The Cry for Security

0:00Perhaps all of you guys think that you're normal, but you're really not. To come here, this is a strange place. A lot of people, even at Hillsdale, who are familiar with the Institute, think it's, yeah, you guys are really wacky right-wing people. And so I was asking guys, can you proctor my exam on Thursday, because we're flying down to the Institute. And they said, oh, what's it on? And I said, oh, we're doing the economics of fascism. And I think they thought it was a strategy session, that we were going to come down. And so, yeah, so perhaps for future reference, you know, the economics of fashion and parentheses were against it, you know, something like that. But, so today I'm talking to you about the cry for security. And as you can imagine, what I'm going to focus on is it's a trend that both left and right have noticed.

0:47but as is so often the case, they can tell when the other side is doing this tactic and they don't realize that they themselves are doing it in the same way and of course what I refer to is that the population gets scared either about economic insecurity or physical insecurity and then the government promises to protect them in exchange for some of their traditional liberties and as I say the leftists are very good at realizing when the right does it in terms of people being afraid of foreign invaders or terrorists or even groups they don't like so that Well, a leftist, if you said, oh well how come people are, they're supporting all these oppressive measures against gays and whether or not there are such oppressive measures, but it's all because people are afraid of them and so the right-wingers take advantage of that fear or that's why there's all the immigration restrictions because the right-wingers know how to exploit the fears of the populace. And by the same token, the right-wingers are very good at realizing how all that FDR, when he instituted Social Security, he took advantage of the fears of the middle class and people whose savings had been wiped out and who couldn't find

1:47And again, so they're both very good at pointing out when the other side is doing it and they don't realize that it's a more general phenomenon where the government, as Bob Higgs also often points out, whenever there's a crisis, they ratchet up their own power and then it subsides a little bit when the crisis fades, but it never gets back to the pre-crisis level. So, Mr. Rockwell yesterday talked about the way this worked when it came to Katrina and the subsequent hurricane. So let me just focus now on the economic area and then in terms of military attack. And again, the two sides are good at seeing when the other one does it. So when it comes to economics, of course, the classic example that's right in the title is social security.

2:32And what we're going to see is this alleged trade-off between liberty and security, or liberty and freedom, is in fact a false one, that there is no such trade-off, that those who give up their liberty in exchange for security get neither. But there's a two-pronged way that this operates, that on the one hand, it's that given everything else the government is doing, it's more than overwhelming what they're apparently claiming to do on that one issue in question. And so when it comes to economics, for example, in the American case, people during the depression, of course, were dispossessed and they could massive unemployment and FDR promises them a new deal and they go for it and we institute social security because apparently the free market couldn't handle pensions and so on and insurance programs in the free market wouldn't have been successful and so that's why the government needs to come in and ensure that these things happen.

3:29But when you inquire, well, why was there so much insecurity in the first place? Of course, if you subscribe to the Austrian view, it was because of prior government interventions. So it wasn't as if the government, as the standard tale goes, was completely laissez-faire up until FDR swept into office and then, fortunately, at long last, he stood up to these laissez-faire economists. That, of course, is completely wrong. But again, if you're an Austrian economist, the reason we were in the depression in the first place was the prior credit expansion of the 20s and then the subsequent and inevitable boom or excuse me bust and then of course the other the smooth holly tariff and job-owning keeping up the wage rates and other sorts of government interventions all the New Deal policies beyond just Social Security were making the situation worse and so the the insecurity the thing that the government was trying to fix with its Social Security legislation was itself due to prior government action but that even to focus on that I mean it's an important

4:25point but that concedes too much it makes it sound as if the government really is helping at least on those particular issues where it's claiming to deal with the insecurity but of course that's not even true even that minor claim that the Social Security program does not make us more secure and it's for this audience I don't need to dwell too long on this point but the obvious reason is that the Social Security legislation does not at least the way it's practiced in this In this country, of course, it doesn't actually force you to save money that is then invested, and so it can grow over time, so by the time you retire, your money has accumulated into a much larger fund that can then fund your retirement. No, you are forced to save so that the government can spend in the current period, and so there is none of the benefits of saving can be realized in the aggregate.

5:12It would make more sense, it still would be a bad idea, but if the government simply required people to save some of their money in private insurance plans or pension plans, then you could understand and advocate of that thinking, okay, we're going to take care of the short-sightedness of these silly individuals left to their own devices, and the government's going to step in in this way, we're going to avert the catastrophe that happened, that was manifested in the 1930s. But again, they don't even do that, it's they force people to save and the government spends all and all that money in the current period. And what's interesting is again going along the earlier theme of how this alleged dichotomy where the one group thinks that the other side is doing it when it comes to economic issues and the other group side thinks that the other side is doing it when it comes to national security.

6:01It's interesting that I think if you ask the average American where do you think social security programs started, I would probably think, I don't know, in Sweden or some real tolerant nation or culture that's very leftist, according to the standard terminology. But no, the standard date or the standard period for when modern social security started was under Bismarck in Prussia, and he's not usually considered to be a left-winger. And it's just ironic. I remember when I myself first heard that I was surprised that the modern welfare state had its origins. I had this idea that at least if you were a militarist, you were a manly man and you thought that those who couldn't hack it in the market should just starve to death or something or they should just go drink more protein shakes, but no, that's not it at all.

6:50If you study history, it's precisely the militaristic regimes that also foster the cradle to grave protection. and now having seen more examples of this and seeing our so-called conservative president and all the proposals he's made, you realize that they're two sides of the same coin, that if the state is going to protect you in terms from economic insecurity, from economic woes and make sure that there's a guaranteed minimum baseline of comfort, well then it's not, why would you think that it's completely a different party who is going to be the ones to protect you from military or physical insecurity. And so it's it's not surprising in retrospect that that's where the modern social security and welfare state would have started. So we see again in the in the economic arena that the government claims protect us from the insecurity of financial ups and downs and people who you know were short-sighted and didn't plan for the retirement and of course just to us it's so obvious but we should just repeat it anyway that the very idea

7:53The idea that politicians in Washington are going to be much more responsible with the care of funds and not be profligate spenders and that we can't trust private individuals to look out for their own welfare, but we need to trust those funds to the people in Washington. It's just absurd, but yet that's the typical understanding. And again, it's the insecurity in the first place was caused by prior government action and then the alleged means to combat it also only makes the problem worse. And I can't leave this point without addressing President Bush's own proposal, and I've written on that George Reisman has also made some points on this, and I'm sure some other people in the room. And just to refresh your memory, because it sort of lost momentum with the hurricane, but the idea was that Bush, again, because the Republicans like the market, right?

8:44If Kerry had won, then we would have a big government person in office, but fortunately we have a friend of the free market in there. What he wants to do is take advantage of the benefits of the market and we all realize and the conservative Republicans realize that it's silly for the Social Security money just to get spent hand over fist by the government that funds taken out of your paycheck for Social Security get spent in the current period so the conservative pundits recognize that and so then they support Bush's plan that instead of spending that money what we're going to do is take some of it, not all of it, but some of it and put it into the stock market Now, you can understand the left is going crazy over that. It would be hard to imagine a proposal that would offend them more than to take Social Security revenue and invest it in the stock market.

9:31I suppose if you wanted to invest it in the KKK, that would probably have offended them just a little bit more, but that just rankled them. And it's ironic, though, is their critique of why it was wrong was close to the right one, or close to what my critique was, so that's why I'm going to say it was the right one. one that the way I think to see it clearly or my particular complaint with Bush's plan and there's all sorts of other things you could raise for example that even if everything else were fine with it just look at the political leverage that would give Washington if they were controlling a fund of which would eventually be trillions of dollars that they could just lean on individual corporations and say you better play ball with us on some issue or we're going to take your corporation out of the broad index that Social Security invests And that could make that firm's stock price plummet 50% overnight.

10:21So that's the kind of arbitrary power that would be at their hands if you instituted this. But beyond all that, just the basic idea is completely flawed that if you're taking this revenue and instead of spending it now, we're going to take it and invest it. But yet at the same time to placate his critics, Bush kept promising, I'm not going to cut one dime of other spending. and other spending, don't worry, this isn't going to jeopardize any of the social programs or our military programs. So where is that extra money going to come from? Oh, and he's also not going to raise taxes, of course, because, again, the Republicans are the friends of the economy. So he's going to have to borrow it. And so just, let's say it's $100 billion, $100 billion coming in that normally the government would have spent and would have technically issued bonds to the Social Security Trust Fund.

11:10Instead of doing that, now they're going to take it and buy stock with it. But then that means they have a hundred billion dollars less to spend now than they otherwise would have. And so where is that going to come from if they're not cutting spending and they're not raising taxes? Well, then they have to borrow a hundred billion more. And so all Bush's plan would do is take the hundred billion, let's say, lend it to the stock market or invest it in the stock market and then go to the loan market and borrow an extra hundred billion dollars to meet current spending needs. And so it's just a complete shell game. And to try to really get to the essence of it, even though it's very complicated and you're trying to picture it, if that is a good idea, and I've had people say it's a good idea, even when I explained it at that level, people would email me and say, well, no, you're right, there are transition costs, but once we get over those, then it's going to be self-funding. But again, that's like buying something with your credit card and thinking, well, yeah, there's the transition cost of when I'm getting the statements, but once I pay that off, the purchase takes care of itself.

12:08All the complexity of it, if Bush's plan really were a good idea, then by the same token, let's just, why doesn't the government, in addition to whatever else it's doing, borrow an extra trillion dollars and then invest it in the stock market and the government's only going to pay about 4 or 5 percent to get that extra trillion dollars and it's going to make, on average, more than 4 or 5 percent in the stock market. And so the few points differential times a trillion dollars, that's a lot of money that Bush just found out of nowhere. It's free money, just tens of billions of dollars lying around because of this brilliant plan. If you put it in that terminology, if you think about it like that, most people would say, wait a minute, there just can't be tens of billions of dollars lying around. Why doesn't a corporation do that? Why doesn't somebody else think of that if there's just these billions of dollars lying around for free?

12:53And, of course, the reason is, well, it's risky. Yes, in general, the stock market has a higher return than the rate of return on a government bond, or what the government would have to pay to people to borrow money from them, but it's possible it might not. And so once you take into account that fact, then it's the risk premium that's determined in the financial markets and it all balances out. So a corporation wouldn't just go out and willy-nilly borrow a trillion dollars and then invest it thinking that's tens of billions that we're going to make for sure. And so that's what I mean when the Democrats and Ted Kennedy, when they're criticizing Bush's plan and saying, oh, it's too risky. I mean, I don't think they really see it the way I just explained it, but it's basically right. but then as always they draw the wrong conclusion and they say that's why we need to have the government guarantee all these things because that's not risky

13:42that you know it's certain that the government you know you'll have your your Social Security money if the government provides it for certain whereas if you rely on the private stock market you know it's uncertain volatile returns all right so I should I should move on to the physical military side Again, it's the exact same thing, but now it's typically the leftists who are the ones to correctly diagnose what the right-wingers are doing. They take advantage of the insecurity of the population. They give up their liberty. And again, the trade-off is a false one, that it's not true if only we would be willing to submit to less freedom or fewer civil liberties, that therefore at least we wouldn't be at the mercy of these terrorists.

14:27And again, it's also the case that the general climate of insecurity is caused not by just nature or just that's the way things are, but rather caused by previous acts of the government. And again, even if you put that aside and say, okay, what about the specific measures to protect us that the government's recommending? No, even those themselves keep us less safe. And just to motivate this, let me quote from my friend Jonah Goldberg, who he has the benefit of. He once called me in print a no-talent ass-clown, because I'm not a clown. I took that personally.

15:13So he had this article called Clenching the Clichés, and this was back, well my response to it was October 23, 2001, so it must have been before then, and he, what he was doing was he was going through, and I kid, but he's a clever guy, and he was making fun of the typical left-right arguments on this issue about giving up liberties or not, and so Clenching the Clichés was him going through and taking these typical statements and making fun of them. So, for example, so this is Jonah talking, you know, if we, this is what he's quoting the conventional wisdom, if we change our way of life, they will have won. And then Jonah responds to this cliché. Actually, this has it exactly backward, if we don't change our way of life, they will win because we will remain unprepared for more attacks.

16:00And then he goes on, and so again he's quoting the cliché, security cannot come at the expense of our liberties. And then Jonah says, what security is supposed to come at the expense of then? Sure, it would be a great world if we could say increased security will come at the expense of PBS, Brussels Sprouts and shopping carts with wobbly wheels, but the world doesn't work that way. So it's very glib and it's cute, but Jonah does think the world works that, yeah, we have to give up our civil liberties and that's the way we get increased security. and Increased Security. Again, it's incorrect if you're all familiar with these claims, but that the reason the terrorists hate us, I personally don't think it's that they dislike our immodest women and that they hate our bicameral legislature and that's why 19 guys would leave their families and come over here for five years and train just to knock down our buildings. I think maybe the reasons they themselves give might have something to do with it.

16:59and so you know it and again I just I still can't quite get around that the the terrors they say that they think we're imperialist and they don't want us invading other countries and so the way we're going to defeat them is to invade other countries and on the basis of things that turn out to be false and I know that I we keep bringing that up but I think it's important and again I just also in terms of these cliches I might as well mention one of the ones that The thing that irks me is, I'm sure many of you have had this happen where you're discussing the war, you're very critical of Bush and so on, and then someone will get real haughty with you and say, you know, it's ironic because our troops over there are defending the very freedom that you need to criticize the administration, you know, and you're supposed to, but is it really true that Osama bin Laden or Saddam Hussein wanted to censor my ability to make fun of George Bush? I don't, I don't think that's what they're going to do.

17:58The goal was, but in any event, fortunately, the troops are over there making sure I can criticize the federal government. And then on to the specific issue, and this is what other people will say to me, I grant you previous administrations have done silly things, and of course it's always Bill Clinton's fault that the Clinton administration really fumbled the ball, and they shouldn't have done X, Y and Z, and then we wouldn't have had September 11th. But given that that's all happened, given where we are now, and these people hate us, If we pull out now, it's not that they're all just going to forgive us and go their merry way. And so even there, it's still not the case that what the government is doing to protect us is actually successful. And I can remember, I don't know if it happened nationally, but certainly I was a graduate student at NYU at the time, September 11th attacks, and for a while there were troops walking around M16s in the street.

18:51in the street. And I remember thinking, okay, so this is what a police state is like. And some people, because of course, as you can imagine, NYU, you know, on the sidewalks outside, the people were running in a crayon, you know, Bush is a terrorist and things like that. But beyond the graduate community, I think most people and some even in my family were saying, you know, I feel safer knowing that these troops are around. And again, it's, I guess I understand why it happens, and it's just to realize, because you see this old footage from the History Channel, the Hitler Channel, that there are all these goose-stepping troops and you wonder, how could those people have succumbed to this? But I think it must have been the case that a lot of them felt safer knowing that their boys were out there marching along and keeping them safe from the Communists or the Jews or whoever was the ones that they were afraid of.

19:47We look at these German soldiers dressed and it scares us, but that's because we weren't German in 1942 over there, whereas now we see Americans dressed up and that's not nearly as scary to us, but certainly the weapons they carry can kill as well. So again, the issue that are these measures keeping us safer, and of course they're not, the troops, I don't understand what they were guarding against, they had troops with M16s in the airport at the security checkpoint, but 9-11 of course wasn't a thousand Arabs came and took over an airport, it was guys who went on an airplane with box cutters. So again, what are they guarding against? Or even biological weapons, it's not that some guy is going to come in with a canister that's got a skull and bones on it and then he's just going to rush the security and they're safe. Only if we had an M16 we could have The illusion of security when in fact that's not really keeping us safer, and specifically people say, let me just very briefly sketch out,

20:52Okay, well what would your free market do? Didn't the free market fail on September 11th? and again no it was the alleged safety measures of the government it wasn't if you had polled federal officials on September 10th and said isn't it the case that right now we're woefully unprepared for a terrorist attack and that you the government have utterly failed us I don't think they all would have said yeah you're right we should all just resign no they've seen no we're keeping you safe and we're vigilant and it was only after September 11th happened that people said oh yes we're completely you know it is a crazy to be leaving security in the hands of these private companies but again that's it's very misleading because it's it wasn't a laissez-faire arrangement and people have talked about that the flights the people on the flights the employees were weren't armed and of course those federal regulations and that guys with box cutters wouldn't have been any match if just one person on the plane had had a gun and

21:47that's certainly true but even beyond that just the the different security Security Measures. We're so used now to the current arrangements, but back then there was pooled security. It's still like this at some airports, where everyone goes through the same checkpoint, whereas now, at least at some airports that I've been to, each carrier has its own wing, so to speak, so that if you're flying Delta, that you're basically getting dealt with by Delta from start to finish. But before there was the common checkpoint and so if you asked, well why wouldn't these airlines institute their own security measures, well there would be a free riding problem and that why would we spend millions of dollars ramping up our security if that meant all of our competitors who are also using these gates would also benefit from it and of course the government has its own uniform policies and that's something too that people overlook that strictly speaking it wasn't that the hijackers snuck through security, they were

22:43We were allowed to bring box cutters on planes on September 11th, so it wasn't that the private person was asleep at the television screen when their cargo went through the x-ray machine or what have you. And so, the market mechanism certainly would have been able to do a better job. Can we say it would have been perfect? No, we can't say that, but as, again, Mr. Rockwell pointed out with the operation of FEMA yesterday, that when the government fails, what happens? Are there massive layoffs and does the government say, okay, we botched this one, let's let the free market handle the next occurrence? No, of course not. The exact opposite, that the federal government gets more power. And when regular people hear that, it sounds very cynical, and I personally don't think that every last person in the entire federal government is out to steal civil liberties and give as much power to the government as possible.

23:40But certainly, just looking at the incentive structure and who gets promoted and what sort of policies get perpetuated, it's not a coincidence that the things that tend to make government grow are the ones that are going to persist over time. And so, again, in the economic arena, we see the same pattern that there's an insecurity, The government comes and promises to protect us and yet it caused the insecurity in the first place and fails to protect us and diverts private energies away from the things that really could have helped us, that private money that could have gone into pension funds and true savings is now being siphoned off and spent by the government because of social security legislation and other such measures. And then when it comes to private security, the government through its own foreign policy adventures has created this climate of hatred against us so that people are willing to devote their lives to inflicting And then the government, to try to protect us, does more of the same and attacks countries that, in retrospect, didn't have anything to do with the initial provocation and then institutes all sorts of measures that fail to keep us safe.

24:44There's anecdotes about some college students sneaking box cutters onto a plane well after the new federalized airport security measures and so on. and so on and so it's not the case that even with all this federal presence at least now we're safe and yet we now of course with the Patriot Act we still have we have less liberty than we had before and we're still unsafe as the recent alarm in New York City shows so it's all we can do is diagnose it and point to it I suppose you say well what's how are we going to fix the problem how are things going to get better beyond just us pointing it out and we in this room can recognize it I suppose there's nothing more we well one thing you can do is Right Checks to the Mises Institute. That's one thing to do. But beyond that, all I guess we can do is just let people know that we ourselves don't agree with it.

25:34And I think there is the approval for the support of our troops in the war. I think that even with the falling poll numbers, I think there's actually less support for that than you would normally think. And in certain environments, I mentioned in an earlier speech here at the Institute that I was in the Atlanta airport with my wife and when troops would come in, the entire airport would just applaud them and so we didn't. You know, just little things like that. But I think a lot of the people, but even with my views, I felt very uncomfortable not applauding. And so I'm sure there were plenty of people applauding who really, that wouldn't have been their natural inclination, but they didn't want to be seen as a traitor. and or we were in in our church and there was a video on the anniversary of September 11th just showing the you know the firefighters and people jumping out of buildings and it was put out by Fox incidentally this video and showing

26:26President Bush you know it was it was music playing and you know so you can see him talking and then at the end a guy in the back gets up and starts applauding and I I really don't know what he was applauding because you know it wasn't it It was just a documentary, but we remain seated, of course. So little things like that is all I can recommend to try to show that you don't give your support to what's going on. And at least, if nothing else, later on when your children or grandchildren ask you, because I think in the history book it's going to be clear when enough time has passed that this whole episode was crazy, At least you can say, well, I wrote letters to the editor and I certainly didn't applaud, and that's maybe the best we can hope for. Thank you.