Von Mises Institute Part IV

The final presentation, “Rothbard’s Economics of Taxation: Where the Mainstream Went Wrong” was a lecture by Mr. DiLorenzo about the common justifications for taxation. He started by paraphrasing John C. Calhoun’s idea that taxes create two classes of people/institutions. The first is the “tax payer” who funds government programs and the second is the “tax eater” who benefits as a result of the redistribution of wealth. Calhoun echoed Franklin's sentiment on my first post claiming that taxation would inevitably lead to class warfare and the end of our Republic. Calhoun also disparaged what he referred to as “naïve defenders of the Constitution”. Calhoun said that people who just trusted the government to adhere to the letter of the law would be very disappointed. Any statist can use demagoguery to encite the voting majority and find a way around restrictions. I say that totalitarians can only exist as parasites. The totalitarian parasite, be it a democratically elected totalitarian like Hitler or a despot like Hussein, depends on the revenue it drains out of its populace. What would a tax revolt do to a despotic regime? Speaking of demagoguery, Mr. DiLorenzo took the opportunity to levy an insult against President Bush. I do not support the President, but I found his remark inappropriate and, to use his term a "low" blow.
Moving on, he showed how Rothbard’s work debunked some economic theories used to justify taxation such as the idea of “public goods” or externalities. The main reason used to tax people to pay for "public goods" or externalities is because we want to eliminate problems like moral hazard or free riders. He asked if the minor problems of moral hazard or free riding exceed the problems that our tax and spend policies have created like the looming Social Security and Medicare shortfalls and our national debt. Using taxation to "solve" these problems has only created even larger problems for us to deal with. When discussing the definition of public goods he asked what is meant by “volunteerism”. Each of us may be tempted (under a free system) to leave the costs of public goods to our neighbors. In other words, we are content to let someone else pay for the costs of clean air, trash removal, and other so-called public goods. Thus, the community argues that taxation should be forced upon all of its members to ensure that we each pay our "fair share" for the benefits we receive. Statists argue that this is voluntary since the “community” came to this decision. However, Rothbard argued, if the effort is voluntary, how come there are police and courts used to punish people who do not participate? In addition, Statists hide behind the idea of democracy to justify their actions. Of course, people can change policy by electing different representatives the next election. However, then all we end up with are large interest groups fighting it out to avoid being the "tax payers" in hopes of becoming "tax eaters". Readers of my blog know that my position (based on personal experience) on democracy can be summed up in two words: mob rule. Just because I choose to participate in the democratic process does not mean I have “volunteered” to participate in whatever program the community deems in its own best interest. DiLorenzo provided the example of a sailor who has been conscripted to serve in the navy to benefit his community (a national draft - either for volunteer (Kerry's plan) or military service). His service is not made voluntary just because he does not jump off the ship and commit suicide. His mere presence on the ship everyday does not mean he gave his consent to be there. Such is the case with “community decisions”. Rothbard claims that the only a unanimous decision creates real volunteerism. Furthermore, Rothbard claims that a true majority rarely exists in policy making anymore. Instead what comes out of our capital, state house, or local government are “package deals” (see earlier discussion on the 17th Amendment). Minority representatives trade their votes now in exchange for support on their own issues later (this was made much easier by the direct election of Senators who are now no longer responsible to their state legislatures). The policy that emerges is a combination of things the minority is willing to sacrifice now in order to (hopefully) achieve something else in the future.

Let me summarize the conference quickly. The conference did make me want to learn more about some issues, but I do not feel as if I learned anything new during the presentation. However, I did feel some validation of my previous research. I asked my wife to acquire a copy of the Constitution of the Confederate States of America for me as a Christmas present so I can read some of the “free trade” items that were included. I also had purchased Mr. DiLorenzo’s book about Lincoln and now I am very interested in reading it and will move it up in my pile of things to read. I will finish the Federalist Papers and Cato Letters first. Although my comments may seem overly critical (perhaps due to government tax policy on good reviews), I want to state that I am very glad that I attended the conference and I hope the Von Mises Institute continues to provide free presentations to those who are interested in listening. A tax revolt would be a good thing for this country, but it needs a proper moral and intellectual basis. The elements of the intellectual basis were presented in the conference, but in an unorganized way. The moral arguments were lost in attempting to portray southerners as “free traders” when, in fact, their economy was primarily based on the involuntary servitude of their fellow man.

J. Thyme Matz