In last week's Republican Presidential debate in Charleston, South Carolina, all of the candidates were asked a final question concerning what they thought was the biggest problem facing the country. All of them, in one form or another, answered: government spending and the federal debt.
Liberals and conservatives each agree that the budget should be cut, but both sides have solutions which fail to address the problem of the true fiscal stability. Both liberals and conservatives ignore the main source behind runaway government spending: the Federal Reserve.
For example, Harvard economist Jeff Miron, in a short video, argues that spending on entitlement programs will only continue to grow at a rapid and unsustainable pace. Miron argues that unless cuts are made to Medicare, Medicaid, and Social Security, there is no hope to getting spending under control.
From the liberal side, Moveon.org's "Big Mike" insists that cuts have to be made, but not in entitlement programs. Given that the wars in Afghanistan and Iraq have cost over $1 trillion, ending these misguided wars would be the right way to begin to reign in spending and bring some fiscal sanity.
Although both of these arguments come from supposedly opposite political spectrums, both agree that cuts have to be made. It's hard not to agree; the U.S. government is over $14 trillion in debt, will spend almost $2 trillion more than it takes in this year alone, and borrows more than 40 cents out of every dollar in order to finance this spending.
As a libertarian, I disagree with both the conservative case for cutting domestic spending and the liberal desire to cut military spending. Both proposals view government spending like an accountant, and try to trim the branches of a tree that has grown far too large. But our spending problem is a philosophicalissue, namely, what is the proper role of government in society and how does the government acquire it's revenue in the first place?
Will Rogers once quipped that "thank God that we do not get all the government that we pay for." Well nearly everything the government does that is not specifically authorized by the United States Constitution is a funded in a way so that Americans don't initially see the costs. Wars, stimulus-es, bailouts, and entitlement programs are paid for through the Federal Reserve's printing presses that give the government all the money it wants without a direct tax on the American people.
Unfortunately, whenever a central bank like the Federal Reserve creates money out of thin air, it devalues the purchasing power of the dollar (disproportionately harming the poor), causes prices to rise, distorts the economy with artificial interest rates, and leaves the bill to those who are not even born. In fact, the value of the dollar has declined by 95% since the Federal Reserve was established in 1913.
Yet hardly anyone on the left or right bring the issue of the Fed up. Yet it is by far the main source of our financial mess, creating "boom-and-bust" cycles, malinvestment, debt, and crony capitalism.
Analyzing what central banks have done and continue to do to economies is the philosophical counterpoint to the nitpicking accounting of liberals and conservatives. Libertarians view government as an institution that exists solely to protect liberty; it should not police the world, create a welfare state, and has no business in the production of currency.
Perhaps the left and the right, unfortunately, are too fixated on their respective big government spending programs and bipartisan statism to see a practical alternative in a free society.
The libertarian solution to the budget problem? End America's governmental controls and sell off federal property, use that money to properly fund anyone who is currently receiving Medicare, Medicaid, or Social Security, allow anyone to opt out of the current tax code, repeal legal tender laws to allow competing currencies, and most importantly, abolish the Federal Reserve; all of these would establish a real free market economy, prosperity, liberty, and fiscal sanity.
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