Economic Growth or Economic Liberty?

Every politician, not mater their party label or ideology promises to promote economic growth. Even many constitutional conservatives and libertarians say that the reason to support tax cuts, deregulation, and repealing economically destructive laws like Obamacare is to promote economic growth, not to give us back lost liberties.

Of course, the best way to economic growth is to promote economic liberty, so one may ask why it should matter if libertarians talk about economic growth instead of economic liberty.

It matters because focusing on growth instead of liberty provides a ready-made justification for conservatives to support various forms of interventions into the marketplace — such as federal spending on infrastructure, research, and corporate welfare programs like the Export-Import Bank on the grounds that these programs are pro-growth.

Some so-called free-market conservatives have even defended excessive spending on the military-industrial complex on the grounds that military spending creates jobs and thus promotes economic growth!

Government facilitates this by producing statistics that count a dollar spent by the military-industrial complex, or on “infrastructure,” or on an EXIMBank funded project the same as a dollar spent by a private business serving consumers with innovative new products.

Some conservatives have actually opposed reductions in government power in the name of promoting growth! For example, instead of joining Campaign for Liberty Chairman Ron Paul in supporting any and all efforts to reduce tax burdens on the American people — and eventually eliminate all taxes — many conservatives only support “pro-growth” tax cuts. This means they oppose tax cuts to middle-and-working class Americans. Some even complain that the government should not “waste money”  on tax cuts that do not produce growth.

These “conservatives” implicitly buy into the Marxist premises that government owns all property, therefore any reduction in what we “owe” government is a gift from government. They also ignore the Austrian insight that money left in the hands of individuals will always be spent more efficiently than money confiscated from people and spent by government bureaucrats.

Another common error made by pro-growth politicians is failure to link tax reductions with reductions in the size and scope of government. This is why the tax reform plan starts with the goal of “revenue neutrality” because god forbid simplifying the tax code and lowering rates would cost the government to lose a penny of revenue. 

Many “pro-growth” tax reformers support “broadening the tax base” as part of tax reform. Broadening the base is code for making sure everyone — especially middle and lower class taxpayers — pay income taxes! Increasing the reach of the IRS seems to be an odd goal for those who claim to love liberty! Tax reformers also speak of changing the tax code to “encourage” individuals to prioritize investment over consumption.

But they never ask themselves why the government tries to use taxes, or any other policy, to change an individual’s preferred allocation of resources? As Campaign for Liberty Chairman Ron Paul said:

Tax reformers also stray from sound economics when they endorse a tax system that is designed to direct consumption and savings. I share the concern that the current tax system distorts people’s behavior by discouraging savings. However, the solution is not for the government to create a tax code that punishes consumption in order to encourage savings. A truly efficient market is one where individuals are completely free to determine how to allocate their incomes between consumption and savings. No politician or bureaucrat can know the proper allocation of savings and investment that meets the needs of every individual, and government policies designed to cause individuals to devote more of their income to savings than they otherwise would distorts the market just as much as policies that encourage excess consumption.

Some so-called “free-market” conservatives sound like Soviet central planers when discussing the benefits of “pro-growth” tax cuts.  I remember during the debates of the Bush tax cuts, a DC-based “free-market think tank” distributed a paper to every member of congress claiming to show exactly how many jobs the tax cuts would create in that member’s district, as if a DC think tank could somehow predict what new businesses and jobs entrepreneurs would create in the future.

The idea of replacing liberty with “growth” as a justification for lower taxes and regulations comes largely from the supply-side movement of the seventies. Supply-sides are best known for promoting the “Laffer Curve” which demonstrated that government revenue increases as marginal tax rates are lowered.

Few conservatives, including some libertarians, wondered why those who claimed to support limited government and individual liberty should support increasing government revenue. I have always viewed increasing government revenues as an unfortunate side effect of tax cuts.

Many supply-siders are actually supporters big government liberals who become big government conservatives because they came to view the Laffer Cruve, and other conservatives “reforms”, as a means to preserve the welfare-warfare state. No wonder the neoconservatives where enthusiastic supporters of supply-side economics!

Lew Rockwell once told me that when he was Ron Paul’s Chief of Staff he attended a briefing with Arthur Laffer himself openly admitting that the only reason he promoted supply-side tax cuts was to save the welfare state. This may explain Laffer’s support for the Internet Sales tax. 

Supply-siders talk about a role for gold in monetary policy, but instead of restoring a true gold standard, much less End the Fed, they favor using the price of gold as a “signal” to tell the Fed when it’s time to raise rates. Just as with tax cuts, supply-siders wish to use gold as a means to make government “management” of the money supply more efficient!

By accepting the premises that government can grant or restrict economic liberties as it sees fit necessary to promoting growth, they are also (at least implicitly) accepting the idea that liberty is nothing more than a gift from the government to be granted or taken away depending on the government’s needs.

If the only reason government should grant us economic liberty is to grow the economy in order to benefit the government than why shouldn’t the government have the power to restrict our liberties whenever they are inconsistent with the government’s “need” to expand or protect its power?

This may explain why so many supply-siders enthusiastically support the PATRIOT Act, TSA, and other restrictions on our liberties.

The idea that government can grant or take away our liberty at will turns the traditional classical liberal/libertarian argument that individuals have inalienable rights to life, liberty, and propriety on its head.

Therefore, any libertarian who frames their arguments for the free-market in terms of how it promotes “growth,” thus increasing tax revenues, is undercutting the philosophical case of liberty and thus undercutting our chances for long-term success.

None of this should be taken to suggest that we should not talk about how free-market policies or that we should not work with supply-siders and others on tax policies — anymore than our philosophical differences with progressives should stop us from working on repealing the PATRIOT Act.

However, we must never let the need to form alliances prevent us from making the case for limited constitutional government and explain how the only way to achieve lasting peace and prosperity is to repeal, not “reform,” the welfare state, the warfare state, the income tax, and, of course, auditing then ending the Fed.

And it certainly should not deter us from opposing any politician who fails to support liberty for any reason — including so-called conservatives who support crony capitalism and oppose reducing taxes on working Americans in the name of promoting growth.

Writing at the Ron Paul Liberty Report Chris Rossini has a must-read essay on why politicians should stop trying to promote economic growth and instead just get out of everyone’s way: