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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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The Real Debate We Should Be Having

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Imagine a society in which there is no income taxation, one in which everyone keeps everything he earns and then decides what to do with his own money — invest, spend, lend, save, or donate it.

Along comes someone who exclaims, “I’ve got a great idea. Let’s change the system to enable the federal government to confiscate 10 percent of young people’s income and transfer the money to senior citizens.”

Someone else pipes in, “That’s a great idea. I’ve got a better one. Let’s change the system in that way and also enable the federal government to confiscate 30 percent of people’s income and transfer the money to people who need it more.”

Of course, this isn’t just fantasy. That’s pretty much what happened here in the United States. Our economic system was founded on the idea that people have a fundamental, God-given right to engage freely in economic enterprise, to keep the fruits of their earnings, and to voluntarily decide for themselves what to do with it.

Owing to the efforts of Americans who were enamored with socialism, all that changed in the 20th century. The federal income tax was adopted. The welfare state was enacted. The Federal Reserve was established. Paper money was implemented. The system changed from one based on economic liberty and freedom of choice to one based on confiscation of income and mandatory redistribution of wealth.

The people who have suffered most from this economic revolution have been the middle class and the poor. That’s ironic because they are among the biggest supporters of this economic revolution.

Why would people support something that is contrary to their interests? One reason is that they don’t realize that the welfare state has victimized them. And, two, oftentimes they become dependent on the system, thereby losing the concepts of self-reliance and belief in one’s self.

In the original American system, the poor had a realistic chance of becoming wealthy. By working hard and saving their money, they were able to keep 100 percent of what they earned. With their savings, they were able to start businesses in competition against the well-established wealthy businesses or simply multiply their savings through the magic of compound interest.

That’s the biggest reason why thousands of penniless immigrants were flooding American shores every day, especially during the late 1800s. They knew that they had a good chance at becoming rich.

But there was another way that the free market benefited the poor and the middle class — through the offering of a vast array of consumer goods at ever-decreasing prices. Producers and manufacturers realized that they could make tremendous profits through production of consumer goods for the masses, as compared to focusing solely on the rich.

Thus, the poor and middle class found their standard of living soaring simply through the inexpensive clothing, food, and other items that were being offered to them in the marketplace.

How were the poor getting jobs? In large part, they were being employed in businesses being opened by the rich. This is what statists oftentimes simply do not understand or appreciate. When a rich person opens a business, he is risking his own money, sometimes everything he owns. In the process of doing that, he offers employment to people at wages that he is guaranteeing.

Thus, if it weren’t for people who were willing to risk their own money, many of the poor wouldn’t have jobs.

Does an owner of a business operate out of altruism? Of course not. He’s operates out of self-interest. Perhaps he wants to get wealthy. Or perhaps he just loves his work. But notice that even though he’s operating out of self-interest, his efforts benefit others, including the people he’s hiring and the consumers to whom he’s offering goods and services.

Consider Bill Gates and Steve Jobs. Let’s assume that they were motivated purely by the quest to become rich and by their love of creating things. They both became tremendously wealthy. So what? Why should that bother us? Look at how those two men improved the lives of all the rest of us.

Why is this so important? Because it shows us that God has created a consistent universe, one in which people’s interests dovetail in a free society, and one in which the sins of “Thou shalt not covet” and “Thou shalt not steal” create severe disharmonies in society.

In a free market, there is a harmony of interests between employers, employees, and consumers. But once people permit covetousness to grab hold of them and make stealing an official part of their economic system, things turn rotten.

That’s precisely what has happened with America. Everywhere you look, the economic system is in crisis. Social Security? Bankrupt. Medicare and Medicaid? Soaring costs, rampant fraud, and doctors fleeing the profession. Education grants? Graduates drowning in debt and hounded by federal debt collectors. The dollar? Forever dropping in value. Federal spending? Out of control.

It’s no different, of course, in the foreign policy sphere, where America abandoned the philosophy of a limited-government constitutional republic in favor of a vast permanent military establishment, overseas empire of military bases, and foreign interventionism. Anti-American anger and hatred grows by the day, and the federal government continues to clamp down on the civil liberties of the people, while continuing its worldwide campaign of assassination, occupation, and drug busts.

It boggles the mind to imagine what the American standard of living would have been like if the federal government had not turned in the wrong direction — had not confiscated the billions of dollars necessary to fund the welfare state and warfare state for the past 50 years. Imagine, say, being able to buy a brand new Lexus for the equivalent of $5,000 instead of $100,000. Or a $300,000 house for $10,000. It is impossible to measure the extent of damage to the poor and middle class by virtue of having removed all those savings and productive capital from the private sector, but the damage nonetheless has to be extensive.

The real debate America should be having is not over which variation of statist reform should be adopted or over which statist would be best at running the statist system. The real debate should be over which economic system should be embraced by the American people — the free-market system our American ancestors bequeathed to us or the statist one that was later foisted upon our land.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.