Yes, This Time We’ll Have Inflation, and Here’s Why

Estimated Reading Time: 4 minutes

After several decades of relatively low rates of inflation, it is easy to think that we will continue to see little change in prices. But the seeds of inflation have been planted.

Purchases of financial assets, primarily Treasury securities, are the primary tool the Fed uses to control the money supply. When the Fed purchases Treasury securities, it provides the federal government with spendable funds. When these funds are spent, the money supply increases. Essentially, money is created out of nothing.

Since 2008, the Fed has expanded these purchases far more rapidly than in the past. Fed holdings of financial assets quadrupled during 2008-2019, expanding from $900 billion to $4.1 trillion. During the past 12 months, these purchases have surged another 80 percent, soaring to $7.47 trillion In February 2021.

Until now, however, the inflation rate has remained relatively low. Two factors have combined to keep inflation in check. Starting in October 2008, the Fed began paying banks interest on their deposits held with the Fed. These interest payments encourage banks to hold larger Fed deposits, rather than undertake investments and extend loans. During 2008-2019, the Fed used these interest payments to induce banks to hold a larger share of their assets as reserves, dampening the money growth and inflationary effects of the Fed’s huge expanded purchases of financial assets.

In addition, worldwide interest rates declined to historic low levels during the decade following the Great Recession. A variety of factors caused this. One that has been largely ignored was a dramatic demographic shift in high-income countries, as the number of people in the lending phase of life (roughly age 50 to 75) increased relative to those in the borrowing phase (under age 50). The resulting low and declining interest rates reduced the opportunity cost of holding money, causing the velocity or turnover rate of money to plummet. As the result of this combination of factors, the Fed’s huge increase in purchases of financial assets and money creation has, to this point, exerted only a minimal impact on inflation.

However, this favorable scenario is about to reverse course. Three major factors underlie the reversal.

First, the Fed’s current money creation dwarfs those of recent decades. Propelled by the $3.6 trillion Covid-19 spending financed by borrowing from the Fed, the narrow measure of the money supply known as M1 has expanded from $4.0 trillion to $6.8 trillion during the past 12 months, a 70 percent increase. By way of comparison, the 12-month increases in M1 during the inflationary 1970s never exceeded 10 percent. The largest previous single-year M1 increase in recent decades was a 21 percent figure in the aftermath of the Great Recession. The story is the same for the broader M2 measure of money, which has increased by 25 percent during the past year. The next largest 12-month expansions in M2 during the past 75 years were the 1975-1976 increase of 13.8 percent during the double-digit inflation of the 1970s and the 10.3 percent increase during 2011.

One has to go all the way back to World War II to find anything comparable to the money supply increases of the past 12 months. Moreover, even these gigantic figures understate the current monetary surge. The Treasury is currently holding more than a trillion dollars of committed funds in its bank account, which will be added to the money supply when they are spent in the next few months. Congress is expected to add additional fuel to the fire with the $1.9 trillion spending package currently under consideration.

Second, the inflation triggered by the huge monetary expansion will increase the expected rate of inflation and nominal interest rates. In turn, the higher nominal interest rates will cause the velocity of money to increase, unleashing additional inflationary pressures from the rapid money growth of 2008–2019. Rising inflation rates and higher nominal interest rates are two peas in the same pod. When the former occurs the latter will follow. As inflation pushes nominal interest rates upward, the recent reductions in velocity will reverse, adding to the inflationary pressure.

Third, the mandated shutdowns have resulted in a huge pent-up demand. Once a sizable share of the population has received the vaccine and the virus is brought under control, spending will increase substantially, providing an additional boost to both demand and the general level of prices. While the shutdown imposed large costs on small businesses and employees who lost their jobs as the result of business closures, the income of another sizable share of Americans continued as usual. In fact, the incomes of many in this group received an additional boost from the government’s direct payments to households in the Covid relief packages. Restrictions on travel, tourism, sporting events, and other entertainment curtailed spending and the personal savings rate more than doubled, jumping from 8 to 17 percent during 2020. Now, many people who have money have been cooped up for too long, and when they can, they are going to spend “big time.”

The current situation is similar to that of World War II and its aftermath. As during the pandemic, the surge in government spending during the war was financed mostly by debt and money creation.  Similarly, spending options were severely limited during both of these events. The performance of the economy after the war provides insight on our likely future. Propelled by pent-up demand and wartime savings, the post-war recovery was stronger than expected. But it was also characterized by inflation. The CPI and GDP deflator (two measures of inflation) both increased at double-digit rates during 1946 and 1947.

The next two or three years are likely to be similar. It is a virtual certainty that inflation will rise, perhaps to double-digit levels. Demand will be strong and real GDP is likely to grow, albeit at a sluggish rate. Currently, the political forces supportive of anti-growth policies such as trade restrictions, higher minimum wages, perverse energy regulations, and cronyism appear to be on the rise, and they will dampen future growth. These policies, along with the uncertainties accompanying inflation and the burden of financing the larger outstanding debt will slow real growth. But inflation is going to be the big story of the post-pandemic economy. Get ready for an inflationary ride.


James D. Gwartney is Professor of Economics and Policy Sciences at Florida State University. He is an expert on such economic issues as taxation, labor policy, and the economic analysis of government.

His research has focused on the measurement and determination of factors that influence cross-country differences in income levels and growth rates. Dr. Gwartney is the co-author of the annual report, Economic Freedom of the World, which provides information on the consistency of institutions and policies with economic freedom for more than 150 countries.

This article was first published on February 25, 2021 and is reproduced with permission by the American Institute of Economic Research, AIER.

Bi-Partisan Fiscal Irresponsibility

Estimated Reading Time: 3 minutes

America’s recent presidents have been all over the spectrum politically, but they shared one thing in common: near-total indifference to our national debt.

George W. Bush wasn’t that interested in fiscal matters, not vetoing a single bill his first six years in office. He exerted little influence as the deficit started to climb. Barack Obama zealously pursued spend and borrow strategies.  He affirmed the mindset of ignoring future implications.

Fiscal conservatives who hoped a Republican president could right the ship were crushed when Donald Trump announced the giant entitlement programs were safe from reform on his watch.

Now, Joe Biden, in a time of peace and prosperity, except for our self-inflicted Covid relief spending, has proposed a $6.1 trillion budget which includes authorization of almost $4 billion of borrowing in a single year.  That’s enough debt, inflation-adjusted, to finance the Revolutionary War, the Civil War, the Great Depression, and both world wars combined (but not the Green New Deal).

Why do presidents matter? After all, appropriations bills must originate in the House and the president has no constitutional spending authority.

The reason is that most politicians, including many who won’t admit it, love spending money without having to raise taxes. Budget cutting is tough work and costs political support.

No matter how urgent the reductions or how indefensible the cause, the deprived party always raises a media-supported stink while the beneficiaries – the taxpayers of the future – are mute. Knowing that your “conservative“ leaders aren’t fully behind your cost-cutting efforts stymies even the most stalwart legislators.

But the Biden administration is breaking new ground. They came into office with the virus on the wane, vaccinations becoming available through the prodigious efforts of their predecessors and the economy growing. Meanwhile, the graph showing the growth of federal debt, now over 100% of GDP, resembles a hockey stick.

But they didn’t despair at the apparent lack of opportunity to spend now that they had the reins. The New Republic advised to “spend like crazy“ anyway and influential party leftists like AOC and Bernie agreed. So they created an imaginary crisis requiring $1.9 trillion more in Covid relief in addition to the $3.7 trillion already spent.

Pitching a crisis just now isn’t easy to do. The housing market is up 12%, manufacturing is at a five-year high, unemployment is falling and private-sector GDP growth was 4.3% in the last quarter.

Still, they soldier on. But the “Covid relief” bill looks suspiciously like a Democrat wish list. There’s a $15 minimum wage mandate.  Those who are still unable or unwilling to work get a $400 per week bonus employment benefit, which will make working a losing proposition for many. Schools get $130 billion, even though they have been mostly closed and unable to spend their previous allocation.

There’s $400 billion to bail out overly generous pension plan promises in big-spending states. There’s pork galore. Art, farms, climate, bridges, you name it.  About 4% of the funding goes directly combating Covid.

Biden is determined to reward his political supporters.  He preposterously insists that he learned the dangers of spending too little from the 2009 “shovel ready“ infrastructure debacle and won’t repeat that mistake. It’s not intuitively clear how, if they couldn’t constructively spend $830 billion, even more money to bungle would have helped. Still, spending for its own sake has become the de facto operating principle.

Republicans as usual are ramping up their anti-spending rhetoric now that Democrats are in charge. Democrats love to point out Republican past fiscal failures to justify their own reckless behavior.

But not one congressional Democrat has stood up to demand a stop to the madness. Groupthink is a powerful force. Surely some of them must be sane enough to recognize that we are on an unsustainable and highly dangerous path and that we are unconscionably victimizing our children and grandchildren.

It’s not rocket science. Yet the desire to be a good member of their tribe trumps all.

So this is how the new Bidenland works. There’s no longer any need for Covid economic relief and, if there were, this “rescue” bill wouldn’t provide it.  We spend because we can.


Thomas C. Patterson, MD is a retired Emergency Medicine physician, Arizona state Senator and Arizona Senate Majority Leader in the ’90s. He is a former Chairman, Goldwater Institute.

A New Form Of Government

Estimated Reading Time: 5 minutes

We have a new form of government.  One we did not consciously select.

This is just one of the bizarre elements of the ongoing Wuhan virus crisis and subsequent lockdown. What is remarkable is the fundamental abuse of power we have endured.

In reality, the government has on a very basic level, ignored structural protections of our constitutional system. It has curtailed rights to assemble, to worship, to engage in free enterprise. It has participated in unconstitutional takings, restricted the movement of individuals, and inflated the currency. Each one of these factors is important to liberty and the future of the country.

It happened so quickly, amidst such fear, it is astounding to see how easily this crisis has been allowed to slip through the institutional protections of liberty. With hardly a notice, we now have a new form of government. Without much prodding, many people gave up their liberty and then resented those who were not willing to give up their liberty.

The unelected bureaucrats acted swiftly but the courts acted slowly, if at all, to protect our liberties.

The Founders of this nation were greatly concerned about controlling power since the abuse of power is the hallmark of a tyrannical government. They were great students of history and philosophy. As such, they set up legal and institutional procedures to both limit power and to see that those who exercised power would be accountable for their actions.

They gave us an intricate separation of powers, keeping legislative, executive, and judicial powers separated and distinct. The various loci of power were to compete with each other, to check and balance one another in order to limit the exercise of power. The many sublevels of the federal government were to compete with each other, or so we believed, creating internal separations. Uniquely, we began with a written Constitution and a specific Bill of Rights, limiting the government’s reach.

All of this structural protection rests on the notion that government only exists to protect the inherent rights of individuals granted by God, and that government operates legitimately only upon the informed consent of those being governed. No class of people was born to rule others. And no class of people was born to be ruled either—the only system the world had previously known.

The government would protect the natural rights of the people, and for the most part, to otherwise leave them alone. The people could, and would organize many private voluntary organizations to undertake tasks that required large social cooperation. It was a good plan and it worked pretty well for a long time.

How did this system work in the current crisis?  It didn’t.  Our liberties were largely suspended in the name of safety.

An unelected administrative agency, the CDC (Centers for Disease Control, a medical apparatus founded in 1946 as an extension of post-WW II malaria control), took actions and assumed powers beyond anything ever imagined. The CDC is not subject to consent by those governed, subject to little in the way of internal checks and balances, and it determined the degree to which a novel mysterious virus from communist China was an imminent health hazard—and what to do about it.

These problematic agencies often flex executive, legislative and judicial powers all under the same roof. A very narrow sliver of the medical community made controversial, sometimes unsupportable, and arbitrary decisions with huge consequences for everyone. A single bureaucrat, Dr. Anthony Fauci, known mainly for his work in the early 1980s with HIV/AIDS, became a policy czar, or even dictator, promulgating regulations and edicts, without scientific consensus, let alone checks and balances.

That’s it? All that’s needed is their opinion and you must comply?

Every other societal factor from the economy’s health, preservation of private wealth, personal freedom, to adherence to our Constitution gave way on the basis of fear—with thanks to a compliant mass media and administrative pronouncements. As the governor of New Jersey so breezily put it, “The Bill of Rights is above my paygrade.” Such hubris. Such audacity.

Using the skeletal form, but not the spirit of federalism, governors, and mayors across the country violated—in the name of public health and safety—most of the cherished freedoms of this country. Almost all these “laws” were in fact mere proclamations. Based loosely on statutes granting emergency powers (sometimes), usually for civil unrest (or nothing), the public obeyed. Mass media failed to question or challenge the usurpations, in mass dereliction of their ethical codes. The one Supreme Court case with any bearing got little attention, Jacobson v. Massachusetts (1905).

Asking citizens to “stay off the street” or even quarantine, is different than shutting down someone’s business, a “taking” without compensation for “public health and safety,” a phrase that seems to have no limit. It is as Chinese communist as the virus itself. We have quarantined the healthy, instead of just the sick.

Our leaders destroyed the wealth and economic lives of countless individuals, leaving the nation deeper in debt than its already deep dark pit. We will be lucky to avoid depression, hyperinflation, or both. In addition, they have set a dangerous precedent: the government will send out checks to people it has harmed with money created with no corresponding production.  In fact, by forcing people not to work, they forced people not to produce.  Further, they have acculturated millions to accept and expect support from the government.

Many governors took their instructions from an unelected malaria-derived agency and proceeded to enforce rules while ignoring their respective legislatures or state judiciaries, which remained inert. Light lockdowns, heavy lockdowns, long and short terms, arbitrary lists of what got locked down—food stores vs. gyms vs. churches a bewildering variety of choices, with no self-limiting characteristics. The rules clearly need to be re-written. Even for short-term emergencies, this kind of discretionary power should not belong to anyone—and resistance to arbitrary rule was quickly squelched by a press that screamed “believe the scientists,” whose actions were undelegated, beyond belief and self-contradictory.

What it really meant was “believe some scientists”, while banning the view of other scientists.

Where are the limits to their power? Apparently, there are none. What will be the next “crisis” that science says must be handled by depriving us of our liberty?  Will it be another pandemic, environmental concerns, social inequality?  Heretofore, only in the case of war, were our liberties curtailed.  Where in the Constitution was such power granted to white-frocked health experts?

You would think that like a declaration of war that suspends liberties, the state legislators should at least vote on granting extraordinary powers to a governor, or the city council, or to a mayor. We learned no consent was needed. No check, no balance, no limitation on their arbitrary and capricious use of power. Just a recommendation from the unelected folks at the CDC, whose knowledge was lacking and policy proclamations contradictory.  They get to decide when we can have some of our rights back and we willingly comply, against our best self-interest, from abject fear they have instilled in us.

What we have is a new form of government. One that has infected us with greater risk than viral infection. It is ugly, and it is dangerous to our liberty. It is a government without checks and balances and without a Constitution.

We are not a nation to be ruled by proclamation. We need to be inoculated against this novel abuse of power.  What, in the end, is the difference between wielding the power that comes from the barrel of a gun from the power of the pen?  No difference really because if you don’t obey the power of the pen, you wind up complying with the power of the gun.  The gun, or the use of coercive force, in the hands of the government, is what the whole American experiment was set up to resist.

Biblical Conditions of Pima County Roads

Estimated Reading Time: 2 minutes

According to the Bible, the Israelites wandered in the desert for 40 years.  Likewise, homeowners on a suburban street in Pima County, in metro Tucson, have been wandering in the desert for 40 years why their street hasn’t been repaved.

To the last point, below is a complaint sent by an unidentified citizen to Pima County, via the website,

Our road has not been repaved or repaired in over 40 years

Stonehouse Place (south of Ocotillo) has been bypassed for repaving in favor of repaving the north portion of Stonehouse Place that had already been repaired once and has now been repaved. Residents of over 40 years have said that outside of a minimal amount of now failing patches, our road has never seen any repairs. I am requesting that you review and approve our portion of Stonehouse for repaving.

Can it be true that the road has been neglected for 40 years?  Absolutely.

My wife and I walk 150 miles of county roads and neighborhood streets a month, just as we used to walk large swaths of the center city of Tucson before moving to the county.  The horrible conditions of roads and neighborhood streets match what the frustrated citizen described above.  However, they don’t match the information on the Pima County website.

The county understates on the website the severity of road conditions.  Likewise, its new ten-year plan and cost estimate for rectifying the conditions and making up for decades of deferred maintenance is poppycock.

Even roads that were repaved several years ago are deteriorating so rapidly that the county will be far from catching up in ten years and might be further behind by then.  A staggering number of miles of roadways are at the extreme level of what’s known in the pavement business as alligatoring, spalling, flushing, and raveling.

For many of the deteriorated roads, it’s way too late for patching, crack sealing, seal coating, and even milling and repaving.  They will have to be rebuilt from the ground up.

It’s hard to believe, but scores of neighborhood streets are in worse shape than arterial and connector roads.  At least the county screws rich and poor neighborhoods alike.  Streets in neighborhoods of million-dollar homes are just as bad as streets where the poor live.

Busy Kolb Rd. north of Sunrise is an example of the consequences of deferred maintenance.  Cracks three inches wide and hundreds of feet long have opened up in the center of the northbound and southbound lanes.  Chunks of asphalt are kicked up by cars into the bike lane, where they remain a hazard for months, because street sweeping is infrequent, unlike the twice-a-month sweeping performed by well-run cities for similarly busy roads.

Near where Kolb becomes Craycroft, gullies have formed at the edge of the pavement due to poor maintenance and poor design.  The county’s solution?  Throw rocks the size of basketballs into the gullies.  Imagine straying off the pavement and hitting those.

Although this road is designated a scenic county road, the county does not pick up the considerable volume of litter and trash discarded along it.  Nor do property owners whose property fronts the road.  They leave it to my wife and me and to a gentleman in his eighties to do so every day along a three-mile stretch.

Israelites put blood on their doors so that they would be passed over by the plague.  The county has let roads deteriorate so that the metropolis would be passed over by high-paying companies looking for a place to locate their headquarters and major operations.

The Bankruptcy of Conservative Political Paternalism

Estimated Reading Time: 13 minutes

Political paternalism – the belief that those in government possess more knowledge, wisdom, and ability to plan, guide, and direct various aspects of people’s lives better than those people themselves – comes in many forms. The American “progressive” movement is euphoric with being, once again, close to power with the new Biden Administration in the hope of intensifying and extending their version of political paternalism on the country.

But there are “conservative” brands of political paternalism, as well. Now in the aftermath of Donald Trump’s defeat in the presidential election, visions of a new conservative paternalism are being offered to “save” the conservative movement from both the collectivism of the progressives and from the free market libertarians who are accused of ignoring that there is more to life than liberty and material wealth. An example of such a call for a new conservative political paternalism may be found in an article by Oren Cass, “A New Conservatism: Freeing the Right from Free Market Orthodoxy” (Foreign Affairs, March/April 2021).

Mr. Cass served as a domestic policy director for Mitt Romney’s presidential bid in 2012, and in 2020 founded “American Compass,” a think-tank focused on post-Trump conservative politics, after having worked for a time as a research fellow with the Manhattan Institute. He never uses the term “political paternalism” in this article; it nonetheless remains a fact that what he advocates is a “conservative” agenda for activist government that can bring about a coalition of social and economic interest groups in ways different from that of the progressives in the Democratic Party to assure Republican successes in future elections.

It is not that Mr. Cass is against free market ideas and policies, per se; indeed he thinks they were useful and even necessary back in the 1980s, when social conservatives, foreign policy interventionists, and free market libertarians needed to help win the Cold War being fought with the Soviet Union, and defeat a variety of misguided domestic policies. But that was then, and this is now.

Rejecting Free Markets and Libertarianism

Times have changed, as they always do. Mr. Cass says that in the post-Cold War world “conservative economic thinking atrophied,” and “libertarian ideas ossified into market fundamentalism” in the controlling hands of an unnamed “clique of market fundamentalists” who have become wrongly identified with “conservatism.” Then came along Donald Trump who “lacked any discernible ideology or capacity for governing.” Trumpism simply has been a cult of personality, which now that he is off the presidential stage of history, leaves the future direction of a conservatism reborn up for grabs.

So, what are the sins of those who advocate this “market fundamentalism,” Mr. Cass’s opposition to which is not much different from its rejection by the broad coalition of those on the political “left?” It seems that libertarians, which is just another name for “market fundamentalists” in his political lexicon, “are obsessed with liberty to the exclusion of other values.” We are told:

“Markets reduce people to their material interests, and reduce relationships to transactions. They prioritize efficiency to the exclusion of resilience, sentiment, and tradition. Shorn of constraints, they often reward the most socially corrosive behaviors and can quickly undermine the foundations of a stable community – for instance, pushing families to commit both parents to full-time market labor or to strip-mining talent from across the nation and consolidating it in a narrow set of cosmopolitan hubs.”

Alas, Mr. Cass declares, “Libertarians have no time for such nuance.” Being “unable to distinguish between what markets can and cannot do and unwilling to acknowledge the harm that they can cause,” they, instead, blindly pursue “the unquestioned priorities of personal freedom and consumption.”

Cass’s Conservatism is Just More Collectivist Planning

What markets, free and uncontrolled by political constraints, tend to do, he warns, is undermine traditions and morals, weaken communities, and leave no sense of the common tasks for national betterment. In a list of concerns not much different from those of the “progressives,” Mr. Cass insists that libertarian market fundamentalists give no consideration to the deleterious effects of income inequality, concentration of community-impacting decision-making in large corporate hands, and place seemingly no importance on the cultivating and fostering of the “right values” in society as a whole and the educational system in particular.

So, what does he propose as his activist political agenda for a new conservatism? Well, it really comes down to pretty much the same conservative paternalism of times in the past. The national interest comes before the individual’s own interest, as reflected in his calling for more of the same Mercantilist directing of economic affairs to assure that America does not “lose out” to a rising China. Industries, clearly, need to be protected, sectors of the economy must be supported, as well as directed as to where businesses are to be located, especially since Mr. Cass wants to “decentralize” where people live and work in a more balanced pattern away from large metropolitan areas.

In other words, this would be his own form of central planning of foreign trade and domestic industry, along with some type of national zoning designed to create the population distributions between town and country that he considers to be better than at present. No doubt, Mr. Cass would loudly object that he is not a “socialist” wanting to plan the economy. But, in fact, this would simply be a form of government direction of economic affairs that in the France of the 1950s was called “indicative planning.” The government does not directly control and command the country’s economic affairs; instead, it uses fiscal and regulatory tools to “nudge” private enterprises into those directions and activities the government social engineers want, while seeming to leave it all up to private sector businessmen within a “tamed” market economy. Nevertheless, a planning mindset and mechanism by any other name still remains political paternalism and social engineering.

Blaming Markets for Government-Caused Problems

How does Mr. Cass propose to deal with economic inequality and the imbalances between workers and employers? First, it might be pointed out that his despair that “market fundamentalism” has forced both parents in a household to earn a living in the labor market has a lot to do with the tax burdens on the average American family that create the necessity for there to be more than one breadwinner. Or perhaps he has not noticed the various amounts of income the government siphons off out of people’s paychecks, particularly, in places like California and New York and many other states, before there is any money left to bring home to cover household expenses. The fiscal follies of the federal and state governments in funding the interventionist-welfare state cannot be placed at the door of the free market. This has more to do with government-knows-best “fundamentalism.”

Furthermore, he seems to have an implied image of the “little woman” (which in our transgender world can be a “him” or a “her” depending upon how they feel that day when they wake up) should be staying at home cooking away at the hearth. Well, as Mr. Cass says himself, times change, and many women, besides any needed family income, would prefer to work outside of the home pursuing a career and having multiple sides to a meaning to their life. Many of them might not appreciate a conservative “nudger” trying to manipulate how they live and for what “values” in mind through household-focused indicative planning.

Conservative Labor Unionism, Not Free Markets

He clearly feels that the degree to which government directly redistributes income undermines a variety of the traditional virtues that he values. But he is uncomfortable with the tried and true “market fundamentalist” methods of low taxes and deregulated competitive capitalism to foster the physical and human capital investment that over time raises the productivity and wages of those employed to bring about rising incomes across groups and individuals in society as well as reducing government-induced inequalities in income.

Instead, Mr. Cass wants a “conservative” government to support labor unions. He sees the path to a better America for the average worker through collective bargaining and required labor union participation on the corporate boards of private enterprises. Well, that certainly is more like an older conservative traditionalism; medieval guild memberships and closed shops to assure that the union bosses – or excuse me, “worker representatives” – on corporate boards can strong arm – excuse me once more, “recommend” – higher wages to their co-managers on how those businesses are operated. (See my article, “Free Labor Markets vs. Biden’s Push for Compulsory Unionism”.)

Perhaps, Mr. Cass should be less quick to castigate the free market economist’s insights that he pooh-poohs as “outdated claims” to “eternal and universal truth,” and turn to the fact that minimum wage laws oftentimes leave out permanently unemployed segments of the unskilled and public school poorly educated young and minority members of society. Time and place do not change the fact that no employer will voluntarily hire and pay someone more than they think to be the value of an individual’s work in their enterprise, regardless of what government commands to be the legal minimum wage rate at which employment may be given. (See my articles, “Freedom and the Minimum Wage” and “Price Controls Attack the Freedom of Speech”.)

He should also be less impatient with how government regulations and interventions prevent or inhibit the ability to open and expand small businesses that, otherwise, enable greater self-employment and hiring of more people in local communities that suffer from higher degrees of low income and lack of job opportunities. Or how such interventions and regulations limit business competition and protect established and larger firms that Mr. Cass feels too frequently dominate markets. (See my article, “Don’t Confuse Free Markets with the Interventionist State”.)

Conservative Rather Than Progressive Schooling Mandates

Mr. Cass’s mindset is no different in the arena of education. He does not see a path to better schooling and the knowledge and skills that students require through either the “conservative” emphasis on competitive school choice or the libertarian proposal for simply privatizing schooling altogether and taking the education business completely out of government hands. No, he shows himself to be an educational central planner here just as much as his progressive “opponents.”

He simply wants government schools to do the teaching and training with a focus that he considers the right ones for the country as a whole, rather than how the “social justice” warriors see it. High schools would emphasize practical skills and partner with local businesses for on-the-job training before they enter the workplace. As for college and university degrees, they would be focused on preparing graduates for a “real world” where they could cover the costs of the higher education they had earned. One wonders what has happened to the older conservative appreciation for a liberal arts education, and how it fits into this mix. But what a “traditional” education means is, obviously, all in the eyes of the “conservative” central planner holding the reins of political power. After all, as Mr. Cass says, times change. (See my article, “Educational Socialism versus the Free Market”.)

Conservative “Social Corporate Responsibility”

He says that much of his frustration with and rejection of libertarians and free markets has to do with his presumption that their proponents show neither understanding nor sensitivity to the “conservative” values of custom, tradition, ordered society, community, and family.” Again, like those in the “progressive” political camp, Mr. Cass criticizes Milton Friedman’s argument that the purpose of private corporations is to maximize profits and ignore “stakeholders” in the surrounding community and society. Instead, they should show a “social corporate responsibility,” regardless of the financial bottom line.

He totally misses, just like the recent host of “progressive” critics of Friedman’s argument, that his point was not that such societal concerns were irrelevant or unimportant. Rather, expecting corporations to take on this role, independent of and possibly in contraction to the wishes of the firm’s shareholders, threatens not merely the financial health of the enterprise but politicizes business activities in a way that can easily undermine the smooth functioning of the social order and the market economy that is part of it. The funding and the facilitating of solutions to these “social problems” were best left to the individual and voluntary associative choices of income earners and dividend recipients, who then decide the practical and ethical best ways of spending their own money. (See my articles, “Milton Friedman and the New Attack on the Freedom to Choose” and “Stakeholder Fascism Means More Loss of Liberty”.)

Misreading Edmund Burke and the Role of Civil Society

Mr. Cass draws upon the ideas of the 18th century British conservative philosopher, Edmund Burke (1729-1797), who placed great value on the historical importance and continuity of institutions and traditions that provide security and stability to people within and across generations. But his reading of Burke leads him to think that if such institutions and traditions are important, it is the duty of governments to preserve them, cultivate them, and reform society in cautiously better directions.

Other Burkean conservatives, while seeing a larger role for government in society than classical liberals and libertarians usually do, have emphasized that these “intermediary institutions” of civil society – family, organized religions, community associations and charities, among others – need to be kept particularly separate from the government and its controls precisely due to the fact that they serve also as the important “buffers” and protectors standing between the lone individual and the potentially unlimited power of the State that can absorb and crush the single person.

For instance, the conservative sociologist, Robert Nisbet (1913-1996), highlighted these aspects to his Burkean understanding of society and its institutions, and made it a central element in his exposition of the ideas and principles of his book, Conservatism: Dream and Reality (1986). Nisbet insisted that “Laissez-faire and decentralization are sovereign to Burke.” In his earlier work, Twilight of Authority (1975), Nisbet explained the importance of the autonomy of such voluntary associative and market-based institutions, and the pressure they were under from the usurping and centralizing powers of government:

“Of all the consequences of the steady politicization of our social order, of the unending centralization of political power…the greatest in many ways is the weakening and disappearance of traditions in which [non-political] authority and liberty alike are anchored…

“Of all the needs in this age the greatest is, I think, a recovery of the social, with its implication of social membership, that in fact exists in human behavior, and the liberation of the idea of the social from the political…Crucial are the voluntary groups and associations. It is the element of the spontaneous, of untrammeled, unforced volition, that is undoubtedly vital to creative relationships among individuals…

“Voluntary associations have an importance well beyond what they do directly for the individual members. Most of the functions which are today lodged either in the state or in great formal organizations came into existence in the first place in the context of larger voluntary associations. This is true of mutual aid in all its forms – education, socialization, social security, recreation, and the like…It is in the context of such [voluntary] association, in short, that most steps in social progress have taken place.”

The importance of this is significant enough for me to tax the reader’s patience with referencing a complementary emphasis on the same point by the noted University of Chicago sociologist, Edward Shils (1910-1995) in “The Virtue of Civil Society” (Government and Opposition, January 1991). Vital to a free, prosperous, and humane social order, Shils insisted, was a large swath of society that is independent of and separate from political control and domination. Or as he put it:

“The idea of civil society is the idea of a part of society which has a life of its own, which is distinctly different from the state, and which is largely in autonomy from it…A market economy is the appropriate pattern of economic life of a civil society. There is, however, much more to civil society than the market. The hallmark of a civil society is the autonomy of private associations and institutions, as well as private business firms…

“The civil society…must possess the institutions that protect it from encroachment of the state and keep it a civil society…These are the institutions by which the state is kept within substantive and procedural confinement. The confinement, which might be thought to be negative, is sustained on belief of a positive ideal, the ideal of individual and collective freedom.”

Yet, this type of a conservatism reborn seems to hold no place in Oren Cass’s vision of a new “conservatism.” His is really just “progressivism” and its confidence and belief in the possibility and power of political paternalism to remake and move society in “better” directions, only in the context of what Cass conceives as the “good,” and the “right” and conservatively “desirable.” A softer governmental nudge here, a firmer political push there to get society into the collective pattern and shape wanted; just as the “social justice” warriors wish to do. It is the same political train, with the only difference being the ideological and paternalistic destination to which the government-determined ride takes us all.

Individual Rights and Liberty for a Good Society

Classical liberalism and libertarianism and the principles and practice of a free market system are all compatible with and complementary to much of the idea of conservatism and civil society that both Robert Nisbet and Edward Shils focused upon. But the difference is that for classical liberals and libertarians, there are no institutions of civil society, there are no protections for the autonomy of the individual and his voluntary associations from threatening infringements by the State unless the philosophical foundations of the social order start with the idea and ideal of those unalienable rights of each and every person to their respective life, liberty, and honestly acquired property, without which there can be no meaningful pursuit of happiness.

Traditions, customs, and noncoercive “authorities” to which people give recognition and respect and deference only can sustainably emerge and intergenerationally survive when they arise out of the free actions and chosen forms of personal and societal interactive conduct of the human actors themselves. It is what Adam Smith called “the system of natural liberty” with its evolved institutions of free exchange that generates the workings of the market’s “invisible hand” of mutual gains from trade in all their varied forms inside and outside of the marketplace. (See my article, “Adam Smith on Moral Sentiments, Division of Labor, and the Invisible Hand”.)

If “liberty” is given foremost importance by classical liberals and libertarians, it is not due to an ossified dogmatism, as Oren Cass tries to suggest. It is because liberty is and should be considered a good in itself, something that recognizes and tells an individual that their life is their own to live and enjoy and use as they peacefully and honestly find to be best so as to give that life meaning and happiness to them.

What greater sense of respect and recognized dignity in the individual human being, what greater due regard for the uniqueness of each and every person alive than to tell them and assure them that they may not be made the coerced tool in the hands of others, whether they be private agents or government officials. It is classical liberalism that raised this as a universal and moral ideal, and it is the institutions and acceptance of free markets that separated earning a living from the control of political power that made it possible to practice the individual freedom that Mr. Cass sneers at and too easily shunts aside. The libertarian’s emphasis on consumer choice is not from a crass worship of materialism, but from an appreciation and understanding that such freedom to choose in a market economy enables the individual to express all the “higher” values that the availability and use of market-provided means make possible in a way that no other economic system has ever allowed. (See my article, “The Rise of Capitalism and the Dignity of Labor”.)

It is also the only basis and means for humanity to live in peace and cooperative harmony through the competition of the marketplace, which successfully reconciles many, indeed most, of the conflicts and discontinuities in the actions of multitudes of people in a world of limited means that can be used to advance the numerous competing ends that people follow.

At the same time, it cultivates the social attitudes and activities that increase the opportunities of life and improves not only the material but the cultural and intellectual conditions of all. What we need is for the political paternalists and ideological busybodies of every stripe to just leave all of us alone. We can take care of ourselves, thank you very much, even if as imperfect people in an imperfect world we make missteps along the way. We need neither “progressives” nor “conservatives” of Oren Cass’s ilk to manage the world. What we need is for the likes of all of them to mind their own business. (See my articles, “Mr. President: Please Mind Your Own Business” and “Hazony’s Tradition-Based Society is a Form of Social Engineering” and “Conservative Nationalism is Not About Liberty” and “The Plague of Meddling Political Busybodies” and my book, For a New Liberalism.)

But this is neither a classical liberalism nor a form of conservatism that appeals to Oren Cass when what he really is after is figuring how to outwit the progressives in the game of political plunderhood by devising coalitions in society that will put “his side” in elected office next time around through a “conservative” version of handouts of favors, privileges and subsidies. His “new” conservatism, therefore, is really only the same old political paternalism, just in different rhetorical clothing.


This article first appeared on February 15, 2021 and is reprinted with permission from the American Institute of Economic Research, AIER.

Hillsdale Imprimis: Who Is in Control? The Need to Rein in Big Tech

Estimated Reading Time: 4 minutes

Editors’ Note: The following January, 2021 Hillsdale Imprimis article is an American wake-up call. The threat and urgency to deal with this advancing danger as described by Mr. Bokhari below is existential for the nation, our liberty, and for the generations to follow. We believe this call parallels Churchill’s warnings to the world in the 1930s.

The following is adapted from a speech delivered at Hillsdale College on November 8, 2020, during a Center for Constructive Alternatives conference on Big Tech.

In January, when every major Silicon Valley tech company permanently banned the President of the United States from its platform, there was a backlash around the world. One after another, government and party leaders—many of them ideologically opposed to the policies of President Trump—raised their voices against the power and arrogance of the American tech giants. These included the President of Mexico, the Chancellor of Germany, the government of Poland, ministers in the French and Australian governments, the neoliberal center-right bloc in the European Parliament, the national populist bloc in the European Parliament, the leader of the Russian opposition (who recently survived an assassination attempt), and the Russian government (which may well have been behind that attempt).

Common threats create strange bedfellows. Socialists, conservatives, nationalists, neoliberals, autocrats, and anti-autocrats may not agree on much, but they all recognize that the tech giants have accumulated far too much power. None like the idea that a pack of American hipsters in Silicon Valley can, at any moment, cut off their digital lines of communication.

I published a book on this topic prior to the November election, and many who called me alarmist then are not so sure of that now. I built the book on interviews with Silicon Valley insiders and five years of reporting as a Breitbart News tech correspondent. Breitbart created a dedicated tech reporting team in 2015—a time when few recognized the danger that the rising tide of left-wing hostility to free speech would pose to the vision of the World Wide Web as a free and open platform for all viewpoints.

This inversion of that early libertarian ideal—the movement from the freedom of information to the control of information on the Web—has been the story of the past five years.


When the Web was created in the 1990s, the goal was that everyone who wanted a voice could have one. All a person had to do to access the global marketplace of ideas was to go online and set up a website. Once created, the website belonged to that person. Especially if the person owned his own server, no one could deplatform him. That was by design, because the Web, when it was invented, was competing with other types of online services that were not so free and open.

It is important to remember that the Web, as we know it today—a network of websites accessed through browsers—was not the first online service ever created. In the 1990s, Sir Timothy Berners-Lee invented the technology that underpins websites and web browsers, creating the Web as we know it today. But there were other online services, some of which predated Berners-Lee’s invention. Corporations like CompuServe and Prodigy ran their own online networks in the 1990s—networks that were separate from the Web and had access points that were different from web browsers. These privately-owned networks were open to the public, but CompuServe and Prodigy owned every bit of information on them and could kick people off their networks for any reason.

In these ways the Web was different. No one owned it, owned the information on it, or could kick anyone off. That was the idea, at least, before the Web was captured by a handful of corporations.

We all know their names: Google, Facebook, Twitter, YouTube, Amazon. Like Prodigy and CompuServe back in the ’90s, they own everything on their platforms, and they have the police power over what can be said and who can participate. But it matters a lot more today than it did in the ’90s. Back then, very few people used online services. Today everyone uses them—it is practically impossible not to use them. Businesses depend on them. News publishers depend on them. Politicians and political activists depend on them. And crucially, citizens depend on them for information.

Today, Big Tech doesn’t just mean control over online information. It means control over news. It means control over commerce. It means control over politics. And how are the corporate tech giants using their control? Judging by the three biggest moves they have made since I wrote my book—the censoring of the New York Post in October when it published its blockbuster stories on Biden family corruption, the censorship and eventual banning from the Web of President Trump, and the coordinated takedown of the upstart social media site Parler—it is obvious that Big Tech’s priority today is to support the political Left and the Washington establishment.

Big Tech has become the most powerful election-influencing machine in American history. It is not an exaggeration to say that if the technologies of Silicon Valley are allowed to develop to their fullest extent, without any oversight or checks and balances, then we will never have another free and fair election…..


If Big Tech’s capabilities are allowed to develop unchecked and unregulated, these companies will eventually have the power not only to suppress existing political movements, but to anticipate and prevent the emergence of new ones. This would mean the end of democracy as we know it, because it would place us forever under the thumb of an unaccountable oligarchy……

Continue reading at Imprimis: Who Is in Control? The Need to Rein in Big Tech


Allum Bokhari is the senior technology correspondent at Breitbart News. He is a graduate of the University of Oxford and was a 2020 Lincoln Fellow at the Claremont Institute for the Study of Statesmanship and Political Philosophy. In 2018, he obtained and published “The Google Tape,” a recording of Google’s top executives reacting to the 2016 Trump election and declaring their intention to make the American populist movement a “blip” in history. He is the author of #Deleted: Big Tech’s Battle to Erase the Trump Movement and Steal the Election.

Will the Fed’s “Feelgood” Medicine Cause an Economic Collapse?

Estimated Reading Time: 7 minutes

Dr. Max Jacobson became known as Dr. Feelgood and “Miracle Max” for treating wealthy celebrities with concoctions, “mixing amphetamines, vitamins, enzymes, tranquilizers, placenta, and anything else that inspired him.” Jacobson’s most famous client was President Kennedy, who became sadly dependent on Jacobson’s “elixirs.”

How much speed, narcotics, and other powerful drugs Jacobson injected into Kennedy we will never know. Certainly, Jacobson’s elixirs allowed Kennedy to override his body’s signals that would have led to more sustainable treatments for his ailments.

Many decades ago, Dr. Feelgood was a cover story for New York Magazine; the cover rhetorically questioned Dr. Feelgood, You make me feel so good, are you sure it’s all right?

The Fed has become the economy’s Dr. Feelgood with its expansionary monetary policy. The lender of last resort has become the prime pusher of financial amphetamines. The Fed is promoting moral hazard by working overtime to eliminate consequences for risk-taking. Such policies didn’t begin with Covid-19.

Along with staggering increases in the money supply, the Fed’s balance sheet has almost doubled from about $3.8 trillion in August 2019 to $7.4 trillion in January. With the Fed’s willingness to support corporate debt, even junk bonds have plunged to record low yields. President Biden wants to “go big” with new deficit stimulus programs that will need still more of the Fed’s largesse.

Long-time Fed critic and financial analyst James Grant, writing in the Wall Street Journal, calls out Fed chair Jerome Powell for being the Fed’s Dr. Feelgood. Grant quotes Powell saying, “What we’re thinking about now is providing the accommodation that this economy needs for as long as it needs it.” What Jacobson did for Kennedy, Powell is sure he can do the country.

Of course, behind Powell are the over 400 Ph.D. economists providing intellectual succor for easy money schemes. Powell may be the Fed’s head, but the monetary Dr. Feelgood is the collective persona of an ideology that robs from the poor to give to the wealthy.

Consider the case of investment bank Morgan Stanley. Before Covid-19 hit the economy, Morgan Stanley stock was trading at about $55 a share. Their stock hit a March Covid low of $27 a share and today trades at around $73 a share. As a result, “Morgan Stanley Chief Executive James Gorman’s annual pay rose by $6 million, or 22%” to $33 million a year. Without the Fed’s asset bubble support, Morgan Stanley’s stock and Gorman’s salary would likely be considerably lower. Down the road, the rest of us will pay when the asset bubble bursts.

Grant explains how artificially low-interest rates prop up the stock market.:

“Ultralow interest rates are a financial psychotropic. They induce feelings of neediness (on the parts of savers to reach for yield), grandiosity (by corporate deal-doers to reach for the moon) or fantasy (for any who would try to rationalize otherwise insupportably high stock prices with reference to the tiny cost of a loan).”

The market process depends on accurate price signals. Grant warns, “Ground-scraping interest rates turn savers into speculators and quarantined millennials into day traders. They facilitate overborrowing, suppress market signals, misdirect investment dollars, and promote the dubious business of turning well-financed public companies into heavily indebted private ones.”

The interest rate is a core price in the economy, facilitating discovery of the real cost of borrowing money. As Don Boudreaux puts it in his book The Essential Hayek, “There’s trouble if prices do not reflect realities.” Boudreaux explains, “Our trust in the overall ‘correctness’ of people’s economic decisions, however, requires that the prices that people use to guide their decision-making are reasonably accurate sources of information.”

None of this is to imply that those setting Fed policy are evil or stupid. Yet, good intentions won’t spare us from the consequences of policy driven by mistaken beliefs. Consider a recent essay by Eric Levitz, who mocks the “regressive” idea that “there is some ‘natural’ benchmark interest rate that exists outside of politics and policy, and that the Fed is corruptly flouting this natural market law.” As a consequence of his misguided beliefs, Levitiz concludes “condemnations of the Fed for bailing out corporate America with its easy money policies” are unwarranted.

Levitz is not alone in believing politicians and policymakers, not markets should set interest rates. Jörg Guido Hülsmann summarizes their ideology:

“We are told by virtually all the experts on money and finance—the central bankers and most university professors—that the crisis hits us despite the best efforts of the Fed; that money, banking, and financial markets are not meant to be free, because they end up in disarray despite the massive presence of the government as a financial agent, as a regulator, and as money producer; that our monetary system provides us with great benefits that we would be foolish not to preserve. Those same experts therefore urge us to give the government an even greater presence in the financial markets, to increase its regulatory powers, and to encourage even more money production to be used for bailouts.”

Grant explains, “The official message is rather that today’s unprecedented monetary-policy offensive holds no potential for anything but a wholesome reduction in the damage of the lockdown-induced recession.” Many people want to believe this “official message,” though it is misguided.

The Cantillon Effect

Richard Cantillon was an 18th-century economist whose work came before Adam Smith. He is most famous for his observation that is now known as the Cantillon Effect: The creation of new money—inflation—does not have equal effects across the economy. Those who are the first recipients of new money, “political entrepreneurs,” gain at the expense of everyone else.

Suppose a family of four sets down to dessert after dinner with one pie to share. Cutting the pie into eight equal pieces means dessert today and tomorrow with each member of the family receiving one slice each evening. Now, suppose one member of the family said, “Let’s create eight additional slices.” If each family member received four pieces, the amount of pie each family member received would be the same.

Suppose the family member cutting the pie sixteen ways has an ulterior motive. He wants more pie at the expense of everyone else. After slicing the pie sixteen ways, he gives everyone two slices and keeps the extra eight pieces for himself. Someone in the family might remark, “My two slices of pie are smaller and less filling.” “No, you are mistaken,” the pie cutter obfuscates. “You are receiving two slices of pie as always.”

Similarly, as Ananya Chowdhury explains, monetary expansion “results in arbitrary benefit to some who have not created any economic value and detriment to others who have not destroyed anything of economic value.”

You may be trying to make sense of the incessant claims by politicians and economists that in order to save the economy the Federal Reserve must engage in fresh rounds of monetary easing. In that case, the Cantillon Effect provides useful insights: Wealth is redistributed to the primary beneficiaries of the new money.

The injection of new money, Don Boudreaux explains, sets the stage for business failures and stagnation in the future:

“The process of injecting newly created money into the economy can distort the pattern of relative prices and, hence, encourage an unusually large number of faulty economic decisions—that is, encourage an unusually large number of economic decisions that are revealed only later to be mistaken. Specifically, injecting new money into the economy causes too many resources to be invested in those industries that first receive the new money. Those industries over-expand.”

In Human Action, Ludwig von Mises wrote of interest rate manipulations: “The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.”

Some people believe the judicious use of monetary policy can avoid the worst. Mises has a wake-up call: further credit expansion can only postpone—but not prevent—the business cycle’s liquidation stage. Mises writes, “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Monetary expansion today, like a Dr. Feelgood elixir, leads to future trouble. In The Constitution of Liberty, Hayek concurred with Mises,

“There are two points which cannot be stressed enough: first, it seems certain that we shall not stop the drift toward more and more state control unless we stop the inflationary trend; and, second, any continued rise in prices is dangerous because, once we begin to rely on its stimulating effect, we shall be committed to a course that will leave us no choice but that between more inflation, on the one hand, and paying for our mistake by a recession or depression, on the other. Even a very moderate degree of inflation is dangerous because it ties the hands of those responsible for policy by creating a situation in which, every time a problem arises, a little more inflation seems the only easy way out.”

Yet, few have studied economic principles set out by Mises, Hayek, Boudreaux and others in the Austrian school of economics.

Many people want to believe in the Fed’s Dr. Feelgood magical powers. Many believe that the Federal Reserve Board has learned to prevent long-term bear markets. “Don’t fight the Fed” is used as a mantra by those who are convinced stock prices only go up. “This time is different” is their mistaken belief.

Of course, human beings want to believe the Fed is in control of an essentially uncontrollable economy. In a bear market, people, rather than questioning their false belief, lash out with recriminations and blame.

The hubris of politicians and Fed chairs is only a reflection of our hubris. As a society, we have collectively spent beyond our means and have had the arrogance to believe that there will be no consequences.

Grant warns, “In neither medicine nor central banking is free lunch on offer. Say yes to a cortisone injection for that inflamed knee, and you risk cartilage damage, death of a nearby bone, nerve damage, etc.”

Take for example a young family house hunting. Grant asks, “Do low mortgage rates advantage young families shopping for their first houses?” “Maybe not,” Grant explains, “if the same low rates spark a rise in house prices greater than the evident savings in interest expense.”

By attempting to create perpetual sunshine on financial assets, the Fed makes it difficult to enter the stock market or housing markets for those on the bottom rungs of the economic ladder.

Eventually, as Mises wrote, all the Fed expansionary policy in the world will not stave off a significant and perhaps a catastrophic bear market. In a bear market, new and even more dangerous populist political movements will be born out of the resulting economic suffering.

The promise of cheap money leading to perpetual asset price sunshine may seem like a reality today. Tomorrow the consequences will be like Dr. Feelgood’s needles. To avoid the worst, markets—not politicians or bureaucrats, must be free to uncover the real cost of borrowing money.


This article first appeared on February 9, 2021, and is reproduced with permission of the American Institute for Economic Research, AIER

Minimum Wages Had a Eugenic Intent

Estimated Reading Time: 4 minutes

All this talk of a $15 national minimum wage prompted me to revisit the standard textbook on economics of the US Progressive Era. Principles of Economics, by Frank W. Taussig (1917) is a pretty interesting book overall and it does hold up in general as an elucidation of then-existing knowledge and pedagogy.

There is one section, however, where the author really goes off the rails. He is discussing labor policy and a “compulsory minimum wage rate.” There was no such national law at the time (that didn’t arrive until 1933) but Professor Taussig made the case for one.

For him, this was not about lifting up the poor or increasing wages for everyone. He saw it as a tool for including and excluding workers based on whether and to what extent the people in question should even be part of the labor pool.

As he plainly says, the purpose of the law is to “regulate the plane of competition” so that “one could undersell the others by cutting below the established rate.” Workers whose productivity fell below the minimum would simply be excluded from the workforce: “It would be impossible to compel employers to pay the minimum to those whose services were not worth it.”

To him, this is a feature, not a bug.

Why would anyone want such exclusion? Here is where Taussig gets brutal. Some people are simply unemployable, he says, for example “those who are helpless from cases irremediable” due to “old age, infirmity, disabling accident” and also those suffering from “congenital feebleness of body and charters, alcoholism, dissolute living…irretrievable criminals and tramps.”

This class, he opines, “must be stamped out” and should not “be allowed to breed.” Ideally, he says, we should “proceed to chloroform them once for all” but that might have a bad look. Instead, “at least they can be segregated, shut up in refuges and asylums, and prevented from propagating their kind.”

What does this have to do with minimum wages? They are one tool to use to achieve that goal. However, in order to enforce this, “the power of laws must be very strong indeed, and very rigidly exercised, to order to prevent the making of bargains which are welcome to both bargainers.”

Pretty chilling? Indeed. Welcome to the world of Progressive-Era economics as informed by eugenic concerns in which the law is deployed for purposes of stamping out undesirables. Taussig’s view was not considered scandalous because it was fully mainstream opinion at the time. As grim and immoral as his aspirations, at least he gets the economics right: the minimum wage does indeed lock people without privilege out of the labor force.

He was hardly alone in this view, which is why no one of that generation found it particularly shocking.

Princeton University’s Royal Meeker, Woodrow Wilson’s commissioner of labor, held the same position. “It is much better to enact a minimum-wage law even if it deprives these unfortunates of work,” Meeker argued in 1910. “Better that the state should support the inefficient wholly and prevent the multiplication of the breed than subsidize incompetence and unthrift, enabling them to bring forth more of their kind.”

Henry Rogers Seager of Columbia University, and president of the American Association of Labor Legislation, laid it all out in “The Theory of the Minimum Wage” as published in the American Labor Legislation Review in 1913: “The operation of the minimum wage requirement would merely extend the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support.”

“If we are to maintain a race that is to be made up of capable, efficient and independent individuals and family groups,” Seager continued, “we must courageously cut off lines of heredity that have been proved to be undesirable by isolation or sterilization.”

Fabian socialist Sidney Webb summed up the consensus of the time in his 1912 article “The Economic Theory of the Minimum Wage:” “Legal Minimum Wage positively increases the productivity of the nation’s industry, by ensuring that the surplus of unemployed workmen shall be exclusively the least efficient workmen; or, to put it in another way, by ensuring that all the situations shall be filled by the most efficient operatives who are available.”

And so on it goes. The whole generation was frank about their intentions: the point of the minimum wage law was to reserve jobs in society only for those who are deemed worthy of civic inclusion. The wage rate was to be used as a test. If your earning power falls below a specified floor, this must be because you are unfit. At that point, the mandatory minimum had eugenic intent. Its purpose was to “stamp out” those who couldn’t make the cut.

For more on this, have a look at Thomas Leonard’s eye-opening account Illiberal Reformers.

You could of course say that none of this matters. That generation was filled with moral monsters who believed that culling the population of non-normative people was a function of the state. These days, however, the purpose of the minimum wage is to uplift everyone. The problem with this excuse is that the previous generation at least had the economics correct. Price control on wages creates serious market dislocations.

Let’s say that instead of a $15 an hour minimum, Congress pushed a $15 maximum wage/salary. The rich would simply stop working, while everyone else would likely lose professional aspiration. This is not complicated to understand. So too with a wage floor: it cuts the poor out of the market just as the eugenicists said it would.


This article was first published on February 15, 2021, and was reproduced with permission from the American Institute of Economic Research, AIER

Lockdown: Incoherent and Ineffective

Estimated Reading Time: 3 minutes

Our response to the Covid pandemic continues to be incoherent and ineffective. No matter how many interstate comparisons prove that lockdowns confer no permanent benefit, no matter how much economic devastation we endure and how many lives are ruined, we soldier on, refusing to learn from experience.

Our panic-driven approach was originally in reaction to an apparent overall death rate of 3% and the need to keep hospitals from being overwhelmed. But we now know that 82 studies worldwide have found a median death rate of 0.2% of all those infected by Covid and supplemental hospital units were mothballed.

Even more encouraging, the virus is not equally threatening to all. The mortality rate for people over 70 is 1000 times greater than for children, who are almost totally protected. In fact, over twice as many children have died from seasonal flu this year than from Covid.

The sparing of the young is of course a great blessing. Yet we continue to pursue policies of blanket restrictions as if all groups are at equal risk.

This is the folly addressed in the Great Barrington Declaration (GBD), authored by Stanford, Harvard, and Oxford epidemiologists, now signed by 50,000 medical practitioners and 664,000 concerned citizens worldwide. The declaration calls for “focused protection“ in place of the one-size-fits-all lockdowns that have wreaked havoc everywhere.

Societies are urged to concentrate isolation strategies on those most at risk: the elderly, obese, and already ill, who comprise the vast majority of fatalities. Those who would likely experience Covid as a flu-like infection, or nothing at all, follow basic prevention hygiene protocols but otherwise resume their lives.

Unfortunately, what should be a stimulus for rational scientific discovery and discussion has deteriorated into another of the partisan brawls Americans have come to despise. Fights break out over masks. Police block the entrance to gyms and bars. Protests over mandates become unruly.  Nut cases threaten public officials.

In this hyper-politicized environment, the right to peaceably disagree goes out the window.  Although epidemiology is normally not influenced by political ideology, the reliably left-wing media has been reflexively hostile. Google initially shadowbanned GBD.

Many scientists have resorted to name-calling and silencing rather than reasoned debate. One of the GBD authors was accused of “Trumpian epidemiology“ by a colleague. Another doctor charged the GBD was the work of “COVID-19 deniers“ similar to “creationists, HIV/AID denialists, and climate science deniers“. Meanwhile, 1300 epidemiologists signed a letter assuring that BLM protests were harmless but all the rest of us should self-quarantine.

Lockdown critics are frequently charged with a heartless over-emphasis on economics. But the UN estimates that 130 million additional people internationally will starve as a result of the economic damage resulting from lockdowns.

Moreover, the fixation on one disease at the expense of all others has severe consequences. Childhood diseases like diphtheria, pertussis, and polio are beginning to reappear because parents are over-focused on Covid. Deaths from heart disease, cancer, and diabetes are also trending up from patients’ reluctance to seek routine care.

Mental well-being is in steep decline. Seven in ten teenagers report struggling with their mental health and crisis hotlines are reporting a surge in suicide-related calls. Suicide deaths far outnumber Covid deaths among the young.

School shutdowns may be the most harmful and senseless of all. Since school children very rarely get sick from Covid, they neither endanger themselves nor are contagious to others. The spectacle of millions of children staying home or struggling with distance learning, because the teacher’s unions insist upon it, is an outrage.

The vaccine will help of course, but those expecting a permanent eradication of Covid anytime soon are likely to be disappointed. For starters, 46% of Americans, partly in response to the disparagement of the president who oversaw its development, intend to refuse the vaccine. Moreover, most flu-type viruses mutate freely so immunity, even when achieved, may not be permanent.

We’ll likely be dealing with the virus for some time yet and will need realistic science-based guidance. But science can’t do its job in an environment where anyone challenging the politically dominant status quo gets demeaned or canceled.


Thomas C. Patterson, MD is a retired Emergency Medicine physician, Arizona state Senator and Arizona Senate Majority Leader in the ’90s. He is a former Chairman, Goldwater Institute.

A Phoenix Event of Interest for Liberty

Estimated Reading Time: < 1 minute

The Prickly Pear announces an outstanding IN-PERSON one-day program for all lovers of liberty being held in Phoenix this Saturday, February 20 from 8:00 AM to 3:00 PM (MST). Location of the IN-PERSON symposium is announced at registration (below).

Heirs of the Republic Presents:

Essential Tools of Personal and Economic Freedom – Class 100
Email: to register for In-Person attendance or
Register for Webinar attendance at: