There Is No Escape; H. Sennholz

Hans F. Sennholz There Is No Escape THE Carter energy plan contains a familiar ingredient: it takes money from the working taxpayers to give to the nonworking population. It proposes a windfall profits tax on oil .producers and a fuel subsidy to poor consumers. When enacted, it may introduce Hfuel stamps" just like ((food stamps," to enhance the lives of some 25 million people who are believed to be poor. Transfer programs now comprise the lion's share of the federal budget. During the past decade transfer payments grew by almost 300 per cent, while wages and salaries rose by 134 per cent. In ~970 these transfer payments Dr. Sennholz heads the Department of Economics at Grove City College In Pennsylvania and Is a noted writer and lecturer on monetary and economic af fairs. His latest book, Age of Inflation, describes our dilemma and offers recommendations for restoring a sound monetary system.

amounted to $57 billion; in the fed eral budget for 1980 they are esti mated to exceed $226 billion. How much longer can the transfers grow at twice the rate ofthe earnings that are supporting them? Surely, the political transfer pro cess cannot continue to grow indefi nitely. There are limits of economic output as well as political power to seize an ever-larger share of income from the producers. But above all, the very nature of the transfer soci ety, which is social and economic conflict, sets limits to the transfer process. It is a strange twist of contempo rary morality that political conduct is judged by far lower standards than are the acts of individuals. Men who would not think of stealing or pillaging the property of others who would rather suffer deprivation 643 644 THE FREEMAN November than to enrich themselves by such methods-believe that politics jus tifies all means. They engage in con fiscatory taxation, devious inflation, and restrictive regulations in order to facilitate the transfer of income and wealth. Their political leaders, anxious to be the favorites of the transfer multitudes, yield to their prejudices, desire what they desire, and furnish the sophistry that will propagate and defend those desires.

Social Conflict The transfer society is a conflict society in which the beneficiaries of transfer are ever eager for rapid progress while the victims bitterly oppose every step of the way. The transfer battle is fought in all media of communication and education and on the floors of the legislature, where, in a democratic manner, the majority of representatives decide the issue. But all decisions are just temporary as the political battle continues. In every session of the legislatures, whether they are na tional, state, or local, the transfer process needs to be fed by new ap propriations and allocations, and new victims need to be found in order to bestow new benefits. A great deal has been said and written about the psychological, so cial and economic consequences of the transfer. Most political discus sions today hinge on this issue. The beneficiaries and their friends applaud the effects and laud the policies that facilitate the distribu tion. The victims, on the other hand, point at many deleterious effects not only upon themselves but also upon the beneficiaries. Both sides advance arguments of ethics, politics, eco nomics, psychology, history, and many others, in order to sustain their position. Both talk about lib ertyand justice for all.

The Rush to the Exits Whatever we may say about the consequences, there cannot be any doubt that the victims of the trans fer system react by seeking to es cape. They become refugees in their own country, dismayed and frightened, always on the run from agents of the transfer society. They spend countless hours searching for avenues of escape that promise re lief and salvation. Many spend their time and effort pursuing the legal loopholes, no matter how narrow and awkward they may be. Others seek their escape on illegal bypaths that are mined by fines and impris onment. A few get caught in an intricate net of rules and prohibi tions which government is spinning continually around its intended vic tims. The direction of escape is deter mined by the policy of expropriation conducted by the transfer govern ment. It may seize income and wealth through confiscatory taxa1979 THERE IS NO ESCAPE 645 tion, devious inflation, andrestric tive rules and regulations. The vic tims seeking refuge from them all, rearrange their efforts to reduce their burdens. They seek to realize income that is tax exempt, or utilize additional tax exemptions, deduc tions and tax credits, shift incomes to various types taxed at lower rates, or simply postpone the tax for various periods of time. They shun savings and investments that are depreciated by inflation and seek refuge in investments that are said to be inflation proof. They buy real estate, precious metals or other tan gible assets that hopefully ap preciate in value. And finally, the businessman who faces regulatory inequity searches for loopholes or, if none can be found, may discontinue his production or otherwise readjust it in order to minimize the regula tory results.

Many refugees from the transfer system pride themselves on their prowess in all matters of escape. They attend Hsurvival seminars," subscribe to advisory services specializing in survival behavior and investments, and otherwise prepare for the breakdown of the transfer order. Some escape artists may even amass sizable fortunes on their way to the social exits. But they are neither prudent nor bold, and surely no heroes in any •sense of the word. They are running from the battlefield of ideas on which our future is decided. They are desert ing, although the battle is still rag ing and there is no safe hiding place anywhere. Getting Your Share Many victims also try to get even by joining the class of beneficiaries. While chafing under the heavy load of progressive taxation and rampant inflation, they are getting in line for any and all favors the· transfer gov ernment may extend. The busi nessman who is suffering from con fiscatory taxation and restrictive regulation lobbies for government orders and contracts, for urban re newal or other HUD-subsidized housing projects. The doctor who pays maximum income-tax rates and loses his Keogh-plan savings to inflation clamors for a federal grant to his favorite hospital or for higher federal outlays for health profes sions training. The. attorney or ac countant, the professor, minister or rabbi, in fact, all primary victims of taxation and inflation send their children to public schools or state universities where government pays the lion's share of the educational expenses. And upon retirement, they all are looking forward to the generous benefits of Social Security.

After all, they contributed so long to the transfer system, why should they not avail themselves of every thing to which they are legally enti tled?

646 THE FREEMAN In the end, no one knows with certainty whether he has lost or gained from the transfer system. Everyone is waiting for his turn at the public trough, which continues to enjoy popularity and respectabil ity. In the line are to be found some of the primary victims, moaning and complaining about the burden they are expected to carry. But their very presence in the line casts doubt on the sincerity of their complaints, while it gives moral sanction to the waiting line and the benefit trough. Defending the Mainspring of Economic WellBeing The true defenders of individual freedom and a peaceful social order neither scramble for the -exits nor stand in line for their share of the loot. They do not spend their waking hours scheming and plotting their escape. They are in the midst of the ideological battle. With all their A Defensible Social Ideal strength and courage they are re sisting the transfer order, rejecting its temptations and refuting its spurious arguments.

They readily admit that private income and capital must be pre served for current production and future employment. They even em phasize the moral obligation of the present generation to preserve and promote the economic wellbeing of future generations. But what would it profit our heirs to inherit our material riches if· they lacked the freedom and morality that are the very mainspring of those riches? In the long run, economic prosperity without this mainspring will wither and die like seed sown upon stony ground. The United States is the ideologi cal, economic, and military bastion of Western freedom and civilization. If it fails, for any reason; civilization must perish. There is no escape. @ IDEAS ON UBERTY THERE is but one defensible social ideal, and that is a world in which every individual is free to work out the inner impulses of the Spirit, without aggression on his part or interference on the part of others. A State which accomplished this simple, primal duty, the protection of all its citizens, would accomplish something greater than has yet been historically recorded, and something which no State, preoccupied with illegitimate and paternalistic activities, is ever likely to accomplish.

HANFORDHENDERSON,"Hands Oft" from The North American Review, December 1924 Lawrence W. Reed The Fall of Rome and Modem Parallels THERE'San old story worth retelling about a band of wild hogs which lived along a river in a secluded area of Georgia. These hogs were a stub born, ornery, and independent bunch. They had survived floods, fires, freezes, droughts, hunters, dogs, and everything else. No one thought they could ever be captured. One day a stranger came into town not far from where the hogs lived and went into the general store. He asked the storekeeper, uWhere can I find the hogs? I want to capture them." The storekeeper laughed at such a claim but pointed in the general direction. The stranger left with his one-horse wagon, an axe, and a few sacks of com. Two months later he returned, Mr. Reed is Assistant Professor of Economics at Northwood Institute, Midland, Michigan. This article Is from a speech before the annual meeting of the Michigan Association of Tlmbermen, Gaylord, Michigan, April 21, 1979.