Monday, January 21, 2019

The Shutdown and Liberty - by Gary North

If President Trump holds firm on the shutdown until January 20, 2021, he will have struck the greatest blow for liberty and against bureaucracy in American political history.
To achieve this, all that he has to do is nothing.
In doing this, he will have overturned a classic slogan of American politics: "You can't beat something with nothing."
Trump is exercising his legitimate constitutional right to do nothing. All he has to do is do nothing until January 20, 2021.
These days, Congress does not get around to passing a real budget. It just keeps passing budget extensions that last a couple of months. There is not enough agreement in Congress to produce an annual budget any longer. Gridlock is here.
These extensions are called continuing resolutions. They are now permanent. Wikipedia reports:
Between fiscal year 1977 and fiscal year 2015, Congress only passed all twelve regular appropriations bills on time in four years - fiscal years 1977, 1989, 1995, and 1997.
Between 1980 and 2013, there were eight government shutdowns in the United States. Most of these shutdowns revolved around budget issues including fights over the debt ceiling and led to the furlough of certain 'non-essential' personnel. The majority of these fights lasted 1–2 days with a few exceptions lasting more than a week.
The article provides a list of these continuing resolutions since 2001. It goes on for pages.
Congress will to have to agree on a budget extension in order to put a bill on Trump's desk. This is highly unlikely today. The government has entered gridlock. This will not change for two years. If, somehow, it passes a continuing resolution, he will have the option of vetoing that bill. If he vetoes it, it will take a two-thirds vote of both houses of Congress to override his veto. The House may do this, but the Senate probably will not do it, at least not the first time he vetoes a bill. So, all that Trump has to do is nothing. It is legal. It is constitutional. It may be bad politics, but it is good economics. It is good for liberty. The longer the shutdown goes on, the more that the federal government will be disrupted. That surely would be good for liberty.
The Democrats in Congress are not going to budge on their refusal to fund Trump's wall. My assumption is that he will back down. But he is going to delay this as long as he can, emotionally speaking. Pressures will be brought on him from Republicans, especially in the Senate, to back down. The political consequences of shutting down parts of the government would probably be catastrophic for the Republicans in 2020. The Federal Reserve's engineered recession will hit, and the Keynesian media will blame the shutdown. But he seems not to care for now.
The partial shutdown of the federal government began on December 22. Have you noticed any difference in your life? I notice no difference whatsoever in mine. Only if you are a government employee are you feeling any pain.
A small fraction of the government has actually been shut down. There are 800,000 civilian employees on unpaid leave, but most of them are still coming to work. There are about two million civilian employees of the U.S. government.
The FBI, the CIA, and the intelligence agencies are still on duty and being paid.
Employees of the TSA have been furloughed. But most of them are coming to work on the assumption that they will eventually receive their presently frozen salaries. About 50,000 IRS agents have been called back to work at no pay. In short, the federal government is treating its workers like dirt. It is making promises to these workers that may not be able to be fulfilled for months. "Trust us!" It all depends on how long Trump and the Democrats decide to play chicken with each other.
If it goes on for several months, tens of thousands of these workers are going to take other employment offers. They will not have any choice in the matter. They have to pay the bills. They're going to get jobs that do not pay anywhere near as much money as the federal government pays. They're going to have to re-enter productive society. I am reminded of the scene in Ghostbusters where the main characters are fired from the university. Harold Ramis' character is unconcerned. Their scientific work will go on! Dan Ackroyd's character is worried.
Personally, I liked the university. They gave us money and facilities. We didn't have to produce anything! You've never been out of college. You don't know what it's like out there. I've worked in the private sector. They expect results.
The great threat to the federal government today, which includes Congress, is the threat that the American public will not notice any significant disruption of their lives because of the furlough of 800,000 workers. The disruptions lie ahead. With respect to the furloughs of the employees of the Internal Revenue Service, there could be serious disruptions of the government's plans if these people don't come back to work within the next four months. It will disrupt the collection of taxes.
This would not be as great a threat as it is, had the government ever been able to revamp its computer system. But that modernization program has been going on for at least 25 years, and it has not led to any significant improvement of the IRS computer system, which is left over from the 1960's. This is one of my favorite headlines of all time. It is from 1997. IRS admits its $4 billion modernizing is a failure. Official says computers don't work; agency wants to contract out tax returns.
The longer that the shutdown goes on, the more unpopular Trump will get. That is not my concern. Not discussed by the mainstream media and most of the other media outlets is the fact that most Americans will not notice that these people are not working any longer. Some of them ought to be out of work. Their departments ought to be shut down. We don't know how many departments there are in the federal government. There has never been a detailed survey of how many departments there are, and how many employees are in each department. The government is not interested in releasing that particular statistic.
The government collects statistics. It collects all kinds of statistics. It collects them by using taxpayers' money. It forces Americans to reveal this information, under penalty of fines or even arrest. It collects information on all those aspects of American life that the government wants to control or might want to control in the future. But it does not collect statistics on those aspects of the federal bureaucracy that some rogue Congressmen might use to embarrass a particular agency. Example: the budgets of the CIA and NSA.
Back in 1961, a then-unknown economist named Murray Rothbard wrote an article for the Foundation for Economic Education (FEE). It was published in an annual collection that FEE released: Essays in Liberty. Its title: "Statistics: Achilles' Heel of Government." It is posted here. It was one of the finest articles Rothbard ever wrote. It was important for two reasons. First, it attacked an area of government expenditure that was almost universally accepted as legitimate in 1961. (Sadly, it is equally accepted today.) He was making a point: sometimes things the government does that seem to be beneficial are in fact threats to liberty. Second, he made the point that the statistics are used for the purposes of government control. He wrote: "Statistics are the eyes and ears of the bureaucrat, the politician, the socialistic reformer. Only by statistics can they know, or at least have any idea about, what is going on in the economy."
Certainly, only by statistics, can the federal government make even a fitful attempt to plan, regulate, control, or reform various industries — or impose central planning and socialization on the entire economic system. If the government received no railroad statistics, for example, how in the world could it even start to regulate railroad rates, finances, and other affairs? How could the government impose price controls if it didn't even know what goods have been sold on the market, and what prices were prevailing? Statistics, to repeat, are the eyes and ears of the interventionists: of the intellectual reformer, the politician, and the government bureaucrat. Cut off those eyes and ears, destroy those crucial guidelines to knowledge, and the whole threat of government intervention is almost completely eliminated.
Third, the government's statistics provide an illusion: the illusion that the government can rationally and scientifically plan the general economy, or intervene into the economy to make things better for the average citizen. If the government did not have access to comprehensive statistics beyond what private industry collects, and which private industry can legally refuse to supply to the government as a matter of property rights, the government could not use the argument that it has the superior knowledge necessary for directing an entire industry or the entire economy. This would remove an extremely important reason for the public to believe in the legitimacy of government economic planning.
It is true, of course, that even deprived of all statistical knowledge of the nation’s affairs, the government could still try to intervene, to tax and subsidize, to regulate and control. It could try to subsidize the aged even without having the slightest idea of how many aged there are and where they are located; it could try to regulate an industry without even knowing how many firms there are or any other basic facts of the industry; it could try to regulate the business cycle without even knowing whether prices or business activity are going up or down. It could try, but it would not get very far. The utter chaos would be too patent and too evident even for the bureaucracy, and certainly for the citizens. And this is especially true since one of the major reasons put forth for government intervention is that it “corrects” the market, and makes the market and the economy more rational. Obviously, if the government were deprived of all knowledge whatever of economic affairs, there could not even be a pretense of rationality in government intervention.
Rothbard concluded his article with these words:
Thus, in all the host of measures that have been proposed over the years to check and limit government or to repeal its interventions, the simple and unspectacular abolition of government statistics would probably be the most thorough and most effective. Statistics, so vital to statism, its namesake, is also the State's Achilles' heel.
This is a strong statement. I don't think any libertarian or conservative would have made this argument prior to Rothbard's article. With the magnitude of the total government being so great, and the money allocated to gather statistics so minimal, and the intrusion of the government seeming so be minimal, no conservative or libertarian would have argued that this really is the Achilles' heel of government. Achilles' heel was his only vulnerable spot. Over the decades, I have come to appreciate his argument. I have written about this before. You can read my article here:
How large a chunk of the federal budget are we talking about? Wikipedia reports:
As of fiscal year 2013 (FY13), the 13 principal statistical agencies have statistical activities as their core mission and conduct much of the government’s statistical work. A further 89 federal agencies were appropriated at least $500,000 of statistical work in FY11, FY12, or FY13 in conjunction with their primary missions. All together, the total budget allocated to the Federal Statistical System is estimated to be $6.7 billion for FY13.
In terms of the federal budget of $4.4 trillion, $6.7 billion is chump change -- a statistical rounding error. Yet if the government ceased collecting all of this information, that would cripple the government more per dollar cut than any other budget reduction. Other agencies would undoubtedly absorb most of the employees in these 102 agencies, but if that funding was not permitted by the government, the government really would begin to unravel. It would no longer be able to tell the public plausibly that it had the power to regulate the economy.
MarketWatch lists the dozens of economic reports that are published every week or month. I'm sure this is not a complete list, but it is extensive. It notes the reports that may be delayed because of the shutdown. There are about 10 of them. I'm sure there are others that will not be released. In terms of the overall collection of statistical data, these reports are marginal. But I will take what I can get. That is to say, I will rejoice in what I cannot get.
The statistics-gathering agencies are easy targets for cutbacks. The voters will not miss them. Meanwhile, nobody in Washington understands the centrality of statistics collection today. It is not economically relevant. But it is highly relevant with respect to producing the fig leaf that provides the illusion of scientific central planning. The sooner that this illusion comes to an end, the better for liberty.