Notes
CHAPTER 1
4 The figures are regularly updated at
http://www.usdebtclock.com. These are not unusually high or inflated figures. As of 2008, Federal Reserve Bank of Dallas president Richard Fisher came up with a combined total of $99.2 trillion in unfunded liabilities, a figure that has only risen in the years since. See Charles Goyette,
The Dollar Meltdown (New York: Portfolio, 2009), 34-35.
5 Peter G. Peterson,
Running on Empty (New York: Farrar, Straus, and Giroux, 2004), 33.
7 Robert Murphy, “Spending Will Confine Americans to Debtors’ Prison,”
Buffalo News, May 8, 2010; see also Edmund L. Andrews, “Wave of Debt Payments Facing U.S. Government,”
New York Times, November 23, 2009.
8 Peterson,
Running on Empty, 34.
11 David Stockman, “Beware the Light at the End of the Tunnel,” MarketWatch. com, August 11, 2010, available at
http://www.marketwatch.com/story/story/print?guid=FC60311E-9958-4B34-9F22-84B0B786E9CD; Gary North, “No V-Shaped Recovery, but a V-Shaped Deficit: The Point of No Return,” August 12, 2010, available at
http://www.garynorth.com/members/6814.cfm 13 Peter G. Peterson,
Gray Dawn: How the Coming Age Wave Will Transform America—And the World (New York: Three Rivers Press, 2000), 5.
16 Peterson,
Running on Empty, 58-59.
21 Ibid., 76. Emphasis in original.
22 Peterson,
Gray Dawn, 34.
23 Peterson,
Running on Empty, xxx.
25 Pamela Villarreal, “Social Security and Medicare Projections: 2009,” National Center for Policy Analysis Brief Analysis No. 662, June 11, 2009, available at
http://www.ncpa.org/pub/ba662 26 Steve Forbes and Elizabeth Ames,
How Capitalism Will Save Us (New York: Crown Business, 2009), 138-39.
28 Peterson,
Running on Empty, 39-40.
30 Peterson,
Gray Dawn, 8.
34 Jordan Schrader, “Republicans Eye State Workers’ Pay,”
The Olympian, March 5, 2010.
35 Eric Bradner, “Indiana Receipts Again Fall Short of Projections,”
Evansville Courier & Press, March 2, 2010.
36 Danny Hakim, “State Plan Makes Fund Both Borrower and Lender,”
New York Times, June 11, 2010.
43 Dennis Cauchon, “For Feds, More Get 6-Figure Salaries,”
USA Today, December 10, 2009.
CHAPTER 2
1 Sally C. Pipes,
The Truth About Obamacare (Washington, D.C.: Regnery, 2010), 16-17.
3 George Reisman, “The Real Right to Medical Care Versus Socialized Medicine,”
Mises Daily, August 6, 2009, available at
http://mises.org/daily/3613 4 Thomas E. Woods, Jr.,
33 Questions About American History You’re Not Supposed to Ask (New York: Crown Forum, 2007), ch. 30.
8 Steve Forbes and Elizabeth Ames,
How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy (New York: Crown Business, 2009), 243.
9 Pipes,
The Truth About Obamacare, 103, 102.
13 Pipes,
The Truth About Obamacare, 183-84.
15 Pipes,
The Truth About Obamacare, ch. 20; Douglas Holtz-Eakin, “The Real Arithmetic of Health Care Reform,”
New York Times, March 21, 2010.
16 Forbes and Ames,
How Capitalism Will Save Us, 251.
17 Peter G. Peterson,
Running on Empty (New York: Farrar, Straus, and Giroux, 2004), 126. As an aside, we might note the question that is completely overlooked in the health-care debate: might American seniors and indeed Americans in general be overmedicated? This is the elephant in the living room. Is it normal and good for 40 percent of seniors to be consuming at least five prescription drugs every week, with 12 percent taking at least ten? A study in the
Journal of the American Medical Association in 2003 estimated 200,000 cases every year of seniors who suffer life-threatening or even fatal problems related to prescription drugs. Ibid., 126-27.
18 Peterson,
Running on Empty, 128.
19 David T. Beito,
From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967 (Chapel Hill: University of North Carolina Press, 2000).
20 Allen J. Matusow,
The Unraveling of America: A History of Liberalism in the 1960s (Athens, GA: University of Georgia Press, 2009 [1984]), 230, 231- 32.
22 Reisman, “Real Right to Medical Care.”
25 Howard Wolinsky and Tom Brune,
The Serpent on the Staff: The Unhealthy Politics of the American Medical Association (New York: Tarcher Putnam, 1994), 142.
26 Pipes,
The Truth About Obamacare, 20.
27 Forbes and Ames,
How Capitalism Will Save Us, 246.
28 “The Doctor Will See You Later,”
Investor’s Business Daily, June 8, 2010, A10.
29 David Asman, “There’s No Place Like Home,”
Wall Street Journal, June 8, 2005.
31 Charlie Savage and David D. Kirkpatrick, “Technology’s Fingerprints on the Stimulus Package,”
New York Times, February 10, 2009; cited in Timothy P. Carney,
Obamanomics (Washington, D.C.: Regnery, 2009), 34.
32 Richard K. Vedder and Lowell Gallaway, “The Great Depression of 1946,”
Review of Austrian Economics 5, 2 (1991): 14. The title of Vedder and Gallaway’s article is, of course, not intended to suggest that there really was a depression in 1946, but that some commentators predicted one and some flawed statistics can even seem to indicate that one occurred.
33 Robert Higgs, “From Central Planning to the Market: The American Transition, 1945-1947,”
Journal of Economic History 59 (September 1999): 600-23.
35 Carney,
Obamanomics, 138.
37 Carney,
Obamanomics, 147, 149.
38 Robert Higgs, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,”
Independent Review 1 (Spring 1997): 561-90.
CHAPTER 3
1 Christi Parsons and Peter Nicholas, “Obama Hits the Stimulus Campaign Trail,”
Los Angeles Times, February 10, 2009.
3 Thomas E. Woods, Jr.,
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (Washington, DC: Regnery, 2009), ch. 2.
4 Mortgage-backed securities (MBS) were instruments in which a pool of mortgages were grouped into a financial product for sale to investors. Each MBS consisted of tiny fractions of a number of mortgages. Strictly speaking, the holder of the MBS was entitled to a tiny portion of the income stream from the various mortgage payments that came in for the mortgages bundled in the instrument.
5 Russell Roberts, “Gambling with Other People’s Money: How Perverted Incentives Caused the Financial Crisis,” Mercatus Center, George Mason University, May 2010, 21, 25.
7 Johan Norberg,
Financial Fiasco (Washington, D.C.: Cato Institute, 2009), 40.
8 Charles W. Calomiris, “Financial Innovation, Regulation, and Reform,”
Cato Journal 29 (Winter 2009): 69.
9 Steve Forbes and Elizabeth Ames,
How Capitalism Will Save Us (New York: Crown Business, 2009), 115.
10 Norberg,
Financial Fiasco, 78.
11 Roberts, “Gambling with Other People’s Money,” 13.
12 Even the minuscule premium on GSE bonds may not have been due to any serious expectation that the federal government might allow Fannie and Freddie to go bankrupt. Instead, according to Sam Eddins of IronBridge Capital Management, the premium was attributable to the differential tax status between Treasuries and GSE bonds; interest income on the former was tax deductible, while interest income on the latter was not. Ibid., 30, 31n73.
13 Patrice Hill, “Taxpayers to Pay for Fannie, Freddie Aid,”
Washington Times, January 13, 2010.
16 Norberg,
Financial Fiasco, 35.
18 For a study of three of the best-known speculative bubbles in earlier centuries, see Douglas E. French,
Early Speculative Bubbles and Increases in the Supply of Money (Auburn, AL: Ludwig von Mises Institute, 2009).
19 Jerry H. Tempelman, “Austrian Business Cycle Theory and the Global Financial Crisis: Confessions of a Mainstream Economist,”
Quarterly Journal of Austrian Economics 13 (Spring 2010): 4-5. The
Economist further acknowledged that “the recent business cycles in both America and Japan displayed many ‘Austrian’ features.” Ibid., 5.
20 Gerald P. O’Driscoll Jr., “Signs of Life in the Housing Market,”
Wall Street Journal, July 30, 2009.
21 Roberts, “Gambling with Other People’s Money,” 20.
22 Alan Greenspan,
The Age of Turbulence: Adventures in a New World (New York: Penguin, 2008), 233.
23 Norberg,
Financial Fiasco, 25.
24 For the information in this paragraph and the two that follow, see John Carney, “The FHA Is a Looming Disaster,”
Business Insider, October 17, 2009, available at
http://www.businessinsider.com/the-fha-is-a-looming-disaster-2009-10; David Streitfeld, “With F.H.A. Help, Easy Loans in Expensive Areas,”
New York Times, November 19, 2009; Froma Harrop, “What Does the FHA Think It Is Doing?”
Richmond Register, November 5, 2009; Mike Shedlock, “FHA Bailout by Taxpayers on the Way,” Mish’s Global Economic Trend Analysis, November 13, 2009, available at
http://globaleconomicanalysis.blogspot.com/2009/11/fha-bailout-by-taxpayers-on-way.html 25 Rajan, “Many Are the Errors.”
26 Norberg,
Financial Fiasco, 6.
30 Robert Klein and George Reisman, “Central Problem: The Central Bank,”
Barron’s, December 28, 2009.
31 Norberg,
Financial Fiasco, 7.
32 The Fed’s discount rate did come down by mid-1921, but there the Fed was following the market. With prices falling so dramatically (consumer prices plunged 38 percent in a single year), the Fisher premium in the interest rate, which reflects inflation expectations, would have come down economy-wide. Historians have described the Fed as “largely passive” during the crisis.
33 For the full details of the depression of 1920, see Thomas E. Woods, Jr., “Warren Harding and the Forgotten Depression of 1920,”
Intercollegiate Review 44 (Fall 2009): 22-29.
34 Joseph A. Schumpeter,
Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process, vol. II (New York: McGraw Hill, 1939), 786-87. Thanks to Gregory Bresiger for this quotation.
35 William Graham Sumner, “The Delusion of the Debtors,” in
The Forgotten Man and Other Essays, ed. Albert Galloway Keller (New Haven: Yale University Press, 1918), 170.
36 Roberts, “Gambling with Other People’s Money,” 12.
37 Cari Tuna, Liz Rappaport, and Julie Jargon, “Halting Recovery Divides America in Two,”
Wall Street Journal, August 29, 2009.
39 Norberg,
Financial Fiasco, 77.
43 John B. Taylor, “How Government Created the Financial Crisis,”
Wall Street Journal, February 9, 2009.
44 Jean Helwege, “Financial Firm Bankruptcy and Systemic Risk,”
Regulation, Summer 2009, 27, 29.
48 Wallison, “Did the ‘Repeal’ of Glass Steagall Have Any Role in the Financial Crisis?” 11-17.
49 Allan H. Meltzer, “Reflections on the Financial Crisis,”
Cato Journal 29 (Winter 2009): 27.
50 Woolsey, “The Crisis and Glass Steagall.”
51 Ben S. Bernanke, “Central Banking and Bank Supervision in the United States,” address to the Allied Social Science Association Annual Meeting, Chicago, Illinois, January 7, 2009, available at
http://www.federalreserve.gov/newsevents/speech/bernanke20070105a.htm; cited in Mark Thornton, “Bernanke’s Solutions Are the Problem,”
Mises Daily, November 5, 2010, available at
http://mises.org/daily/4798 54 Norberg,
Financial Fiasco, 132.
55 Laurence Kotlikoff,
Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking (Hoboken, NJ: Wiley, 2010), 82.
56 Willem Buiter, “Lessons from the North Atlantic Financial Crisis,” paper presented at “The Role of Money Markets” conference of Columbia Business School and the Federal Reserve Bank of New York, May 28, 2008, available at
http://www.nber.org/~wbuiter/NAcrisis.pdf.
57 Tom McGinty, “SEC Lawyer One Day, Opponent the Next,” April 5, 2010.
58 Gerald P. O’Driscoll Jr., “An Economy of Liars,”
Wall Street Journal, April 20, 2010.
59 Mark Thornton, “The Economics of Housing Bubbles,” in
Housing America: Building Out of a Crisis, eds. Randall G. Holcombe and Benjamin Powell (New Brunswick, NJ: Transaction, 2009), 240.
60 Arnold Kling, “Not What They Had in Mind: A History of Policies that Produced the Financial Crisis of 2008,” Mercatus Center, George Mason University, September 2009, 19.
63 Mark A. Calabria, “Why Can’t We Fire Failed Regulators?”
Investor’s Business Daily, July 8, 2010.
64 Ibid.; Mark A. Calabria, “Chris Dodd’s Do-Nothing Financial Reform,”
New York Post, May 20, 2010.
65 Jeffrey Friedman and Wladimir Kraus, “A Silver Lining to the Financial Crisis: A More Realistic View of Capitalism,”
Regulation Outlook, American Enterprise Institute for Public Policy Research, January 2010, 6.
66 Calomiris, “Financial Innovation, Regulation, and Reform,” 70-71.
67 International Monetary Fund,
Global Financial Stability Report: Containing Systemic Risks and Restoring Financial Soundness (Washington, D.C.: International Monetary Fund, April 2008), xi.
68 Tempelman, “Austrian Business Cycle Theory and the Global Financial Crisis,” 8.
69 On Iceland, see Philipp Bagus and David Howden, “Iceland’s Banking Crisis: The Meltdown of an Interventionist Financial System,”
Mises Daily, June 9, 2009, available at
http://mises.org/daily/3499 70 “‘Greenspan Put’ May Be Encouraging Complacency,”
Financial Times, December 8, 2000.
CHAPTER 4
2 Thanks to economist George Selgin for that line.
3 Selgin, Lastrapes, and White, “Has the Fed Been a Failure?” 17.
5 See the extensive citations in ibid., 9-15.
6 Richard H. Timberlake Jr., “Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy,”
Independent Review 11 (Winter 2007): 349.
7 The classic study of the Panic is Murray N. Rothbard,
The Panic of 1819: Reactions and Policies (New York: Columbia University Press, 1962).
8 Murray N. Rothbard,
An Austrian Perspective on the History of Economic Thought, vol. 2,
Classical Economics (Brookfield, VT.: Edward Elgar, 1995), 212.
9 Ibid., 212-13; Murray N. Rothbard,
The Panic of 1819: Reactions and Policies (Auburn, AL: Ludwig von Mises Institute, 2002 [1962]), 249; see also Clifton B. Luttrell, “Thomas Jefferson on Money and Banking: Disciple of David Hume and Forerunner of Some Modern Monetary Views,”
History of Political Economy 7 (Spring 1975): 156-73. Rothbard’s book on the Panic was originally published by Columbia University Press.
10 Rothbard,
Classical Economics, 213-16.
11 Charles R. Morris, “Freakoutonomics,”
New York Times, June 2, 2006.
12 Again, 100 percent reserve banking would have prevented crises of this nature.
13 Andrew Jalil, “A New History of Banking Panics in the United States, 1825-1929: Construction and Implications,” unpublished working paper, November 1, 2009, available at
http://www.ocf.berkeley.edu/~ajalil/Home_files/A%20- New%20 History%20of%20Banking%-20Panics%20in%20the%20United%20 States,
%201825-1929.pdf; cited in Selgin, Lastrapes, and White, “Has the Fed Been a Failure?”
14 Elmus Wicker,
Banking Panics of the Gilded Age (Cambridge: Cambridge University Press, 2000), xii; Selgin, Lastrapes, and White, “Has the Fed Been a Failure?” 22-23.
15 Charles W. Calomiris, “Banking Crises and the Rules of the Game,” NBER Working Paper 15403, October 2009, 11, 36.
17 Jörg Guido Hülsmann,
The Ethics of Money Production (Auburn, AL: Ludwig von Mises Institute, 2008), 91; Johan Norberg,
Financial Fiasco (Washington, D.C.: Cato Institute, 2009), 143-44. The reference is to Michael Parkin and Robin Bade, “Central Bank Laws and Monetary Policy: A Preliminary Investigation,” in
The Australian Monetary System in the 1970s, ed. M. A. Porter (Melbourne: Monash University, 1978), 24-39.
18 Hülsmann,
The Ethics of Money Production, 153.
19 This discussion of deflation is indebted to the work of Jörg Guido Hülsmann, in particular
The Ethics of Money Production and
Deflation and Liberty (Auburn, AL.: Ludwig von Mises Institute, 2008).
20 Andrew Atkeson and Patrick J. Kehoe, “Deflation and Depression: Is There an Empirical Link?”
American Economic Review Papers and Proceedings 94 (May 2004): 99-103; quotation on 102.
21 Joseph T. Salerno, “An Austrian Taxonomy of Deflation—With Applications to the U.S.,”
Quarterly Journal of Austrian Economics 6 (Winter 2003): 93-96.
22 Ludwig von Mises,
The Theory of Money and Credit, new ed. (New Haven: Yale University Press, 1953 [1912]), 438-39.
23 F. A. Hayek, “The Intellectuals and Socialism,”
University of Chicago Law Review (Spring 1949).
24 William Baker,
Endless Money: The Moral Hazards of Socialism (Hoboken, NJ: Wiley, 2009), 160.
26 On money in a free society, see Hülsmann,
Ethics of Money Production,
passim.
CHAPTER 5
2 Seymour Melman,
The Permanent War Economy (New York: Simon & Schuster, 1974), 11.
3 Paul Baran and Paul Sweezy,
Monopoly Capital (New York: Monthly Review Press, 1966), 53.
4 Seymour Melman, “Consequences of a Permanent War Economy, and Strategies for a Conversion to a Demilitarized Society,” lecture delivered at Oregon State University, October 13, 1986.
5 Seymour Melman,
Our Depleted Society (New York: Dell, 1965), 5.
7 Melman,
Our Depleted Society, 42-43. Likewise, Murray Weidenbaum wrote that to convey the true costs of the military establishment in a meaningful way it was necessary to go beyond billions of dollars spent and consider also the “thousands of men and women pulled away (voluntarily or otherwise) from civilian pursuits, millions of man-years of industrial effort, millions of barrels of oil pumped from the earth, and thousands of square yards of planet space filled with equipment and debris. In short, the real cost of military activities should be measured in human and natural resources and in the stocks of productive capital absorbed in producing, transporting, and maintaining weapons and other military equipment. It is in the sense of alternative opportunities lost that military spending should be considered—the numbers of people employed by the military, the goods and services it purchases from the private sector, the real estate it ties up, and the technology devoted to it. Not only do we lose the opportunity for civilian use of goods and services, but we also lose the potential economic growth that these resources might have brought about.” Murray L. Weidenbaum,
The Economics of Peacetime Defense (New York: Praeger, 1974), 28-29. Arthur Burns, an economic adviser to President Dwight Eisenhower and Federal Reserve Chairman in the 1970s, concurred: “The real cost of the defense sector consists not only of the civilian goods and services that are currently foregone as its account; it includes also an element of growth that could have been achieved through larger capital investment in human and business capital.” John Tirman, “Conclusions and Countercurrents,” in
The Militarization of High Technology, ed. John Tirman (Pensacola, FL: Ballinger Publishing, 1984), 13.
8 Murray N. Rothbard made a similar point when suggested that GNP be replaced by Private Product Remaining, which excludes government expenditures altogether and measures only the size of the private economy. Murray N. Rothbard,
America’s Great Depression, 4th ed. (New York: Richardson & Snyder, 1983), 296-97.
9 James F. Dunnigan,
How to Make War, 4th ed. (New York: HarperCollins, 2003), 164.
10 Asit K. Biswas, “Scientific Assessment of the Long-Term Environmental Consequences of War,” in
The Environmental Consequences of War: Legal, Economic, and Scientific Perspectives, eds. Jay E. Austin and Carl E. Bruch (Cambridge: Cambridge University Press, 2000), 306.
11 Victor W. Sidel, “The Impact of Military Preparedness and Militarism on War and the Environment,” in Austin and Bruch, eds.,
The Environmental Consequences of War, 441.
12 Seymour Melman, “Economic Consequences of the Arms Race: The Second-Rate Economy,”
American Economic Review 78 (May 1988): 55-59.
13 Bruce M. Russett,
What Price Vigilance? The Burdens of National Defense (New Haven: Yale University Press, 1970), 144; Seymour Melman,
The Permanent War Economy: American Capitalism in Decline, rev. ed. (New York: Simon & Schuster, 1985), 66.
14 Melman,
Our Depleted Society, 4, 7.
15 Melman,
Permanent War Economy, rev. ed., 64.
16 Melman,
Our Depleted Society, 72-73. Another factor is that military research can be more intellectually stimulating than civilian work. Writes Lester Thurow: “Would the typical engineer rather work on designing a new missile with a laser guidance system or on designing a new toaster? To ask the question is to answer it. Military research and development are more interesting since they are usually closer to the frontiers of scientific knowledge and are not limited by economic considerations such as whether a product can be sold in the market. The military is willing to pay almost any premium to have a superior product. The civilian economy is not. As a result the most skilled technicians and scientists move into defense. But suppose you own a civilian computer firm in Boston and many of your best people leave to work in Boston’s higher paying and more exciting aerospace firms. How do you compete with Japanese computer firms that will not be losing their most brilliant employees? The Japanese engineer might also like to work on missiles but he does not have the opportunity to do so.” John Tirman, “The Defense-Economy Debate,” in Tirman, ed.,
The Militarization of High Technology, 20.
17 Richard N. Nelson, “The Impact of Arms Reduction on Research and Development,”
American Economic Review 53 (May 1963): 445.
18 “Industry: Aiming at the Market Instead of the Moon,”
Time, June 21, 1963.
19 Melman,
Our Depleted Society, 72.
20 John Tirman writes: “One cannot say with complete confidence that the military’s impact on, say, the history of aviation has been positive, because we don’t know what would have happened to aviation if the military had not played such a significant part.” Tirman, ed.,
The Militarization of High Technology, xiii.
21 Melman,
Our Depleted Society, 93.
22 Stephen Broadberry and Mark Harrison, “The Economics of World War I: An Overview,” in
The Economics of World War I, eds. Stephen Broadberry and Mark Harrison (Cambridge: Cambridge University Press, 2005), 29.
23 Herbert J. Holloman and Alan Harger, “America’s Technological Dilemma,”
Technology Review, July-August 1971, 38.
24 Melman,
Permanent War Economy, rev. ed., 134.
25 The essential text here is Murray N. Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” in
On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises, ed. Mary Sennholz (Princeton, NJ: D. Van Nostrand, 1956), 224-62. For an excellent case against state-funded science, one of the great sacred cows of public expenditure, see Terence Kealey,
The Economic Laws of Scientific Research (New York: Palgrave Macmillan, 1997); see also Tibor R. Machan, ed.,
Liberty and Research and Development: Science Funding in a Free Society (Stanford, CA: Hoover Institution Press, 2002) and Joseph P. Martino,
Science Funding: Politics and Porkbarrel (New Brunswick, NJ: Transaction, 1992).
26 Along these lines, John Clark suggests that “the artificial allocation of funds to this type of research could actually hamper economic progress. It concentrates on programs of special military concern, but the allotment of resources to particular segments of the industrial system so as to support these specialized projects may unduly deprive other vital sectors (housing, local transportation, and so forth) of the capital assets essential for balanced economic growth.” It is “not balanced growth nor advancement in speculative knowledge that the God of War seeds; it is merely the accelerated application of the already known for immediate purposes.” John J. Clark, “The New Economics of National Defense,” in
The Economic Impact of the Cold War: Sources and Readings, ed. James L. Clayton (New York: Harcourt, Brace & World, 1970), 23, 25. A recent book claiming that military research has a positive effect on economic growth, and that the diminution of such research would harm growth, is Vernon W. Ruttan,
Is War Necessary for Economic Growth? Military Procurement and Technology Development (New York: Oxford University Press, 2006).
27 Melman, “Economic Consequences of the Arms Race,” 57.
28 Melman,
Permanent War Economy, rev. ed., 28, 30, 31.
32 Robert DeGrasse, “The Military and Semiconductors,” in Tirman, ed.,
The Militarization of High Technology, 85.
33 On the machine-tool industry, see Anthony DiFilippo,
Military Spending and Industrial Decline: A Study of the American Machine Tool Industry (Westport, CT: Greenwood, 1986) and Melman,
The Permanent War Economy, rev. ed.
34 Melman,
Our Depleted Society, 53.
35 Melman,
Permanent War Economy, rev. ed., 81-82.
36 Melman,
Profits Without Production, 6.
37 Seymour Melman, “From Private to State Capitalism: How the Permanent War Economy Transformed the Institutions of American Capitalism,”
Journal of Economic Issues 31 (June 1997): 311-30.
38 Chalmers Johnson,
Dismantling the Empire: America’s Last Best Hope (New York: Metropolitan, 2010), 167; Robert Higgs, “The Cold War Is Over, But U.S. Preparation for It Continues,”
Independent Review 6 (Fall 2001): 292; William E. Kovacic, “Blue Ribbon Defense Commissions: The Acquisition of Major Weapon Systems,” in
Arms, Politics, and the Economy: Historical and Contemporary Perspectives, ed. Robert Higgs (New York: Holmes & Meier, 1990).
39 Robert Higgs, “Military-Economic Fascism: How Business Corrupts Government, and Vice Versa.”
40 Winslow T. Wheeler, “Preface,” in
America’s Defense Meltdown: Pentagon Reform for President Obama and the New Congress, ed. Winslow T. Wheeler (Stanford: Stanford University Press, 2009), x.
41 Johnson,
Dismantling the Empire, 170.
45 Jeffrey St. Clair,
Grand Theft Pentagon: Tales of Corruption and Profiteering in the War on Terror (Monroe, ME: Common Courage Press, 2005), 152.
48 Christopher A. Preble,
The Power Problem: Tallying the Costs of Our Military Power (Ithaca: Cornell University Press, 2009), 46.
51 Higgs, “Military-Economic Fascism.”
54 St. Clair,
Grand Theft Pentagon, 18.
56 Higgs, “Military-Economic Fascism.”
57 St. Clair,
Grand Theft Pentagon, 187.
58 Robert Higgs, “Military Spending/Gross Domestic Product = Nonsense for Budget Policymaking,”
Independent Review 13 (Summer 2008): 149.
59 William S. Lind, “The Navy,” in Wheeler, ed.,
America’s Defense Meltdown, 122.
60 Winslow T. Wheeler, “Understand, Then Contain America’s Out-of-Control Defense Budget,” in Wheeler, ed.,
America’s Defense Meltdown, 235.
62 Wheeler, “Understand, Then Contain America’s Out-of-Control Defense Budget,” 219-21.
65 Ibid.; Wheeler, “Understand, Then Contain America’s Out-of-Control Defense Budget,” 236.
66 Thomas Christie, “Long in Coming: The Acquisitions Train Wreck Is Here,” in Wheeler, ed.,
America’s Defense Meltdown, 195.
67 Johnson,
Dismantling the Empire, 183-84.
70 Bruce Fein,
American Empire: Before the Fall (Springfield, VA: Campaign for Liberty, 2010), 73.
71 Christopher Drew, “High Costs Weigh on Troop Debate for Afghan War,”
New York Times, November 14, 2009.
73 Fein,
American Empire: Before the Fall, 16.
77 Ron Paul,
The Revolution: A Manifesto (New York: Grand Central, 2008), ix-x.
78 Osama bin Laden, “Address to the American People,” October 29, 2004, in
Jihad: Bin Laden in His Own Words, ed. Brad K. Berner (New Delhi: Peacock Books, 2007), 256.
81 A good if provocative place to start is Bill Kauffman,
Ain’t My America: The Long, Noble History of Antiwar Conservatism and Middle-American Anti-Imperialism (New York: Henry Holt, 2008); see also Justin Raimondo,
Reclaiming the American Right: The Lost Legacy of the Conservative Movement (Burlingame, CA: Center for Libertarian Studies, 1993).
82 George H. Nash,
The Conservative Intellectual Movement in America Since 1945 (New York: Basic Books, 1976); Thomas E. Woods, Jr., “American Conservatism and the Old Republic,”
Modern Age 49 (Fall 2007): 434-42.
83 Russell Kirk and James McClellan,
The Political Principles of Robert A. Taft (New York: Fleet Press, 1967), 163.
84 Richard M. Weaver, “The South and the American Union,” in
The Southern Essays of Richard M. Weaver, eds. George M. Curtis III and James J. Thompson, Jr. (Indianapolis: Liberty Press, 1987), 247.
85 Robert Nisbet,
Conservatism: Dream and Reality (Minneapolis: University of Minnesota Press, 1986), 103.
86 Robert Nisbet,
Twilight of Authority (Indianapolis: Liberty Press, 2000 [1975]), 174. On Nisbet, militarism, and conservatism, see Thomas E. Woods, Jr., “Twilight of Conservatism,”
The American Conservative, December 5, 2005, available at
http://www.amconmag.com/article/2005/dec/05/00017/
CHAPTER 6
1 R. M. Hartwell, “The Standard of Living Controversy: A Summary,” in
The Industrial Revolution, ed. R. M. Hartwell (New York: Barnes & Noble, 1970), 178.
2 Johan Norberg,
In Defense of Global Capitalism (Washington, D.C.: Cato Institute, 2003), 26, 29, 31.
3 John Larrivee, “It’s Not the Markets, It’s the Morals: How Excessively Blaming Markets Undermines Civil Society,” in
Back on the Road to Serfdom: The Resurgence of Statism, ed. Thomas E. Woods, Jr. (Wilmington, DE: Intercollegiate Studies Institute, 2010).
6 What follows is indebted to George Reisman,
Capitalism (Ottawa, IL: Jameson Books, 1996), ch. 14.
7 Of course, if the public demands only 3,000 or even the original 1,000 widgets, then still less labor will be necessary in this line of production, and more will be released for the production of other goods.
8 See W. Michael Cox and Richard Alm,
Myths of Rich and Poor: Why We’re Better Off Than We Think (New York: Basic Books, 1999).
9 Some have tried to argue that the decision to take a factory job was not in fact a free one, and that the enclosure movement had actually forced people into factory work. This claim is false. See Walter Block, Marcus Epstein, and Thomas E. Woods, Jr., “Chesterton and Belloc: A Critique,”
Independent Review 11 (Spring 2007): 579-94.
11 I owe this formulation to economist David R. Henderson.
12 Ludwig von Mises,
Human Action: A Treatise on Economics (Auburn, AL: Ludwig von Mises Institute, 1998 [1949]), 615.
13 Cited in Jim Rose, “Child Labor, Family Income, and the Uruguay Round,”
Quarterly Journal of Austrian Economics 1 (Winter 1998): 78.
15 Norberg,
In Defense of Global Capitalism, 199.
17 Theda Skocpol, “America’s First Social Security System: The Expansion of Benefits for Civil War Veterans,” in Theda Skocpol,
Social Policy in the United States: Future Possibilities in Historical Perspective (Princeton: Princeton University Press, 1995), 63; cited in Robert Higgs, “The Welfare State and the Promise of Protection,” Mises Daily, August 24, 2009, available at
http://mises.org/daily/3634 18 Charles Murray,
Losing Ground: American Social Policy 1950-1980, 10th anniversary ed. (New York: Basic Books, 1994), 58.
20 David T. Beito,
From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967 (Chapel Hill: University of North Carolina Press, 2000); Marvin Olasky,
The Tragedy of American Compassion (Washington, D.C.: Regnery Gateway, 1992).
21 James Rolph Edwards, “The Costs of Public Income Redistribution and Private Charity,”
Journal of Libertarian Studies 21 (Summer 2007): 8-9.
22 Thanks to Professor Anthony Carilli of Hampden-Sydney College for relating this incident.
23 Alexis de Tocqueville,
Democracy in America, vol. II, trans. Henry Reeve (New York: Colonial Press, 1900 [1840]), 114-15.
24 Charles Murray,
In Pursuit: Of Happiness and Good Government (New York: Simon & Schuster, 1989).
26 Edwards, “Costs of Public Income Redistribution,” 13.
27 Sheldon Richman,
Tethered Citizens: Time to Repeal the Welfare State (Fairfax, VA: Future of Freedom Foundation, 2001), 94.
29 James L. Payne,
Overcoming Welfare (New York: Basic Books, 1998), 72-73.
30 Howard Husock,
America’s Trillion-Dollar Housing Mistake: The Failure of American Housing Policy (Chicago: Ivan R. Dee, 2003), 15-17, 99.
33 On the problems and fallacies of Section 8, see ibid., ch. 3.
34 Chris Edwards and Tad DeHaven, “Department of Housing and Urban Development : Proposed Spending Cuts,” available at
http://www.downsizinggovernment. org/hud/spending-cuts
35 This and the anecdotes and statistics that follow are drawn, unless otherwise indicated, from Kathy Kristof, “The Great College Hoax,”
Forbes, February 2, 2009.
37 Ron Lieber, “Placing the Blame as Students Are Buried in Debt,”
New York Times, May 28, 2010.
38 See Gary Wolfram, “Making College More Expensive: The Unintended Consequences of Federal Tuition Aid,” Cato Institute
Policy Analysis, January 25, 2005.
40 Neal McCluskey, “Higher Education Policy,” in
Cato Handbook for Policymakers , 7th ed. (Washington, D.C.: Cato Institute, 2008), 238.
41 Miguel Palacios, “Human Capital Contracts: ‘Equity-Like’ Instruments for Financing Higher Education,” Cato Institute
Policy Analysis, December 16, 2002, available at
http://www.cato.org/pubs/pas/pa462.pdf 42 Neal P. McCluskey,
Feds in the Classroom (Lanham, MD: Rowman & Littlefield, 2007), 116.
43 McCluskey, “Higher Education Policy,” 238.
44 McCluskey,
Feds in the Classroom, 52.
46 Ron Paul,
The Revolution: A Manifesto (New York: Grand Central, 2008), 76-77.
47 William C. Mitchell and Randy T. Simmons,
Beyond Politics: Markets, Welfare, and the Failure of Bureaucracy (Boulder, CO.: Westview Press, 1994), 62.
48 Fredrik Reinfeldt, “The New Swedish Model: A Reform Agenda for Growth and the Environment,” speech delivered at the London School of Economics, February 26, 2008.
53 Per Bylund, correspondence with the author, November 8, 2010.
54 This discussion of these entrepreneurs is indebted to Larry Schweikart,
The Entrepreneurial Adventure: A History of Business in the United States (Fort Worth: Harcourt College Publishers, 1999); and Burton W. Folsom,
The Myth of the Robber Barons: A New Look at the Rise of Big Business in America (Herndon, VA: Young America’s Foundation, 1991).
55 Thomas J. DiLorenzo, “The Origins of Antitrust: An Interest-Group Perspective,”
International Review of Law and Economics 5 (June 1985): 73-90.
56 Gabriel Kolko,
The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916 (New York: Free Press, 1963), 5, 40-41.
59 Alfred D. Chandler, Jr.,
Strategy and Structure: Chapters in the History of the American Industrial Enterprise (Cambridge: Massachusetts Institute of Technology, 1962), 32-33.
60 Murray N. Rothbard,
The Betrayal of the American Right, ed. Thomas E. Woods, Jr. (Auburn, AL: Ludwig von Mises Institute, 2007), 22.
61 Butler Shaffer’s important study
In Restraint of Trade: The Business Campaign Against Competition, 1918-1938 (Lewisburg, PA: Bucknell University Press, 1997) provides all the details.
62 DiLorenzo, “The Origins of Antitrust,” 82.
63 Reisman,
Capitalism, 399-408.
64 Thomas J. DiLorenzo,
How Capitalism Saved America (New York: Crown Forum, 2004), 220-22.
65 Steve Forbes and Elizabeth Ames,
How Capitalism Will Save Us (New York: Crown Business, 2009), 200.
67 Walter Adams, “The Role of Competition in the Regulated Industries,” in
Antitrust, the Market, and the State: The Contributions of Walter Adams, eds. James W. Brock and Kenneth G. Elzinga (Armonk, NY: M.E. Sharpe, 1991), 96.
68 On the nonskeds, see Mary Bennett Peterson,
The Regulated Consumer (Ottawa, IL: Green Hill, 1971), 136-37; Murray N. Rothbard, “Monopoly and Competition,” lecture delivered at Brooklyn Polytechnic University, 1986; lecture series available at
http://mises.org/media.aspx?action=category&ID=218 69 “Aviation: Death Edict?”
Time, April 9, 1951.
70 Johan Norberg,
Financial Fiasco (Washington, D.C.: Cato Institute, 2009), 133.
71 Alan Reynolds, “The Sarbanes-Oxley Tax,”
Investor’s Business Daily, March 14, 2005.
72 Forbes and Ames,
How Capitalism Will Save Us, 182-84.
73 Reynolds, “Sarbanes-Oxley Tax.”
74 Sam Peltzman, “The Effects of Automobile Safety Regulation,”
Journal of Political Economy 83 (August 1975): 677-726. Peltzman wrote in 2004, summarizing the work of Alma Cohen and Liran Einav, that “the actual effect of the safety regulation on the death rate is substantially less than it would be if real people behaved like crash dummies….The real-world effect of these laws on highway mortality is substantially less than it should be if there was no offsetting behavior. They conclude that the increased belt usage occasioned by these laws should, in the absence of any behavioral response, have saved more than three times as many lives as were in fact saved.” Sam Peltzman,
Regulation and the Natural Progress of Opulence (Washington, D.C.: AEI-Brookings Joint Center for Regulatory Studies, 2005), 7.
75 Clive Thompson, “Bicycle Helmets Put You at Risk,”
New York Times, December 10, 2006.
76 Thomas J. Kniesner and John D. Leeth, “Abolishing OSHA,”
Regulation, no. 4, 1995, 49.
78 Ibid., 55. Worker’s comp programs are enforced by government, to be sure, though here again we are simply faced with the common government practice of reducing people’s take-home pay and imposing on them a particular configuration of pay and benefits instead of allowing them to decide for themselves.
79 Raymond J. Keating, “Warning: OSHA Can Be Hazardous to Your Health,”
The Freeman, March 1996.
80 Peltzman,
Regulation and the Natural Progress of Opulence, 4.
82 Robert P. Murphy,
Chaos Theory (New York: RJ Communications, 2002), 26-27.
83 Randall G. Holcombe,
Public Policy and the Quality of Life: Market Incentives Versus Government Planning (Westport, CT: Greenwood, 1995), 116.
85 Glenn Sonnedecker, “Contribution of the Pharmaceutical Profession toward Controlling the Quality of Drugs in the Nineteenth Century,” in
Safeguarding the Public: Historical Aspects of Medicinal Drug Control, ed. J. B. Blake (Baltimore: Johns Hopkins University Press, 1970), 97-111; cited at FDAReview. org,
http://www.fdareview.org/voluntary_assurance.shtml 86 On Unocal, see Timothy P. Carney,
The Big Ripoff: How Big Business and Big Government Steal Your Money (Hoboken, NJ: Wiley, 2006), 177-80.
88 Herbert Brean, “Discount Houses Stir Up a $5 Billion Fuss,”
Life, August 9, 1954, 58.
92 I am indebted for this discussion of the estate tax to Carney,
The Big Ripoff, 164-68.
93 Peltzman,
Regulation and the Natural Progress of Opulence, 8. This discussion is indebted to the Peltzman treatment of the subject.
96 For how pollution and other environmental issues would be addressed in a free society, see Murray N. Rothbard, “Law, Property Rights, and Air Pollution,”
Cato Journal 2 (Spring 1982): 55-99, available at
http://mises.org/daily/2120 97 This discussion of science is derived from Terence Kealey,
The Economic Laws of Scientific Research (New York: St. Martin’s, 1996). On the displacement of private funding by government funding, see 240ff. On this general subject, see also William N. Butos and Thomas J. McQuade, “Government and Science: A Dangerous Liaison?”
Independent Review 11 (Fall 2006): 177-208.
98 Kealey,
The Economic Laws of Scientific Research, 80.
99 Ibid., 240ff. The remainder of this discussion draws on the Kealey text.
101 Tom Bethell,
The Politically Incorrect Guide to Science (Washington, D.C.: Regnery, 2006).
102 People worry about the confluence of drug use and violence, but alcohol use leads to millions of acts of violence every year, and is a major contributing factor to domestic abuse, sexual assault, and murder. A recent study finds alcohol to be the most lethal drug overall. See Associated Press, “Study: Alcohol More Lethal than Heroin, Cocaine,” November 1, 2010, available at
http://www.rawstory.com/rs/2010/11/study-alcohol-lethal-heroin-cocaine/; Steve Fox, Paul Armentano, and Mason Tvert,
Marijuana Is Safer: So Why Are We Driving People to Drink? (White River Junction, VT: Chelsea Green, 2009), x. Thanks to Mark Thornton for this latter reference.
105 This is the contention of economist Bruce L. Benson. Joel Miller,
Bad Trip (Nashville, Tenn.: WND Books, 2004), 20-21.
107 Judge James P. Gray,
Why Our Drug Laws Have Failed and What We Can Do About It: A Judicial Indictment of the War on Drugs (Philadelphia: Temple University Press, 2001), 23.
109 Miller,
Bad Trip, 88-89; Gray,
Drug Laws, 95-96.
110 Miller,
Bad Trip, 37-38.
112 Ibid., 126-27; Gray,
Drug Laws, 118.
113 Miller,
Bad Trip, 28-29.
114 Gray,
Drug Laws, 51-52.
115 General Accounting Office, “Drug Control: Heavy Investment in Military Surveillance Is Not Paying Off,” September 1993, 18.
116 Miller,
Bad Trip, 85.
117 Liz Szabo, “Prescriptions Now Biggest Cause of Fatal Drug Overdoses,”
USA Today, September 30, 2010; Katherine Harmon, “Prescription Drug Deaths Increase Dramatically,”
Scientific American, April 6, 2010; see also Marrecca Fiore, “CDC: Prescription Drug Deaths Increase Sharply,” AOL Health, June 17, 2010, available at
http://www.aolhealth.com/2010/06/17/cdc-prescriptiondrugs-send-as-many-to-er-as-illegal-drugs/. According to the federal government, “6.9 million individuals aged 12 or older were current (past month) nonmedical users of prescription-type psychotherapeutic drugs (opioid pain relievers, tranquilizers, sedatives, or stimulants) during 2007.” National Drug Intelligence Center, National Prescription Drug Threat Assessment 2009, April 2009, available at
http://www.justice.gov/ndic/pubs33/33775/execsum.htm.Internal footnote omitted.
118 Gray,
Drug Laws, 157-58.
120 Maia Szalavitz, “Drugs in Portugal: Did Decriminalization Work?”
Time, April 26, 2009.
122 Gray,
Drug Laws, 29-30.
124 Miller,
Bad Trip, 166-67.
133 Miller,
Bad Trip, 179-80.
CHAPTER 7
1 Michael D. Tanner,
Leviathan on the Right: How Big Government Conservatism Brought Down the Republican Revolution (Washington, D.C.: Cato Institute, 2007), 167.
3 David Brooks, “How to Reinvent the GOP,”
New York Times Magazine, August 29, 2004.
4 Tanner,
Leviathan on the Right, 56-57; Dana Milbank, “Kerry and Gingrich Hugging Trees—and (Almost) Each Other,”
Washington Post, April 11, 2007.
5 Peter G. Peterson,
Running on Empty (New York: Farrar, Straus and Giroux, 2004), 108.
6 W. James Antle, III, “Republicans Against Repeal,”
American Spectator, April 8, 2010.
8 John J. DiIulio and Donald F. Kettl,
Fine Print: The Contract with America, Devolution, and the Administrative Realities of American Federalism (Washington, D.C.: Brookings Institution, 1995), 60.
9 That is not to say that analyses of particular programs in order to justify their elimination are unwelcome; many of them have much to teach us. In this genre I like Martin L. Buchanan,
To Save America: How to Prevent Our Coming Federal Bankruptcy (BookSurge, 2007).
11 An occasional critic has tried to claim that although the original 13 states may indeed have created the federal government, the later 37 were themselves created by the federal government. This is a misconception. An American state is created by the people, not the federal government. Jefferson himself amplified this point in the controversy over the admission of Missouri. The people of Missouri had drafted a constitution and were applying for admission to the Union. Were they not admitted, Jefferson told them, they would be an independent state. In other words,
their statehood derived from their sovereign people and its drafting of a constitution, not the approval of the federal government.
12 Professor Barnett initially proposed a vote of three-fourths of the states, but accepted two-thirds as a friendly amendment in a roundtable discussion on the Mike Church Show (Sirius/XM) in early 2010.
13 I believe it was Professor Marshall DeRosa of Florida Atlantic University who first proposed a constitutional amendment whereby a federal law would be repealed if a simple majority of the state attorneys general found it unconstitutional.
14 See Thomas E. Woods, Jr.,
33 Questions About American History You’re Not Supposed to Ask (New York: Crown Forum, 2007), ch. 28; Clay S. Conrad,
Jury Nullification: The Evolution of a Doctrine (Durham, NC: Carolina Academic Press, 1998).
15 Hampden (pseud.),
The Genuine Book of Nullification (Charleston, SC: E.J. Van Brunt, 1831), 1. Emphasis added.
20 Robert Nozick,
Anarchy, State, and Utopia (New York: Basic Books, 1974), 290-92.
21 Niall Ferguson, “America, the Fragile Empire,”
Dallas Morning News, March 19, 2010.