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Friday, January 6, 2012

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Time to End the War on Poverty
by Jacob G. Hornberger

Wouldn’t it be great if some mainstream pundit were to ask the following question of the Republican presidential candidates: “Do you believe that the time has come to end the war on poverty?”

Alas, it’s not going to happen. The question would obviously be considered outside mainstream America and, therefore, not the subject of legitimate debate among the presidential candidates. Moreover, all but one of the candidates, along with all the mainstream press, are as enthusiastic supporters of the war on poverty as President Obama and liberals/progressives.

But the question should be asked. And the right answer is the libertarian one: It’s time to end the war on poverty.

After all, statists have had 40 years to wage their war. Aren’t four decades long enough? If they haven’t ended poverty by now, then why in the world should anyone believe that this federal program is going to be any more successful in the future? In fact, from what I understand, liberals/progressives believe that there is more poverty than ever before.

It almost seems as though we have to continue old, failed welfare-state programs indefinitely into the future simply because it’s the mainstream thing to do. Ending an old, failed welfare-state program would obviously be too extreme, too loony, too fringe. The 40-year-old, failed war on drugs comes to mind here too.

How have the statists waged their war on poverty? The main way is by forcibly taking money from people in the private sector through the taxing process and giving it to the poor.

But notice something important here: The war necessarily depends on the existence of people in the private sector who have money. If people in the private sector don’t have money, then the state cannot give anything to the poor because there is no one in the private sector to take the money from.

So, I repeat: The war on poverty necessarily depends on having people in the private sector with money. The state takes their money and gives it to the poor.

One of the big problems with statists is that they believe that a wealthy private sector is a given. That is, they just assume away the problem. They assume that people in the private sector have money. And then they say, “Let’s take some of their money and give it to the poor.”

That’s a big assumption. And an invalid one.

The critical question that needs to be asked is: How does wealth come into existence within the private sector? That’s the question that liberals/progressives never ask, given their assumption that wealth in the private sector is simply a given.

That’s the question that Adam Smith asked in his treatise: An Inquiry into the Nature and Causes of the Wealth of Nations.

The answer is: Wealth comes into existence when people are free to engage in economic enterprise and free to accumulate wealth — without governmental interference.

In fact, that’s the key to ending poverty. That’s the only way to end poverty. When people are free to engage in economic enterprise and to accumulate unlimited amounts of wealth, poor people are able to become wealthy people.

The problem is that once that happens, statists see all that wealth that has been accumulated in the private sector and exclaim, “Wow! Those people don’t need all that money. Let’s wage war on poverty by taking some of their money through taxation and giving it to the poor.”

As they do that, however, they push people who are on the margin back into the ranks of the poor. They also put marginal enterprises out of business. That increases the demand for more welfare. Over time, as the number of people on the dole increases, the amount of wealth in the private sector decreases. Ultimately, the end of the road is a totally impoverished society — that is, one in which there is no money left in the private sector.

That logical end result of the war on poverty is Cuba. In that society, the state took everything from the private sector and gave it to the poor. Today, there is only a very tiny private sector in Cuba. Everyone had to end up working for the government, which for a long period of time depended on financial assistance from foreign governments. The entire society is on the verge of starvation and has been for a long time. Another example is North Korea.

There are, of course, less extreme examples of the direction that the war on poverty takes a nation. Look at Greece. Their welfare recipient class kept growing and growing. Their welfare was financed by both taxes and ever-increasing debt. Today, the government is faced with a quandary. If it imposes more taxes on the private sector, it shrinks the private sector, thereby making it more difficult to collect money next year from the private sector. Yet, the recipient class continues to demand the payment of its dole and the creditor class continues to demand repayment of its debt.

In the United States, despite 40 years of the war on poverty, there is still a very wealthy private sector. But with the enormous and ever-growing demands of both the welfare state and the warfare state, one can only wonder how long America’s private sector can withstand the burden. We all know what a difficult time the American middle class is having under the tax burden of America’s welfare-warfare state.

There is a solution to ending poverty—the libertarian solution, which entails prohibiting the government from waging war on poverty. The best way to help the poor is by ending the government’s 40-year-old, failed war on poverty and by dismantling both the welfare state and the warfare state and the enormous taxes that fund them.

Jacob Hornberger is founder and president of the Future of Freedom Foundation.

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