Ticket to the Future; R. Bradford

DES1\NA1\ON:,RALPH BRADFORD TODAY we are writing the ticket to the future. We have been doing that all our lives, to be sure. Each generation does. But now it is a new ticket, and calls for passage over strange and dangerous roads not traveled by us before. The course of our history, the prosperity and welfare of our peo ple, the stability of our economy, the safety of our savings, and, in the long run, the survival of our political and personal freedom all these are wrapped up in the decisions being made by the Amer icans who live today. That is the ticket we are writing - the ticket to the future. Mr. Bradford is well known as a writer, speaker, and business organization consultant. He now lives in Ocala, Florida. In politics, in economics, in fiscal affairs, in law enforcement, in crime detection, in the attitude of our nation toward the rest of the world - in all this, and also in the fundamental matter of per sonal morality, we have been writ ing, and continue to write, a ticket that is in sharp contradiction of our experience, a reversal of our long-held convictions, and a denial of the principles of government which, with varying degrees of faithfulness and failure, we have professed and tried to live by.

Of late years we have seen old landmarks of safety and beacons of stability disappear. At a time of unprecedented economic activ ity, with our combined energies producing nationally at an all-time 67 68 THE FREEMAN February high, we are plagued with debt and with a continued shrinking of our personal assets, due in large measure to mismanagement of our national finances. Theories of the New School It is fair to say at this point that not everyone will agree with that appraisal. There is a con siderable school of economists, especially of the academic order, who see little wrong with the statist course we have been pur suing. These hopeful scholars feel secure because the Gross National Product is double the amount of our debt; and they also postulate that in order to provide employ ment (which some of them mis takenly assume to be the reason for industrial and commercial en terprise) the economy must be kept at what they call "high veloc ity," and that very extensive spending by the "public sector"

(i.e., the government) is neces sary to attain and maintain that velocity. Actually (they say), it doesn't matter whether our staggering national debt is ever paid, so long as there is high employment, and so long as .the dollars paid in wages and salaries increase in the same ratio as the cost of living. This means that if an item form erly sold at a dollar and now costs six, the increase is of no consequence so long as the purchaser now receives six times as many dollars for his labor or other services.! Suppose we see if we can state this spend-and-borrow theory in the simple terms of a certain fam ily man, John Doe. As a junior industrial executive, he has a pretty good salary, Iives well, and saves some money. But if the fam ily becomes extravagant, and John begins to spend more than he takes in, what happens? Nothing at all, for a year or two, because his credit is good and he can bor row to cover his deficit. But after a while the word gets around that the Does are "living beyond their means" - and credit begins to get tighter. Before long, it is denied altogether. Holders of notes close in. The car is repossessed. When John defaults on his house pay ments for several months, the holder of the mortgage has no choice but to foreclose. In a short time the Does are bankrupt, if not destitute.

1 In "What's Going on Here 1" in the November 1967 FREEMAN, I showed that this argument is fallacious, because the GNP does not belong to the government but to the people and cannot, without seizure, be hypothecated to secure the debt. The increase-in-number-of-dollars theory takes no account of what infla tion has done to all bonds, insurance, pensions, annuities, and other fixed income investments which the average person has made in an effort to provide for his own security.

1968 TICKET TO THE FUTURE 69 Isn't that the way things would eventually work out for such an improvident family? And can yon figure out how it could be other wise? Ah, but the devotees of deficit financing look with scorn on any such homely analogy. They say the two things have no relation to each other. The credi tof an individual is necessarily limited by his ability to earn and pay; but the government, being sov ereign, can go on spending indefi nitely' without regard to its income. It is immune to such things as garnishments and. other legal attachments. Nobody can foreclose on the United States. The government can't go bankrupt. For one thing, look at its re sources - over two and a half tril lion dollars worth of them. Maybe three trillion!2 And besides, it has the power to issue more money whenever needed. The proper analogy, they say, is that of the huge corporation anyone of a dozen that come quickly to mind. These gigantic outfits are always in debt. They borrow hundreds of millions of dollars on which to operate. They never intend to get out of debt.

By their vast borrowings they are able to turn out their products, make a profit, pay dividends, and 2 By this, they mean all the wealth of this country. provide employment. The financ ing of such debts is simply part of the cost of doing business. If these great capitalistic enterprises can go along with more or less permanent debts in the interest of production and profit, why criti cize the Federal government for doing the same thing in order to provide services and security for the· people? Some Vital Differences All this ignores two fundamen tal differences between such cor porations and the government. The first difference is that even the biggest corporation in the country could not obtain such loans if the lenders did not know that the corporation possessed the assets to secure them and would be able on demand or at maturity to pay them off. The government, on the other hand, does not have such collateral as sets. All the talk of its multitril lion dollar resources is so much wishful thinking. Those assets be long to the people, not to the gov ernment; and they can be properly cited as offsets to the debt only if and when the government is pre pared to seize them without com pensation to their owners.

The other difference is that such borrowings of corporations do not affect the value of our money. Borrowings and lendings among 70 THE FREEMAN February corporate enterprises, like most of those among individuals, are sim ply part of the economic process of production and exchange. If a lender (probably a bank or other large corporate structure) is fool ish enough to loan a manufactur ing company more than the latter can repay, the worst that can hap pen is that the debtor company may be thrown into bankruptcy, with loss to its creditors and in vestors, transi tional unemploy ment' for some of its workers, and with perhaps some adverse but not devastating impact upon the economy. It win be a disaster to those involved, but it will not cause inflation or otherwise lessen or destroy the value of our money. The government, on the other hand, by its borrowings creates credit which in turn becomes the basis for more borrowings. This can be kept within manageable bounds only if the government demonstrates that it can and will payoff its creditors (the holders of its bonds) without first cheap ening their money and thus re ducing or destroying the value of their bonds. When this is not done, more and more money is printed, metal coinage is debased, excess dollars help create demand for more goods, prices rise-and all fixed-income investments are either seriously impaired in value or are wiped out altogether.

Inflation in Two Countries Let us take two examples of how this works, in one case mildly, in the other devastatingly. Twenty years ago Richard Roe bought some U. S. Government "E" Bonds. Each hundred dollar bond cost $75.00 and matured in ten years at face value. At maturity, bond holders were urged to leave the bonds at interest, and Mr. Roe did so. Today each bond is worth $140.00, a pa.per profit of $65.00 on the original $75.00 investment. This looks pretty impressive, until you figure what has happened to the dollar. Recent government figures reveal that the value of the dollar has shrunk by one-third in the past 20 years. So, the $75.00 investment, after 20 years, is worth only $93.33 in terms of those original dollars. The other example is from Argentina. I first visited that in teresting country - so like our own in many respects - in 1947. At that time the peso was fairly strong at 4 to the dollar. Peron was in power, but the country had not yet really begun to feel the impact of his big-spend, every thing-for-the-descamisados pro gram. Four years later I returned, and in that short time the peso had shrunk 80 per cent - down to 20 to the dollar.· And today? It is now quoted at 350 to the dollar a dollar which also has shrunk 1968 TICKET TO THE FUTURE 71 by one-third in the same period.

The peso is now worth less than one per cent of its former purchas ing value. Now suppose Ricardo Hernandez had saved some money and twenty years ago had bought an Argentine bond with a face value of 400 pesos ($100.00 at that time). It has now matured. He cashes it, and he gets his 400 pesos, all right - but they are worth in current dollars only $1.14! Of his 400 pesos, 397 have been wiped out by inflation. This problem of inflation and its dangers is one of the ghastly unrealities of our present situa,;, tion - not the inflation itself, which is already at work and creeping more and more danger ously high, but the generaf inertia with which it is regarded, the bland .and blind indifference to the destruction of values, both financial and moral. At high gov ernment levels, in many academic circles, among certain businessmen and even some bankers the doc trine of the bigger-and-bigger and-never-to-be-paid debt is being accepted as normal and natural and necessary.

Thus, we write the ticket to the future by denying the dictates of common sense and the experience of history. Nobody has yet given n1e a satisfactory ans,ver to this question: by what logic do we as sume that somehow, miraculously, and contrary to all humanexperi ence, we of· all earth's people shall escape the day of reckoning? A National Guilt Complex Our confusion about matters financial is on a par with our un certainties concerning other things that are now being written into that ticket to the future. We talk about that future rather hopefully at times, but without actually· re lating it to the present. We ignore (because we do not understand) the inexorable laws of cause and effect. Partly as a result of this, we seem to have no firm sense of our national destiny, nor even a clearly defined idea of what we want our country to be. Participa tion in two world wars and two "police actions" has taught us little. We are still fascinated with the idea that it is our mission to "save" the world. We also suffer from a kind of guilt complex, en gendered, no doubt, by the cease less propaganda of highly-placed leftists, who equate material· suc cess with social wickedness.

Mea culpa - God forgive me, I am guilty! Of what? Well, I am a citizen of a rich and powerful country. Moreover, by dint of luck and some foresight, I myself am not a candidate for public re lief. Therefore, I'm guilty, and ought also to do penance. Our na tion, too, is guilty, for the same 72 THE FREEMAN February reason, and must do penance. And since universal flagellation is im practicable, the way to· absolution is to slice off large portions of our wealth through taxation and hand it over to certain "underprivi leged" or "emerging" nations. They mayor may not deserve it. In all likelihood most of it will go into the pockets of the upstart ad venturers who are running most of those nations; and in any event it is a safe bet that they hate us, and will continue to do so. But no matter. Weare rich and they are not; therefore, we owe them a handout -a ten-or forty-or two hundred-million-dollar handout!

We also suffer, domestically, from a species of moral and eco nomic schizophrenia. For genera tions we have taught and been taught that it is a worthy thing to work hard and save money, partly for the sake of accomplishment, partly as a hedge against the hazards of old age. Now. we are not so sure, and our uncertainty is being articulated by some highly placed "liberal" spokesmen. Just now a well-known professor. at a leading university, who also writes books and dabbles in poli tics (and who represents a con siderable body of "liberal" opin ion) is worried because the coun try is too affluent. He wants a new industrial system. He wants a few wise men in Washington (or at Harvard?) to decide what por tion of our earnings should be spent for our own subsistence, comfort, pleasure, development, and security, and how much should be taken away from us to be expended on public improve ments and facilities, and espe cially on things of esthetic value (as determined by whom ? A lib eral elite, maybe?) He would, of course, do all this by compulsion of law, because he understands that the average person, not know ing what is good for him, will re sist such a program. Yet, so weak is our understanding of the mean ing of freedom, that many who would on principle strongly op pose these pa.rticular exactions, will not hesitate to invoke com pulsion to force you and me and others to pay for their favorite political nostrums!

Hidden Consequences It would seem, however, that these Galbraithian proposals are somewhat more than slightly ex post facto. For over 30 years we have been subjecting ourselves to just such a bleeding process by electing persons and parties com mitted to essentially the same kind. of Big Brotherism, except that we have seldom understood until too late that Big Brother may distribute largesse, but that he also collects taxes to cover the 1968 TICKET TO THE FUTURE 73 outlay - and that he demands obedience!· For light on this phase of our aberration it is helpful to talk with some of the "benefi ciaries" of slum clearance proj ects, or with farmers who are "aided" under allotment pro grams, or with stockholders in motel properties that have been by-passed by Federally financed highways. Despite all disillusion ment, Big Brotherism still has it~ devotees, who believe firmly that there is nothing wrong with the country or the world that seven, fifteen, or sixty billion American dollars won't cure! In the furious annual debates in Congress on the national Budget (which nine times out of ten is a deficit one) there has seldom been a year when the termination of a few worse-than useless· foreign aid grants would not have balanced the books. Yet, we have continued, under both ma jor political parties, to pour out billions, often to our avowed ene mies, or to states that do not even pretend to be our friends - states that criticize and ridicule us at every opportunity, and that would not stand with us for a moment in any showdown with the com munist powers.

Confusion? Say rather, lack of direction. Somewhere along· the line we got off the track. Was it occasioned by the permissiveness that seems to dominate education as well as the morals and the dis cipline of family life? Was it the long-continued propaganda of in fluential socialists in the political, educational, and religious fields? Why does a nation of intelligent people drift into and persist in a policy of general self-deception leading to self-destruction? Who knows? Some blame attaches to all those conditions and circum stances, .no doubt; but it should be assessed finally against all of us - against every person who un derstands the blessings - and the demands - of freedom, but· who sells out for advantage, or ex pediency, or ·who "goes along" because he just doesn't care, or because he doesn't understand that he, too, is writing the ticket to the future. A Heritage of Disaster If, as we profess, we want for our children a society that nur tures freedom, we shall have to begin now' to think and talk in terms of freedom, rather than in the shackling cliches of statism, for the one concept utterly ne gates the other. We cannot think and act t.oday as collectivists and expect to· avoid tomorrow the mounting tyrannies of rampant bureaucracy and supergovernment alism. It is useless to talk hope fully of a golden future, with everybody happy and prosperous 74 THE FREEMAN February in a great society, if by our deci sions now we are undermining the only foundations upon which such a future can be based.

Some of our collectivists are most probably men of evil pur pose, linked more or less directly to a world conspiracy that would destroy us. But they are few, and would be impotent. in their de signs, were they not upheld, with good intent and clear conscience, by a much larger number who are people of good will and charitable, if mistaken, attitude. What the conspirators think is no concern of ours, in this article or at any time. They know their goal, and will not be deterred from its wicked accomplishment. But the others, the· men and women of fuzzy good will, should reflect (as a starter) that if inflation is not stopped by the exercise, finally, of fiscal prudence, and is allowed to reach avalanche velocity (as it has done in many countries, both an ciently and of late) then the first to suffer loss and want and desti tution· will be the people of small means and limited income, over whose status certain types of poli ticians and left-wing "philoso phers" now shed tears.

At about this point, some ad herent of collectivism and compul sion is due to rise up and demand whether one is aware that by such advocacy of prudence and solvency one is opposing real economic progress. as well as social better ment. Such questions, and their im plication that solvency is an enemy to progress, are without founda tion. There is no precedent in hu man experience to warrant the assumption that a permanent gov.ernmental debt is a prerequisite for economic growth. On the con trary, it works the other way around. (Ask the British.) Bank,. ruptcy has never been a safe foundation for either material or social progress. Lessening or de stroying the value of a nation's money in order to liquidate its debt without seeming to repudi ate it - this has always brought disaster rather than prosperity. The best way to make an econ omy secure is to safeguard the national credit and preserve the value of its currency. The best way to encourage a "high velocity"

economy is to maintain conditions under which men can create and venture without fear of being penalized either through excessive taxation or the debasement of their money. The surest way to bring on a "static" economy is to deny those conditions. Yet, that is what we are doing. This is the ticket we are writing - the ticket to the future. How far will it take us? And to what destination? ~ The Practical Liberal I ASSUME that in this context "lib eralism" means the use or advo cacy of market processes to de termine the application of effort and resources, wherever the ob jects in view are economic in character. The definition embraces more than may at first sight appear, because the market process re quires private ownership, includ ing private ownership of capital, and is inconsistent with arbitrary interference with, or specific reg ulation of,· the economic choices of the citizen.