Recall, Atlas Shrugging from Washington Policy Hounds

9 September 2011

I recently found the following opinion piece that, although written two years ago, presents the case of Washington policy hounds in strikingly luminous and parallel fashion to Rand’s magnum opus.

“For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.”

The relevance of Rand’s masterpiece half a century after its entrance into the public forum is evident in two ways. First and foremost, we are living its story. Secondly and subsequently, the controversy over Rand’s ideas has grown to magnificent proportions since 2008. Whether you are for or against Rand’s philosophy of Objectivism, one thing remains clear. The more the government meddles, the more the government is called to meddle. So the question is to examine whether such meddling has been more beneficial or harmful. What has such meddling produced beyond additional calls for government stimulus, bailouts, and tax reform? Most recently and attributable to the heavy hand of government fiscal policy and the Federal Reserve’s perpetual devaluation of the dollar – the world’s reserve currency – is the S&P downgrade of U.S. credit. While many mainstream Washington pundits attempt to rationalize S&P’s move, I suspect they do so in modest aspirations to avert potential panic among investors; this of course makes sense. However, what they overlook is the more fundamental implications of such a downgrade, instead maintaining by a posteriori logic that U.S. credit is still good to foreign investors like China and Japan from the simple fact that they have nowhere else to invest. But a credit downgrade of this type carries with it much deeper implications that cannot be shucked aside due to the dollar’s preeminent place in the global markets. Indeed it is for this very reason why investors, foreign and domestic, should be concerned. The implication is this: when the dollar fails due to government mismanagement, whether from loose fiscal or monetary policy, the entire global financial network, due to the dollar’s preeminent place in it, will surely follow. There will be no “stimulus-effect,” no bailouts, nor any liquidity because to a large degree, global liquidity is furnished by the dollar. To deny this, is to assume some other universal currency will provide a safe haven for investors. Perhaps gold, but such a shift still necessitates the destruction of the dollar, U.S. Treasuries, and much of the wealth of our nation.

It should become quite clear at this stage that government interference in the economy – whether one calls it Keynesian economics, deficit financing, or stimulus spending – encroaches upon and binds up the free-market. Such programs as the $700 billion Emergency Economic Stabilization Act of 2008 (H.R. 1424), the Auto Industry Financing and Restructuring Act of 2008 (H.R. 7321; note that this bill was never voted on in the Senate, but was passed in the House), the American Recovery and Reinvestment Act of 2009 (H.R. 1), and the most recent Budget Control Act of 2011 (S.365) with its 13-member ‘Super Congress’ have failed to generate adequate job growth. Instead, the national debt has grown to proportions even Washington is unable to manage. Much can be gleaned from the general descriptions of these bills. For example, H.R. 1 is summed up as follows: “Making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization.” Job creation and investment are primarily functions of the economy, not government, while assistance to the unemployed – when done in perpetuity – only exacerbates natural market fluctuations, which delays natural readjustment by the market. Moreover, state fiscal stability, so long as it lies at the federal level negates the very core conception of statehood. If I live in Georgia and decide I do not agree with its policies, I can move to Oregon. But if both states depend too heavily on federal sustenance, where does one go? Where has one’s choice gone? The end result here is statism, whereby the State (i.e. the federal government) controls most aspects of private life. Economic policy that negates market principles in place of political ideals inevitably fails because this is to replace principles grounded in reality (i.e., the market) with those conjured from the depths of human emotion. While not the only avenue of statism, this is arguably its most far reaching.

The ideological and practical implications of this are enormous for Republican government. It is critical to realize that the more a people rely on their government, the less freedom they allow themselves. I am reminded of Hobbes’ classic political tract written in defense of the monarchy during one of England’s most turbulent times. I am reminded of this because Leviathan assumed the natural inferiority of the people to their government and the doctrine of the “Divine Right of Kings.” He argued the necessity of an absolute monarchy, lest we fall back into the “state of nature,” whereby the weak succumb to the brute force of the strong. I recall the cover of Leviathan (seen left), whereby the body (the people) is incomplete – dysfunctional – without the head (the state). The political (post-9-11) and cultural (welfare-dependence) ideologies of America today resemble more closely than at many times past the traditional justification of the authoritarian state called from the necessity for stability and safety. This ideology is highly antiquated. Hobbes published this tract in 1651, yet we still see today the fear-mongering that has become the cornerstone of big government. The state is quickly becoming the sole arbiter of private disputes, the sole thinker of our generation. Rand once stated that “A country without intellectuals is like a body without a head” (For the New Intellectual, p. 12). What she meant was that a generation without those willing to think and judge will sink beneath the weight of government.

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