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Advancing Austrian Economics, Liberty, and Peace

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Making Economic Sense
by Murray Rothbard
( Contents by Publication Date)

Chapter 21
The Neocon Welfare State

Ever since its inception in the 1930s, the welfare state has proceeded in the following way. First, liberals discover social and economic problems. Not a difficult task: the human race has always had such problems and will continue to, short of the Garden of Eden. Liberals, however, usually need scores of millions in foundation grants and taxpayer-financed commissions to come up with the startling revelations of disease, poverty, ignorance, homelessness, et al. 

Having identified "problems" to the accompaniment of much coordinated fanfare, the liberals proceed to invoke "solutions," to be supplied, of course, by the federal government, which we all know and love as the Great Problem-Solving Machine.

Whatever the problem or its complexity, we all know that the Solution is always the same: a huge amount of taxpayer money to be trundled out by local, state, and especially the federal government, and spent on building up an ever-growing giant bureaucracy swarming with bureaucrats dedicated to spending their lives combating the particular problem in view. The money is supplied, of course, by the taxpayer, and by a burgeoning debt to be financed either by inflation or by future taxpayers.

From the beginning, each new creative Leap Forward in the welfare state is launched by liberals in the Democratic Party. That, since the 1930s, has been the Democrats' historical function. The Republicans' function, on the other hand, has been to complain about the welfare state and then, when in power, to fasten their yoke upon the public by not only retaining the Democratic "advances" but also by expanding them.

The best that we have been able to hope for under Republican administrations is a slight slowing down of the rate of expansion of the welfare state, and a relative absence of new, "innovative" proposals.

The result of each of the Great Leaps Forward of the welfare state (The New Deal-Fair Deal of the '30s and '40s, and the Great Society of the '60s), has clearly not been to "solve" the problems the welfare state has addressed. On the contrary, each of these problems is demonstrably far worse two or three decades after the innovation and expansion. At the same time, the government Problem Solving Machine: taxes, deficits, spending, regulations, and bureaucracy, has gotten far bigger, stronger, and hungrier for taxpayer loot.

Now, in the Nineties, we are at another crossroads. The results are now in on the Great Society and its Nixonian codicils. A massive and expensive attempt to stamp out poverty, inner-city problems, racism, and disease, has only resulted in all of these problems being far worse, along with a far-greater machinery for federal control, spending, and bureaucracy. 

Liberal Democrats, who now call themselves "moderates" because of the perceived failures of liberalism, have come up with the usual "solutions": redoubled and massive federal spending to "help" the inner cities, "rebuilding" the decaying infrastructure, helping to make declining industries "competitive," et al. But whereas Republican administrations in the 1950s and 1970s were in the hands of avowed "moderates" or "liberals", the Republican administration is now run, or at least guided by, conservatives.

What is the "conservative" (read: neoconservative) Republican response to the welfare state and to the Democratic proposals for yet another great Leap Forward?

The good news is that the neoconservative alternative is not just another "me-too" proposal for slightly less of what the Democratic liberals are proposing. The bad news, however, is that the proposed "conservative welfare state"--rain the words of neocon godfather Irving Kristol--is a lot worse. For once, under the aegis of the neocons, the Republicans are coming up with genuinely innovative proposals.

But that's the trouble: the result is far more power and more resources to the Leviathan State in Washington, all camouflaged in pseudo-conservative rhetoric. Since the conservative public always tends to put more emphasis on rhetoric than on substance, this makes the looming Alternative Welfare State of the Republicans all the more dangerous.

The dimensions of the Neocon Welfare State in embryo may be seen in the Bush-endorsed proposals of Education Secretary Lamar Alexander, aided and guided by neocon educationists Chester Finn and Diane Ravitch. The education disaster in this country has been largely created by the massive federal funds and controls that have already fastened a gigantic educational bureaucracy on the American people, and have gone a long way toward taking control of our children out of the hands of parents and putting it into the maw of the State.

The Neocon Welfare State would finish the job: expanding budgets, nationalizing teachers and curricula, and seizing total control of children on behalf of the State's malignant educational bureaucracy.

The housing and urban dimensions of the Alternative Welfare State have been worked out by the neocon's favorite politician,  HUD secretary Jack Kemp. While Kemp's vision was kept at arm's length by the Bush administration, the L.A. riots have brought it a virtual Republican endorsement, in the wake of President Bush's deficiency in the "vision thing," and of the liberals' chorus of adulation for Jack Kemp's "caring and compassion" for the inner cities.

As Jeff Tucker has pointed out in The Free Market, Kemp's proposed "enterprise zones" and "empowerment" turn out to be still more of the welfare state. The "enterprise zone" concept, originally meant to be islands of genuine free enterprise in a statist morass, have been cunningly turned into yet more welfare, and affirmative-action-type subsidies. The Thatcherite idea of selling public housing to tenants has merely turned into another method of expanding public housing, of subsidizing inner cities, and of keeping the tenants dependent on the federal bureaucracy and on Big Massa in the White House.

How would the greater Neocon Welfare State be financed? Neocons are the most enthusiastic fans of the federal deficit since the Left-Keynesians of the 1930s. We can expect, then, much bigger deficits, accompanied by a large and innovative battery of excuses. Statistics will be dredged up to the effect that the deficit and the debt "really aren't so bad," compared, say, with some year during World War II, or, that on deep and murky philosophic grounds, they really don't exist.

On taxes, we can probably trust neocons to keep marginal income tax rates on upper brackets down, as well as to cut capital gains taxes, but the sky's the limit on everything else. We can look forward to a lot more of the "loophole closing" that helped send the real estate market into a long and continuing tailspin after the Tax Reform Act of 1986. We can also look forward to increases in excise taxes, and perhaps a national sales or value-added tax.

Harry Hopkins is supposed to have outlined the basic New Deal Strategy: "We shall tax and tax, spend and spend, elect and elect." He might have added: control and control. Over the decades, the outer forms, the glittering trappings, have changed in order to entice new generations of suckers. But the essence of the ever-expanding Leviathan has remained the same. 

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