- Out of Control Government and Isaiah’s Job - August 29, 2022
- The Centenary of Ludwig von Mises’s Critique of Socialism - June 9, 2022
- In the Beginning: The Mont Pelerin Society, 1947 - May 19, 2022
It is very difficult to be a classical liberal or libertarian and not experience bouts of disappointment, frustration, and outright pessimism. The world around us seems to be going to hell in a handbasket. Government continues to grow and, apparently, is out of control.
For example, the Congressional Budget Office (CBO) released its semiannual Budget and Economic Outlook, 2022-2032 in late May 2022. The CBO expects that when the federal government’s current fiscal year ends on September 30, 2022, Uncle Sam will have spent $5.874 trillion. Tax revenues from all sources will be $4.890 trillion, leaving a budget deficit for the fiscal year of $1.036 trillion. Total national debt held by the public will come in at $24.173 trillion, while the gross national debt (which includes Treasury securities held by other government agencies) will be more than $30.621 trillion.
Gross Domestic Product (GDP) is expected to equal $24.694 trillion in 2022. So, this means that federal spending will 23.8 percent of GDP, while taxes will absorb 19.6 percent of GDP. The more than $1 trillion deficit will amount to 4.2 percent of GDP.
Bigger government in the years ahead
Things do not get better looking over the coming decade, the CBO anticipates. In 2032, federal expenditures are expected to total $8.469 trillion, for a 51.8 percent increase over 2022. Federal taxes are projected to amount to $6.662 trillion in 2032, or a 36.2 percent increase over a decade earlier. The budget deficit is predicted to be $2.252 trillion in 2032, representing a 217 percent increase over the deficit in 2022. Gross Domestic Product will be $36.680 in 2032, says the CBO, and will be 48.5 percent larger than in 2022.
The government’s share of the GDP pie, in other words, will be increasing noticeably faster than the national economy is projected to grow over the next 10 years. Also, the share of government borrowing to simply pay the interest on the existing accumulated national debt will be increasing as well. In fiscal 2022, the federal government will borrow $1.036 trillion, as we saw. Out of this, nearly $400 billion will be used to pay interest owed on the national debt, or about 39 percent of total borrowing. In 2032, when the deficit is expected to be $2.253 trillion, $1.193 trillion will be used just to pay interest on the, then, accumulated national debt, or 52 percent of all government borrowing in that year. So more than half of all the money the federal government will have to borrow 10 years from now will be used just to stay current on the interest payments due from all the earlier decades of annual deficit spending.
Of course, all of this has to be taken with a grain of salt. Ten years ago, the CBO did not anticipate the great economic contraction of 2020 caused by the federal and state government’s draconian response to the coronavirus crisis, that commanded the shutdown and lockdown of much of the U.S. economy for several months. And just two or three years ago, the CBO was still projecting that price inflation, as measured by the Consumer Price Index, would still be rising at a “modest” 2 percent a year in 2022.
Entitlement programs are heading for disaster
What is driving a huge portion of government spending and growing deficits and debt are the “entitlement” programs, that is, the welfare state, especially Social Security and Medicare/Medicaid. In 1970 (in 2022 inflation-adjusted dollars), Social Security and Medicare spending came to a little over $300 billion out of $1.5 trillion (again, in 2022 inflation-adjusted dollars) of federal government spending, or a little less than 21 percent of the total budget that year. In fiscal year 2022, Social Security and Medicare spending will come to about $1.8 trillion, or 31 percent of all federal expenditures.
But an additional component to this is that these entitlement programs are heading for bankruptcy. Already, in 2021, the Social Security Trust Fund spent $147 billion more than was taken in by the designated taxes for the government pension program. Over the next 10 years, Social Security will run a cumulative deficit of $2.4 trillion. Where is the money coming from to fill this gap? In past decades, the Social Security Trust Fund ran surpluses, that is, it collected more of those designated taxes than it paid out to eligible retirees.
The trust fund “invested” those surpluses in U.S. government securities. In other words, these surpluses were covering part of the federal government’s overall annual deficits. But by around 2034, the trust fund will have “cashed in” all of those securities. Under current legislation, the Social Security Trust Fund may pay out only what it collects in taxes or holds in the form of those Treasury securities. So, around a decade from now, Social Security taxes collected will permit retirees to receive only about 77 percent of what is currently redistributed to them from the working-age population. In other words, if you were receiving a Social Security check from Uncle Sam every month in the amount of, say, $1,000, you would find at some point that the check in the mail would be only $770.
The same applies to Medicare. In 2021, Medicare-related taxes came to $337.4 billion, with expenditures of $328.9 billion, or a modest surplus of $8.5 billion. But according to the Medicare Trust Fund report for 2022, by 2031, taxes collected will equal around $594 billion, with outlays totaling $684 billion, or a deficit of $90 billion. The problem will be that the Medicare Trust Fund will have cashed in all the Treasury securities in its “asset” portfolio in 2028. It, too, is facing bankruptcy under current federal legislation.
Bigger military budgets due to foreign interventionism
Added to this is government military spending, as well. In inflation-adjusted 2022 dollars, the U.S. defense budget was about $600 billion in 1970, when the Vietnam War had not yet come to an end. In fiscal year 2021, defense spending came to over $800 billion. So, in spite of the end of the Cold War with the demise of the Soviet Union in 1991, the United States government spends 33 percent more on the military than over half a century ago. Foreign military interventions in Somalia, Afghanistan, Iraq, Libya, Syria, and other places in the world over the last 30 years have prevented any of the promised “peace dividend” expected three decades ago with the end to the Cold War.
Now, with U.S., NATO, and European Union military support for Ukraine in its war with Russia, and the emerging new Cold War between the United States and China, Defense Department spending can only be expected to increase in the years ahead. After all, President Biden has publicly committed America to coming to Taiwan’s defense if China were to attempt to invade that island. If this is a serious “promise,” in the face of growing Chinese military expenditures and outreach in East Asia and the Indian Ocean, this will require greater sums spent by the United States to militarily match its new chosen rival for global hegemony.
These numbers, of course, do not include all the other categories of federal spending, from National Public Radio to the Departments of Education, Housing and Urban Development, Health and Human Resources, Agriculture, State, Interior, Homeland Security, and all the rest. Still more tens of billions of dollars on these.
Government spending equals what is taken from the private sector
This is all a far cry from the beginning of the twentieth century, when in 1900, federal spending equaled only around 2.7 percent of GDP, with state and local spending, together, coming to another 4 percent of GDP. That is, all levels of government took less than 7 percent of national income. That meant that the American citizenry was keeping 93 percent of the income they earned. Keep in mind that this was also before the introduction of federal income tax in 1913. In comparison, with a CBO-estimated GDP in 2022 of almost $24.7 trillion, all levels of government — federal, state, and local — will be spending almost $10 trillion, or over 40 percent of the national economic pie.
The reader may have noticed that I have given greater emphasis to levels of government spending than to amounts taxed or borrowed, per se. The reason being that it is government spending that represents the amount of private production siphoned off and out of the direct hands of the private producers and income earners of the society. This is how much the government plunders from the people of the country, regardless of whether the production and income that is transferred into the hands of those in political power has been done by taxation or borrowing.
What does $10 trillion of total government spending equal? It is, in fact, more than the $9.777 trillion that the American citizenry spent in 2021 on household consumption expenditures for “services.” These included housing and utilities, health care, transportation, recreational activities, food services and hotel accommodations, and financial services and insurance, as well as nonprofit institutional spending on household services.
What this means is that if government had not pickpocketed this $10 trillion out of our income and wealth, we would have had the financial wherewithal to more than double our expenditures on these types of personal and consumption services. Our consumer-chosen standards of living would have been that much higher, as reflected in what we decided to spend that $10 trillion on.
Bigger government reduces freedom in many ways
All of this, of course, is just the relatively direct dollars-and-cents size and scope of government in modern American society. It does not include the estimated additional $2 trillion a year that private businesses must incur in additional costs to comply with all the federal regulations imposed on private enterprises in the United States. It does not capture all the human misfortunes imposed on all those priced out of employment opportunities due to the minimum wage, or who do not have the financial means to meet the regulatory rules and expenses to be able to open and operate a business and thus never have a chance to be self-employed or try their hand at being an entrepreneur.
Also, that $10 trillion of government spending does not directly remind us of the extent to which government intrudes and surveils into the privacy of our individual and family lives in the name of a war on terrorism or the never-ending war on drugs, or restrictions on people’s movements through passport and visa requirements, or due to border controls that represent government central planning of who may travel and for what reasons they may enter or leave the country.
It also enables the United States government to play the role of self-appointed policeman of the world, with military bases in dozens of countries, which carries the constant risk of Americans at any time being drawn into new foreign wars and conflicts based on what those in political power in Washington, D.C., decide is in the “national interest.” This can include the danger of a nuclear conflict with Russia over Ukraine or a potentially equally cataclysmic war with China over Taiwan.
Albert Jay Nock on social versus political power
Thinking about all of this, as I said at the beginning, easily sinks the friend of freedom into despair and despondency. How can it even be stopped, let alone reversed, so that a society of individual liberty, limited government and truly free markets can be established in the United States? This gets me to a famous but seemingly neglected essay written by Albert Jay Nock in the 1930s called “Isaiah’s Job.”
Nock was one of the most insightful advocates of individual liberty in the twentieth century. He is most famous for his 1935 book, Our Enemy, the State. He clearly laid out what he called the difference between “social power” and “political power.” Social power is the sum of all the free actions of all the free individuals in a free society. It comprises the personal choices, free associations and exchanges, and creative achievements when government leaves people alone to peacefully follow their own paths for betterment as they, respectively, see it.
Political power comprises all the government actions that interfere with those free actions by free people in the form of taxes collected, regulations and restrictions imposed on personal and market activities, and the compulsory redistributions of income and wealth that are meant to privilege some at others’ expense. The greater the political power by government in the society, the more social power is diminished; that is, individual freedom is reduced and “the state” grows with its legitimized use of force over people’s lives.
The dark New Deal days of growing government
Nock wrote all this during the New Deal days of Franklin D. Roosevelt’s administration. Government spending had never before been as large; government taxes had never been so high; government deficits and the national debt had never before reached such heights. The people’s gold had been confiscated by the government, and depreciating paper money was given to them in exchange. Millions were on the government dole, and huge government “public works” projects replaced private enterprise or seduced private business with government contracts and subsidies.
In addition, during the first years of FDR’s New Deal, there was the attempt to impose a system of fascist-type central planning over the entire U.S. economy. Only a series of Supreme Court decisions brought this “experiment” in a fully command-and-control economy to an end. Roosevelt merely continued with more and bigger government through greater spending on welfare and “make-work” projects.
FDR demonstrated an arrogance and hubris in his wielding of presidential power than seemed not much different from the dictators of Europe who finally brought about a terrible war in 1939. Roosevelt then finagled his way into the war, a war that a huge majority of Americans wanted no part of, by introducing a system of aggressive economic sanctions and ultimatums on the Japanese. It culminated in the Japanese attack on Pearl Harbor in December 1941.
These were dark times for friends of freedom. The classical liberal idea and ideal seemed not only to be in eclipse, coming to an end with collectivisms like communism, socialism, fascism, and Nazism seeming to be the future for mankind.
Isaiah’s job of speaking the truth
In the midst of all this, Nock wrote his essay, “Isaiah’s Job,” which appeared in The Atlantic Monthly in 1936. He paraphrased the story of Isaiah in the Old Testament. Isaiah was sent by God to warn people about the evils of their ways and their need to repent and return to the path of righteousness. But wherever he goes, Isaiah is met with resistance and ridicule. Finally, in despair, Isaiah cries out to God, asking why he has been sent on this hopeless mission.
God replies that it’s not Isaiah’s job to know whether or how successful he may or may not have been in getting people to change their ways. That’s God’s job, since he can look into the hearts and minds of people in a way that Isaiah cannot, and as a result, Isaiah can never know who may have been touched and influenced by what he had said in God’s name. Isaiah’s job is to uprightly speak the truth and tell people where a better path may be found. The rest is God’s job.
Nock’s point was to say that nobody can read the future, or how people may or may not change what they believe and what they will socially and politically want or oppose. All that a friend of freedom can do is speak what he knows to be true about the right principles for a free society and how and why such a free society should be desired if liberty has any value and if peaceful prosperity for mankind is to be made possible.
In dark political times, like those in the 1930s or now in 2022 America, Nock said that the cause of freedom had need for a “remnant,” by which he meant, “those who by force of intellect are able to apprehend these principles [of freedom], and by force of character are able, at least measurably, to cleave to them.” They learn, preserve, and share their understanding about the idea and ideal of liberty when and as they can with those around them, when opportunities present themselves in their respective corners of society. And you may never know who has listened to what you said or how effective and influential it may have been.
You never know who is listening when you explain freedom
Let me give an example from my own experience. When I was in graduate school in the New York City area, I started to make some extra money teaching introductory economic classes at the Newark campus of Rutgers’s University in New Jersey. I lived in New York City and would have to commute back and forth on the nights that I was teaching.
One evening after taking the train under the Hudson River from New Jersey to lower Manhattan, I stopped to do some food shopping at a small market before continuing over to Queens, where I was living. Waiting on line at the checkout, I noticed the woman behind me was staring at me. Finally, she asked, “Aren’t you Richard Ebeling? And you teach at Rutgers’s, don’t you?” I nervously replied, “Yes,” Then in a voice loud enough that everyone around could hear, she said, “You have ruined my marriage.”
That got everyone’s attention, especially when she repeated the words for a second time. My eyes were looking for the exit. I said, “Excuse me?” She answered, “My husband took your economics class last semester, and all he does now is come home from work, watch the evening news, and complain about government for the rest of the night. You have ruined my marriage.”
How she knew that I was his teacher for that class I never found out. Nor do I have any idea who her husband was. Did he earn an “A” or was he a “C” student? Did he ask any questions during class or did he just listen silently the entire semester? Did he sit in the front or way in the back of the room? I have no idea.
But what it did teach me was that you never know how or who you may influence and get to think about things after sharing your ideas about freedom. Even when it seems that the person you are talking to is resistant or oblivious to the ideas you are expressing, you never know how they may rattle around in his mind the next day or a year later and affect how he thinks about freedom and the free society. Nor can you always know if someone not part of the conversation is listening in to what is being said and making him think about things a little differently about the value and importance of liberty.
Modern communication facilitates the freedom advocate’s task
When Albert Jay Nock wrote “Isaiah’s Job,” back in the 1930s, it was a much more isolated and lonelier environment in which to discover others who shared classical liberal or libertarian ideas. There were only a handful of print publications open to them. And communication was limited to snail mail, landline telephones, and having to physically travel to meet and interact with people face-to-face.
Today, the internet and email and text messaging have transformed the means by which friends of freedom can find out about each other, publish articles, write blogs, film and upload videos, and talk face-to-face via Skype or Zoom, from one’s own living room. We have come to take such things so much for granted that we forget how revolutionary they really are, compared to not very long ago.
This also means that we have amazing ways to communicate with multitudes of others; friends of freedom are able to share and improve their understandings of the ideas of liberty and the better ways to express them. These are ways that Nock and others like him never had in those earlier times. We can far more easily and rapidly work to change the climate of opinion by making people aware of the facts and the consequences of a government out-of-control.
The most important thing not to lose sight of, in my opinion is that regardless of how bad things may seem, they have seemed equally bad in the past. Just as Albert Jay Nock helped to cultivate a new generation of friends of freedom, that is our task in our own time. And together we can make a society of liberty a reality, without always being depressed or despondent about who or how many may be listening.
This article was originally published in the August 2022 edition of Future of Freedom.