Both political parties support the welfare-warfare state

In an op-ed, “Romney-Ryan worldview:  Reaganism on steroids,” Joseph Chuman, leader of the Ethical Culture Society of Bergen County, makes more economic fallacies and historical inaccuracies than you can shake a stick at.  President Reagan’s fiscal conservatism was all rhetoric.  Spending skyrocketed under the Gipper and taxes, especially payroll taxes, were hiked to “save” Social Security.

Mr. Chuman asserts that a Romney-Ryan administration would “starve the beast”—the federal government– and hollow out both Social Security and Medicare.  Under Rep. Ryan’s budget plan federal spending increases as far as the eye can see and the budget is not balanced for the next twenty years.  This is hardly a “starve the beast” approach to the federal budget.

In addition, Romney-Ryan would “protect” both Social Security and Medicare with more government intervention instead of calling for the phasing out the two largest Ponzi schemes in the history of the country.  Both programs are financially unsustainable and are losing propositions for future generations.

One of the nation’s leading experts on intergenerational accounting economics professor Laurence Kotlikoff  had this to say about Social Security:  “This massive Ponzi scheme has not only driven our country broke, it’s also wiped out national saving. In 1950 our national saving rate was 15 percent. Last year it was 1 percent. Unfortunately, last year was no anomaly. National saving has been declining, with some temporary upticks, for 60 years.”

In short, FDR’s legacy is a massive swindle that Romney-Ryan wants to perpetuate and Mr. Chubman defends unequivocally.

Savings are necessary for investment.  And investments in capital goods create wealth—and jobs.  Increasing taxes on savings will lower living standards for the very people Mr. Chuman claims need more government funds to survive.  This assertion is disingenuous.  As Ludwig von Mises remarked:  “The characteristic mark of economic history under capitalism is unceasing economic progress, a steady increase in the quantity of capital goods available, and a continuous trend toward an improvement in the general standard of living.”  In short, more capital investment, more prosperity.

As far as taxes are concerned, Mr. Chuman makes the following statement about both President Reagan and President George W. Bush, namely, that they allowed the wealthy to abandon “their fair and rightful obligations to support the less fortunate through the redistribution of their earnings.”  Mr. Chuman forgets to mention that shill for capitalism, President Bill Clinton, signed legislation to cut capital gains and increase the estate tax exemption in 1997.

As economist Ludwig von Mises observed, “Nothing is more calculated to make a demagogue popular than a constantly reiterated demand for heavy taxes on the rich. Capital levies and high income taxes on the larger incomes are extraordinarily popular with the masses, who do not have to pay them.”

According to Mr. Chuman, a portion of the income of the “rich” must be confiscated –a euphemism for stolen—to help the less fortunate among us.  This unethical approach to taxation is at the heart of the welfare-warfare state that has caused the real federal deficit to balloon to an astonishing $222 trillion.

And one of the most astute observers of the American economy, Peter Drucker concluded, “government has proved incompetent at solving social problems,” and called for nothing less than the abolition of the welfare and the expansion of the nonprofit sector to help the less fortunate among us.

If Mr. Chuman’s economic illiteracy was not enough, his misinterpretation of history is another weak link in his argument for expanding the unethical welfare state.  According to Mr. Chuman, FDR saved the country from economic ruin with the New Deal.  Nothing could be further from the truth.

First, the depression that began in 1929 was the result of the Federal Reserve’s easy money policies that ignited both a stock market boom and real estate boom.  When the FED “tightened” monetary policy in 1929 to prevent the economy from overheating, prices crashed.  President Hoover then went on a spending spree to prop up (stimulate) the economy even though that was the wrong medicine.  The result, massive unemployment and a contracting economy for four years.

FDR ran as a fiscal conservative in 1932 and won in a landslide.  As Gregory Bresiger recounts, “FDR, who was credited as the first major American politician to support a social security system, nevertheless had campaigned in 1932 in favor of limited government. He bitterly criticized Herbert Hoover’s huge deficits. On the campaign trial he promised to roll back, not expand, the size of the federal government.”  As FDR said, “For three long years I have been going up and down this country preaching that government – federal government, state and local – costs too much. I shall not stop that preaching. “

After FDR took office in March 1933, he and his left-wing “brain trust” went to work to impose a collectivist agenda on America.  They basically succeeded.  America has become a mixed economy, a welfare-warfare state with trillion dollar deficits, extensive business regulations that are driving factories and thus jobs off shore and an overseas empire that is morally untenable.

The Romney-Ryan agenda perpetuate the very policies Mr. Chuman embraces, the failed welfare state.  America needs a makeover; it is called limited government, free enterprise and a vibrant nonprofit sector.

 Murray Sabrin is professor of finance at Ramapo College and blogs at http://www.MurraySabrin.com

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