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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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Where’s That Cliff?


Have you noticed that all that fear-mongering among the statists regarding the fiscal cliff is starting to diminish? That’s because they are now coming to the realization that their fear-mongering might not succeed in driving Congress and the president into making a deal that would avoid the fiscal cliff. Given that the fiscal cliff is almost upon us, the statists are now hedging their bets and saying, “Well, maybe the fall isn’t going to be that big a deal after all.”

It’s really all quite humorous. Here’s what Wikipedia says about federal spending under that scary fiscal cliff:

During 2013, defense and non-defense discretionary spending would be maintained around 2012 levels due to the sequester. However, the spending begins to rise thereafter, but not at the pace projected prior to the sequester. In other words, the trajectory of spending increases is reduced, but spending is not frozen at 2012 levels. Defense and non-defense discretionary spending increases from 2013–2021 would be about 1.5% annually, significantly below the prior decade.

So, that’s what all the fuss is about — not a real cut in spending but rather a smaller increase in federal spending than what federal officials had hoped for.

Big deal.

And now you’ve got federal officials playing hard ball with the American taxpayers, essentially saying to them: “We are entitled to your money — as much of it as we want to take. If you don’t give us the increase in federal spending that we want and instead try to give us a smaller increase than we want, we will eliminate the ‘services’ that are most important to you.”

But let’s look at things in terms of the big picture — the entire welfare-warfare state way of life that statists have foisted upon our nation for the past several decades. If statists are bellyaching and crying over a smaller increase in federal spending than what they had planned for, how would they react to the total dismantling of the entire welfare-warfare state apparatus, which is what we libertarians call for?

They would undoubtedly scream in severe panic: “Giant recession! Great depression! National security! Extremism!”

You see, the way they look at it, when federal employees are laid off and federal programs terminated, that’s bad for “the economy.”

Nothing could be further from the truth.  In fact, statist reasoning is the height of economic idiocy.

Consider the following hypothetical. Suppose the federal government employed 50 percent of the citizenry in some capacity. No, let’s go higher. Let’s go to 95 percent. The result, of course, would be that people would be suffering from poverty and maybe even starvation, as they are in Cuba and North Korea, where at least 95 percent of the citizenry work for the government.

Along come libertarians and convince the government to lay off 90 percent of the federal workforce.

Statists would go ballistic. They would exclaim: “Mass unemployment! The economy will suffer! Don’t do it. Hire even more federal workers! Implement even more federal programs!”

But the statist position is ludicrous. All those federal workers are not an economic benefit to a society. They are an economic burden on society. Their pay depends on the confiscation of money from people in the private sector, who produce the wealth. Thus, laying off people in the federal sector means less money being confiscated from those in the private sector.

The way to look at this is not as if the federal government is just another “player” in the economy, as statists maintain. The way to look at it is that there are two sectors: the parasitic sector, which is the public sector, and the wealth-producing sector, which is the private sector.

Thus, if the parasitic sector is reduced, then the wealth-producing sector keeps more of its wealth. Why is that an important benefit to society? Because that’s the key to a higher standard of living! Private-sector wealth means capital, which means better tools and equipment, which means higher productivity, which means higher revenues, profits, wage rates, and standards of living.

But that’s not the only benefit of reducing the federal sector. Another benefit is that it shifts people out of the parasitic, wealth-consuming sector into the private, wealth-producing sector. So, now you have more people producing more wealth, which means even higher productivity, revenues, profits, wage rates, and standards of living.

So, when statists say that laying off all those federal workers and terminating all those federal programs mean a “recession” or “depression,” what they mean is that those workers in the parasitic sector will lose their federal jobs or federal contracts and have to shift over to new jobs and projects in the private, wealth-producing sector.

So, yes, it’s true that dismantling the welfare-warfare state would definitely mean that thousands of people would lose their jobs and income in the federal government sector and that thousands of companies that are currently on the federal dole might well go out of business.

But at the same time, there will be countless opportunities opening up in the private sector because people there will now have all that extra money that is no longer being confiscated from them. And all those people formerly in the parasitic sector will now be contributing to the creation of wealth in the private sector.

Think of Cuba and North Korea. The welfare-warfare state way of life, which employs most of the citizenry in the parasitic sector, has brought nothing but misery and impoverishment to those two nations. It would make sense to immediately lay off 95 percent of the federal welfare-warfare workforce and immediately terminate all the welfare-warfare state programs in those two countries. That would bring an immediate vitality to the economy, not to mention economic liberty to the long-suffering people of North Korea and Cuba.

Now think of the United States. It would make sense to do the same thing here.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.