Even the supposedly perfect and far superior government “systems” of services in other countries are bound to fail. They thrive through funds forcefully taken from the public and rely on the superior knowledge of bureaucrats to manage and manipulate the system. Such a setup destroys the regulatory ability of the individual and leaves no room for creative problem solving from a grassroots level.

Ontario, Canada’s most populous province, kicked off a fierce battle with drug companies and pharmacies when it said earlier this year it would halve generic drug prices and eliminate “incentive fees” to generic drug manufacturers.

British Columbia is replacing block grants to hospitals with fee-for-procedure payments and Quebec has a new flat health tax and a proposal for payments on each medical visit — an idea that critics say is an illegal user fee.

And a few provinces are also experimenting with private funding for procedures such as hip, knee and cataract surgery.

It’s likely just a start as the provinces, responsible for delivering healthcare, cope with the demands of a retiring baby-boom generation. Official figures show that senior citizens will make up 25 percent of the population by 2036.

“There’s got to be some change to the status quo whether it happens in three years or 10 years,” said Derek Burleton, senior economist at Toronto-Dominion Bank.

“We can’t continually see health spending growing above and beyond the growth rate in the economy because, at some point, it means crowding out of all the other government services.

“At some stage we’re going to hit a breaking point.”

http://www.reuters.com/article/idUSTRE64U3XO20100531

I don’t believe in Intellectual Property Rights. There. I said it. I know it sounds ridiculous for someone who hopes to make movies someday, but it’s true. And my reasoning is surprisingly economic in nature.

A Copy is Never Theft

Ideas are the only infinite resource. Everything else cannot be copied infinitely. If I have a loaf of bread, I can’t simply place it on the copy machine and make two loaves. But if I copy a book or a software program or a movie, then I now have two where I formerly had one. If it were your movie or your book, I have deprived you of nothing. If it was your idea then you still (mentally) retain the idea, and you have been deprived of zero physical property.

Mercantilism is Dead

Intellectual property rights were born out of mercantilism and governments failed attempts to keep “capital” within their own countries. Before the printing press the idea of “owning the intellectual rights” to your work was a non-issue. Copying books was very expensive and if your work was copied, you had received the ultimate form of flattery. This applied in all disciplines, including music and art.

Today, we understand the economic destruction a mercantilist systems causes, but cling to the idea of intellectual property rights, mostly via our patent system.

Fashion, Scents, and Emulation Innovation

Oddly enough, certain “intellectual property” remains outside the protection of the law. You can’t patent a scent. If I can figure out the formula for CK One and copy it, then I can market and sell it without any laws requiring me to pay royalties or give credit. Although admittedly, I would probably put on the label “compare to CK One!” to raise my sales.

The world of fashion also evades “intellectual property” laws. Every year, thousands of designers compete to create the latest fashion. Every year six months later you can buy clothes identical to those found at Talbots (TLB) at your local Wal-Mart (WMT).

Yet, Talbots not only remains in business but fashion is the second largest producing enterprise in the world (after automobiles). If the regulators and advocates of intellectual property law were right, then shouldn’t all the fashion designers be bankrupt? I know of at least one grave that should read: Christian Dior, Died Poor.

What the “Pirate” Teaches Us

Remember when VHS and cassettes were supposed to be the end of the music and movie industries? Those industries that felt threatened by such innovations quickly ran to the government to pass protectionist laws. Those who embraced the new technology like BluRay continue to reap the rewards.

Today, it will be no different for those who seek to profit off the likes of The Pirate Bay and online live streaming sites such as Megavideo or Justin.Tv. Many companies will bankrupt themselves paying for lawsuits in one last ditch effort to survive, but many more will thrive.

Capitalism could be called one giant conspiracy to reduce all profits to zero. I find it ironic the only system that will ever successfully achieve that which is the ultimate goal of socialism is freedom. When left to the free market, competition reigns supreme. Everyone is forced to innovate or die. History shows us that time and time again any company which ignores this fact will die not with a bang but a whimper.

Are you looking for those companies that stay on the cutting edge and find ways to profit from the internet and data revolution? Or are you relying on the government and laws to protect your investments? Let me hear your thoughts in the comments section below.

“None are more hopelessly enslaved than those who falsely believe they are free.” – Johann Wolfgang von Goethe

Recent events not only with the current healthcare bill, but also on the economic front are waking up more and more Americans to the sad truth that the federal government is out of control. A fascist state is quickly developing in America, one of the few rare places in the history of the planet where “life, liberty, and the pursuit of happiness” was not an unattainable dream but instead a mission statement. I first fully grasped where the misguided actions and ideology of the Republocrats would lead America during the Banker Bailout of 2008, and I returned home to fight against the Establishment by running for United States Congress as soon as I could.
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The War on Poverty… the War on Drugs… the War on Terror… now we have the government’s “War” on Main Street. How to improve the economy and why the government is taking the exact opposite actions to destroy Main Street as a bad case of the “Seen and the Unseen” strikes the Lehigh Valley.

This talk was originally delivered to a Campaign of Liberty chapter on December 3, 2009.  Video will be available shortly.

Today President Obama will tour Allentown, Pennsylvania, in my home congressional district as part of a “Main Street Tour” to show his concern for economic plight of the masses. Many of the people I have spoken with while campaigning innately realize that government is at fault – or at least complain a lot about how the government should “fix” the economy. Unfortunately, many do not have enough of a grasp of economics to understand exactly how the government is ruining their lives and their childrens’ lives. Speaking for myself, about 2 years ago I would have been included in this category. This is no surprise as most of the press and educational system has been hijacked by the disciples of Lord Keynes (the Keynesians) and the socialist Karl Marx for the past century.

The late economist from the Austrian school and NY Times columnist Henry Hazlitt wrote a series of easy-to-understand economic lessons in the 1940s in what was later published as Economics in One Lesson. Hazlitt warned of the dangers of what he termed the “seen and the unseen.” Let me give a rather harsh but true example.

Last week one local paper published a story about a local hardware store on Main Street in Nazareth going out of business. I grew up in Nazareth, and this store was there my whole life. The owners were not able to afford the rent, tried moving down the street for cheaper rent, but were not able to save the company.

On the exact same day, another local paper published a story about the Obama stimulus plan. They explain how $7.8 million was awarded to the private Lehigh University for research on hot lava, smarter electric wheelchairs, and Ice Age climate shifts in Alaska. This amount was more than the amounts allotted to Allentown, Bethlehem, and Easton, the three major cities in the Lehigh Valley. Before I continue – I am a proud alumni with an excellent education in chemical engineering provided by Lehigh.

So, what is going on here? It is nothing more than Hazlitt’s seen and the unseen at work. What is normally seen is the government spending on government pet projects, whether the Hoover Dam, hot lava research, banker bailouts of Goldman Sachs, or even new roads and bridges. Some government projects may even have some utility, like new roads or bridges. These are held up to the population as examples of how the government is doing its best to help you – with your taxes, that is.

However, what is typically NOT SEEN is local hardware stores failing, or other businesses who fail to get listed on the government’s gravy train list. What is NOT SEEN is those living on fixed incomes like social security whose standards of living are affected the harshest by inflation, the businesses that never started due to government interventions. What is NEVER SEEN is the employment these new businesses would be providing and, most especially, what is not seen is simply what would happen if the people were not plundered by government in the first place, either in the form of payroll taxes or the insidious hidden tax of inflation.

Of course, realistically speaking in today’s America, what is seen is the looting of the public treasury by the special interest lobbyists who, to a large extent, control Congress, the FED, and the rest of DC. We must instead focus on the general interest of society over the long run. We must remember that government exists to protect liberty, not to redistribute wealth, nor to grant special privileges, nor to interfere with the lives of individuals and their actions.  (more…)

In recent years profits have gotten a bad name from many people and politicians. Profits are said to take advantage of others, encourage greed, among a variety of other allegations. These concerns can be legitimate but often miss a crucial point.

Profit represents the reward for taking a risk. You wouldn’t start a business if you knew you weren’t going to make more than you would spend creating that business, would you? However, if you can increase your income more than your expenditures through that business, you’ll feel much more inclined to continue with the operation. Obviously, people cannot survive operating a business at a loss.

Profits do not come without work and risk. It is only possible to make a profit if you can offer a product or a service that people want, in an efficient manner. No matter how greedy you may be, in a free market you cannot survive without efficiently producing a product that has market demand. You cannot force people to work for you, you cannot force people to invest in your business, and you cannot force people to purchase your product. Your greed is limited to free and voluntary exchange.
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A recent New York Times article by David Leonhardt brings up an interesting proposal to pay for government health care:

The numbers show there is only one sure way out of the problem, and, after months of roundabout discussion, that solution has re-emerged: It’s a tax on health care.

If Congress taxes health care, the revenue has a chance of rising with health spending. A health tax will also create an incentive for workers and businesses to slow the growth of health spending — thus reducing the amount of taxes needed to pay the nation’s health bill.

In other words, politicians want to control the health care industry with a special government plan that will cost trillions of dollars in a several-year period. Government doesn’t have money, considering that the nation is broke and suffering a harsh recession. But with this brilliant new proposal, Congress can provide health care service and pay for it by taxing health care spending.

I honestly don’t know where to begin with this one. If cutting wasteful spending is as simple as slapping a tax on an item, why not throw a tax on the escalating government spending, where there is far more waste than any business or service in the marketplace?

More from the Times article:

Because health care — unlike food, clothing and most other things — isn’t taxed, it’s effectively on sale. And when something is on sale, people often buy more of it than they need.

In the case of health care, they buy — or their employer buys for them — insurance plans that don’t make much of an effort to control costs. Rather than putting pressure on hospitals to root out administrative waste, the plans cover the cost of that waste.

Taxing rising spending is not going to lower the price of health care without a cost. To compensate for the lost income businesses will either cut or limit their service or increase prices. If government really knew a method of lowering prices while increasing productivity, I highly doubt anyone would be against that type of plan. It’s funny, though, when I think of the yearning for lower prices and higher productivity, I can’t help but think of some other economic system that provides this exact service without the supposed wisdom of government officials: the free market.

Certainly there is a good deal of waste and over-use in the health care industry today. But the last thing that is causing this phenomena is the lack of a tax on health care spending. The direct problem for rising health care costs is the fact that today the individual carries little control over his or her’s medical plan. Through HMOs and other programs encouraged and forced by government, we have effectively put other people in charge of our health care.

The more that people rely on third-parties to manage and pay for their health care (whether it’s their employer, insurance businesses, or government), the less they will be financially attached to their medical plans. If they aren’t paying for their health care directly, they have little incentive to take cost into account. It isn’t because we haven’t slapped a tax on medical spending that we have the problem of rising spending, it’s because the individual is losing the direct control over medical spending and therefore the incentive to limit medical spending and costs as much as possible. When someone else is paying the bill, who is really going to hold back and not grab as much of a service as possible?

Another problem stems from the idea that health insurance needs to pay for every little medical cost. This again takes more of the incentive away to control spending and cost. If you buy flood insurance, you do not expect it to pay for covering the damage of a muddy lawn after a drizzle of rain. Insurance is a simple tool to measure and pay for risk, not common procedures.

Consider what caused the price of cell phones to drop quickly while the products continually improved. The first cell phone, the Motorola DynaTAC 8000x, released in 1984, weighed two pounds, had a half-hour battery life, and cost $3,995. Today, you can purchase a cell phone for twenty or thirty dollars with far more capabilities than the DynaTAC. Was it a tax on cell phone spending that encouraged businesses to increase efficiency, lower costs, and create cheaper and better products, or was it competition, a relatively unregulated market, and the power of the consumer?

Imagine if in 1984 the government forced employers to offer cell phones to their employees and placed “insurance” businesses in charge of paying the simple fees. When you take the power away from the individual and hand it to a third party, people greatly lose the incentive to find the best product at the cheapest price. They lose the incentive to find value, and the ability and options to find value become greatly limited because of the government intervention. This is why people will often overuse the medical system in Canada, which leads to rationed medical care, limited medical services, and long waiting periods for simple procedures.

The solution to our health care problem does not lie in a collective system such as socialism. We have had a sort of collective corporatism insurance and few people are pleased with it. It really does not matter which third party is paying for health care; so long as individuals don’t have the financial control over their medical care, inefficiency will abound. Employer-provided medical coverage, corporate insurance plans, and socialized medicine all have a basic flaw: they can’t fully serve the individual because it is not the individual who is in full control.

Individuals need more, not less, control over their medical care, and this is what many people and politicians fail to recognize today. More government involvement through subsidies, taxes, and programs will not solve a thing in the long run. To save health care, it must be the individual -  not the employer or the corporate workers or the government officials – who carries the power of choice and the incentive to reward value in the marketplace.

In today’s age one would expect the principles of slavery and involuntary servitude to be unacceptable under any grounds. What people fail to realize is that while this may be true for individual citizens, what is illegal for citizens is not necessarily illegal for government.

The Merriam-Webster definition of slavery is the “submission to a dominating influence.” The 13th Amendment of the Constitution, adopted in 1865, specifically prohibits slavery and involuntary servitude. The U.S. Code punishes those who seek involuntary and forced labor of others with a fine and prison sentence of up to twenty years.

Yet there is one form of involuntary servitude, coercive labor, and obtaining money through force and threat of physical restraint that largely goes unquestioned in the U.S.: the income tax. First, let’s briefly explore the history of taxes in the U.S.

After the creation of the United States and the Constitution, the federal government paid the majority of its bills through tariffs and internal excise taxes on various items and goods. During the War of 1812 an income tax had been proposed to help pay off expenses but was never brought into existence. Several years later in 1817, every internal tax was eliminated and all of the federal revenue came from tariffs on imported items and the sale of public land.

To pay for the mounting costs of the Civil War, in 1862 Congress passed the first income tax of 3% on those who made between $600 and $10,000 (people who made above $10,000 paid a higher portion). This income tax was phased out in 1872. Another income tax was briefly put into place in 1894 and 1895, but was deemed unconstitutional by the Supreme Court. During this period, the Populist, Democratic, and Socialist Labor parties were all advocating for some form of income tax. The Socialist Labor Party was and still is the leading socialist/communist party in the U.S.

Arguments made for the passage of the 16th Amendment and the permanent ability of the federal government to tax income often revolved around the rhetoric that an income tax would mean less reliance on tariffs for revenue, which would result in lower prices, and therefore help less fortunate citizens. The original idea was that only the rich would be taxed and feel any negative effect. Sound familiar?

An income tax gives government the direct control over any individual who holds a legal job. This simple principle of direct taxation, especially since the 16th Amendment was ratified in 1913, has played a major role in the growth of the federal government over the past century. If government can reach into income, there is no limit to the extent that government can reach into your property to raise funds. It is all done in the name of protecting the poor and the middle class, punishing the rich, and promoting “equality.”

“It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.” — Frederic Bastiat

Think about this situation for a second. Are taxes not forced out of us through coercion and threats (audits, fines, prison, etc.)? Is income taxation anything close to voluntary servitude? Is the income tax in any way not a “submission to a dominating influence,” the Webster definition of slavery? At what point does taxation become a form of legal slavery?

Most people in the U.S. spend approximately one-third of their time working for the government. Some may argue that we get benefits by working for the federal government: welfare, education, and many other programs created since the adoption of the latest income tax in 1913. Would these same people argue that if slaves had been forced to work merely one-third of their time and received basic benefits from their masters that it would be morally acceptable? This practice would be rightfully blasted as immoral and illegal in a second if it was done by a plantation owner, but it is rarely questioned when performed by government. So I ask again – at what point does taxation become a form of legal slavery?

“To tax the community for the advantage of a class is not protection, it is plunder.” — Benjamin Disraeli, Prime Minister of the U.K. (1874-1880)

The intentions of the income tax do not justify a thing. It is one of the core ideals of socialism, communism, and Nazism, the very systems that have grown into the greatest abominations of life that mankind has ever seen. The income tax builds into the notion that our rights, privileges, and liberties come from government and its powerful leaders. Certain centralized and elevated individuals have the power to take the fruits of our labor through force; this alone is a principle that originated with kings and some of the greediest individuals in history, not with a free people.

In The Communist Manifesto, first published in 1848, Karl Marx lists “a heavy and progressive or graduated income tax” as the second of ten general steps for a nation’s transition to communism.

The principle of the income tax is a direct assault on the life, liberty, and property of all humans. An income tax implies that there is a higher authority to whom we must work and contribute or be severely punished. It shifts power to the men and women who feel they know the best uses for our labor. The very idea is that certain centralized and powerful individuals in government have the wisdom and morality that the general people lack, and the authority to force others into that moral code. At heart, it is one of the most selfish, discriminatory, and violent ideals to have crept upon the U.S. and other nations.

“I know no class of my fellowmen, however just, enlightened, and humane, which can be wisely and safely trusted absolutely with the liberties of any other class.” — Frederick Douglass

The income tax has become incredibly entrenched in our economy and society today. It is often considered unthinkable to imagine a time when the federal government stayed within its constitutional confines; it is unimaginable to think of a federal government whose soul purpose is to protect life, liberty, and property. An income tax is one of the worst forms of taxation possible: there are few ways to avoid it (as you can somewhat do with sales tax, excise taxes, and tariffs), it is a horrid state invasion of privacy and property, and it turns government into a tool of plunder with a strong disregard for basic justice.

These elevated and seemingly angelic figures whom we elect convince us that it is because of too much freedom and voluntary exchange that our biggest problems arise, rather than recognize one of the greediest, most powerful, and largest attacks on life, liberty, and property through the income tax and the centralist principles it is guaranteed to carry with it.

“I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” — James Madison

The recent AIG bonus debacle has angered many people, but usually for the wrong reasons. While the $165 million in bonuses handed out to its high level employees is nothing to support or be proud of, it is disheartening when Congress and President Obama spend this much time going after $165 million and discussing nothing of the $170 billion+ they’ve already specially loaned to AIG. Now, a special 90% tax has been passed to recall the bonuses which, if signed into law, marks a huge expansion of the federal government’s power to intervene.

Bonuses are an easy item to attack and gain “extra credit” for, but I’d like to think that people could read through the lines a little bit more than this. If the federal government can just tax a company’s bonus payments (after giving them billions of dollars in bailout money), where does it go from there? Can the federal government just waltz in and pass special taxing legislation when a company does something it doesn’t like?

There are quite a few people who tell us that Washington D.C. is “broken”. I don’t necessarily disagree with this, although I’m sure I have different complaints than they do about government. But these same people want the “broken” system to legislate, mandate, and regulate “moral and ethical decisions.”  So the bureaucrat in D.C. knows more about the right morals and ethics of business than the people who actually put their time and money into a business? Washington should not be thrown onto a pedestal to regulate ethics when it itself is reeking of foul and corrupt play.

The reasoning behind intervening in AIG in the first place, with the bailouts, is shaky at best. Obama recently spoke on this topic:

So the problem with AIG was that it owed so much and was tangled up with so many banks and institutions that if you had allowed it to just liquidate, to go into bankruptcy, it could have brought the whole financial system down. So it was the right thing to do to intervene in AIG.

If they got so tangled up with debt exposed to many industries, why in the world do they need a bailout? Why can’t they learn their lesson? Using the “too big to fail” argument, we are told that AIG can’t fail because it would be too painful for the overall economy.

I’m confused.

Obama has said countless times that he wants to change the way Wall Street works. If this is the case, why is he jumping to the plate to continue bailouts, preventing the marketplace from making this very change on its own?

If AIG’s practices got it too interconnected within the financial system, clearly something needed to change with its business. Our financial system is not built on a very stable foundation to begin with, and the market was sending strong signals that things needed to change.

But the Washington bureaucrats just couldn’t dare let this atrocity happen. This way the whole country pays to bailout failed business practices, a failed financial system, and a few irrational individuals who started the madness. Rather than let the people who created the mess fail, go bankrupt, and allow a better operation to come of it, politicians made the decision to keep Wall Street the way it is. Instead, new regulations are proposed to be thrown on Americans nationwide to regulate “ethics and morals” and lord knows what else.

What the government has done throughout the past year especially is try to discourage regulation from the market. Rather than take the signs that the financial system, despite massive central intervention over the past century, is not working, that government sponsored enterprises Fannie Mae and Freddie Mac are not sustainable, and that subprime mortgages obviously aren’t a smart plan for the bank or client, the government actually prevented the short-term failure of all these things. Ignoring the free market’s regulatory power for expanded government regulation will turn out to be the most deadly mistake we take from these rough times.

Those who preach that we need more government intervention do not understand the regulatory powers of the free market. They say that the whole financial system would collapse if the government did not intervene, but do they ever think that we might need to do things in a new and better way? A financial system built on a stable foundation won’t just “collapse”, but an inflationary system manipulated by central powers and government planners will.

The problem with government intervention and socialism is the assumption that government knows the best solution for each and every person, problem, and industry. Through the depths of history no socialist has dared believe that people could enact reasonable solutions through their own errors, trials, and hard work. A government-managed system assumes there is no better way to run an operation, which leads to inefficiency and mismanagement of capital that it didn’t earn in the first place (tax dollars).

Do not believe for a second that one more government regulation or intervention will get us out of this mess or prevent the next one that is sure to come. The market has tried to show us that the way things have been done can’t last, but the government attempts to overrule the power of the invisible hand with bailouts, forceful regulation, and varying treatment to different industries. It isn’t difficult to see that the market is yearning for a new system, but the majority of our politicians would rather take things into their own hands and stick some paint on a building scheduled for demolition.

In a free market it is the consumer and individual who make the regulations. The government is constantly working to take away that regulatory power and instead place it the hands of a few bureaucrats who promise to protect us from ourselves.

Don’t forget that the market was well on its way to punishing the irresponsible business practices; it was not the government regulatory agencies who made the first move. By simply allowing the market to regulate itself, we would be well on our way to deflating the bubbles, weeding out (not bailing out) failed ideas, and by learning from our mistakes we could once again be on the path toward sound economics, sustainable decisions, and freeing the unyielding regulatory power of the individual.