It’s Time to Try Something New for a Change

January 16, 2014

Last week, on the 50th anniversary of Lyndon Johnson’s so-called War on Poverty, President Barack Obama unveiled his latest initiative to combat economic deprivation in America.  The President’s latest scheme involves public and private funding to create jobs, enhance public safety, improve schools, and provide better housing in 20 communities across the country.  You know, it is the same old story.  If only the federal government would spend enough money we could eradicate poverty in our lifetime.  Unfortunately, for Obama, his latest initiative to fight poverty will have the same end result as LBJ’s War on Poverty – utter failure.

You see, in the 50 years since LBJ signed into law the most sweeping social welfare programs in the history of the U.S., Uncle Sam has spent about $16 trillion on public assistance schemes.  Yet, Americans living in poverty has only gone from 19 percent of the population in 1964 to about 15 percent today.  Put another way, it cost our economy $4 trillion for every percentage point decrease in the rate of poverty.  Given our already enormous national debt and the future calamity it will bring, isn’t there a more cost effective way to help the poor escape poverty?  We cannot afford to spend more money and that is clearly not the answer anyway.

At the end of the day, the best way to fight poverty is with a job.  Thus, to help the poor all minimum wage laws should be repealed immediately.  The late, great, Murray Rothbard had it right when he labeled minimum wage laws “compulsory unemployment”.  Whenever government fixes prices either shortages or surpluses result.  Fixing wage rates above the market rate will only lessen demand for workers’ labor.  Thus, a surplus of workers’ labor (unemployment) will result.  This is Economics 101.

Low wages may not provide a decent standard of living, but for the 49 percent of African-American youth who are currently unemployed, the jobs they would have by virtue of repealing minimum wage laws would give them the opportunity to work hard, get work place experience, and build a resume.  All three could lead to higher paying jobs in the future.

But repeal of minimum wage laws alone isn’t enough.  Uncle Sam needs to repeal costly regulations on business which prevents the creation of new jobs.  In 2013, the federal government adopted $112 billion worth of new regulatory costs on job producers.  This amounted to 80,224 pages being added to the Federal Register.  Since Barack Obama became president in 2009 close to $500 billion in new regulations have been imposed.  And then there is the job killing scheme known as Obamacare.  At a time when the labor force participation rate is at the lowest level since 1978, should the federal government really be concerned about expensive energy efficiency standards for microwave ovens?

To be sure, more could be done to alleviate the scourge of poverty.  A gold backed dollar like existed in the late 1800s and which kept price inflation flat for more than 60 years should be reintroduced in America.  Abolition of the Federal Reserve System which is primarily responsible for the continuous boom and bust cycle in our economy and the destruction of the middle class should be enacted.

In the final analysis, for 50 years, Washington has thrown good money at the so-called War on Poverty.  The result has been failure to achieve the objective.  And this is why it’s time to try something new for a change.

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Old Beliefs Die Hard

July 25, 2012

It is very difficult coming to the realization that something or someone you truly believe in, have revered and defended for a long time, and have dedicated your life to following is not what you thought it was and might even be the exact opposite of what you appreciated about it.

For me recently, I have had to come to grips with the fact that former Penn State head football coach Joe Paterno was not the hero I revered for a long time.  See, I grew up in Pennsylvania and followed his winning teams every year.  His success was abundant while all along running a squeaky clean program with no recruiting violations and a good graduation rate.  To top it off, we shared an ethnic heritage (Italian) which became a source of personal pride.

Then the Jerry Sandusky child abuse scandal hit.  My world was shattered.  How could Coach Paterno only inform his superiors at the University when he was told that his former assistant coach Jerry Sandusky was caught showering with a young boy in a university locker room?  How could he not blow the whistle loudly to put an end to the carnage and bring a deviant to justice?  I mean, Paterno was the moral bastion of college football.  As an educator, he would never forsake the well-being of youngsters in order to protect a friend and/or his football program.

But, it’s true.  Paterno did not do all that he should have and many more young boys were abused at Penn State facilities by Jerry Sandusky as a result  This realization has negated close to 40 years of hero worship.  Joe Paterno made more than a mistake; he allowed a tragedy to continue.  He was not the moral bastion I naively thought he was.  It was tough and a long process, but he is no longer a hero.

Thus, I can now empathize with folks who need to come to grips with their wrongheaded thinking that government is the great solver of our problems.  Take the so-called “War on Poverty”(1) programs launched under Lyndon Johnson in the 1960s.  Supporters would argue that it was the right thing to do at the right time to eradicate poverty.  However, close to 50 years and $15 trillion later, the poverty rate has barely budged going from about 15 percent to 13 percent.  In fact, poverty was on a steep decline for five years preceding Johnson’s programs.  His “War on Poverty” halted that decline and stabilized the poverty rate in the low teens.  But if you listen to advocates of the federal social safety net, you’ll hear how without federal largess the problem of poverty would be more acute.  They just can’t bring themselves to accept the realization that federal welfare programs are wasteful, debilitating, and ineffective.

Of course, the best example from recent history where government policy has been wasteful, debilitating, and ineffective is the economic policies of the current administration.  The same folks that can’t admit to themselves that the War on Poverty was a failure are now defending the Obama Administration’s policies as if they have been successful in bringing about recovery from the Financial Crisis of 2008.  After trillions have been spent and interest rates kept at rock bottom lows for the last four plus years the unemployment rate has never fallen below eight percent.  In fact, the real unemployment rate (U6 which includes discouraged workers) is 15 percent and on the rise. Most embarrassing for the President is the fact that more people went on Social Security Disability than got jobs in June.

To be sure, there are many more examples of government intrusion gone wrong.  The greatest of which is Roosevelt’s New Deal because it prolonged the Great Depression through the 1930s.

So, with such a track record of failure, why is it that advocates of big government cannot bring themselves to realize that their philosophy is bankrupt and wrongheaded?  One reason is emotional.  They think with their hearts and not their heads.  They are so fixated on helping others and believe they may need the same kind of help someday, that they forsake logic and experience for empathy and generosity (of other peoples’ money of course).

Another reason is socialization.  There are so many Americans who rely on the federal government for one reason or another that it is hard to find many that are willing to bite the hand that feeds them.  Take college professors and the mainstream media (MSM) for instance.  Very, very few are willing to go against the Establishment line for fear of losing grant money, being denied tenure, or losing the interview or even their jobs (remember Helen Thomas?).  These are the societal elites that most Americans get their information from (many times academics appear on the MSM).  It’s no wonder many Americans lack basic economic knowledge.  They have been bombarded through the years with the party line instead of the truth.

At the end of the day, it’s brutal being challenged let alone acknowledging that what you have believed in for a long time is poppycock.  I know – I lost a long-time hero recently.  It is a tough and long process but one that needs to be undertaken by those that cherish big government intrusion in our economy.  It needs to be undertaken so the widespread suffering resulting from big government intrusion in our economy seizes.

Article first published as Old Beliefs Die Hard on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina