Beware of the Return of Big Government – it is Deadlier Than COVID-19
“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety” (Benjamin Franklin). This is war! We will do whatever it takes to win it!
Something along these lines has been spoken by nearly every head of government around the globe referring to the ongoing coronavirus pandemic. Immediately, most governments and parliaments rushed to pass billion and trillion-dollar packages. Many cheered as the size of government everywhere expanded to levels comparable to those of the Second World War.
The Problem With Big Government
History has proven that sudden emergencies, proven or imagined climate threats, wars, financial crises and so on provide the perfect opportunity for politicians to prolong their influence and make citizens more dependable on them. Government programs that start as temporary become permanent and siphon taxpayer money for decades after the emergency has passed, as the programs of Franklin Delano Roosevelt, Lyndon B. Johnson or the US central bank’s Quantitative Easing policies have proven.
Last month, the United States passed the CARES Act, a relief package of $2.2 trillion. Many items may be considered necessary, and up to a point affordable by the world’s biggest economy. However, what can be defined as the biggest enlargement of government in a single day included increases in welfare and other programs that were not related to the current emergency.
As per the Wall Street Journal, there were $25 billion more for food stamps and child nutrition, $12 billion for housing, $900 million for heating assistance, $50 million for legal services for the poor, $60 million for NASA, $8 million for the National Archives, $99 million for the Energy Department on science related spending, $3 million dollars for the Forest Service, for forest research, $75 million to the National Foundation on the Arts and Humanities and $25 million for the Kennedy Center. Apparently, no opportunity is wasted for the spreading out of government programs and frenetic spending.
More recently, House Speaker Nancy Pelosi and Senate Minority Leader Charles Schumer held hostage the much needed extra $250 billion for small and middle enterprises, in order to get more funding for expenditures in programs unrelated to the coronavirus or the private sector. Through coercion, they managed to add an additional unnecessary $200 billion. This provides further proof of the mentality politician have and the lengths they would use to increase their importance in the lives of citizens.
In addition, on top of the unemployment benefits that individuals get from their states, the CARES act includes $600 dollars per week. This is more than many individuals made while working. The disincentive that this provides for these citizens to look for a job is huge, and the damage done to the private sector and the economic recovery is immense. The only way a country can recover from an economic crisis is by strengthening the private sector, by making it easier for businesses to hire and thus, reducing unemployment. This includes lower taxes, less regulations and less dependency on the government for the individuals. There can be no public sector without the private one. As Ronald Reagan said, the best welfare program is a job.
The Left is Exploiting This Crisis
Left wing parties see this as an opportunity to increase the dependency on government, because that is how politicians can remain relevant. In a truly free market economy only those who work hard and are talented and deserve it succeed. Society’s dead weight loves being dependent on government, and irrelevant or incompetent politicians love this as well. They want the economy to be centrally planned and citizens dependent on them, because this way, they can be more easily controlled.
This is nothing new, as it has always been the center of their ideology. They see government the way conservatives see God. It is their religion and they will use every pretext and every crisis to reach their goal. They promise security and ensure slavery as history has shown throughout the centuries, while feeding fear, panic and repression. However, more shockingly, even so-called conservative groups and governments are requesting a higher government intervention and more central planning. This is when the phenomenon becomes dangerous and government interference permanent, while we forget that free will and personal responsibility is the greatest and most important right we have. Yet, we give it away so easily.
The Danger of Interventionism
Not only will interventionism lead to a lower economic recovery and extended hardships for citizens everywhere, it will risk more human rights and liberty infringements. We are seeing in most countries with the pretext of protection from the virus.
As an analysis by the Mises Institute puts it, “the virus has unleashed petite tyrants to haunt their tiny jurisdictions, using the cover of crisis to arrogate powers belonging to the people”. This is true especially in countries with fragile democratic systems and institutions. Wannabe dictators use wars and health emergencies to pass laws making it easier to infringe rights and rule as kings. History has proven this time and time again. They now have little to no opposition from media or other political parties, even in highly democratic countries.
Almost everybody agrees that it should be up to the government to decide when to go out, when to work, how to live and when to return to normalcy. Yet, centralization is not the solution. It makes the problem worse. Instead of doing more tests, isolating hot spots, believing in individual’s sense of responsibility, as Taiwan and South Korea successfully did, many are following the one size fits all solution, total blockage of the economy and authoritarian suppression of liberties in the name of security. However, whoever chooses security instead of liberty will get none.
“Promoters of Totalitarianism” Always Make It Sound Necessary
In his latest book, Freedom or Equality, economist Daniel Lacalle writes: “A truly free individual is one who fully understands the consequences, risks, and opportunities of his or her actions and is permitted to choose which actions to take. A true slave is one who rejects responsibility and feels free in being able to feed off the crumbs that are left for him or her. Slavery is always promoted for own our good. Promoters of totalitarianism will use words such as social, solidarity, justice and equality”.
It is a good thing that at least the US is proving to be as always “the shining city atop the hill”, with the example of the people protesting for their freedom and rights in many states. Also, President Donald Trump’s support for them and him delegating the authority to states, is a great example that at least one world leader stands for liberty. Differently from all his predecessors, Trump has not used the occasion to seize new powers. Congress, the Federal States and the private sectors have been as much factors and actors as the President.
Moreover, if the governments provide taxpayers’ money to companies, it will certainly not be free. It will come with strings attached. Government bureaucrats will decide a great many things on how these companies are run; who is remunerated and how much; can shares be bought back; how much they are regulated and so on. If a business is unable to pay back the loans it has received, is the government going to buy shares in it? Will nationalizations be the next step? The one strength of the US economy has been its private sector, which is more flexible, less dependent on banks, more reliant on capital markets and more importantly its government independence and entrepreneurial spirit. The US risks increasing the size of its public sector to European levels, which will dampen the prospects of a quick recovery. A weaker US economy leads to a weaker world economy.
Keeping the Government’s Monopoly in Check
The government is a monopoly and as all monopolies the propensity for abuse is great. How can we trust government with unchecked powers and control over individual liberties? It will undoubtedly lead to more corruption, more totalitarianism and less liberty. Socialism and communism have proven this time and time again. Just ask the once prosperous nation of Venezuela or Cuba. Why should we protest against special interest groups, lobbies and monopolies, when the government is the biggest monopoly there is, and yet it seeks unchecked powers deeming itself worthy of controlling us for our own good?
Governments’ role should be to intervene as little as possible and only when market cannot reverse its failures by itself, which is a rare occurrence. In the emergency we are currently in, it is actually governments’ failure and not the market’s fault. Governments have not spent taxpayers’ money efficiently, to support only the vital sectors such as national security and the healthcare system. They spend money on issues they deem important but have little relevance to their citizens. They channel money towards unproductive sectors or their own clients, harming the prosperity of their citizens.
It was their inability throughout the decades to create strong and modern healthcare systems and their incompetence in containing the pandemic that led to them shutting down the economies. Can we really expect that more government will save us from government’s failures? Moreover, government is making it worse as its regulations in the pharmaceutical industry are slowing research and development down and also by limiting testing. It is logical and easy to prove that more government regulation leads to higher medicament prices.
The Private Sector is Where Solutions Will Come From
Naturally, everybody expects the private sector to lead and get us a vaccine and a cure. It is the private sector that makes technological breakthroughs. It is the private sector and the free market that, when left to act, push the economy upwards. Market forces, consumer behavior, company competition channel money towards innovation and productivity. It is wrong to say that monetary stimulus, and huge fiscal spending lead to recovery. Pumping money does not produce anything, because money is not a good or a service. There has been no case in history when giving money has led to economic recovery. Only when the private sector has been allowed to thrive has the economy prospered.
More government spending leads to a higher debt. Often, the programs the money is spent on are unproductive and cannot generate income to repay the debt. This means taxes will go up. By increasing taxes, citizens will have less disposable income, which will lead to lower consumption. Not only are we borrowing from future generations without producing anything, but we force future generations to pay for frenetic spending. On the other hand, businesses will have less incentives to invest. All these economic factors will apply negative pressure on the GDP of a country. Next, governments take on more debt to spend on welfare programs and unemployment benefits. However, this debt cannot be repaid, because productivity will have declined, together with consumption. This leads to economic ruin, and Europe is the best example, which instead of encouraging saving and investments in times of expansion, spends with money created out of thin air unsupported by goods or services.
The US Needs to Avoid Europe’s Mistakes
In the US, the world’s biggest economy, all public programs are in difficult situations. Medicare and medicaid are soon expected to become insolvent. Government job programs failed during the Obama Presidency to create productive jobs. As National Review points out, government subsidies and regulations have driven up the cost of colleges and housing. Yet, the left wants more regulations, welfare spending and restrictions on private options. Europe is in the current situation precisely because of high government interventionism, which has led to distortions in markets and perverse spending.
In conclusion, it is easy to ask for more money from the government. It is equally easy for government to comply with such requests. There is nothing they want more than to increase their power and influence, while destroying wealth and blaming the private sector, banks and markets. Citizens should have more faith in their own individual sense of responsibility and not fall into the trap that will force them to hand over their liberties, economic and otherwise. Doing so will lead only to more misery, authoritarianism and economic devastation.