WEBVTT NOTE Power and Ideology in D.C. 1 00:00:00.000 --> 00:00:10.000 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. 2 00:00:10.000 --> 00:00:14.000 Six miserable years there. Glad to be out. 3 00:00:14.000 --> 00:00:28.000 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. 4 00:00:28.000 --> 00:00:39.000 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. 5 00:00:39.000 --> 00:00:46.000 And far from being a source of controversy, this is just humdrum information by today's Washington standards. 6 00:00:46.000 --> 00:00:55.000 The really bad news, however, is that Congress is confirming his successor, Andrew Cuomo, the son of Mario Cuomo, to the same post. 7 00:00:55.000 --> 00:01:06.000 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. 8 00:01:06.000 --> 00:01:15.000 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. 9 00:01:15.000 --> 00:01:24.000 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. 10 00:01:24.000 --> 00:01:28.920 and that's why it's always said scandal-ridden HUD for 30 years now these 11 00:01:28.920 --> 00:01:33.300 scandals are nearly always of the same sort shady businessmen in the private 12 00:01:33.300 --> 00:01:37.140 sector conspire with political appointees and lifetime bureaucrats to 13 00:01:37.140 --> 00:01:42.080 channel money to themselves in the name of building or financing public housing 14 00:01:42.080 --> 00:01:46.840 but why is it supposed to be shocking that such a thing we go on a 30 billion 15 00:01:46.840 --> 00:01:52.360 dollar agency that was founded to do precisely this and what is Cuomo's plan 16 00:01:52.360 --> 00:01:59.960 He's a long-time advocate of moving away from traditional public housing. 17 00:01:59.960 --> 00:02:04.040 He points out that the private sector is much better at building and managing housing, even 18 00:02:04.040 --> 00:02:07.200 for the poor, than the government is. 19 00:02:07.200 --> 00:02:11.680 To demonstrate this, he ran a non-profit organization in New York that was heralded by everyone 20 00:02:11.680 --> 00:02:13.520 in the media. 21 00:02:13.520 --> 00:02:18.040 All this is music to the ears of Washington politicians, especially Republicans, but here 22 00:02:18.040 --> 00:02:19.040 are the bad notes. 23 00:02:19.040 --> 00:02:25.740 In fact, his organization in New York was nothing but a conduit for government money, state and federal. 24 00:02:25.740 --> 00:02:33.680 His high-rises for the homeless built at taxpayer expense were invariably placed in neighborhoods where his buildings drove property values down. 25 00:02:34.100 --> 00:02:36.860 But because he had a government, he had government backing, 26 00:02:37.680 --> 00:02:45.140 and no zoning ordinance, neighborhood protest or market conditions could prevent his brand of creative destruction from taking place. 27 00:02:45.680 --> 00:02:47.680 This is what Cuomo calls 28 00:02:47.680 --> 00:02:50.680 Privatization 29 00:02:50.680 --> 00:03:08.680 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. 30 00:03:08.680 --> 00:03:13.680 He's got a list in his pocket of organizations that would love to help out. 31 00:03:13.680 --> 00:03:15.680 But hold on just a minute. 32 00:03:15.680 --> 00:03:21.600 Now, private interest groups are working with political appointees and lifetime bureaucrats to benefit financially from HUD's program. 33 00:03:21.720 --> 00:03:26.020 How is this different from the usual scandals that have long plagued the agency? 34 00:03:26.480 --> 00:03:31.480 Well, the difference is that it's about to become out in the open. In the name of privatization, 35 00:03:31.480 --> 00:03:38.240 what was once called GRAF is transformed into the sound exercise of public policy. And there we have it. 36 00:03:39.280 --> 00:03:41.480 Ideology in the service of power. 37 00:03:41.480 --> 00:03:48.500 What Cuomo is using is the newest thing in status propaganda. The left knows 38 00:03:48.500 --> 00:03:52.480 that the old language of socialism, tax and spend, government management and 39 00:03:52.480 --> 00:03:58.800 ownership, no longer works, even appeals to the poor starting to wear thin, which 40 00:03:58.800 --> 00:04:03.240 is why you don't often hear Clinton making them. Instead the left is in the 41 00:04:03.240 --> 00:04:08.240 process of adopting the language of free market economics in order to peddle a new 42 00:04:08.240 --> 00:04:11.240 Socialist Schemes 43 00:04:11.240 --> 00:04:19.240 As the old covers are exposed and refuted, the state must invent new rationales for its crimes against liberty and property. 44 00:04:19.240 --> 00:04:28.240 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. 45 00:04:28.240 --> 00:04:33.240 Sadly, not everyone on our side has caught on to this trick. 46 00:04:33.240 --> 00:04:45.240 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. 47 00:04:45.240 --> 00:04:56.240 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. 48 00:04:56.240 --> 00:04:58.240 Today, that is flip-flopped. 49 00:04:58.240 --> 00:05:06.240 Think about it. The left has suddenly decided it must reinvent the old socialism using the language and rubrics of markets and private property. 50 00:05:06.240 --> 00:05:17.240 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. 51 00:05:17.240 --> 00:05:21.240 Now, if ideas didn't matter, none of these lies would be necessary. 52 00:05:21.240 --> 00:05:27.240 All that would be necessary for the conduct of imperialist social democracy would be the application of government power. 53 00:05:27.240 --> 00:05:32.240 But no government on earth can go about its dirty work without an ideological cover of some sort. 54 00:05:32.240 --> 00:05:36.240 The dirtier the work, the more urgently the ideological cover is needed, 55 00:05:36.240 --> 00:05:41.240 preferably one that taps into the cultural prejudices and general philosophical orientation of the public. 56 00:05:41.240 --> 00:05:49.240 When the government is small and unseen, and the rule of law is obeyed, very little of this cover is actually necessary. 57 00:05:49.240 --> 00:05:57.240 The government needs no propagandists and intellectuals to invent new rationales for graft and theft because so little of it is going on. 58 00:05:57.240 --> 00:06:03.240 But as the state's power grows and it confiscates ever more of the national wealth through inflation, taxes and mandates, 59 00:06:03.240 --> 00:06:07.240 the need for court intellectuals becomes ever more acute. 60 00:06:07.240 --> 00:06:13.240 So the propaganda machine always grows in concert with the taxing power. It has to. 61 00:06:13.240 --> 00:06:17.240 A confiscatory state without a public rationale is an unviable project. 62 00:06:17.240 --> 00:06:27.240 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. 63 00:06:27.240 --> 00:06:35.240 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. 64 00:06:35.240 --> 00:06:42.240 Now, this insight is all we need to understand the advent of the Washington think tank in the post-war era. 65 00:06:42.240 --> 00:06:48.240 We couldn't imagine such a thing existing in the Washington of, say, 1820. 66 00:06:48.240 --> 00:06:55.240 Political power was devolved to the states and localities, and intellectual life existed within a largely private culture. 67 00:06:55.240 --> 00:07:02.240 A think tank in Washington in 1820 would have nothing to do but count the cows grazing outside their office windows. 68 00:07:02.240 --> 00:07:06.240 Today, however, there are thousands of think tanks in Washington, 69 00:07:06.240 --> 00:07:11.240 each filled with well-paid intellectual apologists for something the government is doing or wants to do. 70 00:07:11.240 --> 00:07:18.240 have different styles. Some think tanks leap on the mantle of science and intimidate politicians 71 00:07:18.240 --> 00:07:23.880 by citing precise-sounding numbers. Others adopt a moralistic tone, letting their hearts 72 00:07:23.880 --> 00:07:27.920 bleed for the children and the jobless in front of this or that committee or in front 73 00:07:27.920 --> 00:07:33.140 of the national press corps. Still others prefer the globalist approach and feign altruistic 74 00:07:33.140 --> 00:07:40.640 love for all foreign people's lands, jungles, trees and endangered flying insects. It is 75 00:07:40.640 --> 00:07:44.920 There's not only the style that differs between them, but also the ideological orientation 76 00:07:44.920 --> 00:07:49.020 they offer to back various government programs. 77 00:07:49.020 --> 00:07:55.560 When HHS needs a defense of its newest immunization scheme, there are a hundred child advocacy 78 00:07:55.560 --> 00:08:00.100 organizations behind them to assure the public that without the program, the streets would 79 00:08:00.100 --> 00:08:04.860 be strung with the diseased corpses of tiny babes. 80 00:08:04.860 --> 00:08:09.700 When HUD needs a defense of its newest privatization scheme, it can count on neoliberal think tanks 81 00:08:09.700 --> 00:08:15.580 to come to its defense, while market-oriented think tanks tend to cheer this as a step in 82 00:08:15.580 --> 00:08:16.580 the right direction. 83 00:08:16.580 --> 00:08:22.980 When the Pentagon wants a cool 10 billion to subsidize its favorite munitions manufacturers, 84 00:08:22.980 --> 00:08:26.580 it can count a bride of center think tanks to say, of course, that it's in the national 85 00:08:26.580 --> 00:08:28.500 interest. 86 00:08:28.500 --> 00:08:31.900 So what do think tanks get out of all this jockeying? 87 00:08:31.900 --> 00:08:34.100 For what quid do they trade their pro quo? 88 00:08:34.100 --> 00:08:39.460 Well, in addition to money, they also gain the benefits that derive from respectability. 89 00:08:39.460 --> 00:08:44.180 It's a hard word to define in Washington, but you know it when you have it. 90 00:08:44.180 --> 00:08:46.300 Senators show up to your cocktail parties, 91 00:08:46.300 --> 00:08:50.860 not necessarily even to seek your support, but to pay you back for all the work you put in 92 00:08:50.860 --> 00:08:52.400 when you backed his recent 93 00:08:52.400 --> 00:08:54.200 bill that increased taxes. 94 00:08:54.200 --> 00:08:58.100 If you are respectable, National Public Radio calls you to do 95 00:08:58.100 --> 00:09:05.360 the voiceovers, and it's in one of their own pre-arranged scripts they call in-depth stories. 96 00:09:05.360 --> 00:09:10.180 And by the way, a few months ago I got a call from an NPR reporter who called me to get 97 00:09:10.180 --> 00:09:15.480 my comments on a bill being considered by Congress. Here's the way this obviously stupid person 98 00:09:15.480 --> 00:09:21.920 asks the question, how will the working poor be hurt by the deep cuts in job training that 99 00:09:21.920 --> 00:09:28.480 Congress is considering? I was taken aback by this and I said something like this, well 100 00:09:28.480 --> 00:09:33.620 if they're working why do they need tax-funded job training? And realizing that she pulled 101 00:09:33.620 --> 00:09:40.620 When I got the wrong card from the Rolodex, she thanked me for my insight and hung up. 102 00:09:43.540 --> 00:09:48.540 I listened the next morning to the radio. I wasn't on. 103 00:09:48.540 --> 00:09:55.020 Respectability means that you can boast about all the powerful people who come to your media 104 00:09:55.020 --> 00:09:59.020 shows and cocktail parties, how many times the New York Times quotes your recent study 105 00:09:59.020 --> 00:10:03.020 and how many times you've appeared on the McNeill-Lair NewsHour. But let's be clear 106 00:10:03.020 --> 00:10:10.020 When you hear about this, respectability is not the same thing as influence, and these days more often it is the opposite. 107 00:10:10.020 --> 00:10:18.020 Often respectability is counter-influence or at best second-hand influence, but in Washington this doesn't really matter. 108 00:10:18.020 --> 00:10:25.020 Respectability in Washington is an end in itself because it suggests that you are a player, that you matter in the power game. 109 00:10:25.020 --> 00:10:29.020 Do people seek you out for counsel? Do they invite you to the right receptions? 110 00:10:29.020 --> 00:10:32.020 Are people impressed when they hear of your affiliation? 111 00:10:32.020 --> 00:10:39.020 If so, you've got respectability. If not, you need to work on fitting into Washington culture a bit more. 112 00:10:39.020 --> 00:10:47.020 The means towards acquiring respectability is to provide an intellectual justification for an important policy goal of the central state. 113 00:10:47.020 --> 00:10:57.020 The goal of the justification is to utterly obscure the reality of the policy that is being defended. 114 00:10:57.020 --> 00:11:01.020 And I'd like to give some examples of this. 115 00:11:01.020 --> 00:11:11.020 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, 116 00:11:11.020 --> 00:11:17.020 it's the job of Washington's respectable intellectuals to say this is merely deterring aggression. 117 00:11:17.020 --> 00:11:28.020 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, 118 00:11:28.020 --> 00:11:35.020 The job of Washington's respectable intellectuals is to say this is merely a profitable way to help a neighbor in need. 119 00:11:35.020 --> 00:11:41.020 And so it goes until you become a certified expert in the proper conduct of foreign economic policy. 120 00:11:41.020 --> 00:11:49.020 Or let's say you're in the pay of a powerful Indonesian oil conglomerate called the LIFO Group. 121 00:11:49.020 --> 00:11:55.020 They know of about 1.7 million acres of clean burning coal in Utah worth about 1 trillion dollars. 122 00:11:55.020 --> 00:12:19.020 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. 123 00:12:19.020 --> 00:12:31.020 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. 124 00:12:31.020 --> 00:12:41.020 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. 125 00:12:41.020 --> 00:12:45.020 My favorite example of this is the North American Free Trade Agreement. 126 00:12:45.020 --> 00:12:48.020 Originally it was not supposed to be controversial. 127 00:12:48.020 --> 00:12:54.020 The governing elites had planned to shove it through as a non-controversial, unmitigated blessing for one and all. 128 00:12:54.020 --> 00:13:03.020 But once NAFTA became controversial, the intellectuals, working on earmarked grants from private interests that stood to benefit on all three governments concerned, 129 00:13:03.020 --> 00:13:05.020 they went into overdrive. 130 00:13:05.020 --> 00:13:08.020 In the course of the debate, or the screaming match, 131 00:13:08.020 --> 00:13:18.020 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. 132 00:13:18.020 --> 00:13:28.020 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. 133 00:13:28.020 --> 00:13:34.020 To the financial industry, NAFTA was sold as creating a potential credit-driven boom for the stock market. 134 00:13:34.020 --> 00:13:39.900 To the Nationalists, it was sold as a way for the U.S. to pool its resources to compete 135 00:13:39.900 --> 00:13:44.600 against Japan and Europe and pursue a mercantile expert policy. 136 00:13:44.600 --> 00:13:49.340 To the free traders, it was sold as the embodiment of David Ricardo's vision of a borderless 137 00:13:49.340 --> 00:13:53.460 world for the exchange of goods and services. 138 00:13:53.460 --> 00:13:55.620 Now how could all of these be true? 139 00:13:55.620 --> 00:14:00.580 The last rationale contradicts all the previous ones, and it turns out that all were in fact 140 00:14:00.580 --> 00:14:05.580 are not true except one, that NAFTA had anything to do with free trade. 141 00:14:05.580 --> 00:14:10.580 Since the Washington propagandists were now on the Mises Institute's turf, however, 142 00:14:10.580 --> 00:14:14.580 we did our best to set the record straight, and despite not getting a single grant from a government, 143 00:14:14.580 --> 00:14:18.580 no large foundation or corporate support, we ended up making a tremendous amount of trouble 144 00:14:18.580 --> 00:14:21.580 for the interest groups pushing NAFTA. 145 00:14:21.580 --> 00:14:27.580 As well-funded as the propaganda machine was, our case against NAFTA carried tremendous weight 146 00:14:27.580 --> 00:14:33.660 Because we were part of a handful of people active in the debate that had no financial 147 00:14:33.660 --> 00:14:38.660 or respectability stake in the outcome, and we were thus free to actually tell the truth. 148 00:14:38.660 --> 00:14:42.220 And there's only one thing more powerful than the power of ideas generally, and that is 149 00:14:42.220 --> 00:14:44.900 the power of the truth specifically. 150 00:14:44.900 --> 00:14:48.420 In the end, of course, NAFTA passed, but it was only over the opposition of a majority 151 00:14:48.420 --> 00:14:52.500 of the public, and to this day, it remains one of the most hated treaties the US has 152 00:14:52.500 --> 00:14:53.500 ever negotiated. 153 00:14:53.500 --> 00:15:00.500 The governing elites are too afraid to rev up the controversy anytime soon again by expanding NAFTA, and that's all to the good. 154 00:15:00.500 --> 00:15:06.500 Now, I do not believe that this treaty, or the World Trade Organization Treaty that came one year later, 155 00:15:06.500 --> 00:15:13.500 would have gotten through had it not been for the initial credibility that free trade rhetoric had imbibed the legislation with. 156 00:15:13.500 --> 00:15:18.500 Absent that, Republicans would have had no cover to allow them to vote for NAFTA or GATT, 157 00:15:18.500 --> 00:15:23.100 and both of these treaties would have been seen more clearly for what they truly were, 158 00:15:23.100 --> 00:15:26.900 central planning schemes to be implemented on a regional and global scale. 159 00:15:26.900 --> 00:15:33.300 It follows then that the crucial role or a crucial role for the Mises Institute or any free market organization 160 00:15:33.300 --> 00:15:35.900 is to expose these policies for what they are. 161 00:15:35.900 --> 00:15:40.900 We must work to prevent the elites from attaching market oriented rhetoric to legislation 162 00:15:40.900 --> 00:15:44.900 that in fact increases the size of the state in one respect or another. 163 00:15:44.900 --> 00:15:52.900 However, the truth about legislation before Congress or any idea being pushed by a bureaucracy is not always easy to come by. 164 00:15:52.900 --> 00:15:55.900 You generally always have to read the fine print. 165 00:15:55.900 --> 00:16:00.900 I'm reminded of an experience I had recently when my wife gave birth to our first son. 166 00:16:00.900 --> 00:16:06.900 I was standing outside the hospital nursery, looking through the window at my beautiful boy, 167 00:16:06.900 --> 00:16:11.900 who clearly had my eyes, my hair color, my wife's eyes and skin color, 168 00:16:11.900 --> 00:16:12.900 and Skin Color 169 00:16:12.900 --> 00:16:19.400 and I gloried in the miracles of genetics to so perfectly pass on these physical marks. 170 00:16:19.400 --> 00:16:23.400 And then I noticed the name on the crib was not Tucker, but Russell. 171 00:16:23.400 --> 00:16:32.400 It was a good thing I read the tag before I grew to attach to them. 172 00:16:32.400 --> 00:16:35.400 Well, it's the same thing. The same goes with legislation. 173 00:16:35.400 --> 00:16:41.400 We must read the fine print to determine what really belongs in our camp and what does not. 174 00:16:41.400 --> 00:16:49.400 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. 175 00:16:49.400 --> 00:16:56.400 We have to educate not only the general public about this, but also people with ideological sympathies towards such ideas as privatization. 176 00:16:56.400 --> 00:17:04.400 The purpose of state propaganda is to get us to let down our guard, and sadly, the word privatization does exactly that. 177 00:17:04.400 --> 00:17:17.400 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. 178 00:17:17.400 --> 00:17:24.400 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. 179 00:17:24.400 --> 00:17:31.400 He was also the first to institute a privatization racket called Moving to Opportunity, which is really a glorified Section 8 program, 180 00:17:31.400 --> 00:17:46.320 The welfare state is being privatized in phony and peculiar ways. 181 00:17:46.320 --> 00:17:50.560 The earned income tax credit requires no additional bureaucracy to administer. 182 00:17:50.560 --> 00:17:54.260 You qualify for it when you fill out your tax forms every spring. 183 00:17:54.260 --> 00:18:00.040 The standard by which you are accepted or rejected is not assets, it is income, and 184 00:18:00.040 --> 00:18:07.040 And most importantly, it is a refundable tax credit, meaning that when you get your credit, 185 00:18:07.040 --> 00:18:09.980 you get to debit other people's bank accounts. 186 00:18:09.980 --> 00:18:14.080 The first proposal for such a program was advanced by Milton Friedman in Capitalism 187 00:18:14.080 --> 00:18:19.400 and Freedom, an idea quickly refuted in those days by Henry Hazlitt. 188 00:18:19.400 --> 00:18:25.700 And though today the program is one of the fastest growing welfare programs in Washington, 189 00:18:25.700 --> 00:18:30.500 When lawmakers are at pains to roll back at speedy advances, the Wall Street Journal editorial 190 00:18:30.500 --> 00:18:34.020 page still can't bring itself to make a principled case against it. 191 00:18:34.020 --> 00:18:40.260 In fact, the dirty secret is that most conservatives don't know what to make of this program, while 192 00:18:40.260 --> 00:18:43.740 there are plenty in Washington's think tank culture who will tell you this tax credit 193 00:18:43.740 --> 00:18:47.980 is an example of non-bureaucratic empowerment through privatization. 194 00:18:47.980 --> 00:18:55.340 In truth, it's the same old forcible welfare transfer program that is the foundation of 195 00:18:55.340 --> 00:19:00.340 The only difference is that it is more efficient than the conventional means of welfare. 196 00:19:00.340 --> 00:19:05.340 It's the difference between the criminal who has to break into your house while you're on vacation 197 00:19:05.340 --> 00:19:09.340 and the hoodlum who has your cash card and password. 198 00:19:09.340 --> 00:19:13.340 Another example of a proposal to privatize the welfare state 199 00:19:13.340 --> 00:19:18.340 is one that would allow you to write in your favorite charity on your tax forms 200 00:19:18.340 --> 00:19:22.340 and suggest that your taxes ought to go to it rather than Donna Shalala. 201 00:19:22.340 --> 00:19:30.340 Now that sounds superficially plausible, until you realize who would actually be signing the checks that would go to these private charities. 202 00:19:30.340 --> 00:19:35.340 That's right, this program would put any private charity that qualifies on the federal dole. 203 00:19:35.340 --> 00:19:40.340 So rather than privatization, it would actually amount to the nationalization of private charity. 204 00:19:40.340 --> 00:19:44.340 It's quite a trick, but you have to look closely to discover it. 205 00:19:44.340 --> 00:19:47.340 There are many other such examples. 206 00:19:47.340 --> 00:19:56.340 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. 207 00:19:56.340 --> 00:20:08.340 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, 208 00:20:08.340 --> 00:20:14.340 and institute a brand new foresaving program unparalleled since FDR instituted Social Security. 209 00:20:14.340 --> 00:20:20.020 Social Security. And believe it or not, the plot has been blessed with the name privatization. 210 00:20:20.020 --> 00:20:24.980 If the Washington spin masters get away with this, they can get away with anything. I'm 211 00:20:24.980 --> 00:20:29.300 talking of course about the National Advisory Board on the Reform of Social Security, which 212 00:20:29.300 --> 00:20:36.860 recently released its final report. First some background on the program. It never 213 00:20:36.860 --> 00:20:42.540 of course worked as old age insurance as it was advertised to be. It was designed as an 214 00:20:42.540 --> 00:20:51.540 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. 215 00:20:51.540 --> 00:20:55.540 And it worked to do just that, much to the detriment of society. 216 00:20:55.540 --> 00:21:00.540 What resulted was the largest wealth transfer program in American history. 217 00:21:00.540 --> 00:21:03.540 The scheme also contained the seeds of its own destruction. 218 00:21:03.540 --> 00:21:07.540 It would have worked if life spans had drastically shortened after the Second World War, 219 00:21:07.540 --> 00:21:11.540 so that more and more workers could continue to pay fewer and fewer retirees. 220 00:21:11.540 --> 00:21:22.540 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. 221 00:21:22.540 --> 00:21:32.540 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. 222 00:21:32.540 --> 00:21:35.540 These are the conventional solutions. 223 00:21:35.540 --> 00:21:41.040 Every time it has had the chance, Washington, of course, chooses the worst choice from the point of view of the taxpayer. 224 00:21:41.040 --> 00:21:47.040 It has raised taxes and raised benefits, thereby guaranteeing the need for ever-higher taxes in the future. 225 00:21:47.040 --> 00:21:55.540 Okay. In the early 80s, the task of providing ideological cover for this operation was performed by the great Alan Greenspan, of course, 226 00:21:55.540 --> 00:22:03.040 and the cover was Sound Finance. Thanks to his tax increases rammed through the Senate by Bob Dole, 227 00:22:03.040 --> 00:22:07.440 Social Security was supposed to be put on a sound financial footing for the 228 00:22:07.440 --> 00:22:12.320 indefinite future. Yet here we are 13 years later and we are again facing the 229 00:22:12.320 --> 00:22:16.560 same old problem. Soon enough there won't be enough revenue to pay the promised 230 00:22:16.560 --> 00:22:21.360 benefits. It's not complicated. Now the question becomes what will Washington do 231 00:22:21.360 --> 00:22:25.960 about this? The path of raising taxes in the name of sound finance has already 232 00:22:25.960 --> 00:22:31.360 been taken. It probably won't work again. Where to turn? Where else but to classical 233 00:22:31.360 --> 00:22:37.360 and liberalism, the one ideological tradition with credibility, after a century of failed socialist policies. 234 00:22:37.360 --> 00:22:42.360 Specifically, the newest reform claims to be a privatization. 235 00:22:42.360 --> 00:22:48.360 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, 236 00:22:48.360 --> 00:22:53.360 be sure and make it big enough to change the subject completely. 237 00:22:53.360 --> 00:22:58.360 In fact, diverting debt receipts from the present trust fund or any future income stream to stocks 238 00:22:58.360 --> 00:23:04.360 has essentially nothing to do with solving the real problem unless you think the real problem is political and not economic. 239 00:23:04.360 --> 00:23:09.360 The economic problem is not low returns on debt securities in which the trust fund is invested. 240 00:23:09.360 --> 00:23:13.360 The problem is that the program is inherently inviolable from an economic point of view. 241 00:23:13.360 --> 00:23:20.360 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. 242 00:23:20.360 --> 00:23:28.360 Now, the advocates of this phony privatization like to call the requirement for new receipts the transition costs. 243 00:23:34.360 --> 00:23:37.360 I have a note to myself, the cry of the dictator. 244 00:23:38.360 --> 00:23:44.360 Today, everything is terrible. Tomorrow, everything will be great. Leave the transition to me. 245 00:23:44.360 --> 00:23:54.520 It turns out that the transition in this case lasts 75 years. We used to laugh at Soviet 246 00:23:54.520 --> 00:24:00.820 five-year plans. When has Washington ever planned 75 years in advance? That's the moment 247 00:24:00.820 --> 00:24:05.520 of time between the ratification of the Constitution and the firing of Fort Sumter. Privatization 248 00:24:05.520 --> 00:24:09.680 advocates will forgive me if I'm not reassured by their promise to repeal this new tax in 249 00:24:09.680 --> 00:24:16.680 In an attempt to restrict the scope of the debate, the Advisory Commission has offered three separate plans. 250 00:24:16.680 --> 00:24:21.680 The first one is the supposed liberal approach, written by a former Social Security Commissioner. 251 00:24:21.680 --> 00:24:26.680 He wants no new taxes until the trust fund is gone completely, a slight reduction in benefits, 252 00:24:26.680 --> 00:24:32.680 some consideration given to letting the government put funds in the stock market and otherwise to keep the program the same. 253 00:24:32.680 --> 00:24:39.760 Now given the other option, strangely, this one qualifies as sane if unworkable. 254 00:24:39.760 --> 00:24:45.120 The other two programs offer a brand new for saving program to be stuck on top of 255 00:24:45.120 --> 00:24:49.280 the existing program so that instead of spending money on your families you pay 256 00:24:49.280 --> 00:24:53.200 evermore to the government. That money is then diverted to the stock market which 257 00:24:53.200 --> 00:24:58.720 is then guaranteed by the government to go up forever just like in the last three 258 00:24:58.720 --> 00:25:08.720 President Future Retirees are then paid out of the new income stream generated by a 20 to 25 percent tax increase. 259 00:25:08.720 --> 00:25:13.720 Now, much is made about how these plans offer the right to choose where you want to put your money. 260 00:25:13.720 --> 00:25:18.720 One plan lets government choose and another allows the payer to shift the accounts around. 261 00:25:18.720 --> 00:25:21.720 In fact, this entire debate is a diversion tactic. 262 00:25:21.720 --> 00:25:25.720 Notice that no citizen has the right to choose whether to actually pay the new tax. 263 00:25:25.720 --> 00:25:29.920 The government is collecting the money so the government has an interest in where the money goes. 264 00:25:29.920 --> 00:25:38.400 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. 265 00:25:38.400 --> 00:25:46.440 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% 266 00:25:46.440 --> 00:25:51.560 and let's hope this happens before rather than after this supposed privatization is implemented. 267 00:25:51.560 --> 00:25:55.280 The key to understanding this privatization was summed up by the New 268 00:25:55.280 --> 00:26:01.120 York Times, January 8th, in clear language. Edward Gramlich, the chairman of the 269 00:26:01.120 --> 00:26:05.600 advisory board, quote, would use the popular appeal of privatization to 270 00:26:05.600 --> 00:26:10.600 transform the unpalatable tax increase into a politically acceptable forced 271 00:26:10.600 --> 00:26:16.240 savings, unquote. And that about sums it up. But in addition to destabilizing the 272 00:26:16.240 --> 00:26:20.160 financial system, what would be the economic consequences for the average 273 00:26:20.160 --> 00:26:25.160 Ironically, it would dramatically reduce the ability for families to save. 274 00:26:25.160 --> 00:26:32.160 It would destroy the 401k industry overnight, and frankly 401k is one of the great innovations of the last decade. 275 00:26:32.160 --> 00:26:37.160 They actually allow people to prepare for the future and secede from a future dependency on Social Security. 276 00:26:37.160 --> 00:26:43.160 Leave it to the government and its court intellectuals to plot the destruction of a good financial trend. 277 00:26:43.160 --> 00:26:48.160 And it is not a good excuse that some of these intellectuals who are backing this program 278 00:26:48.160 --> 00:26:55.600 program claim to back the stock investment scheme but not the transition tax and would 279 00:26:55.600 --> 00:27:00.320 like to see it paid out of existing government spending. That's like saying I favor a tax-funded 280 00:27:00.320 --> 00:27:04.880 card for everyone, but of course not being a socialist, I want the funding to come from 281 00:27:04.880 --> 00:27:11.760 the Medicare budget. When taxes are raised to pay for a cards for all program, you bear 282 00:27:11.760 --> 00:27:17.640 part of the responsibility. And truth is we're politically feasible to cut 50 billion of 283 00:27:17.640 --> 00:27:22.640 of Next Year's Budget, which is what the new tax would raise in the first year alone. 284 00:27:22.640 --> 00:27:25.640 It should be done regardless of any social security reform. 285 00:27:25.640 --> 00:27:31.320 Well, I'm no longer astonished to see that think tankers in Washington who swear loyalty 286 00:27:31.320 --> 00:27:36.520 to the market cause completely sell their souls on issues like NAFTA, GATT, the CPI 287 00:27:36.520 --> 00:27:42.060 revision racket, the budget debate, private school welfare, are now the largest tax increase 288 00:27:42.060 --> 00:27:46.960 in American history and an explosion of corporate welfare to boot in the name of social security 289 00:27:46.960 --> 00:27:53.260 Reform. The pressure of the Beltway can get even to the best people. The desire 290 00:27:53.260 --> 00:27:57.240 to fit in, the clamor for respectability and power, and the temptation to serve 291 00:27:57.240 --> 00:28:02.960 the Leviathan that surrounds you is overwhelming. But for those of us 292 00:28:02.960 --> 00:28:06.680 on the outside, we have a responsibility to tell the truth about what the 293 00:28:06.680 --> 00:28:11.240 government is doing to us and what its effects will be. And by the way, let me 294 00:28:11.240 --> 00:28:14.680 just offer congratulations to Gary Bauer of the Family Research Council who's 295 00:28:14.680 --> 00:28:28.880 Well, what is the truth about Social Security? The truth is, of course, that it can't continue. 296 00:28:28.880 --> 00:28:34.320 It must be dismantled. The path to dismantling it has always been clear. Raise the retirement 297 00:28:34.320 --> 00:28:39.800 age, cut benefits, lower taxes. The best solution, of course, would be to immediately abolish 298 00:28:39.800 --> 00:29:05.840 Mises and Rothbard were never much for half-baked policy schemes, and much preferred telling 299 00:29:05.840 --> 00:29:12.840 Washington II understands this, which is why every act to increase power is cloaked in some ideological garb. 300 00:29:12.840 --> 00:29:19.840 So long as we understand this, we can wisely choose our battles and our tactics in the struggle to restore liberty. 301 00:29:19.840 --> 00:29:26.840 State power ultimately stands no chance against the social and intellectual movement committed by Washington II. 302 00:29:26.840 --> 00:29:32.000 We can wisely choose our battles and our tactics in the struggle to restore liberty. State 303 00:29:32.000 --> 00:29:36.000 power ultimately stands no chance against the social and intellectual movement committed 304 00:29:36.000 --> 00:29:42.400 to liberty. As Mises said, how vain it is to fight with the sword against the spirit.