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Archive for October 30th, 2012

I just ran across an article that said hurricane Sandy reminds us how much we rely on governments to protect us. It even used the storm to say arguments criticizing the nanny state are wrong-headed. Geez. One doesn’t know where to start with statements like that. The government doesn’t protect us: we protect us. We establish various public institutions to carry out numerous cooperative activities, just as we form private institutions to carry out other cooperative activities. We don’t say that business corporations protect us, as if they have some sort of life apart from us. Neither should we ever regard government as some kind of abstract, protective entity that exists apart from us.

Yet we seem to have an in-built instinct to regard government as a replacement parent. When we leave home, who will take care of us? When we’re on our own, don’t we need someone to watch over us and help us out when trouble comes? The world is dangerous, and we don’t want to be alone.

If you’ve read The Jeffersonian long enough, you know this way of thinking is dangerous in the extreme. The state as it has developed is not your friend. Of all the threats you will face in your life – from nature, from criminals, from financial uncertainty, from people who act like your friend but turn out to be otherwise – an over-powerful, out of control state is the biggest threat of all. Little Red Riding Hood, acting by herself, could not escape the wolf – no matter how the wolf dressed up.

Consider other stories to see how deeply we crave and appreciate protection, both as children and as adults. Hansel and Gretel is a particularly scary tale, as an evil stepmother conspires to force the poor woodcutter to take his children out into the woods to abandon them there. Only the children’s ingenuity, courage, and perseverance save them: no one else will do it. Children love this story, frightening as it is, because brother and sister defeat the wicked witch on their own. They stick together and find a way out.

Hansel and Gretel had no guardian angel – not even their father would protect them under pressure. Cinderella was equally miserable, except her stepmother kept her close by. As Cinderella’s stepmother and stepsisters exploited her, abused her and ostracized her, she kept a cheerful outlook and hoped for better times to come. Her fairy godmother, equipped with all kinds of supernatural powers, arranged for her to meet the prince, so that one day she should be queen. Cinderella did have someone to look after her, and her guardian spirit came through.

The more we look for this theme of protection from harm, the more we find it in our stories. Lassie was so popular with children and families because its theme so consistently told this story. The heroic collie would brave anything to protect Timmy. Lassie rescued the vulnerable little boy from fire, flash floods, kidnappers, or whatever else might bring ruin. The dog looked out for Timmy and brought him through every danger.

One of the most compelling stories for young people in American literature, To Kill a Mockingbird, relies on this theme. “Hey Boo,” says Scout as she recognizes Boo Radley standing in the corner. He has just rescued Scout and her brother Jem from Bob Ewell, who aimed to kill them as they walked home from a Halloween party. “Heck, someone’s been after my children,” says Atticus when he calls the sheriff. Shortly afterward, Atticus thanks Boo: “Thank you for my children.” Mr. Radley – the amazing guardian angel, the mysterious neighbor who stayed inside until he heard the children cry for help – responds in silence.

Dumbledore and Harry’s parents through all seven Harry Potter books, Odysseus when he returns home to Penelope in the Odyssey, Moses’ leadership of his people in Exodus: we can find this theme of protection and bravery everywhere. Our favorite stories show the theme’s power to compel our hearts and our attention.

Let’s return to government and the kind of protection it offers. You won’t find stories on that theme in our literature. I recently completed Barbara Tuchman’s A Distant Mirror, a book that – like her others – has a lot of wisdom in it. By her account, the French serfs in the fourteenth century wanted so much to see their king as their protector. They knew the king and his nobles exploited them. Taxes, warfare, robbery, all kinds of injustice flowed from society’s top ranks down upon the poor. The underclass resisted and revolted, several times. Even so, they hoped the king would come through to protect them. The king even dramatized his protective role at public festivals. Despite all contrary evidence, the people perceived the king, ordained by God, as the sovereign power who could redeem them from apparently inescapable misery.

Here’s the last instance I want to mention, a story filled with so much horror for grown-ups they cannot stand to face it. Some months ago I watched a film titled Explosive Evidence, which investigates why two steel framed skyscrapers in the World Trade Center exploded on September 11, 2001, and why one skyscraper imploded. A segment toward the film’s end explores why people resist the conclusion that gravity did not bring these buildings down. “It can’t be true,” they say. One woman, when she realized how the buildings fell, took a long walk outside her office building. She said she could not stop sobbing as she walked block after block.

She became so upset because until then, she had thought of government as her protector. The idea that it could be anything else wrenched her world view, forced her to see that it did not necessarily act as a replacement parent. She felt as Hansel and Gretel felt when they overheard their stepmother persuade their father to take them into the wilderness to let them starve. But for that bit of eavesdropping Hansel would not have brought bread crumbs with him. From beginning to end, Hansel and Gretel managed to save themselves because they learned the truth, about their own home and about the witch’s home. Like the woman in Explosive Evidence, we must recognize the truth about where we live, and use our wits to save ourselves.

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The Military Budget is Another Bubble

As students of the Austrian School of Economics understand, financial bubbles are caused by central bank monetary policy and government intervention in the economy.  The housing boom and subsequent crash in the first decade of this century is an excellent example of the Austrian Business Cycle Theory (the Austrian School’s explanation for booms and busts in the economy).

For more than 4 years between June of 2001 and September of 2005 the Federal Reserve kept its Federal Funds interest rate under 4 percent.  Artificially low mortgage rates resulted.  This coupled with large investments by the Bush Administration for low income homebuyers created the largest housing boom in American history.  As interest rates were gradually increased by the Fed, reaching a decade high of 5.25 percent in June 2006, investments in housing that were made at lower interest rates became unsustainable at higher rates.  As adjustable rate mortgage rates rose, defaults increased eventually causing home prices to plummet.  The housing bubble had burst.

Of course, pundits, politicians, mainstream economists, and others dependent on big government for their sustenance blamed the free market and deregulation for the housing boom and bust.  Yet, time and again in the Twentieth Century, from the stock market crash of 1929 to the dot com bubble of the late 1990s, the fingerprints of Fed manipulation and monetary price fixing have been all over every economic downturn and crisis.

Now, there are other bubbles in our economy that have yet to burst.  These are the bubbles that are insulated from bursting by politics.  They include higher education and defense spending.

In terms of defense spending, the political forces that protect it are currently working overtime to maintain that bubble.  In January, under provisions of the Budget Control Act of 2011, defense budget cuts totaling about $50 billion a year for the next 10 years go into effect.  Opponents of the cuts, like Senator Lindsey Graham are claiming “It would be like shooting yourself in the head. It would be the most destructive thing in the world.”  John McCain has even warned that the cuts would leave us unable to defend the country!

Then there are the threats of wide spread layoffs by defense contractors and the devastation to local communities like Newport News, Virginia that defense budget cuts would bring.  Corporate officials and community leaders have teamed up to decry the cuts based solely on the harm they would do to their bottom lines and tax bases without any regard for whether as a nation we should spend the money on more armaments.

After all, defense spending accounts for close to 20 percent of all federal spending.  The U.S. spends more on defense than the next 13 highest spending countries combined!

This enormous government bubble has been financed for years by deficit federal spending monetized by the Federal Reserve – in other words debt.  Since at least Reagan, military spending has been erroneously used as a fiscal stimulus to the economy, financing millions of jobs in the military-industrial complex.  And it has been used to launch several seemingly endless wars and other lethal adventures worldwide.

The country doesn’t need that much military and can no longer afford it.  As the real fiscal cliff approaches, political defenders of the military-industrial complex are going to find it more and more difficult to protect their bubble.  With hundreds of trillion of dollars in future unfunded liabilities on the books of the federal government, the only answer for Washington is to continue to print more money.  Eventually interest rates will rise increasing the interest payments on the debt.  More printing will occur perpetuating a financial spiral which will destroy what’s left of our economic system.  Cutting a measly $50 billion a year from military spending now should be a no-brainer.  But it probably won’t happen because anymore politics takes precedence over reason in Washington.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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