In this week’s Acton Commentary, “Do Less with Less: What the History of Federal Debt and Tax Leverage Teaches,” I reflect on how the federal government has lived beyond its means for decades. This reality is especially important to recognize as we approach Tax Day this year as well as in the context of debates about how to address the public debt crisis.

There are many who think we need to raise taxes in order to close the historic levels of deficit spending. In theory I would consider raising taxes as a viable option, or at least preferable to continued deficit spending, since it would at least make the real cost of government more visible. Roughly 40% of what the government spent last year was beyond what it took in.

But without structural connections between increased taxes and balancing the budget, there’s nothing at all to give us hope that the government wouldn’t simply continue to leverage the greater revenue into greater deficit spending. In this vein I note the conclusions recently updated by Richard Vedder and Stephen Moore, that “over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.”

Calvin College philosophy professor James K. A. Smith doesn’t take this reality into account, I don’t think, when he recently argued that the current situation calls for raising taxes, both on the rich and the middle-class. Thus, he writes,

But only a lazy, unimaginative take on this would assume that “low taxes” is a given. So sure, one strategy to reduce debt would be to slash spending, which inevitably happens on the backs of the poor and vulnerable, particularly women and children.

The alternative to such an unattractive option as Smith sees it is to raise taxes, particularly on the rich. Smith thus points to the idea that America needs to adopt a “graduated tax like most other North American countries.”

The fact is, though, that the US already has a progressive tax system, and indeed places a much higher relative burden on the top decile of household incomes than other developed nations.

One of the next big fights will be over raising the debt ceiling, as Smith points out. Perhaps we can link balanced budgets with increases on the debt ceiling (something more feasible than passing a balanced budget amendment). The idea would be that we only increase the debt ceiling on the condition balancing the annual budget, and that we only think about raising taxes to balance that budget if we actually commit to balancing it.

Simply raising taxes won’t do anything but give the federal government more money to leverage into higher levels of deficit spending.

Blog author: lglinzak
Tuesday, April 12, 2011
By

It sounds draconian and contrary to the beliefs of many humanitarian organizations, including the United Nations which declared water as a basic human right in 2010. However, if we expect to take the correct steps forward to solve the global water crisis, then water must be treated as a commodity not a basic human right.

In his book, The Mystery of Capital, and also in an essay published in the International Monetary Fund, Hernando de Soto explains why capitalism has failed in many third world and developing countries and continues to succeed in many Western countries.

According to De Soto, by assigning property rights, people are held accountable when any sort of damage of property is committed. Such accountability is accomplished through the legal system:

The integration of all property systems under one formal property law shifted the legitimacy of the rights of owners from the political context of local communities to the impersonal context of law. Releasing owners from restrictive local arrangements and bringing them into a more integrated legal system facilitated their accountability.

By transforming people with real property interests into accountable individuals, formal property created individuals from masses. People no longer needed to rely on neighborhood relationships or make local arrangements to protect their rights to assets. They were thus freed to explore how to generate surplus value from their own assets. But there was a price to pay: once inside a formal property system, owners lost their anonymity while their individual accountability was reinforced. People who do not pay for goods or services they have consumed can be identified, charged interest penalties, fined, and embargoed, and can have their credit ratings downgraded. Authorities are able to learn about legal infractions and dishonored contracts; they can suspend services, place liens against property, and withdraw some or all of the privileges of legal property.

While De Soto’s arguments look at property mostly as land and buildings, his principles can also be applied to water. Treating water as a commodity and granting it property rights will reduce pollution and help create more sanitary sources of water. Once water becomes a commodity, the legal system will have the justification to prosecute any industry or individual that damages the water supply because it will be destruction to property. When water is a human right, and nobody owns the rights to the water, then there is nobody to prosecute because everybody owns the water and can freely do with it as he or she pleases.

Many are familiar with the economics behind the tragedy of the commons. Just as the commons were over-used, water will be depleted if we continue down the path of treating water as a basic human right.

People will over-use water until they are faced with an enormous crisis. The UN’s call for making water a basic human right does not provide any deterrent from over-use, but instead gives people the entitlement to use as much water as they desire. By charging people for the amount of water they use, people will be more conscious of their use of water and take measures to not waste it. There is no incentive to provide free water, and without assigning property rights to it, as De Soto’s argument articulates, there is no way to legally prosecute anyone or any industry that damages or pollutes water.

Samuel Gregg also articulates the problems that come from central planning and communal ownership:

Why then do people tend to favor private over communal ownership? One reason is that they are aware, as Aristotle and Aquinas witnessed long ago, that when things are owned in common, the responsibility and accountability for their use disappears, precisely because few are willing to assume responsibility for things that they do not own. Our everyday experience reminds us of the tragedy of the commons. The early advocates of socialism were well aware of these objections. Their response was to hold that all that was needed was a change of mind and heart on the part of people as well as profound structural change: a change that would not only produce a new system of ownership, but also a “new man” — the socialist man much trumpeted by the former Soviet Union.

Furthermore, in his essay, Our Stewardship Mandate, Rev. Robert Sirico explains how integrating the market supports stewardship:

Long experience has shown that the state is a bad steward. One reason this is so is because of what has been termed the “Tragedy of the Commons.” Simply put, if everyone owns something, no one person has any incentive to protect or take care of it. This has been graphically demonstrated by the appalling reports of environmental disaster in the former communist countries. Furthermore, the state has many incentives to be a poor steward. For example, the federal government owns a great deal of forestland. These forests are supervised by the U.S. Forest service, the mission of which is to cut down trees. Because it is federally funded, the Forest Service has no market incentives to keep its enterprises cost-efficient. As a result, the forest service is logging old-growth forests with a return of pennies on the dollar. Had these forests been supervised by a private company, they would never had been touched.

Likewise, experience has shown that the market is a better steward of the environment than the state. Not only does it allow for private ownership and offer better incentives, but it allows for the expression of minority opinions in regard to land and resource use. Take, for example, the Hawk Mountain Sanctuary in eastern Pennsylvania. Located along the Appalachian migration route, it provided an ideal location for hunters to shoot thousands of hawks. Conservationist Rosalie Edge decided that those birds ought to be protected, a minority opinion at the time. In 1934 she purchased the property and prevented the hunting of the birds. It is now considered one of the best bird-watching locations in the world. Had Ms. Edge lived in a regime where property was owned by the state, she would have to convince a majority of the lawmakers, bureaucrats, and competing special-interest groups that Hawk Mountain should be a preserve, so daunting a task it is unlikely it would have happened. As it was, she only had to purchase the land.

The same principles Rev. Sirico articulates in his essay can also be applied to support stewardship in the global water crisis.

 

Is it conceivable to endorse the cinematic adaptation of Ayn Rand’s libertarian manifesto Atlas Shrugged – as I do – while rejecting the flawed ideology which inspired it?

I would argue, yes. On the one hand, I place the Beatles at the pinnacle of 1960s pop music while concluding that their song “Mr. Moonlight” is wince-inducing to the point of being unlistenable. Likewise, I admire 99.9 percent of G.K. Chesterton’s body of work yet disagree with him on his assertion only men should vote. On the other hand, I disagree for the most part with Camille Paglia’s worldview yet admire her writing style and intellectual honesty.

So it goes with Ayn Rand. Her free-market views were a welcome antidote to New Deal policies and the malignant growth of government programs and crony capitalism. And for the same reasons I warmly welcome the first installment of the planned cinematic trilogy of Rand’s Atlas Shrugged – timed to coincide with the traditional Tax Day this coming Friday – which renders her themes in such a fashion they appear ripped from the headlines of today’s Wall Street Journal.

Atlas Shrugged-Part I captures the malaise of our times in its depiction of a United States of the near future when businessmen look to government to throttle competition by any means necessary (e.g. legislation and regulation) rather than innovating and investing to succeed. Part I ignores Rand’s anti-collectivism, rampant individualism, atheism and, for the most part, libertarian libertinism, to focus on her depictions of government looters and corporate rent seekers.

All this recommends the movie to lovers of liberty properly understood, to borrow a phrase from Russell Kirk. In fact, I’ll go so far as to encourage readers to see the film and skip the book.

My problems with Rand and Objectivism, the ideology of “enlightened self-interest” she founded, go beyond the oft-quoted admonition of Whittaker Chambers in which he expressed her autocratic intransigence led him to read Rand’s command to all detractors real and perceived “to the gas chambers go!” on every page. There is some truth to Chamber’s critique, to be sure, in that any worldview that rejects faith and community eventually succumbs to obduracy leading to what Russell Kirk labeled the “chirping sect” of libertarianism (a phrase he borrowed from T.S. Eliot).

By chirping sect, Kirk intentionally references Edmund Burke’s “insects of the hour” — those libertarians who splinter into ever smaller groups and thereby sacrifice both the personal and common good on the altar of their own narcissism masked as “individualism.” One need only read about the internecine strife within the Objectivist’s ivory tower to note the wisdom of Burke and Kirk. The CliffsNotes version: Arguing with Rand meant immediate exile to intellectual Siberia.

Contrary to Rand’s individualism, the United States since its beginning has congregated in townships and parishes where true democracy flourishes under the express influence of religious faith. Nineteenth-century writers Alexis de Tocqueville and Orestes Brownson both noted these communal incubators and conservators of liberty – small collectives that reflect their respective faiths to advocate for the good of all within their sphere.

As Tocqueville wrote in his seminal Democracy in America:

In the United States the influence of religion is not confined to the manners, but it extends to the intelligence of the people. Amongst the Anglo-Americans, there are some who profess the doctrines of Christianity from a sincere belief in them, and others who do the same because they are afraid to be suspected of unbelief. Christianity, therefore, reigns without any obstacle, by universal consent; the consequence is, as I have before observed, that every principle of the moral world is fixed and determinate, although the political world is abandoned to the debates and the experiments of men. Thus the human mind is never left to wander across a boundless field; and, whatever may be its pretensions, it is checked from time to time by barriers which it cannot surmount. Before it can perpetrate innovation, certain primal and immutable principles are laid down, and the boldest conceptions of human device are subjected to certain forms which retard and stop their completion.

Among his many salient points against libertarianism enumerated in the essay, “Libertarians: the Chirping Sectaries,” Kirk said:

What binds society together? The libertarians reply that the cement of society (so far as they will endure any binding at all) is self-interest, closely joined to the nexus of cash payment. But the conservatives declare that society is a community of souls, joining the dead, the living, and those yet unborn; and that it coheres through what Aristotle called friendship and Christians call love of neighbor.

Elsewhere in his essay, Kirk delineates the differences between individualism as expressed by Rand and her like and the community spirit so intrinsic to our national character by invoking Eric Voegelin, whom, Kirk states:

[R]eminds us – is not between totalitarians on the one hand and liberals (or libertarians) on the other; rather, it lies between all those who believe in some sort of transcendent moral order, on one side, and on the other side all those who take this ephemeral existence of ours for the be-all and end-all-to be devoted chiefly to producing and consuming. In this discrimination between the sheep and the goats, the libertarians must be classified with the goats – that is, as utilitarians admitting no transcendent sanctions for conduct. In effect, they are converts to Marx’s dialectical materialism; so conservatives draw back from them on the first principle of all.

In short, capitalism and the toxic individualism of Rand and others for the instantaneous benefits supposedly granted leads to liberty misunderstood in the forms of materialism and licentious behavior – both antithetical to liberty properly understood as the fully realized temporal life in community and faith.

So I’m thankful Atlas Shrugged-Part I avoids the toxic elements of Rand’s so-called “philosophy” and am hopeful the subsequent installments of the film trilogy steer clear of the same pitfalls. By all means, see the film and avoid the book.

April 1 was no Fool’s Day in Verona, Italy.

Istituto Acton held a private viewing and debate on The Call of the Entrepreneur in the romantic city of Verona, better known for its romantic association with Romeo and Juliet than with one of Italy’s most enterprising commercial regions.

Arranged and sponsored by the investors group – Noi Soci – of Cattolica Assicurazione, a private insurance company founded 115 years at the turn of the 19th century, the documentary was shown on April 1 to a private audience of 220 of the company’s stakeholders, colleagues and business partners – who actually showed up early – a rarity of time management and courtesy not often experienced in the southern city of Rome, where Acton’s Italian office is located.

The company’s original mission, based on protecting the private landholdings of farmers against natural disaster, was the brainchild of 34 entrepreneurs who boasted more than 14 Catholic priests in its original investment group.

When I heard this story, I had to ask the president of Cattolica Immobilare (the real estate investment firm owned entirely by Cattolica Assicurazioni), Enrico Racasi, to repeat what he had just told us.

“Few people realize this, but among the insurance company’s original founders there were actually 14 priests who were very much concerned about the survival and welfare of local enterprise”, Racasi said.

“We still commence our executive meetings with prayer and often meet for Mass beforehand … We need priests to become entrepreneurs again. Wouldn’t that be wonderful if we were all working privately together for the common good? But times have really changed!”

Debate and commentary on the film included inspiring remarks from Verona’s mayor, Flavio Tosi, a “no excuses” conservative politician from the north. Tosi said that politicians should be much less concerned about “legislating a good society” in order to “let private individuals lead the way” to work hard and improve society themselves.

“Everyone should work with a spirit of calling and moral purpose … All we (politicians) can do is encourage free enterprise among our citizenry through adequate public policies and fiscal incentives.”

One of the entrepreneurs present on the speaker panel, Giuseppe Pasini, president of Federation of the Italian Steel Companies, Federacciai, said Jimmy Lai’s story as portrayed by the documentary was most inspiring.

Istituto Acton Director Kishore Jayabalan conducts interview for Italian television.


Pasini said today’s entrepreneurs need to dig down to find inspiration for their enterprise within their deep moral values and convictions. (more…)

I’m scheduled to discuss “A Call for Intergenerational Justice” with Paul Edwards later this afternoon (4:30 pm Eastern). You can listen to the live stream here and we’ll link to the archived audio as well.

You can check out my piece in last Saturday’s Grand Rapids Press, “Christ’s kingdom is bigger than the federal government,” and an Acton Commentary from last month, “Back to Budget Basics,” for background.

Be sure to visit Acton’s newly-released “Principles for Budget Reform,” too.

This graphic from NPR’s Planet Money also puts the looming “government shutdown” in perspective.

With the ongoing budget battle and the possibility of a government shutdown looming, the Acton Institute has released its “Principles for Budget Reform.” The Acton Institute developed four key principles to reforming the federal budget that will be important to not only providing a sound fiscal budget but a budget that also has a strong moral basis.

In addition to the four principles, readers can also find staff written commentaries that are related to each principle, additional articles written by Acton staff, related blog posts, video of Rev. Sirico discussing morality in the federal budget, and audio from a radio appearance made by Rev. Sirico talking about the “What Would Jesus Cut?” campaign.

As the federal budget process continues, the Acton Institute will continue to update its “Principles for Budget Reform” with the most up-to-date articles available.

To navigate to the “Principles for Budget Reform” webpage click here.

Rev. Sirico was recently quoted in an article by Our Sunday Visitor titled, “Unions, yes. But when the Church is the employer?” The article utilizes various historical examples to describe the relationship between United States Catholic Church leaders and institutions with their employees. The article seeks to demonstrate a strained relationship between Church leaders and their employees by citing historical examples, such as the 1949 gravediggers strike in New York.

When Catholic social teaching is discussed in the article, Rev. Sirico weighed in:

But Father Robert Sirico, president of the free-market think-tank, the Acton Institute, said there is a popular distortion about how Catholic social teaching views unions. Even in the 1949 gravedigger strike, Father Sirico said, Cardinal Spellman acted only after the union had already rejected a 3 percent raise offer. There were also 1,000 bodies waiting to be buried in the cemetery. “This should be a clear example of the legitimacy of breaking a strike,” he said.

Father Sirico said that if there is any problem in the Church institutions’ dealings with workers, it is that employees are often kept on even if their performance is deleterious to the mission. He said it is incumbent upon Church administrators to make efficient use of their money since the faithful has entrusted them with those resources.

Click here to read the full article.

To read more on Catholic social teaching on unions please click here to read Rev. Sirico’s Acton Commentary, “Catholic teaching’s pro-union bias,” which was also published in the Milwaukee Journal Sentinel on March 1, 2011.

Gas prices are not the only thing on the rise. As of yesterday, corn is at its highest level in three years at $7.60 a bushel and prices are not predicated to go down anytime soon. The United States government anticipates a shortage despite farmers’ intent to plant 5 percent more acreage of corn this year, a shortage is still predicted.

Reuters also indicates that rising corn prices will continue:

U.S. corn prices will keep rising to new highs over the coming months, a new Reuters poll has found, as demand from ranchers and ethanol makers proves better able to withstand record costs than many thought.

The forecasts will compound inflation concerns as higher feed costs filter through to beef and chicken prices. Analysts also warned that anything less than perfect growing weather for the spring crop could push prices even higher as traders fear tight conditions will extend well into next year.

As the article later states, the chances of having a perfect growing season with no weather related problems are very slim.

Reuters also asserts that food prices rose by 14 percent over the past three months which can be attributed to the rising use of ethanol and the ranchers demand for feed for livestock: “The rally has sharpened the focus on two imponderables: the price point at which livestock ranchers or ethanol makers will begin to cut back use, relieving demand pressures; so far, traders say there’s little evidence of this happening yet.”

Perhaps the United States should learn from China’s mistake. An article in the New York Times describes how the biofuel sector does affect the food supply and price, and how China’s ethanol use resulted in higher food prices:

It can be tricky predicting how new demand from the biofuel sector will affect the supply and price of food. Sometimes, as with corn or cassava, direct competition between purchasers drives up the prices of biofuel ingredients. In other instances, shortages and price inflation occur because farmers who formerly grew crops like vegetables for consumption plant different crops that can be used for fuel.

China learned this the hard way nearly a decade ago when it set out to make bioethanol from corn, only to discover that the plan caused alarming shortages and a rise in food prices. In 2007 the government banned the use of grains to make biofuel.

However, the article later explains that China is now using cassava, instead of corn. China may have not entirely learned their lesson as cassava is still a food crop used predominately in Africa and also in China during food shortages.

The article by the New York Times adequately closes with a quote from Olivier Dubois, a bioenergy expert at the UN’s Food and Agriculture Organization that gets at the root of the food and fuel argument: “We have to move away from the thinking that producing an energy crop doesn’t compete with food,” he said. “It almost inevitably does.”

Previous blog posts on ethanol, rising food prices, and the moral issues of the two can be found here, here, here, and here.

It has been over a year since the passing of the Affordable Care Act, and we are still discovering problems with it. Supporters claimed passing the bill will help everyone, especially the vulnerable. However, the Affordable Care Act ironically does just the opposite by placing the elderly in a very dangerous position. Dr. Don Condit, author of the Acton monograph a Prescription for Health Care Reform, explains how the Affordable Care Act negatively impacts the elderly and its violation of subsidiarity in this week’s Acton Commentary. Get Acton News & Commentary in you email inbox every Wednesday. Sign up here.

A Sugar Coating for the Bitter Pill of ObamaCare

By Dr. Don Condit

Remember Mary Poppins singing, “A spoonful of sugar helps the medicine go down in the most delightful way”?

If so, be concerned, because you or your parents are probably on Medicare – or will be soon — and last week the Department of Health and Human Services (HHS) proposed regulations for Accountable Care Organizations (ACOs).

The sugar-coated rhetoric in this announcement from HHS cannot disguise the bad medicine in this part of this part of the Affordable Care Act, which intends to bureaucratically cut as much as $960 million in Medicare spending over three years. This ObamaCare prescription  threatens patients, the physicians who care for them, and the common good. The only clear winners are the consultants and lawyers busy trying to decipher this 429-page tome of acronyms and encrypted methodology that will compromise the doctor-patient relationship and is contrary to the principle of subsidiarity.

Medicare beneficiaries will be “assigned” to 5,000 patient-minimum organizations to coordinate their care. While HHS Secretary Kathleen Sebelius talks about improvement in care, the politically poisonous truth is that Medicare is going broke and ACOs are designed to save money. The words “rationing” or “treatment denial” or “withholding care” are not part of her press release, but reading the regulations reveals intentions to “share savings” with those who fulfill, or “penalize” others who fall short of, the administration’s objectives. The administration’s talking points include politically palatable words which emphasize quality improvement and care enhancement when the real objective is cost control by a utilitarian calculus.

Physicians and other health care providers will find themselves in conflict with the traditional ethos of duty to patient within ACOs. Ever increasing numbers of doctors are leaving private practice and becoming employed by hospitals, due to a variety of challenges inherent in these uncertain times. The hospitals are the most likely recipient of bundled payments for caring for Medicare patients. Doctors will face agency conflicts between the time honored primary duty to patient, which may conflict with hospital administration, and ACO goals of fiscal savings. Medical care providers will receive incentives for controlling spending, and penalties if they do not. “No one can serve two masters” (Matthew 6:24). Not even physicians.

The physician’s ACO conundrum is illustrated in the language where these regulations proclaim that, “Providers should be accountable for the cost of care, and be rewarded for reducing unnecessary expenditures and be responsible for excess expenditures.” Yet the very next sentence stipulates that, “In reducing excess expenditures, providers should continually improve the quality of care they deliver and must honor their commitment to do no harm to beneficiaries.” (page 14)

The principle of subsidiarity guides policy makers to empower decision making and scarce health care resource allocation at the doctor-patient level. However, the Affordable Care Act moves in the opposite direction. It increases bureaucratic power and responsibility. This is not the antidote needed to reform health care in the United States. The complexity, cost, and confusion of implementing these ACO regulations defy comprehension. We can only hope ACOs will follow “just say no” HMOs into the historical ash heap of misguided health policy.

There is no question that significant – and scarce — health care resources are consumed in the Medicare population toward the end of life. ACOs intend to limit this spending — the government way. The Ethical and Religious Directives by the United States Conference of Catholic Bishops suggest a better path forward:

While every person is obliged to use ordinary means to preserve his or her health, no person should be obliged to submit to a health care procedure that the person has judged, with a free and informed conscience, not to provide a reasonable hope of benefit without imposing excessive risks and burdens on the patient or excessive expense to family or community. (32)”

The patient must be the focal point of concern. They, or their surrogate, with the help of their physician, need to become informed. They must also participate in the expense of their care, which will better allocate resources for the community than would more distant bureaucratic panels or regulation.

Furthermore:

A person may forgo extraordinary or disproportionate means of preserving life. Disproportionate means are those that in the patient’s judgment do not offer a reasonable hope of benefit or entail an excessive burden, or impose excessive expense on the family or the community (57).

Enabling all patients, with and without means, to “proportionally” participate in the cost of their care will better allocate scarce health care resources than further sugar-coated, and non-delightful, misguided administrative policies.

By the way, if you didn’t recognize the Mary Poppins song, that’s OK. Worry instead about your grandparents for now, and consider how your generation will counter-reform ObamaCare in the future.

Dr. Donald P. Condit, MD, MBA is an orthopaedic surgeon specializing in hand surgery in Grand Rapids, Michigan. After graduating with a BS in Preprofessional studies at the University of Notre Dame he attended the University of Michigan Medical School. At the Seidman School of Business of Grand Valley State University his emphasis of study was economics and the ethical allocation of scarce health care resources. With his family, he serves annually with Helping Hands Medical Missions in El Salvador. He also volunteers at Clinica Santa Maria and for Project Access, for the uninsured, in Kent County. He is the author of A Prescription for Health Care Reform and is a Clinical Professor of Surgery at Michigan State University.

 

Acton On The AirThis afternoon, Acton President Rev. Robert A. Sirico joined host Paul Edwards on The Paul Edwards Program (broadcasting live from the Acton Institute here in Grand Rapids today, by the way) to discuss some of the hot issues in the world of politics and economics, including the efforts of governors in Wisconsin and Michigan to address the fiscal issues faced by their states, and also giving a response to Jim Wallis’ question of what would Jesus cut? Listen via the audio player below:

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.