Lies the government told you

by Andrew P. Napolitano

  From Too Big to Fail, to Too Public to Succeed

  The claims by the government that the companies it bails out will return to private ownership after they stabilize is a well-known government deception. History has many such stories of companies in trouble that the government “rescues.” Once government bureaucrats get their hands on a certain industry, they cannot let it go.

  The strange thing is that Americans really do believe that the government can fix the problems in the private sector, because they believe that it is the greed of capitalistic businessmen that brings the market down, and so only the forces of a not-for-profit government can bring the market back up. People seem to have forgotten the disastrous result of a centrally controlled economy that was the Soviet Union. This government deception has been fed to us for so long that it has become an accepted fact, without any basis in actual reality.

  This pervasive myth leads to the situation in which a libertarian may argue for the privatization of some part of the public sector, for example, utility companies, and the general population is shocked and awed that anyone would even contemplate such a thing. Professor Murray Rothbard once made a great analogy, noting that if the government had a monopoly on shoe manufacture and sale and had been providing shoes for everyone from tax revenues, then anyone who proposed that shoe production be privatized would get the same reaction. People would cry:

  How could you? You are opposed to the public, to the poor people, wearing shoes! And who would supply shoes to the public if the government got out of the business? How many shoes would be available in each city and town? How would the shoe firm be capitalized? What material would they use? What would be the pricing arrangements? Wouldn’t regulation of the shoe industry be needed to see to it the product is sound? And who would supply the poor with shoes?16

  Because the government’s own mythology has become so predominant in our time, most really do believe that if the government has been providing a monopolized service, no one else could or would want to do it, unless the new producer charged exorbitant amounts. Yet, all Professor Rothbard was attempting to prove was that the capitalist economy can handle itself, and it can do so better than the government because businesspeople have to answer to their customers and investors, and if they do not provide the product that customers want and bring a return to investors, then competition will wipe them out.

  The government has no such worries. For one, since there is no relationship between product and payment, the government needn’t worry about not getting paid for the product. It also does not have to worry about competition, because it has effectively banned anyone from competing with it. And, of course, the government never needs to impress investors when it wants cash. It just raises taxes, which we pay like sheep, or it prints money, which devalues all previously printed money.

  Government Motors

  There are many who argue that the Bush and Obama bailouts were the only possible solutions to ensuring that the economy did not collapse. On the other hand, as former British Prime Minister Margaret Thatcher once said, “The problem with socialism is that sooner or later, you run out of other people’s money,” so some firms need to go down because they are no longer functioning effectively in the market, and the government is just throwing good money after bad.

  Some of these are lucky, like General Motors, which has now become Government Motors, with the federal government purchasing a huge stake in the company. General Motors initially received $20 billion as a bailout, but that did not save the company. So the government decided to give the company another $30 billion, but this time with a 60 percent controlling stake in the company. The result has been that government agents are making financing and business decisions, including President Obama effectively firing the long-time CEO, Richard Wagoner, and Congressman Barney Frank deciding where at least one GM warehouse should be (hint: in his congressional district).

  Finally, rather than following well-established securities law, where secured creditors and bondholders get paid first when a corporation liquidates, the government paid out the United Auto Workers union, an unsecured creditor meant to get paid last in a bankruptcy. Instead, the union got almost double the amount of what the secured creditors did. Of course, the government continues to placate the public with assurances of the temporary nature of the fix and how GM will soon become profitable again.

  So there it is; the government has acquired yet another corporation that it thinks it will be able to run more successfully than the private sector did. Of course, nationalizing an automobile maker sounds very much like something from Communist Russia, or Socialist Venezuela; and we know how successful those governments have been at earning profits. So now our government has spent billions of dollars of taxpayer money so that it can keep open a company, General Motors, that the market was on the brink of closing. And, if the history of Amtrak and the Post Office has anything to say, the government will continue to pour billions into GM well into the next century, without a thought for profit but always with the justifications of employment and public welfare.

  Reagan once said that “[g]overnment’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Well, the government has just done that with General Motors, because it will never be able to run it profitably, so instead it will just keep pumping taxpayer money into it.

  Government Railroad

  The story of Amtrak begins in 1971 during the Nixon Administration, as it was then that Congress established Amtrak as a federally owned passenger railroad. Originally, the government claimed that such a passenger railroad was important and also claimed that it expected “the corporation would experience financial losses for three years and then become a self-sustaining enterprise.”17 Well, it has now been forty years, and Amtrak has yet to make a profit. Instead, it has survived on government subsidies, grants, and loans of enormous proportions, totaling over $25 billion throughout its existence.18

  At the same time, while airline travel has increased from 191.3 million passengers in 1972 to 665.6 million in 2000, Amtrak passengers went from 16.6 million in 1972 to 22.5 million in 2000.19 This increase of 6 million passengers, considering the intense population growth in the U.S. during that time, exhibits the minimal need for train travel, and the fact that if there were a demand for such travel, the private market could handle it more efficiently. And if it could not, Amtrak would have been closed many years ago.

  Privatization in other countries has illustrated that the private industry is much more efficient than anything the public sector can do. For example, privately owned Virgin Rail took over publicly owned British Rail and sparked such a traffic boom that the company has now placed an order for $3 billion in new trains.20 While Amtrak’s survival depends not on its ability to generate profits but solely on political hay, it will keep losing money and costing billions of dollars. The government has given multiple deadlines for Amtrak to reach profitability or face closure, and such deadlines have never been met, yet Amtrak continues its operations.21

  One could argue that Amtrak, rather than an illustration of government inefficiency, is an illustration of the lack of demand for rail transport. For those there is the example of the United States Postal Service (USPS). Currently the USPS is facing extraordinary deficits. From January to July 2009, the USPS lost over $7 billion, and the government is attempting to figure out a resolution, including stopping Saturday delivery.22

  Because the government consumes wealth, rather than produces wealth, the government can only save money by shutting down (so as to stop the consumption). In this respect (consumption versus production) the government and private enterprise are literally opposites. When private enterprise wants more income, it works overtime and produces more goods. When the government wants to save money, as the government of the City of Chicago did for a few days in the summer of 2009, it shuts down.

  The Father of the Three-Cent Stamp<
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  For some reason, we have become so indoctrinated to the need for a government-run monopoly on mail delivery that many have forgotten the story of Lysander Spooner. Though not many today know the name, he was a lawyer and author of The Unconstitutionality of Slavery, which was cited by Supreme Court Justice Antonin Scalia in his opinion in District of Columbia v. Heller. Another of his achievements was his establishment of the American Mail Company in 1844, a challenge to the monopoly of the Post Office, which was charging exorbitant rates.

  By early 1843, mail prices had soared, and the government charged nearly nineteen cents to deliver a letter from Boston to New York.23 In setting up his company, Spooner set up service to run between New York, Boston, Philadelphia, and Baltimore, which were also some of the main Post Office routes. He then announced that he would be charging a little over six cents per half-ounce letter and that there would be daily delivery in the cities. Initially, the government ignored his new company, but soon it was losing customers to the American Letter Mail Company.

  Because of the competition from his business, the government filed suit to have him barred from invading the postal monopoly. “A ‘not guilty’ verdict was sustained by the U.S. District Court . . . [t]he court expressed doubt that the U.S. had the right to monopolize transportation of mail.”24 Still, Post Office revenues continued to drop until Congress was forced to give the Post Office permission to drop prices to five cents a letter. And later, Spooner was responsible for Congress agreeing to drop the price once again, which earned him the name “Father of the Three-Cent Stamp.”25 This entrepreneur had been able to create a successful and profitable company that charged almost one-third the price that the government charged for its mail delivery and created a situation where the government was forced to compete and reach prices that people were willing to pay.

  Of course, once the government regained its monopoly, the price of mail increased constantly with no end in sight, and the Post Office is no longer even profitable, running massive deficits. Still the government claims that it would not be possible to provide mail service through a private company. Today, it is unlawful to charge the same or less than the Post Office to deliver any mail—unlawful to compete with the government.

  R.I.P., Personal Responsibility

  The magic of this idea of affordable housing, cheap automobiles, mail, and railroads, the idea that everyone deserves something from another, has resulted in a total depreciation of the idea of personal responsibility, an idea that is at the basis of America’s values. The government does not have its own money to give away, but it loves to reallocate resources. So when the government is using taxes to pay for mistakes made by big businesses as well as by the little guys, it is only taking from those who have managed not to make gigantic mistakes and giving it to save those who have. And, of course, the government justifies its actions, blaming the big businesses and deflecting blame from itself and the little taxpayers who bought houses they could ill afford. And this is where personal responsibility has lost itself.

  President George W. Bush asked for, received, and signed the American Dream Downpayment Act in 2005. Though I have always believed that the American Dream involves hard work and dedication, apparently in 2005, it was for sale to the lowest bidder. This Act in essence gave the government the authority to provide those in the lowest income brackets with down payments on homes that they could not afford. No longer did people have to save for the American Dream; the government decided to give it away, but of course only to those who had not worked hard and not saved from their incomes until they could afford to buy. That is perhaps the most stupefying consequence of this Act, because free down payments meant more people could buy, which in turn meant more demand, which in turn meant housing prices soared. So those who had saved enough to buy a house no longer had enough, because prices had climbed, and therefore so did the amount required for a down payment from those who did not qualify for the American Dream.

  Still, once the housing bubble burst and the system collapsed, no one wanted to take the blame. Those who had bought houses they could not afford ran to the government for help, clamoring about the unfairness of the system. Those who invested in mortgage-backed securities and lost billions cried that they needed money from the government or else they would collapse, and the market would spiral out of control. The government blamed laissez-faire capitalists and the greedy bankers with their grubby hands. There was blame to go around, but no one would take it. And not only would they not accept it, but they also wanted payment from the taxpayers—from those who could still afford to pay the taxes. Of course, the government gave them all money.

  The lesson learned was that as long as you did not take responsibility for your actions, then you would receive more money. The government bailed out the banks, it bailed out the people who could not afford their mortgages, and it continues to bail them out. The American Dream, which once rested on personal responsibility and hard work, now rests on getting the most for the least amount of work. And if the climate continues this way, pretty soon there will be nothing left of America or the Dream.

  Conclusion

  Before you finish reading this book, return to those quotations at the beginning. Did I prove my case? If you believe in God, you believe He is Truth. But a Roman governor asks if anyone can know the truth, and a modern-day American vice president marvels at its debasement by the government. And two philosophers claim we are ripe for being plucked into the baskets of the deceivers.

  As I finish writing this book, the country is consumed with a great public debate over proposals for the federal government to take over and manage the delivery of health care to every person in America.

  During that debate, Congressman Joe Wilson (R-SC) was disciplined by his colleagues in the House of Representatives because he called President Obama a liar during the President’s address to a joint session of Congress. The statement that the President made, which provoked the Congressman’s ill-timed outburst, claimed that illegal aliens would not receive health care benefits under the President’s government option proposal, which essentially establishes a Medicare-type program for everyone in America under the age of sixty-five.

  When the Supreme Court last looked at government attempts to deny social benefits to certain groups, the Court held that the Constitution protects all “persons”; persons are citizens as well as strangers, people born here and people who end up here, people here lawfully and people here unlawfully; and in the area of social services, whatever benefits the government makes available to the general public cannot be kept away from a class of persons based on their immigration status or that of their parents.

  Did the President know this when he stated the contrary to the Congress? Did he lie? And if he did lie, wasn’t that lie in the tradition of his forebears?

  We know where his forebears’ lies have brought us: war, fear, power, loss of innocent life, loss of liberty, and loss of property. My friend Llewellyn Rockwell, an astute philosopher and commentator whose Web site, LewRockwell.com, is the best monitor of government excess in America today, is fond of reminding me that we are all susceptible to temptation; we all have lusts within us that we must suppress. And the most pernicious of those lusts is libido dominandi, the lust to dominate.

  This lust is in the heart of all in government who lie, who break the laws they have sworn to uphold, and who violate the Constitution they are committed to preserve. They lie to enhance and retain their power over us. Justice Antonin Scalia has commented that courts should refrain from reading what members of the legislative branch have publicly stated about a law when the courts are endeavoring to interpret the meaning of that law. It doesn’t matter, he has argued many times, why they say they voted for any given law. They only do so, he maintains, for one reason: To get reelected— the Natural Law, the Constitution, the laws of the land be damned. They want to dominate us.

  I don’t personally know this lust, but it must be overpowering.

  My own l
ust is to challenge illicit authority, to break the chains of slavery with which the government has bound us, and to liberate all persons to fulfill their lives as they see fit, by pursuing happiness.

  How can we do this?

  We will need a major political transformation in this country to rid ourselves of persons in government who kill, lie, cheat, and steal in our names. We will need to recognize some painful truths.

  First, we must acknowledge that through the actions of the government we have lost much of the freedom that we once all thought was guaranteed by the Constitution, our laws, and our values. The lost freedoms have been cataloged in this book and need not be restated here. In sum, they are the loss of the primacy of the individual’s inalienable rights and the concept that government is limited in its powers. We have lost the diffusion of power between the states and the federal government. We have lost a federal government that stays within the confines of the Constitution.

  Second, we must recognize that we do not have a two-party system in this country; we have one party, the Big Government Party. There is a Republican version that assaults our civil liberties and loves deficits and war, and a Democratic version that assaults our commercial liberties and loves wealth transfers and taxes.

  Third, we must acknowledge that there is a fire in the bellies of millions of young people who reject both wretched visions of the Big Government Party. These millions of young folks need either to form a Liberty Party or to build on the libertarian base in the Republican Party by banishing Big Government conservatives, neocons, and so-called social conservatives who want to use government to tell others how to live their lives back to the Democratic Party from whence they came.

  Then we need a political fever that consumes the careers of all in government who voted for the Patriot Act, the illegal wars in Iraq and Afghanistan, the TARP and stimulus programs, the federal takeover of education, spying on Americans without warrants, and all other unconstitutional monstrosities that have tethered lovers of liberty to Washington, D.C.