My grandmother, Tucker, was never so worried about me as when I told her I was moving to DC and she was never so happy as when I left and moved to Auburn to be with her.
Six miserable years there. Glad to be out.
I'm pleased to report to you that Henry Cisneros, the most profligate and meddlesome head of HUD since Jack Kemp, is leaving the agency and returning to private life where he can pursue his profligacy at his own expense.
Given that money is fungible, it is instructive to realize that the tax dollars that paid his salary while he was at HUD have been spent paying off a long-time paramour in Texas.
And far from being a source of controversy, this is just humdrum information by today's Washington standards.
The really bad news, however, is that Congress is confirming his successor, Andrew Cuomo, the son of Mario Cuomo, to the same post.
Andrew is widely described in Washington as a competent manager, a humanitarian whose appeals on behalf of the poor and the homeless cross ideological boundaries.
In short, just like his father, he's a political scam artist and he's about to become more of a public enemy than he already is.
Cuomo, like his predecessors, promised Congress that he would reform HUD and clean up the agency whose name might as well be scandal-ridden HUD.
and that's why it's always said scandal-ridden HUD for 30 years now these
scandals are nearly always of the same sort shady businessmen in the private
sector conspire with political appointees and lifetime bureaucrats to
channel money to themselves in the name of building or financing public housing
but why is it supposed to be shocking that such a thing we go on a 30 billion
dollar agency that was founded to do precisely this and what is Cuomo's plan
He's a long-time advocate of moving away from traditional public housing.
He points out that the private sector is much better at building and managing housing, even
for the poor, than the government is.
To demonstrate this, he ran a non-profit organization in New York that was heralded by everyone
in the media.
All this is music to the ears of Washington politicians, especially Republicans, but here
are the bad notes.
In fact, his organization in New York was nothing but a conduit for government money, state and federal.
His high-rises for the homeless built at taxpayer expense were invariably placed in neighborhoods where his buildings drove property values down.
But because he had a government, he had government backing,
and no zoning ordinance, neighborhood protest or market conditions could prevent his brand of creative destruction from taking place.
This is what Cuomo calls
Privatization
Now he wants to take his scam to the federal level, having the government give billions of dollars to left-wing non-profit groups that would then build and manage public housing, provide counseling to residents to make sure they're getting all the welfare to which they're entitled, and subsidize their transportation, job training and medical expenses.
He's got a list in his pocket of organizations that would love to help out.
But hold on just a minute.
Now, private interest groups are working with political appointees and lifetime bureaucrats to benefit financially from HUD's program.
How is this different from the usual scandals that have long plagued the agency?
Well, the difference is that it's about to become out in the open. In the name of privatization,
what was once called GRAF is transformed into the sound exercise of public policy. And there we have it.
Ideology in the service of power.
What Cuomo is using is the newest thing in status propaganda. The left knows
that the old language of socialism, tax and spend, government management and
ownership, no longer works, even appeals to the poor starting to wear thin, which
is why you don't often hear Clinton making them. Instead the left is in the
process of adopting the language of free market economics in order to peddle a new
Socialist Schemes
As the old covers are exposed and refuted, the state must invent new rationales for its crimes against liberty and property.
Sooner or later, we should have known that the court intellectuals would start looting even the lexicon of the Austrian school and the old classical liberals for their own purposes.
Sadly, not everyone on our side has caught on to this trick.
I want to describe a few of the areas in this short talk, but first to point out that this trend is an unintended tribute to the power of ideas, and to the power of free market ideas in particular.
Earlier this century, many defenders of private property were pressed to explain how what they advocated was consistent with collectivist ideals, the dominant intellectual and public trend.
Today, that is flip-flopped.
Think about it. The left has suddenly decided it must reinvent the old socialism using the language and rubrics of markets and private property.
And think about this. During the campaign, Clinton scored points on Dole by claiming he had reduced the size of government to its smallest points since the Civil War.
Now, if ideas didn't matter, none of these lies would be necessary.
All that would be necessary for the conduct of imperialist social democracy would be the application of government power.
But no government on earth can go about its dirty work without an ideological cover of some sort.
The dirtier the work, the more urgently the ideological cover is needed,
preferably one that taps into the cultural prejudices and general philosophical orientation of the public.
When the government is small and unseen, and the rule of law is obeyed, very little of this cover is actually necessary.
The government needs no propagandists and intellectuals to invent new rationales for graft and theft because so little of it is going on.
But as the state's power grows and it confiscates ever more of the national wealth through inflation, taxes and mandates,
the need for court intellectuals becomes ever more acute.
So the propaganda machine always grows in concert with the taxing power. It has to.
A confiscatory state without a public rationale is an unviable project.
and an ideologically diverse society such as ours is often necessary for the state to offer a variety of rationales for the same state action, even when they contradict each other.
The goal here, of course, is not truth or logic, but merely to placate the public, tame the critics and keep the rebels at bay.
Now, this insight is all we need to understand the advent of the Washington think tank in the post-war era.
We couldn't imagine such a thing existing in the Washington of, say, 1820.
Political power was devolved to the states and localities, and intellectual life existed within a largely private culture.
A think tank in Washington in 1820 would have nothing to do but count the cows grazing outside their office windows.
Today, however, there are thousands of think tanks in Washington,
each filled with well-paid intellectual apologists for something the government is doing or wants to do.
have different styles. Some think tanks leap on the mantle of science and intimidate politicians
by citing precise-sounding numbers. Others adopt a moralistic tone, letting their hearts
bleed for the children and the jobless in front of this or that committee or in front
of the national press corps. Still others prefer the globalist approach and feign altruistic
love for all foreign people's lands, jungles, trees and endangered flying insects. It is
There's not only the style that differs between them, but also the ideological orientation
they offer to back various government programs.
When HHS needs a defense of its newest immunization scheme, there are a hundred child advocacy
organizations behind them to assure the public that without the program, the streets would
be strung with the diseased corpses of tiny babes.
When HUD needs a defense of its newest privatization scheme, it can count on neoliberal think tanks
to come to its defense, while market-oriented think tanks tend to cheer this as a step in
the right direction.
When the Pentagon wants a cool 10 billion to subsidize its favorite munitions manufacturers,
it can count a bride of center think tanks to say, of course, that it's in the national
interest.
So what do think tanks get out of all this jockeying?
For what quid do they trade their pro quo?
Well, in addition to money, they also gain the benefits that derive from respectability.
It's a hard word to define in Washington, but you know it when you have it.
Senators show up to your cocktail parties,
not necessarily even to seek your support, but to pay you back for all the work you put in
when you backed his recent
bill that increased taxes.
If you are respectable, National Public Radio calls you to do
the voiceovers, and it's in one of their own pre-arranged scripts they call in-depth stories.
And by the way, a few months ago I got a call from an NPR reporter who called me to get
my comments on a bill being considered by Congress. Here's the way this obviously stupid person
asks the question, how will the working poor be hurt by the deep cuts in job training that
Congress is considering? I was taken aback by this and I said something like this, well
if they're working why do they need tax-funded job training? And realizing that she pulled
When I got the wrong card from the Rolodex, she thanked me for my insight and hung up.
I listened the next morning to the radio. I wasn't on.
Respectability means that you can boast about all the powerful people who come to your media
shows and cocktail parties, how many times the New York Times quotes your recent study
and how many times you've appeared on the McNeill-Lair NewsHour. But let's be clear
When you hear about this, respectability is not the same thing as influence, and these days more often it is the opposite.
Often respectability is counter-influence or at best second-hand influence, but in Washington this doesn't really matter.
Respectability in Washington is an end in itself because it suggests that you are a player, that you matter in the power game.
Do people seek you out for counsel? Do they invite you to the right receptions?
Are people impressed when they hear of your affiliation?
If so, you've got respectability. If not, you need to work on fitting into Washington culture a bit more.
The means towards acquiring respectability is to provide an intellectual justification for an important policy goal of the central state.
The goal of the justification is to utterly obscure the reality of the policy that is being defended.
And I'd like to give some examples of this.
If the government is burying innocent people in an Iraqi desert in order to reinstall a neighboring kleptocracy that has huge contracts with a blue-chip oil company,
it's the job of Washington's respectable intellectuals to say this is merely deterring aggression.
If the government needs to raise $40 billion to bail out a foreign government whose failing bonds are held by an investment banking firm whose former director is now the Secretary of the Treasury,
The job of Washington's respectable intellectuals is to say this is merely a profitable way to help a neighbor in need.
And so it goes until you become a certified expert in the proper conduct of foreign economic policy.
Or let's say you're in the pay of a powerful Indonesian oil conglomerate called the LIFO Group.
They know of about 1.7 million acres of clean burning coal in Utah worth about 1 trillion dollars.
When you nationalize the land in a single stroke, it is a job of Washington's respectable intellectuals to say that the land is a beautiful nature preserve. Nationalizing 1.7 million acres is good for the environment.
Thus we see how ideology is used to cover every manner of theft and corruption and how such crimes could not possibly be undertaken without this ideological cover.
But rarely does Washington offer a single rationale for some awful policy scheme. It throws out several to appeal to the diversity of opinion in and outside the beltway.
My favorite example of this is the North American Free Trade Agreement.
Originally it was not supposed to be controversial.
The governing elites had planned to shove it through as a non-controversial, unmitigated blessing for one and all.
But once NAFTA became controversial, the intellectuals, working on earmarked grants from private interests that stood to benefit on all three governments concerned,
they went into overdrive.
In the course of the debate, or the screaming match,
NAFTA was sold to the environmentalists as a regulatory measure that would lock up land in Mexico and force its government to dramatically increase its environmental controls.
To the labor unions, NAFTA was sold as a way of enforcing the minimum wage and other labor regulations in Mexico and preventing it from unfairly competing with the U.S.
To the financial industry, NAFTA was sold as creating a potential credit-driven boom for the stock market.
To the Nationalists, it was sold as a way for the U.S. to pool its resources to compete
against Japan and Europe and pursue a mercantile expert policy.
To the free traders, it was sold as the embodiment of David Ricardo's vision of a borderless
world for the exchange of goods and services.
Now how could all of these be true?
The last rationale contradicts all the previous ones, and it turns out that all were in fact
are not true except one, that NAFTA had anything to do with free trade.
Since the Washington propagandists were now on the Mises Institute's turf, however,
we did our best to set the record straight, and despite not getting a single grant from a government,
no large foundation or corporate support, we ended up making a tremendous amount of trouble
for the interest groups pushing NAFTA.
As well-funded as the propaganda machine was, our case against NAFTA carried tremendous weight
Because we were part of a handful of people active in the debate that had no financial
or respectability stake in the outcome, and we were thus free to actually tell the truth.
And there's only one thing more powerful than the power of ideas generally, and that is
the power of the truth specifically.
In the end, of course, NAFTA passed, but it was only over the opposition of a majority
of the public, and to this day, it remains one of the most hated treaties the US has
ever negotiated.
The governing elites are too afraid to rev up the controversy anytime soon again by expanding NAFTA, and that's all to the good.
Now, I do not believe that this treaty, or the World Trade Organization Treaty that came one year later,
would have gotten through had it not been for the initial credibility that free trade rhetoric had imbibed the legislation with.
Absent that, Republicans would have had no cover to allow them to vote for NAFTA or GATT,
and both of these treaties would have been seen more clearly for what they truly were,
central planning schemes to be implemented on a regional and global scale.
It follows then that the crucial role or a crucial role for the Mises Institute or any free market organization
is to expose these policies for what they are.
We must work to prevent the elites from attaching market oriented rhetoric to legislation
that in fact increases the size of the state in one respect or another.
However, the truth about legislation before Congress or any idea being pushed by a bureaucracy is not always easy to come by.
You generally always have to read the fine print.
I'm reminded of an experience I had recently when my wife gave birth to our first son.
I was standing outside the hospital nursery, looking through the window at my beautiful boy,
who clearly had my eyes, my hair color, my wife's eyes and skin color,
and Skin Color
and I gloried in the miracles of genetics to so perfectly pass on these physical marks.
And then I noticed the name on the crib was not Tucker, but Russell.
It was a good thing I read the tag before I grew to attach to them.
Well, it's the same thing. The same goes with legislation.
We must read the fine print to determine what really belongs in our camp and what does not.
Of course, this housing privatization scheme of Andrew Cuomo is a good example, and we should do everything possible in the coming year to defeat his attempt to impose it on us.
We have to educate not only the general public about this, but also people with ideological sympathies towards such ideas as privatization.
The purpose of state propaganda is to get us to let down our guard, and sadly, the word privatization does exactly that.
When Jack Kemp claimed to be privatizing, he was actually spending about $140,000 in taxes per unit to repair them prior to putting the actual residents of the units on the HUD payroll and calling them managers.
And those of you who have heard my Jack Kemp spiel, you can relax and I'm not going to go on about his evils for the next 30 minutes.
He was also the first to institute a privatization racket called Moving to Opportunity, which is really a glorified Section 8 program,
The welfare state is being privatized in phony and peculiar ways.
The earned income tax credit requires no additional bureaucracy to administer.
You qualify for it when you fill out your tax forms every spring.
The standard by which you are accepted or rejected is not assets, it is income, and
And most importantly, it is a refundable tax credit, meaning that when you get your credit,
you get to debit other people's bank accounts.
The first proposal for such a program was advanced by Milton Friedman in Capitalism
and Freedom, an idea quickly refuted in those days by Henry Hazlitt.
And though today the program is one of the fastest growing welfare programs in Washington,
When lawmakers are at pains to roll back at speedy advances, the Wall Street Journal editorial
page still can't bring itself to make a principled case against it.
In fact, the dirty secret is that most conservatives don't know what to make of this program, while
there are plenty in Washington's think tank culture who will tell you this tax credit
is an example of non-bureaucratic empowerment through privatization.
In truth, it's the same old forcible welfare transfer program that is the foundation of
The only difference is that it is more efficient than the conventional means of welfare.
It's the difference between the criminal who has to break into your house while you're on vacation
and the hoodlum who has your cash card and password.
Another example of a proposal to privatize the welfare state
is one that would allow you to write in your favorite charity on your tax forms
and suggest that your taxes ought to go to it rather than Donna Shalala.
Now that sounds superficially plausible, until you realize who would actually be signing the checks that would go to these private charities.
That's right, this program would put any private charity that qualifies on the federal dole.
So rather than privatization, it would actually amount to the nationalization of private charity.
It's quite a trick, but you have to look closely to discover it.
There are many other such examples.
Let's jump right to the heart of what is surely the grossest example of market ideology being used as a mask for power that I've witnessed in recent days.
It's a vast conspiracy to increase taxes by 20-25%, add about $7 trillion to the national debt, put all of corporate America on the federal dole,
and institute a brand new foresaving program unparalleled since FDR instituted Social Security.
Social Security. And believe it or not, the plot has been blessed with the name privatization.
If the Washington spin masters get away with this, they can get away with anything. I'm
talking of course about the National Advisory Board on the Reform of Social Security, which
recently released its final report. First some background on the program. It never
of course worked as old age insurance as it was advertised to be. It was designed as an
It was an anti-depression wage scheme to tax the young to subsidize older Americans so that they would drop out of the workforce and stop putting downward pressure on wages.
And it worked to do just that, much to the detriment of society.
What resulted was the largest wealth transfer program in American history.
The scheme also contained the seeds of its own destruction.
It would have worked if life spans had drastically shortened after the Second World War,
so that more and more workers could continue to pay fewer and fewer retirees.
But despite Vietnam and Korea this didn't happen and with fewer workers paying the tab for more and more retirees the program has been systematically falling apart for two decades and we all know this.
Anyone who puts a moment's thought into the problem knows that so long as the program is going to remain in place there are only two paths out of this mess, raise taxes or cut benefits.
These are the conventional solutions.
Every time it has had the chance, Washington, of course, chooses the worst choice from the point of view of the taxpayer.
It has raised taxes and raised benefits, thereby guaranteeing the need for ever-higher taxes in the future.
Okay. In the early 80s, the task of providing ideological cover for this operation was performed by the great Alan Greenspan, of course,
and the cover was Sound Finance. Thanks to his tax increases rammed through the Senate by Bob Dole,
Social Security was supposed to be put on a sound financial footing for the
indefinite future. Yet here we are 13 years later and we are again facing the
same old problem. Soon enough there won't be enough revenue to pay the promised
benefits. It's not complicated. Now the question becomes what will Washington do
about this? The path of raising taxes in the name of sound finance has already
been taken. It probably won't work again. Where to turn? Where else but to classical
and liberalism, the one ideological tradition with credibility, after a century of failed socialist policies.
Specifically, the newest reform claims to be a privatization.
And I don't know who originally thought up this scheme, but he must have learned the lesson from history that if you're going to tell a lie,
be sure and make it big enough to change the subject completely.
In fact, diverting debt receipts from the present trust fund or any future income stream to stocks
has essentially nothing to do with solving the real problem unless you think the real problem is political and not economic.
The economic problem is not low returns on debt securities in which the trust fund is invested.
The problem is that the program is inherently inviolable from an economic point of view.
Adding to that, if benefits are not cut, any money that is diverted away from the present receipts has to be made up in new receipts.
Now, the advocates of this phony privatization like to call the requirement for new receipts the transition costs.
I have a note to myself, the cry of the dictator.
Today, everything is terrible. Tomorrow, everything will be great. Leave the transition to me.
It turns out that the transition in this case lasts 75 years. We used to laugh at Soviet
five-year plans. When has Washington ever planned 75 years in advance? That's the moment
of time between the ratification of the Constitution and the firing of Fort Sumter. Privatization
advocates will forgive me if I'm not reassured by their promise to repeal this new tax in
In an attempt to restrict the scope of the debate, the Advisory Commission has offered three separate plans.
The first one is the supposed liberal approach, written by a former Social Security Commissioner.
He wants no new taxes until the trust fund is gone completely, a slight reduction in benefits,
some consideration given to letting the government put funds in the stock market and otherwise to keep the program the same.
Now given the other option, strangely, this one qualifies as sane if unworkable.
The other two programs offer a brand new for saving program to be stuck on top of
the existing program so that instead of spending money on your families you pay
evermore to the government. That money is then diverted to the stock market which
is then guaranteed by the government to go up forever just like in the last three
President Future Retirees are then paid out of the new income stream generated by a 20 to 25 percent tax increase.
Now, much is made about how these plans offer the right to choose where you want to put your money.
One plan lets government choose and another allows the payer to shift the accounts around.
In fact, this entire debate is a diversion tactic.
Notice that no citizen has the right to choose whether to actually pay the new tax.
The government is collecting the money so the government has an interest in where the money goes.
That gives government undue influence over who wins and who loses on Wall Street and is guaranteed to make the stock market like the banking system too big to fail.
Of course, this idea would never be considered in a bear market and I expect that the entire scheme will collapse if the stock market falls as much as 5%
and let's hope this happens before rather than after this supposed privatization is implemented.
The key to understanding this privatization was summed up by the New
York Times, January 8th, in clear language. Edward Gramlich, the chairman of the
advisory board, quote, would use the popular appeal of privatization to
transform the unpalatable tax increase into a politically acceptable forced
savings, unquote. And that about sums it up. But in addition to destabilizing the
financial system, what would be the economic consequences for the average
Ironically, it would dramatically reduce the ability for families to save.
It would destroy the 401k industry overnight, and frankly 401k is one of the great innovations of the last decade.
They actually allow people to prepare for the future and secede from a future dependency on Social Security.
Leave it to the government and its court intellectuals to plot the destruction of a good financial trend.
And it is not a good excuse that some of these intellectuals who are backing this program
program claim to back the stock investment scheme but not the transition tax and would
like to see it paid out of existing government spending. That's like saying I favor a tax-funded
card for everyone, but of course not being a socialist, I want the funding to come from
the Medicare budget. When taxes are raised to pay for a cards for all program, you bear
part of the responsibility. And truth is we're politically feasible to cut 50 billion of
of Next Year's Budget, which is what the new tax would raise in the first year alone.
It should be done regardless of any social security reform.
Well, I'm no longer astonished to see that think tankers in Washington who swear loyalty
to the market cause completely sell their souls on issues like NAFTA, GATT, the CPI
revision racket, the budget debate, private school welfare, are now the largest tax increase
in American history and an explosion of corporate welfare to boot in the name of social security
Reform. The pressure of the Beltway can get even to the best people. The desire
to fit in, the clamor for respectability and power, and the temptation to serve
the Leviathan that surrounds you is overwhelming. But for those of us
on the outside, we have a responsibility to tell the truth about what the
government is doing to us and what its effects will be. And by the way, let me
just offer congratulations to Gary Bauer of the Family Research Council who's
Well, what is the truth about Social Security? The truth is, of course, that it can't continue.
It must be dismantled. The path to dismantling it has always been clear. Raise the retirement
age, cut benefits, lower taxes. The best solution, of course, would be to immediately abolish
Mises and Rothbard were never much for half-baked policy schemes, and much preferred telling
Washington II understands this, which is why every act to increase power is cloaked in some ideological garb.
So long as we understand this, we can wisely choose our battles and our tactics in the struggle to restore liberty.
State power ultimately stands no chance against the social and intellectual movement committed by Washington II.
We can wisely choose our battles and our tactics in the struggle to restore liberty. State
power ultimately stands no chance against the social and intellectual movement committed
to liberty. As Mises said, how vain it is to fight with the sword against the spirit.