The Debt Crisis and the Fiscal Leviathan State

My former professor, mentor and friend Richard Ebeling has a new blog post/article on the current debt crisis. The Debt Crisis and the Fiscal Leviathan State. In the article he explains that virtually all that is going on in Washington about the government’s debt is really smoke and mirrors because everyone there accepts the premises of the “entitlement” society. As a result, practically no one is willing to call for the real cuts in government spending that would bring about a reduction of the government’s “slice” of the national economic pie; and put the country on a real solution to the debt problem.

He goes on to explain that the reason for this unwillingness has two origins: First, an ideological one, which takes the implicit form of the acceptance of the socialist critique of capitalism. Left to its own devices, the socialists claimed, the market economy leads to abuse of workers by employers, tends toward monopoly manipulation of consumers, and results in a failure to produce the products and services people “really” need. Hence the necessity for the paternalistic interventionist-welfare state, with its massive growth in government spending and intrusiveness in society.

The second is pragmatism of everyday politics. After Keynesian Economics undermined the rationale for an annual balanced budget, politicians soon saw that they could justify offering voters “something for nothing” – government spending, programs, and interventions with a smaller price tag they the real cost – through the “miracle” of deficit spending.

As a result, modern government has become the Fiscal Leviathan State that is absorbing more and more of the society’s wealth and productive capability.

He concludes by arguing that there are few short-term solutions given the anti-capitalist ideology of our time, and the political pull of interventionist and redistributive paternalism that serves the interests of politicians and special interest groups.

The long run solution requires a change in the climate of ideas – and that requires setting the historical record straight on the achievements of free market capitalism, and articulating and defending the moral case for the free society and its smaller role for government.