Government

Over time, that clarity of vision has been blurred. In times of crisis enough people become convinced that government needs more power and that people can get by with fewer liberties. In our current economic crisis, this trend has unfortunately gathered a great deal of steam.

It our desire to make the pain of economic contraction go away, we have forgotten that freedom involves risk. If government is obligated to cure all hardships, then no one is really free in the first place. Take away the freedom to fail and you have obliterated the freedom to succeed.

— Peter Schiff; How an Economy Grows and Why It Crashes

Throughout history, governments have gotten themselves into trouble by spending more than they have. When the gaps become too big, difficult choices arise.

One option is for the government to increase revenue by raising taxes. This path is never popular with citizens, and in a democracy is hard to push through. Even in authoritarian states (where there are no pesky elections), tax increases are problematic. Higher rates always discourage productivity and deflate economic vitality. There is a limit to how high taxes can go. Raise them enough, and people stop working. Raise them higher, and they may even start rioting.

A far better option is to cut government spending. However, this is often more difficult than raising taxes. Those whose benefits are cut are particularly apt to express their hostility both at the polls and on the street. This is especially true when the recipients feel entitled to the benefits. Politicians make lots of promises to secure their elections and voters rarely consider the ability of taxpayers to actually foot the bills.

To avoid either of these politically unpopular options, some governments choose to default instead. In this option a country simply tells its creditors that it can't pay the full amount of its debt obligations. If the debt is largely owed to foreigners, the decision is that much easier to make. Politically speaking, it is better to stiff a foreigner than to raise taxes on, or deny benefits to, a country's own citizens.

For political leaders, default can be rather embarrassing, as it amounts to an official acknowledgment of insolvency. To avoid this, many opt to simply print money to pay debts, effectively repudiating their obligations by inflating them away. Since inflation is usually the easiest choice to make, it is often the most likely. But while it may seem easy at first, it ultimately exacts the harshest toll.

Inflation allows governments to avoid hard choices and dispose of their debt on the sly. By printing money governments can nominally pay back all that they owe, but they do so by diluting their currency. Creditors get paid, but what they get isn't worth much, and if inflation turns into hyperinflation, it's worth nothing.

Inflation is simply a means to transfer wealth from anyone who has savings in a particular currency to anyone who has debt in the same currency. With hyperinflation, the value of savings gets completely wiped out and the burden of debt is removed. (Those who own hard assets do okay, because, unlike savings in currency, assets will rise in nominal value when inflation flares up.)

— Peter Schiff; How an Economy Grows and Why It Crashes

The primary purpose for government is to be a vehicle for the rich to get their hands into our pockets.

— Buckminster Fuller; quoted by Robert Kiyosaki

Saying it another way, weakening people financially via taxes, debt, and inflation allows for a government's greater consolidation of power. When people are struggling financially, they are more willing to have the government save them, unwittingly exchanging their personal freedom for financial salvation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Government policies can be judged by what they promise or by what they do. While it might seem to be obvious that the latter is what is relevant, many people nevertheless assume that rent control laws control rent, gun control laws control guns, stimulus spending stimulates the economy and jobs bills create jobs. Moreover, few people seem to find it necessary to check any of these assumptions against facts. For example, the fact that cities like New York and San Francisco, with a long history of very strong rent control laws, have some of the highest rents in the country might suggest that such assumptions need a lot closer attention than either the public or the media give them.

— Thomas Sowell; Dismantling America

People who say that the government has to "do something" when there is an economic downturn almost never compare what actually happened when the government did something, as in the wake of the 1929 stock market crash, compared to what happened when the government did nothing after a comparable stock market crash in 1987 - or in fact after a number of other crashes before 1929. Facts seem to have become irrelevant, for all too many people, who rely instead on visions and rhetoric.

— Thomas Sowell; Dismantling America

Separating words from realities is one of the most important steps toward evaluating government policies, whether domestically or internationally.

— Thomas Sowell; Dismantling America

Edmund Burke understood that, no matter what form of government you had, in the end the character of those who wielded the powers of government was crucial. He said: "Constitute government how you please, infinitely the greater part of it must depend upon the exercise of the powers which are left at large to the prudence and uprightness of ministers of state."

— Thomas Sowell; Dismantling America

Modern governments actually spend relatively little on programs and systems that benefit all citizens, such as national defense or the judicial system; mainly they are concerned with infringing on the property rights of one (less politically powerful) group of citizens for the benefit of another (more politically powerful) group.

— Thomas DiLorenzo; How Capitalism Saved America

The overall size of government as a percentage of an economy is important because every dollar that government spends must necessarily come from the private sector. If the government taxes, it takes money out of the pockets of consumers; if it borrows, it crowds out private borrowers (individuals, families, and businesses) and puts upward pressure on interest rates, which makes borrowing more expensive for private borrowers (individuals, families, and businesses) and puts upward pressure on interest rates, which makes borrowing more expensive for private citizens; and if it prints money to finance its programs, it creates inflation, which reduces the value of all privately held wealth. Except for spending to protect property rights, enforce the law, and protect citizens from foreign aggressors, all government spending crowds out private spending and weakens the vitality of capitalism.

— Thomas DiLorenzo; How Capitalism Saved America

In a much quoted passage in his inaugural address, President Kennedy said, "Ask not what your country can do for you -- ask what you can do for your country." It is a striking sign of the temper of our times that the controversy about this passage centered on its origin and not on its content. Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic "what your country can do for you" implies that government is the patron, the citizen the ward, a view that is at odds with the free man's belief in his own responsibility for his own destiny. The organismic, "what you can do for your country" implies that government is the master or the deity, the citizen, the servant or the votary. To the free man, the country is the collection of individuals who compose it, not something over and above them. He is proud of a common heritage and loyal to common traditions. But he regards government as a means, an instrumentality, neither a grantor of favors and gifts, nor a master or god to be blindly worshiped and served. He recognizes no national goal except as it is the consensus of the goals that the citizens severally serve. He recognizes no national purpose except as it is the consensus of the purposes for which the citizens severally strive.

— Milton Friedman; Capitalism and Freedom

The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather "What can I and my compatriots do through government" to help us discharge our individual responsibilities, to achieve our several goals and purposes, and above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect? Freedom is a rare and delicate plant. Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp.

— Milton Friedman; Capitalism and Freedom

Whoever wants lastingly to establish good government must start by trying to persuade his fellow citizens and offering them sound ideologies. . . . There is no hope left for a civilization when the masses favor harmful policies.

— Ludwig von Mises; Omnipotent Government

Government means always coercion and compulsion and is by necessity the opposite of liberty.

— Ludwig von Mises; Human Action

Once the principle is admitted that it is duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments.

— Ludwig von Mises; Human Action