Prices and Lies: What a Tangled Web.

The Free Market is a system in which buyers can freely find sellers. The two parties can agree to a voluntary transaction, free of the coercive violence that is hallmark to all government action. The Free Market allows buyers and sellers to know real prices and understand the market information they convey, free of distortion by government mandates on prices.

A fatal error that many amateur Libertarians make is this: to believe that the Free Market is an almost mystical system that will solve everyone’s problems and create utopian results.  The Free Market is actually not always the bearer of good news. The real price tags presented by the Free Market are not always what people want to hear. Consider the modern American welfare state – specifically where Social Security and Medicare are concerned. People want to believe that these programs are solvent. People want to believe that they can count on the State to take care of over 78 million baby boomers.

The total unfunded liabilities of the United States government, a good chunk attributable to Social Security and Medicare, are over $222 trillion. This will never be under control. It is impossible. As Professor Boris Kotlikoff expounds:

” When fully retired, 78 million baby boomers will collect, on average, more than 85 percent of per-capita gross domestic product… The answer for the U.S. isn’t pretty. Closing the [fiscal] gap using taxes requires an immediate and permanent 64 percent increase in all federal taxes. Alternatively, the U.S. needs to cut, immediately and permanently, all federal purchases and transfer payments, including Social Security and Medicare benefits, by 40 percent.”

So in theory, there is a price to be paid that can make Social Security and Medicare solvent. As you can see, this price is outrageous. An immediate 64% increase in all federal taxes? To even introduce such a plan would be tantamount to political suicide. I call this impossible, therefore, because no politician in our society could push for such a tax and be re-elected. Not even the Obama of 2008 could have made such a suggestion without significant backlash. If Washington was seized with madness and somehow pushed through a 64% tax increase, there would be open tax revolt. No joke. I’m talking about riots in the streets. Politicians do not want to deal with this. American politics are, thankfully, not at a point where legislators could legitimately deal with it.

This is what that means: My generation will pull the plug on these programs. When talking heads speak of “saddling our children with an unimaginable burden”, it makes me scratch my head. They really believe that my and other associated generations are going to “saddle the burden” to keep Social Security and Medicare afloat? Fat chance. Social Security and Medicare will be dismantled when we become the mainstream voters. Old people will need to rely on their families for support. Old people without families will need to rely on the charity of others.

The public ignores this (for now). The Welfare State is not cheap, but people like cheap. People want to believe that politicians can fudge the numbers and make the Welfare state cheap. Many people even realize on some level, deep down, that this is all an exercise in fantasy. The public continues to bask in the glow of unhampered deficit spending. They will do so until the Free Market alternative (default on government promises) becomes obviously better than the government-produced price. Unfortunately, the Free Market price to be paid at that time will be even higher than it is now.

The Free Market shows real price tags and helps people understand true cost, which is often more than people wish they had to pay. This is why Welfare-Warfare state politicians have dominated American politics for the past 100 years. These politicians tell people that they can bring them vast social programs and foreign military adventures for figurative pennies-on-the-dollar. They are being wholly dishonest of course, but the public is willfully deceived. Deficit spending is painless for a while.

Many libertarians do not think critically about the true nature of the Free Market. These are things that need to be understood. This is why Welfare-Warfare state politicians are so much more successful than libertarians: their fantasy-world economic system is far more attractive than what the Public deep-down knows the Free Market provides. This will not change until it becomes apparent to the public that they have been duped, which could take a long time. Bureaucrats and Politicians are very good at pushing things off. No politician wants to be the unlucky one caught holding the hot potato. Do not forget, though, that they drive up the tab the entire time.

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