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Ignoring the Unseen Consequences of the Dole

by

Mocking Mitt Romney’s shifting positions on the auto bailout, the New York Times editorializes that the bailout turned out to be a huge success because “nearly 1.5 million people are working as a direct result of the bailout. G.M.’s American sales continue to increase, and Chrysler said this week that its third-quarter net income rose 80 percent.”

We begin with the proposition that thievery can sometimes be tremendously successful for the thief. Let’s assume that a penniless robber robs a bank of $10 million dollars and isn’t caught. Obviously he’s now able to do things he couldn’t do before. He buys two new cars, thereby increasing employment in the car industry. He does the same in the home-construction business by purchasing a new mansion. He opens a successful business, hiring dozens of people. He donates money to the poor.

Defenders of the theft can point to the robber and say, “Look at all the good that has come out of that robbery. Praise theft!”

Do you see anything wrong with this picture?

One thing involves moral principles. Theft is wrong in a moral sense, even if the thief benefits from the money and does nothing but good things with it. The money belongs to the owner. He’s entitled to it regardless of how he uses it. The thief has no moral right to take the money from the owner, even if the thief plans to do wonderful things with the money.

That’s a moral blind spot that afflicts statists, at least when government enters the picture. For them, if it’s the government doing the stealing and redistributing, then it’s not immoral at all. Instead, for the statists, it is the epitome of goodness.

Consider the auto bailout. Where did the money come from? Contrary to popular opinion, the federal government is not a fountain of wealth. It doesn’t produce anything. Instead, it is parasitic in nature. It gets its money by confiscating (taxing) wealth from the private sector.

Thus, in order to give money to the auto companies, the government must first take it from people who are working in the private sector. In doing so, it is taking money from people to whom it belongs in order to give it to big corporations to whom it does not belong.

For statists, that’s no problem. For them, the taking and redistribution reflect how good the politicians and bureaucrats are. If anyone objects, he’s labeled a bad, selfish, no-good type of person.

Moral principles are one of the major dividing lines between libertarians and statists. Libertarians adhere consistently to moral principles, not just with respect to private conduct but also governmental conduct. For statists, moral principles go out the window when government is doing the stealing (or murdering, kidnapping, torturing, assassinating, etc.).

But that’s not the only blind spot that statists have. They are also unable to recognize the unseen economic consequences of a government dole. Their mindsets are focused on what is seen rather than on what is unseen.

The Times’ position on the auto bailout is a classic example of this phenomenon. The Times’ editorial board points to the auto companies and exclaims: Look at how well they’re doing with the money that the government has given to them; this shows that taking money from people to whom it belongs and giving it to people who need it more really does work.

But what about the people from whom the bailout money was taken? What happened to them as a consequence of having that money taken from them? How many marginal firms went out of business because that much-needed money was taken from them? How many people were put out of work owing to the fact that people in the private sector weren’t allowed to spend and invest their money they way they wanted.

Let’s assume, for example, that thousands of people planned to buy new television sets. Before they made the purchases, the government took their money from them and gave it to the auto companies. What happened to the television industry? It didn’t make the sales. It didn’t expand production. It didn’t hire new people.

Since those things never happened, we don’t see them. Even the new people who were never hired in the television industry don’t know how the bailout affected their lives. But through reason, thought, and analysis, we can see that a government dole has unseen economic consequences by virtue of taking money from one group of people and transferring it to another group of people.

There is another factor to consider. Think of the hundreds of millions of dollars that the auto companies have paid in income taxes for the last several decades to fund the welfare-warfare state. If all that money had not been extracted from the auto companies, they would have a nest egg of billions of dollars to draw upon. With all that money, they wouldn’t have needed a government bailout. The fact that the government has taken all that money from them to fund its welfare-warfare operations for the past several decades has left the auto companies (and everyone else in the private sector) significantly poorer than they would be had there been no welfare-warfare state and income tax to fund it.

Finally, we mustn’t forget the mindset of dependency that the statists have inculcated in the American people with the welfare-state way of life. As soon as things go wrong, as they inevitably do from time to time, the first thing many Americans now do is call on the government to take someone else’s money and give it to them. Thus the welfare state not only violates moral principles, it also damages the traits of self-reliance and independence as well as spirit of benevolence that comes in a libertarian society.

The Times concludes, “What Mr. Romney cannot admit is that all this is a direct result of the government investment he would have rejected.”

Maybe that’s true. But what the New York Times cannot acknowledge are the horrible consequences that the welfare-state way of life has had on the American people, morally, economically, and spiritually.

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.