July 07, 2009
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Borrowing puts you in debt. It is your choice, not governments decision. If you need two years to work and save for college, take them and go when you are twenty. I agree it is likely to be smarter than borrowing.
Just make sure you do the math and determine if your earning potential at eighteen is enough to be worth it. Private colleges that have money to give, will assess your need for money, and the more you have the less they will give you. That is their policy, not Governments.
Free marketeers believe that if you are intelligent and deserving you will overcome the difficulties life sets before you, and you should look forward to the challenge, whether that is few opportunities in small government Toga, opressive criminal gangs in small government Somalia, or excessive Gov help here in the USA.
Most "nanny state" type of governments offer taxpayer funded college which would solve your specific college financing issues and allow you to come out of college not in debt to a BANK as opposed to your government. You could think of Government as a tool to accomplish your education and help to shape it to do so.
Instead we maintain the worlds largest nuclear arsenal.
Generally I do not think the surrender of voting power to the decisions of well financed private interests is a good idea.
Be careful out there. Rarely do the small gov advocates include relevant information as it "teaches" tax cut ideology. They are rarely teaching as much as selling.
For example in this promotional advertisement for lowering their taxes the Heritage Foundation celebrates the tax cuts from 1920 -28 for raising Gov. revenues but do not remind us that these tax cuts were immediately followed by a market crash and depression. Or remeber to credit the lack of European competition after wwi
It celebrates the Kennedy tax cuts from a top rate of 90% down to 70% claiming increased Gov revenues but neglects mention of 70's rising prices and stagflation.
And the Reagan/Bush tax cuts were financed by the excessive borrowing you grump about having to pay back, and led directly to today and another economic collapse. It was the flood of cheap money that drove the economy and increased Gov revenues, that delayed the inevitable bubble and collapse. The tax cuts again caused the bubble because the concentration of money into a few hands has to go somewhere and it bought up houses and equities and caused a bubble and collapse.
One could argue that tax rates for the highest income levels that are too low lead to bubbles and malinvestment and severe market crashes. Because that is what happened next. Each of the three times it was tried.
But the fact is there are many relevant pieces of information that are left out. Import tarrifs in the 20's and the small gov't 1800's. The Heritage Foundation selecting 1968 as its tax cut success story endpoint instead of 1967 or 1971. The Heritage Foundation's discussion of Reagans tax cuts leaves out the excessive borrowing and spending of the Reagan, and all following administrations and Americans, to explain increased tax revenues.
All I'm saying is, go get the whole story. Cold war spending in the 60's. Military build-ups, rebuilding Europe and Japan after a long war and no competition in the twenties or fifties.
David in Qatar recently instructed us about President William G Harding as a hero for cutting Gov spending. In 1920-21, America suffered a correction that was more severe than the 1929-1930 correction. President Harding slashed government spending and allowed wages to fall. The economy was flying again in 18 months.
It is important to note that in 1917 US Gov't spending totaled 5.7bil. then jumped to16bil in 1918, 23 bil in 1919 (the two years we were involved in WW1) and when it ended Harding "slashed" gov't spending in the next three years to 10.6 bil, 9.6bil and 9.3bil, and never got anywhere near "slashing" it to preware levels or doing anything that could be considered lowering "normal peacetime" Gov't spending levels.
It is important to note that the 1920's economy was flying in part because European competition was destroyed. Especially if you also want to believe it was WW2 that ended the great depression, and not the new deal.
It is my humble opinion that the Mises institute sells. It does not teach. It tells you what conclusions to reach (small gov, low taxes = good) and then displays evidence to prove their conclusion while ignoring other evidence that disputes it.
I would suggest collecting facts before reaching conclusions.
More than 6 months after I first asked, there is no model succesful small Gov offered, but there are many unsuccesful ones. There are also failed large government models, but at least there are some succesful ones too.
It is difficult to do government well. It requires work. The hope offered by Mises that you can blame Gov for your ills and just shrink Gov and your problems will go away, is pure foolishness.
Thanks for all the help you gave me in the past. I hope this offers something of value back.
You aren't forced to borrow, but when the government provides cheap credit for college it gives colleges and incentive to raise their prices that much more, thereby hurting students who wouldn't necessarily need a loan originally. College should not be a government system (federal government, at least). If you want to go through higher school, you must work to do so.
When I say "small government" I don't mean a government that allows crime, trashes property rights, and doesn't protect individual liberty. So don't throw out those oppressive countries as an example of small government that protects life, liberty, and property and otherwise lets people pursue their own interests.
It is absolutely ridiculous to claim that tax cuts caused the Great Depression. The Fed was inflating the market with cheap money and credit, just the same as the bubble situations we've seen all too many times.
Please do your research on how the Great Depression ended. Clearly the New Deal didn't get us out. And somehow some people believe WWII got us out of it. Complete baloney. If that's what true prosperity is, why doesn't the U.S. and Japan make an agreement to fund massive spending on aircraft carriers, planes, bombs, and go blow it all up in the Pacific.
It was after WWII, when Truman cut the size of government by 2/3 and ended many of the New Deal programs that the economy was finally able to correct and be on its way. The government's meddling prevented the market from correcting, and only when government let the market work did the market correct.
You should look a bit deeper into the Mises Institute. They do not spout out the usual tax cut=good stuff that "Reagan Republicans" are known for doing. Mises explains monetary policy, central banks, and their role in creating these booms and busts. Austrian economists predicted the Great Depression, tech bubble, housing bubble, yet they are constantly ignored.
We put the people who denied and ignored the problem for as long as possible on the pedestal to solve all our problems. Why aren't we listening to Peter Schiff, Ron Paul, Tom Woods, and the other people who were predicting this crisis 2-3 years ago? Why are we listening to Bernanke and Greenspan and a bunch of clueless politicians?
I don't think the Heritage Foundation and the tax cut examples you say they cite bring the whole story. I never said they did. A lot of "conservative" organizations ignore monetary policy. They don't discuss the Fed and central bank, which play a larger role than anyone else in creating the bubbles and busts which do so much damage to the economy.
So, before you accuse me of not looking at all the facts, don't write down some tax cut examples that I never even mentioned. Explore what the people at Mises say regarding central banks and monetary policy. See what the people who predicted these messes have been saying.
I hoped you might have a model small government you prefer, since you do not like the ones that are real, but I did not think so. The small government model stinks.
Please do your research on how the Great Depression ended.
It's pretty easy. Loads of Government infrastucture spending directly and through business combined with low interest rates replaced money removed by the market crash. To make matters better union membership grew from 5% up to 24% of the workforce so less money could be hoarded and not put to use. Even better the Gov raised taxes on the highest earners and recirculated even more money.
Even better the investments in infrastructure fueled business growth by creating better roads, and irrigation, helped electrify twice as many homes and created a foundation of hard working customers with money and a way to get products to them.
For the next forty years there was a nice balance of power between unions, government and high earners that worked very well until unions were weakened by teamster corruption.
The 1980's follow up of Reagan breaking the air traffic controllers union and passing right to work laws spelled doom for unions and membership and negotiating power declined until today unions represent 8% of the workforce almost entirely in Government. Because worker wages did not increase and Reagan cut corporate and high earner taxes, financial power steadily shifted to executives away from earners and Gov.
Because Volker had FED rates at 17% when this shift began, the problems were hidden partly by steadily declining rates and debt refinancing. Had the rates been at 6% in 1980 it would have caught up with us in 8-12 years instead of 20. All that money concentrated in fewer and fewer hands by declining income tax rates had to be invested and it went into home prices and China because of foolish tarrif laws. Home prices should have stopped rising in 1999-2002. Greenspans 1% rate followed with investment bank influence that persuaded the sec to allow 30:1 leverage to a few investment banks flooded the markets with another burst of money that had to be invested and it went into mortgages through ridiculously lax lending standards and general RE industry corruption. Eventually it became obvious the invested money would be lost and here we are today.