own communities; we should expect to find little support for national charities that spend most of the donor's money elsewhere. Indeed, the current federal system is unpopular for exactly that reason.

Furthermore, charity is a drop in the bucket compared to all the social spending conducted by the government. The total assets (as opposed to merely the income from endowments) of America's 34,000 foundations add up to only about 10 percent of current government expenditures for social welfare and related domestic programs. (9) As Senator Daniel Patrick Moynihan says, "There are... not enough social workers, not enough nuns, not enough Salvation Army workers" to care for the millions of people who would be dropped from the welfare rolls.

To replace welfare with charity, our society would have to boost its charitable giving tenfold. Which raises an interesting point: conservatives bitterly assail the federal government for making them pay taxes to help the poor. Why, then, would they turn around and happily surrender an equal amount to charity? The answer, of course, is that they would not. Once conservatives are freed from their obligation to help the needy, charitable donations will continue to languish as they always have.

Here conservatives might return to Olasky's argument: that they would feel more inclined to give to charities that espoused traditional family values and conservative morals. But, as we have seen, Olasky's idea of charity is to dispense advice, not funds. There is no question that a charity that simply tells the needy, "Get a job," is less expensive to run. But it should be pointed out that Olasky's entire argument is really a disingenuous change of subject. The original argument was that charity could replace welfare. In Olasky's world of privatized philanthropy, this is not the case; welfare would be eliminated but charity donations would not rise to replace it. This is a different argument, one about the benefits of eliminating most financial aid to the poor, not replacing it.

Finally, there is a matter of accountability. Private charities are notorious for spending 90 percent of their revenues on administrative costs. Many will certainly remember the fund-raising efforts of Jim and Tammy Faye Bakker, who raised millions ostensibly to spread the word of God -- but actually spent it on themselves. In such cases, a donor's only recourse is to stop giving once the scandal breaks. These scandals are often belated, because the media does not actively search out scandals in the private sector; they need to be tipped off to them. The scandal may put this fraudulent charity out of business, but there always seems to be another to take its place.

By contrast, the federal government is held much more strictly accountable for its actions. The media conducts an intense and proactive search for scandals in government, and their discovery becomes front page news. This results in enormous political pressure to correct deficiencies. Just one example is FEMA -- the Federal Emergency Management Agency. This is the agency commissioned with helping Americans recover from natural disasters. Under President Reagan, the nature of these disasters was assumed to be nuclear, and the agency poured millions into the creation of nuclear-proof command and control structures that would survive and "win" a nuclear war. Needless to say, it was completely unprepared to deal with the many natural disasters that were actually occurring. It took FEMA three days just to show up after Hurricane Andrew, and they snarled its victims with an unforgivable amount of red tape. Media reports sparked such public outrage that Senate hearings were held. Senator Fritz Hollings called FEMA "the sorriest bunch of bureaucratic jackasses I've ever known." (10) Under the intense glare of the national media, reforms occurred. James Lee Witt took over the ailing organization and completely turned it around. Today, it is one of the best functioning agencies in government, and is winning praise even from its former critics.

In sum, the claim that charity can replace federal social spending -- and do it better -- is a hopelessly unfounded one.

 

[amicus]

Sweets...It was a socialist, Franklin Delano Roosevelt, whom, among many other things, destroyed the precious metal base of our currency and replaced it with 'paper money'.

You may have to study up on this, but before 'Federal Banks', banks were required to have sufficient amounts of gold and silver on hand to 'redeem' the otherwise worthless pieces of paper you call money.

Whether it is beads or oyster shells a Franc or a pound or a Lira, money represents the wealth and value of a man's labor. Only with paper money can it be corrupted and inflated, especially with the 'power' of government to borrow upon an individuals investments....


amicus...

 

[amicus]

Amy Sweet=Sweetnpetite....why not, instead of using a surrogate socialist to make your points, express your own thoughts?

In response to your last plagarism, I suggest you research early America where settlers cooperated for their own mutual benefit.

Corny, but...perhaps Laura Ingalls and her books, Little house on the Prairie, may give you an idea of how real people, in a real world, work together and share, by mutual concern, not government edict, can resolve issues and solve problems.

People are basically good at heart, they help each other without the heavy hand of government.

You need to learn that.


amicus...

 

[sweetnpetite]

Sweets...It was a socialist, Franklin Delano Roosevelt, whom, among many other things, destroyed the precious metal base of our currency and replaced it with 'paper money'.

You may have to study up on this, but before 'Federal Banks', banks were required to have sufficient amounts of gold and silver on hand to 'redeem' the otherwise worthless pieces of paper you call money.

Whether it is beads or oyster shells a Franc or a pound or a Lira, money represents the wealth and value of a man's labor. Only with paper money can it be corrupted and inflated, especially with the 'power' of government to borrow upon an individuals investments....


amicus...

The government still- even then- printed the money, stored and gaurded the gold and garanteed it's value.

Second:

He also addresses the question of the gold standard:

Myth: The gold standard is a better monetary system.

Fact: The gold standard causes deflation and depressions.



Summary

The far right advocates the gold standard because it gets government out of the business of controlling the money supply. They fear that printing money creates inflation, and retracting money causes recessions. But the opposite is also true: printing money cures recessions, and retracting it cures inflation. Governments in the last 60 years have used these policies with tremendous success. There has not been a single depression or bank panic in any nation anywhere in the world using Keynesian monetary policies. But during the Gilded Age of the late 19th and early 20th centuries, depressions and bank panics were common. The historical record is so strong that mainstream economists reject the gold standard almost universally.



Argument

Once the subject of heated national debate over 100 years ago, the gold standard today has nearly disappeared as a political issue. The world has abandoned the gold standard in favor of so-called "paper money," and only a diminishing group on the far right continues to call for its return. However, if mainstream economists (on both the left and the right) have anything to say about it, there will never be a return to "that barbarous relic," as John Maynard Keynes called gold over 60 years ago.

Even so, defenders of the gold standard include such former presidential candidates as Jack Kemp and Stephen Forbes. Furthermore, the rise of well-funded, right-wing think tanks in the last few decades has managed to resurrect the issue. Therefore, reviewing the arguments of the "gold bugs" -- as they are irreverently known in academia -- is well worthwhile, if only to screen our presidential candidates for obsolete economic ideas.

The reason why the far right opposes the current money system is because it allows the government to control the size of the money supply. They argue that an unscrupulous government might pay its bills by printing more money, which would cause inflation. They also argue that shrinking the money supply allows the government to create recessions. Under a gold standard, the total value of money would be fixed (or nearly so), and the market would adjust itself efficiently around it. In his book, The Theory of Money and Credit, Ludwig von Mises wrote: "The excellence of the gold standard is to be seen in the fact that it renders the determination of the monetary unit's purchasing power independent of the policies of governments and political parties."

Mainstream economists, however, have a powerful counter-argument. The current system might, in theory, allow an unscrupulous government to create inflation or unemployment, but it also allows the government to fight inflation and unemployment. And that is a tremendous achievement, because not one nation around the world using Keynesian monetary policy has experienced a depression in the last six decades. It appears that we eliminated depressions when we eliminated the gold standard.

It hasn't been for lack of opportunities. In 1987, the U.S. stock market crashed, in a "meltdown" that was even worse than the Crash of 1929. But the Federal Reserve had learned its lessons from the Great Depression, and this time it responded correctly: with a sharp expansion of the money supply. And not only was there no depression, but there was no recession either -- in fact, the remarkable economic boom of the 80s continued without even a bump. Under a gold standard, the Fed would have been robbed of this anti-recessionary weapon.

Of course, the gold bugs have developed a set of apologetics for arguments like these. To put everything in perspective, it is helpful to trace the evolution of the monetary system, from its very beginnings to the rise and fall of the gold standard. The reason for starting at the beginning is twofold: even the basics are disputed by people who believe themselves informed on the issue, and many lay persons might not know them anyway. So, with apologies, let's start with the invention of money.

The history of monetary systems

The first economic activity was undoubtedly bartering. Two people would make a direct exchange: say, food for furs. However, bartering is a most inefficient trading system. If the person with furs wanted food, but the person with food wanted wood carvings, they would have to search for a third party with wood carvings before they could make their trade. And the third party may not want either of their tradeables, requiring a search for a fourth party -- as you can see, the process quickly becomes unworkable.

The invention of money solved this problem. As a medium of exchange, money allows people to conduct multi-person bartering without all the effort of searching for a hundred people before making the transaction that everyone wants. True, a hundred people may indeed be involved in the final transaction -- but no thought or planning has to go into it, because money, by some miracle of economics, eliminates such a need. In short, money is a tool that allows for easy and painless multi-person bartering. In and of itself it has little or no intrinsic value.

But the invention of money presented a problem of what should be used for it. Suppose that a common resource like stones was used for money. The problem is that tradeable goods are limited -- it may take all day to hunt game or weave a rug. When you put your final product on the market, buyers will compete for it, because, after all, everyone desires to hoard wealth. The first buyer may pick a rock off the ground and offer it to you, whereupon a second buyer will pick up two rocks and better the offer. Soon a bidding war erupts, with buyers picking up rocks as fast they can. In the end you might receive an entire rock quarry for your marketed good. This example highlights two absurdities. First, this is the essence of inflation. When there is too much money available, prices soar, and tons of money are needed to buy things. Second, it is a waste of human and natural resources to dig up so much money -- people might as well devote all this effort to producing the actual goods.

So early money had to be made out of something rare. Silver and gold met this requirement, although some societies used other rare materials, like conch shells among African tribes. However, money that is too rare has the opposite effect described above. Suppose that a village is using gold for money, but unfortunately there is only one gold nugget. Whoever possesses that nugget will be able to buy literally anything in the village -- but only once. After surrendering the nugget for an item, that person will then have to turn around and offer literally anything to get it back. Because the village has numerous people waiting in line to use the nugget for money, economic activity will slow down to a crawl, unemployment will rise, and the result is a recession. This example highlights another principle: money needs to be divisible. The village's economic activity would be doubled just by cutting the gold nugget in half. Of course, dividing money is the same thing as expanding the money supply.

So the amount of money has to be optimal -- not too much, but not too little, to support the natural amount of trading that goes on. As you can see, this calls for some knowledge of the amount of economic activity that normally occurs. An economist would need to measure this activity, and calculate how many coins would cover this activity without causing either inflation or unemployment. One of the practical ways to do this is to watch the economic indicators: when inflation starts rising, cut back on the money supply; when unemployment starts rising, expand the money supply. This approach is called Keynesian monetary policy, after the British economist who devised it, John Maynard Keynes. But when the money supply is determined by some completely arbitrary factor, like the amount of gold that happens to be in the hills, then the odds that the money supply will match the amount needed are virtually zero.

An insufficient money supply is not the only thing that can cause a recession. Recessions commonly occur when people start hoarding money. In normal economies, there is a circular flow of money, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But for some reason, you may see tight times ahead, and decide to save your money to get through them. But this only makes things worse on me, because I am depending on your spending. So I respond to tight times by hoarding my money also. The result is a drop in economic activity, rising unemployment, and recession. Keynesian monetary policy calls for expanding the money supply, which puts more money in the hands of consumers, restores their confidence, and encourages them to begin spending again.

Gold bugs argue that we don't need to adjust the size of the money supply to match the level of economic activity -- the value of money will automatically adjust itself to the level of economic activity. Here's how it works. Suppose three people live in a village, and they have 100 gold coins among them. And suppose this covers 100 units of work. A loaf of bread may require five units of work, and therefore cost five gold coins. Now suppose that their economy grows to 120 units of work. There are two ways for the money supply to adjust to this new activity. The villagers could simply add 20 more coins to their money supply, so they now have 120 coins. Or they could let the value of the coins increase.

How would that work? Well, suppose the extra 20 units of work is being produced by just one of the three villagers. Obviously, he is eager to sell his product, just as the other two are eager to buy it. But no one can afford the sale, because there is insufficient money. So they artificially "create" money by lowering their prices for all their other goods, to increase their savings so they can buy it. For example, a loaf of bread still requires five units of work, but they may lower its price from five to four gold coins. The extra gold coin can now be used towards the purchase of the new product. This process is called deflation.

Prices do indeed inflate and deflate in this way. The problem is that this process is terribly inefficient. In real economies, prices tend to be "sticky" -- that is, enormously resistant to change. (At least in a downward direction. In an upward direction, they climb easily. This is good if you want to fight inflation, bad if you want to fight unemployment and recessions.)

There are several reasons for price stickiness. One is psychological -- people hate to cut their prices and wages. Another is that salaries and wages are often locked into contracts, the average of which is three years. And for many, raising prices incurs certain costs (reprinting, recalculating, reprogramming, etc., not to mention a dip in business) that may not make the price change seem worth it. Even if they do decide to change prices, it takes many companies quite some time to put them into effect. Sears, for example, has to reprint and remail all its catalogues. But perhaps the most important reason is that in a big and complex economy, people just don't realize at first when goods start becoming excessive on the market, and the glut may have to reach severe proportions before people notice it and take action.

Price stickiness means that the value of money is slow to adapt to changing economic conditions. Economists have found it much faster and simpler just to expand the money supply and cut the recession short. The Great Depression, for example, dragged on for ten years, with the natural deflation of money proceeding at a glacial pace. It wasn't until World War II that the government was forced to conduct a massive monetary expansion (to fund its defense spending). The result was such explosive economic growth that the U.S. economy doubled in size between 1940 and 1945, the fastest period of growth in U.S. history. Another example is Japan in the 1990s. Its economy has stagnated for five years now, and many economists have criticized its government for not doing enough to expand the money supply. But whatever the solution, the important point is that Japan's government has done very little, and its economy has not deflated or adjusted itself -- Japan's economic pain continues five years later.

But let's return now to our history of money. Historians debate the exact sequence and nature of events that led to our current monetary system, but the following fictionalized account is often retold and widely accepted as reasonable.

Suppose that an economy starts by using gold coins. There are disadvantages to circulating gold: large purchases require lugging around lots of the heavy metal, and a family might be worried about protecting its gold reserves from thieves. So people may decide to store their gold in a secure, centralized location: perhaps the goldsmith, who already protects his store of gold in a large safe. The goldsmith accepts their gold, and, to keep a record of who owns what, writes them a receipt for their deposit. So the goldsmith has now become a banker.

When the people have spent their pocket change and need to draw on their gold reserves for more, they can visit the bank and make a withdrawal. But that wastes a lot of time and effort. Instead, people can just buy their goods with their receipts for gold, rather than the gold itself. The seller then becomes the new owner of the receipt, and the share of gold it represents, and he can visit the bank and trade the receipt for gold any time he wants. Of course, he may want to use the receipt himself in another sale. In this way, people start circulating receipts for money, and paper money is born.

The banker soon decides to facilitate this system, by issuing receipts that say, "This bank will pay the bearer of this note 10 gold units upon demand." Now the receipts have become banknotes, and the bank has become a bank of issue. The banknotes, like the gold coins they represent, are called commodity money, because they are based on commodities like gold or silver.

But under the new system, the banker notices that people are visiting his bank much less frequently. His gold stocks are just sitting around. So he gets a bright idea: he'll print up some new banknotes and issue them as loans. The new banknotes are not backed up by actual gold reserves, but he can get away with this because only a percentage of the note-bearers come in on a given day asking for their gold. It's profitable for him, because he collects interest on the loans, and it's profitable for the people, because they can increase their productivity. So from now on the bank will issue banknotes on a fractional reserve, and the bank itself will become a trust, because people must now trust that the banker will have the gold reserves to cover their withdrawals. And the banknotes are no longer called commodity money, but fiduciary money, after the Latin word fide, meaning trust.

Of course, if too many people come in at once demanding their gold, the banker is out of luck. Experience may teach him that he needs to keep a reserve ratio of 1 gold unit to 3 banknotes. Any more banknotes and he might not be able to cover withdrawals. Still, this is a somewhat risky business, because it creates the possibility of a bank run or bank panic. That happens when people become afraid that a bank may not be in sound condition, and they start withdrawing their gold to protect themselves. Once this process starts, however, it becomes a vicious circle, as disappearing reserves create yet more panic and more customers running to the bank to be the first to withdraw their gold. The result is a bank failure, leaving most of the customers holding worthless banknotes. These sort of bank panics have the effect of reducing the money supply, which can -- and often did -- result in higher unemployment, recession and even depression.

Fiduciary money was widespread in Europe by the early 19th century. During the Napoleonic wars, however, Britain found itself hard-pressed to fund its war effort. So the Bank of England temporarily scrapped the fiduciary system and issued fiat money instead -- money whose value was determined not by gold, but by the command, or fiat, of the government. After the war, England returned to a fiduciary gold system, although people were not allowed to cash in their notes for gold unless it was for very large amounts, usually for international trade.

Temporarily suspending the gold standard in favor of fiat money during times of war became common over the next century. During the American Civil War, the government interrupted its policy of gold convertibility and issued nonconvertible "greenbacks" instead. During World War I, all belligerent nations did much the same. It is interesting to note that during times of war, when a nation's survival is on the line and it must boost productivity, the economic policies its leaders resort to are always liberal ones. Fiat money, tax hikes and Keynesian monetary expansions result in booming economies, hence the truism that "war is good for the economy." It took economists and politicians over a century to learn that these policies could be applied during times of peace as well.

In 1821, Britain became the first nation to switch to a full gold standard. Until then, nations had used a bimetallic regime of gold and silver. In the 1870s, the U.S. and the rest of Europe followed suit, after the discoveries of huge gold deposits in the American West. From then until 1914, the world would operate under a unified gold standard. This era is known as the Gilded Age, and it offers us a chance to assess the advantages and disadvantages of the gold standard, or at least an early version of it.

Bitter controversy over the gold standard was a hallmark of the Gilded Age. It was widely regarded as a tool of the rich. Democratic presidential candidate William Jennings Bryan spoke for the poor when he charged, famously, that "You shall not crucify mankind upon a cross of gold." The U.S. suffered three depressions during the Gilded Age, and the gold standard and its bank panics were often held to blame.

Throughout this era, the value of gold was fixed at a certain price. One U.S. dollar, for example, was defined as 23.22 grains of pure gold. A British pound sterling was defined as 113.00 grains of pure gold. This meant that the total value of a nation's money supply was determined by the size of its gold reserves. Furthermore, fixed rates meant that international exchange rates were also fixed. In other words, the world operated under a single, unified monetary system. One British pound always equaled 4.8665 U.S. dollars (113.00/23.22), at least according to the official rate. The actual rates might fluctuate, due to the shifting supply and demand of international trade, but the nations set up a system to make sure that they never fluctuated too far from the official rate. This system was rather complex, but basically it kept exchange rates stable and close to the official rate by making sure that nations with trade deficits paid their bills quickly and directly in gold. (1)

But there were economic consequences to such a system. Suppose Britain ran up a trade deficit with the U.S., and promptly paid in gold. The U.S. money supply would expand, and its economy would experience a mixture of inflation and growth. Conversely, the British money supply would shrink. Theoretically, this should have resulted in deflation, but in practice it resulted in widespread unemployment, due to price stickiness. Therefore, outflows of gold from a country were often very painful to its economy. And when people learned that gold was leaving the country, they often conducted bank runs, trying to withdraw their gold before it ran out. Thus, the Gilded Age was replete with bank panics and failures.

The Gilded Age was brief, lasting from the 1870s to 1914, when World War I broke out. During the war, nearly all nations either placed restrictions on gold convertibility or issued non-convertible paper money. But one of their top priorities after the war was the recreation of the full gold standard. It took several years before they succeeded. Britain restored its gold standard in 1925, but in an act of folly, made the pound worth $4.86 again in U.S. dollars -- its old, pre-war parity. Unfortunately, the pound was overvalued at this price now, due to changes in the price of gold, and Britain subsequently experienced a drastic outflow of gold. Again, severe unemployment was the result, not the expected deflation. Britain would struggle with unemployment for the rest of the decade.

By 1928, all the major currencies and most of the minor ones had returned to the gold standard. But the coming Great Depression would lay bare all its disadvantages. A unified monetary system meant that no nation could protect itself from a disaster that occurred in another nation. When the depression struck in the U.S., it quickly ricocheted across the Atlantic. In the U.S., two gigantic bank runs caused over 10,000 bank failures. So many people were left holding worthless banknotes that the money supply shrank by about a third -- a catastrophic reduction.

When Roosevelt took office in 1933, unemployment had soared to nearly 25 percent. His inauguration took place literally in the middle of a third bank panic. Roosevelt stopped it in its tracks by doing something novel: he intervened. He declared a "banking holiday" that closed banks to the public for eight days, to prevent further withdrawals. During that time, the banking system was reorganized. When banks finally reopened, banks deposits actually exceeded bank withdrawals. It was a tremendous political success for Roosevelt, and America's last bank run. Later under the New Deal, bank deposits would become insured by the federal government.

After the Great Depression struck, the world wasted little time severing its ties to gold. Britain left the gold standard in 1931, as did the U.S. in 1933. By 1937, not a single country remained on the gold standard. After World War II, the U.S. partially restored the gold standard for international trade. And to prevent citizens from bank panics, it made its currency inconvertible at home. In 1971, a diminishing gold supply and growing deficits caused the U.S. to suspend the gold standard even for international trade. Ever since, international trade has been based solely on the dollar and other paper currencies. Today, there are no mainstream economists who call for a return to the gold standard; it is widely regarded as a fringe idea of the radical right.

Modern arguments on the gold standard

Gold bugs cite two reasons in particular for returning to the gold standard. The first is that it prevents nations from an irresponsible expansion in the money supply to pay its debts. This is what happened to Argentina. After printing too much money and suffering disastrous inflation, Argentina passed a law tying its currency to the U.S. dollar. This may not be the optimal strategy for Argentina, but it's far better than what it was doing. Likewise, Italy has sought a measure of monetary responsibility by tying its currency to the German mark. So the gold bugs do have a few case histories to point to.

Even so, this reason is weak. Argentina did not need a gold standard to tie its currency to a more responsible country and solve its problems. Furthermore, a monetary policy that's right for one country might be completely wrong for another. For example, in the early 1990s, Europe tried to unify its currency by tying it to the German mark. But subsequently the German economy boomed while the rest of Europe became mired in double-digit unemployment. And following Germany's anti-inflationary monetary policy only made things worse, because it was exactly the opposite policy they should have been following. Finally, many countries have established long and sound reputations with fiat money -- Switzerland, Japan and the U.S., for example.

The second reason cited for a gold standard is because it creates certainty in international trade by providing a fixed pattern of exchange rates. The current system contains a degree of uncertainty -- in the last five years, the dollar has swung between 80 and 120 yen. This tends to make economic analysis and planning difficult for international traders. The costs of such uncertainty are difficult to determine, but they are expected to be significant. However, trade comprises only 10 percent of the U.S. economy, and compared to the enormous benefits of fiat money, these costs are minuscule by comparison.

What are the benefits of the current system? The most important has already been mentioned: the elimination of depressions. Being able to expand the money supply in times of unemployment and recession is a critical tool for government. Before World War II, eight U.S. recessions worsened into depressions (as happened in 1807, 1837, 1873, 1882, 1893, 1920, 1933, and 1937). Since World War II, under Keynesian monetary policies, there have been nine recessions (1945-46, 1949, 1954, 1956, 1960-61, 1970, 1973-75, 1980-83, 1990-92 ), and not one has turned into a depression. In fact, no nation in the world has suffered a depression under Keynesian policies.

The current monetary system also gives us protection from less scrupulous or unfortunate countries. A bank run that starts in Europe is not going to end up in America, thanks to the flexibility and autonomy of the Federal Reserve Board.

And fiat money also gives economists a chance to tie the appropriate size of the money supply to what's actually happening in the economy. In the end, the amount of gold a nation has is completely irrelevant to its level of economic activity. Gold is a commodity that experiences price swings. A change in dentistry or electronics is enough to change the entire market. To see how unrelated it is, consider the following trends. Since the U.S. dropped the gold standard in 1971, the price of gold has risen tenfold. But consumer prices have risen only two and a half times. If the U.S. had instituted a full gold standard in 1971, the result would have been the worst deflation since the Great Depression. And considering that widespread unemployment is usually the result, not deflation, it is easy to see the why such a policy would increase the risk of a depression.

Gold bugs also face an enormously challenging question: what kind of gold standard would they like to create? One based on fractional reserves? But that led to countless bank runs. Furthermore, as a practical matter, it doesn't stop banks or governments from changing the money supply, simply by changing the amount of fiduciary notes.

So the only purist alternative is a return to commodity money, where a bill is backed 100 percent by gold. But there is no longer enough gold in the modern world to cover the needed economic activity. We have already mined all the major deposits, and without new discoveries to match the growing economy, a pure gold standard would see a troublesome fall in commodity prices. Even worse, industry is also increasing its demand on the gold store. In past centuries gold had very little secondary use, so it proved useful as money. Today, modern technology has found a growing number of applications, and industry is consuming more and more of it. In response to all this, a monetary authority could periodically reduce the amount of gold defined as the dollar, but this is no different from the floating, fiat money that the gold bugs so bitterly criticize.

So the gold bugs would have to resolve historical and theoretical challenges of King-Midas proportions before they could ever reinstate the gold standard. But if a workable gold standard requires a tremendous amount of design, effort, regulation and safeguards, we might as well use fiat money, which is already simple and enjoys a successful track record.

 

[sweetnpetite]

Amy Sweet=Sweetnpetite....why not, instead of using a surrogate socialist to make your points, express your own thoughts?

In response to your last plagarism, I suggest you research early America where settlers cooperated for their own mutual benefit.

Corny, but...perhaps Laura Ingalls and her books, Little house on the Prairie, may give you an idea of how real people, in a real world, work together and share, by mutual concern, not government edict, can resolve issues and solve problems.

People are basically good at heart, they help each other without the heavy hand of government.

You need to learn that.


amicus...

That is also adressed under the myth of the rugged individualist.

You might also be interested in the info their about how much the *government* did do- like for example, purchase the land, drive off the indians, give away or sell land below cost, protect business interests such as the railroads. The government's hand was indeed very heavy.