Chapter 4: The Problems

Let us take a brief look at the major problem areas of our society and see if we can detect any “red thread” that runs through all of them.

High taxes. High and rising taxes have crippled almost everyone and are hampering productivity, incentives, and thrift, as well as the free energies of the people. On the federal level, there is a rising rebellion against the burden of income taxes, and there is a flourishing tax rebel movement, with its own organizations and magazines, which refuses to pay a tax which it regards as predatory and unconstitutional. On the state and local levels, there is a rising tide of sentiment against oppressive property taxes. Thus, a record 1.2 million California voters signed the petition for the Jarvis-Gann initiative on the 1978 ballot, a proposal which would drastically and permanently lower property taxes by two-thirds to one percent and place ceilings upon the assessed value of the property. Furthermore, the Jarvis-Gann initiative enforces the freeze by requiring the approval of two-thirds of all registered voters in the state of California to raise property taxes beyond the one-percent ceiling. And, to make sure that the state doesn’t simply substitute some other tax, the initiative also requires a two-thirds vote by the state legislature to increase any other tax in the state.

Furthermore, in the fall of 1977, scores of thousands of homeowners in Cook County, Illinois, engaged in a tax strike against the property tax, which had increased dramatically due to higher assessments. [p. 74]

It need hardly be emphasized that taxation, of income, property, or whatever, is the exclusive monopoly of government. No other individual or organization enjoys the privilege of taxation, of acquiring its income by coercion.

Urban fiscal crisis. Throughout the nation, states and localities are having difficulty paying interest and principal due on their swollen public debt. New York City has already pioneered in a partial default on its contractual obligations. The urban fiscal crisis is simply a matter of urban governments spending too much, more even than the high taxes they extract from us. Again, how much urban or state governments spend is up to them; once again, government is to blame.

Vietnam and other foreign interventions. The war in Vietnam was a total disaster for American foreign policy; after countless people were murdered and the land devastated, and at an enormous cost in resources, the American-supported government finally collapsed in early 1975. The disaster of the Vietnam war has properly called the rest of America’s interventionist foreign policy into severe question, and was partly responsible for Congress’s putting a brake on U.S. military intervention in the Angolan fiasco. Foreign policy, of course, is also an exclusive monopoly of the federal government. The war was waged by our armed forces which, again, are a compulsory monopoly of the same federal government. So the government is wholly responsible for the entire war and foreign policy problem, as a whole and in all of its aspects.

Crime in the streets. Consider: the crime in question is being committed, by definition, on the streets. The streets are owned, almost universally, by government, which thereby has a virtual monopoly of street-ownership. The police, who are supposed to guard us against this crime, are a compulsory monopoly of the government. And the courts, which are in the business of convicting and punishing criminals, are also a coercive monopoly of the government. So government has been in charge of every single aspect of the crime-in-the-streets problem. The failure here, just as the failure in Vietnam, must be chalked up solely to government.

Traffic congestion. Once again, this occurs solely on government-owned streets and roads.

The military-industrial complex. This complex is entirely a creature of the federal government. It is the government that decides to spend countless billions on overkill weaponry, it is the government that hands out contracts, the government that subsidizes inefficiency through cost-plus guarantees, the government that builds plants and leases or gives them outright to contractors. Of course, the businesses involved lobby for these privileges, but it is only through government that the mechanism [p. 75] for this privilege, and this wasteful misallocation of resources, can possibly exist.

Transportation. The crisis of transportation involves not only congested streets, but also decaying railroads, overpriced airlines, airport congestion at peak hours, and subways (e.g., New York City) that are suffering deficits and visibly heading toward collapse. Yet: the railroads were overbuilt from extensive government subsidies (federal, state, and local) during the nineteenth century, and have been the most heavily regulated industry for the longest period of time in American history. Airlines are cartelized through regulation by the Civil Aeronautics Board and subsidized through such regulation, mail contracts, and virtually free airports. Airports for commercial lines are all owned by branches of the government, largely local. The New York City subways have been government-owned for decades.

River pollution. The rivers are, in effect, unowned, i.e., they have been kept as “public domain” owned by government. Furthermore, by far the biggest culprits in water pollution are the municipally owned sewage disposal systems. Again: government is at the same time the largest polluter, as well as the careless “owner” of the resource.

Water shortages. Water shortages are chronic in some areas of the country, and intermittent in others, such as New York City. Yet the government, (i) via its ownership of the public domain, owns the rivers from which much of the water comes, and (2) as virtually the only commercial supplier of water, the government owns the reservoirs and water conduits.

Air pollution. Again, the government, as owner of the public domain, “owns” the air. Furthermore, it has been the courts, owned solely by the government, which, as an act of deliberate policy, have for generations failed to protect our property rights in our bodies and orchards from the pollution generated by industry. Moreover, much of the direct pollution comes from government-owned plants.

Power shortages and blackouts. Throughout the land, state and local governments have created compulsory monopolies of gas and electric power and have granted these monopoly privileges to private utility companies, which are then regulated and have their rates set by government agencies to insure a permanent and fixed profit. Again, government has been the source of the monopoly and the regulation.

Telephone service. Increasingly failing telephone service comes, again, from a utility which receives a compulsory monopoly privilege from government, and which finds its rates set by government to guarantee a profit. As in the case of gas and electricity, no one is allowed to compete with the monopoly phone company. [p. 76]

Postal service. Suffering from heavy deficits throughout its existence, the postal service, in stark contrast to the goods and services produced by private industry on the free market, has become steadily higher in price and lower in quality. The mass of the public, using first-class mail, has been forced to subsidize businesses using second- and third-class services. Again, the Post Office has been, since the late nineteenth century, a compulsory monopoly of government. Whenever private firms have been allowed to compete, even illegally, in delivery of mail, they have invariably provided better service at a lower price.

Television. Television consists of bland programs and distorted news. Radio and television channels have been nationalized for half a century by the federal government, which grants channels as a gift to privileged licensees, and can and does withdraw these gifts when a station displeases the government’s Federal Communications Commission. How can any genuine freedom of speech or of the press exist under such conditions?

Welfare system. Welfare, of course, is exclusively the province of government, largely state and local.

Urban housing. Along with traffic, one of our most conspicuous urban failures. Yet there are few other industries that have been so closely intertwined with government. Urban planning has controlled and regulated the cities. Zoning laws have ringed housing and land use with innumerable restrictions. Property taxes have crippled urban development and forced abandonment of houses. Building codes have restricted housing construction and made it more costly. Urban renewal has provided massive subsidies to real estate developers, forced the bulldozing of apartments and rental stores, lowered the supply of housing, and intensified racial discrimination. Extensive government loans have generated overbuilding in the suburbs. Rent controls have created apartment shortages and reduced the supply of residential housing.

Union strikes and restrictions. Unions have become a nuisance with power to cripple the economy, but only as a result of numerous special privileges afforded by the government; especially various immunities accorded unions, particularly the Wagner Act of 1935, still in effect, which compels employers to bargain with unions which gain a majority vote of a “bargaining unit” arbitrarily defined by the government itself.

Education. Once as revered and sacrosanct in American opinion as motherhood or the flag, the public school, in recent years, has come under widespread attack, from all parts of the political spectrum. Even its supporters would not presume to maintain that the public schools actually teach much of anything. And we have recently seen extreme cases in which the actions of the public schools have motivated a violent [p. 77] reaction in such widely different areas as South Boston and Kanawha County, West Virginia. The public schools, of course, are totally owned and operated by state and local government — with considerable assist and coordination from the federal level. The public schools are backed up by compulsory attendance laws which force all children through high school age to attend school — either public or private schools certified by governmental authorities. Higher education, too, has become closely intertwined with government in recent decades: many universities are government-owned, and the others are systematic receivers of grants, subsidies, and contracts.

Inflation and stagflation. The United States, as well as the rest of the world, has been suffering for many years from chronic and accelerating inflation, an inflation accompanied by high unemployment and persisting through severe as well as mild recessions (”stagflation”). An explanation of these unwelcome phenomena will be presented below; here let it be said that the root cause is in a continuing expansion of the money supply, a compulsory monopoly of the federal government (anyone who presumes to compete with the government’s issuing of money goes to jail for counterfeiting). A vital part of the nation’s money supply is issued as “checkbook money” by the banking system, which in turn is under total control by the federal government and its Federal Reserve System.

Watergate. Finally, and not least, is the entire traumatic syndrome suffered by Americans known as “Watergate.” What Watergate has meant is a total desanctifying of the President and of such previously sacrosanct federal institutions as the CIA and the FBI. The invasions of property, the police state methods, the deception of the public, the corruption, the manifold and systemic commissions of crime by a once virtually all-powerful President led to a once unthinkable impeachment of a President and of a widespread and well-justified lack of trust in all politicians and all government officials. The Establishment has often bemoaned this new, pervasive lack of trust, but has not been able to restore the naive public faith of pre-Watergate days. The liberal historian Cecilia Kenyon once chastised the Anti-Federalists — the defenders of the Articles of Confederation and opponents of the Constitution — as being “Men of Little Faith” in the institutions of government. One suspects that she would not be quite so naive if she were writing that article in the post-Watergate era.1  [p. 78]

Watergate, of course, is purely and totally a governmental phenomenon. The President is the chief executive of the federal government, the “plumbers” were his instrument, and the FBI and the CIA are governmental agencies as well. And it is, quite understandably, faith and trust in government that was shattered by Watergate.

If we look around, then, at the crucial problem areas of our society — the areas of crisis and failure — we find in each and every case a “red thread” marking and uniting them all: the thread of government. In every one of these cases, government either has totally run or heavily influenced the activity. John Kenneth Galbraith, in his best-selling The Affluent Society, recognized that the government sector was the focus of our social failure — but drew instead the odd lesson that therefore still more funds and resources must be diverted from the private to the public sector. He thereby ignored the fact that the role of government in America — federal, state, and local — has expanded enormously, both absolutely and proportionately, in this century and especially in recent decades. Unfortunately, Galbraith never once raised the question: Is there something inherent in government operation and activity, something which creates the very failures which we see abounding? We shall investigate some of the major problems of government and of liberty in this country, see where the failures came from, and propound the solutions of the new libertarianism.

• 1Cecilia M. Kenyon, “Men of Little Faith: The Anti-Federalists on the Nature of Representative Government,” William and Mary Quarterly (January 1955), pp. 3-43. [p. 79]