Listen to Lawrence Reed’s interview on The Mike Slater Show.

[.]… the deficit that matters most is not denominated in dollars at all. Its currency is of the heart and mind. It’s a manifestation of the values with which we circumscribe our actions, our purposes, and our values. I speak of a deficit of character, which arguably is the root of all of our major economic and social troubles today.

Describing it as a very different kind of deficit, Mr. Reed focuses on the key ingredients of strong character: “honesty, humility, responsibility, self-discipline, courage, self-reliance, and long-term thinking” and how a free society is impossible without having these traits in widespread practice.

The full commentary in The Christian Science Monitor here.

More of Mr. Reed’s thoughts on liberty and moral character from his recent participation in the Idea Room here.

To watch the webinar click here.

Set as an hour-long online lecture, “The Great Myths of the Great Depression” generated a lot of interest from the participants. Time limit didn’t allow for answers to all questions. Below are Mr. Reed’s answers to questions he did not have time to address during the webinar.

1. From Nikola: “Seeing as the 2008 crisis is Keynesian in nature, can it be solved by laissez faire/Austrian policy (non-interventionism), or should we paradoxically, seek Keynesian remedies?”

Answer: If you drink poison and it hurts you, you don’t drink another gallon of it to get better. I see nothing in the Keynesian formula of politicians squandering other people’s money and burdening future generations with unconscionable debt and tax burdens that could possibly fix the problem. We must unequivocally junk Keynesianism wholesale as bunk from its very inception. Henry Hazlitt’s classic, “The Failure of the New Economics” should have settled the question decades ago but Keynesianism remains popular with economists who don’t do their homework or think they can reduce human action to equations that some over-paid charlatan central planner flunkies can manipulate. It’s also popular with those politicians who seek a veneer of plausibility to gloss over their irresponsibility. When we learned that the sun didn’t revolve around the earth and the earth wasn’t flat, we set those failed theories aside. So it’s long past time to take the junk science that Keynesian represents and toss it on the compost pile.

2. From Abel: “If there were competition in money, what monetary policies would your money of choice follow?”

Answer: Competition in money. This is indeed the ideal we should seek. Money is an invention of the marketplace of exchange in the first place, not the invention of kings, queens, parliaments and presidents. The essential task of monetary reform today should be to take money out of the realm of politics and place it squarely in the realm of market forces, supply and demand, consumer choice and sound, unsubsidized banking. This is not so radical as it may sound. I would recommend precisely the same solution if we were talking about any other commodity or service. For example, if governments had produced our shoes for us, I would argue that the market should be in charge, that politicians have neither the knowledge nor the proper incentives to produce shoes that people want at prices they can afford. Some might say that money is different and too important. I believe money is too important to trust to politicians! Their track record really ought to speak for itself.

So to those who still cling to the voodoo of government monopoly money, I urge you to get over it. Look at the record. Question your misplaced, mystical faith. Trust the market. Wake up. And if your teachers in high school told you government must be in charge of money and never acquainted you with any other side of the debate, please consider filing an educational malpractice lawsuit.

This question also raises others about how do we get to where we ought to be with regard to money, what does the transition look like, what do we do with the money that government has already created and foisted on us, and how and when do we rid ourselves of those harmful government institutions like the Federal Reserve System and endless other bureaucracies and regulations that play God with our money? All good questions which I and others have addressed in many other venues, but beyond the scope of the question I am answering here or the time I have to answer. As an Austrian economist, let me say that I shy away from all attempts at central planning so I am not going to say that this or that should be our money.

I am very friendly to gold because it has passed the market test of reliability as a superb media of exchange through the centuries, but I also believe that no commodity should be granted any special privileges (legal tender laws, for example) that would bias its choice as money in the marketplace. I think there are strong and good reasons to assume that in a free and competitive market, gold would once again emerge as a dominant media of exchange but I would favor that only if the market were truly free and competitive so as to not prevent the emergence of other forms of money that market participants may choose.

3. From Scott: “As the money supply grows and malinvestments gather in the economy, what is the straw that breaks the camel’s back and causes the bust? As in, why do all the malinvestments collapse at one time?”

Answer: Let’s assume from the start that what you are referring to, Scott, is a growth in the money supply that occurs because of government policy, not natural forces in a free, healthy, responsive and competitive money market. I think that indeed is what you are implying because it is precisely that scenario that produces the subsequent “malinvestments” you are referring to.

Keep in mind that many different, usually unpredictable “straws” can break the camel’s back, so to speak, and cause a bust or downtown to begin. Monetary policy that is artificially inflationary and driven by government authorities certainly sets us up for that day to eventually happen, but the unsustainable directions that bad policy puts into place creates an inherent instability that can reverse because of any number of shocks that could take place, such as panics in other markets, wars, additional bad government regulatory policy, etc. But generally speaking, the bust commences after a period when monetary policy has reversed, that is, became less expansionary or even contractionary. The earlier, temporarily “stimulative” effect (especially in capital goods) of the expansionary policy wears off and dissipates throughout the economy, interest rates begin to rise, projects that seemed affordable but now become increasingly costly to continue to finance, and investors grow less confident of the future. The smart money sees these changes first and begin to sell and disinvest. Later, a stampede can begin as the masses of people sense change in the air.

In hindsight, the malinvestments seem to have occurred at about the same time period, as you suggest. This very fact is evidence of a systemic problem, not a particular economic sector problem—which is to say, it’s evidence that unwise monetary policy (which affects everything) is the culprit, not cycles peculiar to particular industries (there’s a natural boom and bust in tomatoes, for instance—lots of activity at planting time, a little less during growth, lots of activity again during harvest time, then nothing until the winter’s over, but that doesn’t produce economy-wide swings). Malinvestments are fostered in the first place by the false signals sent by inflationary monetary policy that suggest—falsely through low interest rates—that people’s time preferences have changed when they may really haven’t, that it will pay to borrow money now at artificially low interest rates to finance long-term, capital-intensive projects that will yield sufficient happy, paying customers down the road. But that’s a short-term phenomenon. It sends business in directions they wouldn’t have gone without the falsification of interest rates and relative prices caused by the monetary policy. When that policy changes, or wears off, or is reversed, it knocks the bottom out from the house of cards and many business plunge at about the same time.

This seeming failure of a primary entrepreneurial function—anticipating future market conditions—cannot be explained by casually asserting that a lot of business people at about the same time suddenly became bad planners. At any given time in even the freest and healthiest economies, some entrepreneurs will get it wrong or be overtaken by events or smarter competition or surprisingly reluctant customers, and they will go bust. That’s healthy. But when great numbers of them at about the same time fail, that’s evidence of something exogenous, namely the falsification of interest rates and relative prices caused by the systemic, economy-wide manipulation of money and credit.

4. From Alejandro: “How did the Wagner Act affect the rights of individual workers during the 1930s and how does it affect workers rights as of now?”

Answer: The Wagner Act took labor disputes out of the ordinary courts of law and put them under jurisdiction of a national, presidentially-appointed board called the National Labor Relations Board. That in itself was revolutionary. It has meant that the settlement of labor disputes now are far more subject to the whims of a handful of political cronies and much less predictable than a true rule-of-law approach (a fair field and no favors with the rules spelled out clearly in advance and just for all parties’ rights). The Wagner Act also empowered organized labor, under certain conditions, to possess exclusive rights for organized labor to represent workers collectively at a work site, even if large numbers of those workers might not want a union’s representation or actually be harmed by it. It replaced individual bargaining with collective bargaining when those conditions are present (such as 50% +1 voting for the union and then being able to impose it on the remaining, reluctant work force). It has resulted in less freedom in the worker marketplace, less freedom for managers to manage, higher costs of labor and therefore fewer jobs offered in those industries.

It must be understood that ultimately, productivity is what determines wages (wages can only be paid out of what is produced) and most of the time, unions empowered by the Wagner Act are not involved in boosting productivity; through strikes, threats and work rules, they can force some wages up but it means lower wages elsewhere, and fewer workers employed in those very unionized industries than would otherwise be the case. Fortunately, later additions to the law, such as Taft-Hartley, gave state governments the right to enact “right-to-work” laws which mean that in those states (22 of the 50 at the moment), no worker can be compelled to join or pay dues to a labor union as a condition of employment. In right-to-work states, wages have been rising faster, jobs have been growing faster, costs of living have risen more slowly, and employers have opened more work sites than has been the case in typically rust-belt non-right-to-work, high cost union states like Michigan, New York and California. Businesses and job creators are moving far more decisively to right-to-work states than they are to the compulsory-union states.

5. From Efrem: “How did the economy recover after World War II with the high income tax rates, which were maintained until the 1960s, still in place?”

Answer: Personal income tax rates did indeed remain high for a while after the war. Eisenhower cut the top rate a mere 1% from 92% to 91% in the 1950s. But by 1960, John Kennedy, a Democrat, campaigned on a platform calling for more robust growth. He rightly asserted that the economy of the 1950s was more sluggish than it needed to be and part of his solution to it was to bring that top rate down to 70%. Later, under Reagan, who rightly argued that 70% was way too high and a massive disincentive, cut the top rate down to 50% and then down to just 28%, a big reason for the sustained economic boom and remarkable innovations and entrepreneurship of the 1980s.

But the economy after the war did benefit from some major, positive things that allowed for a post-war boom: a) in 1945, the top corporate income tax rate was lowered massively, from 90% to just 38%; b) we had the greatest reduction in federal spending in U.S. history (largely because of war demobilization), which meant that resources tied up by government were now released to be deployed more efficiently for consumers (we started making refrigerators and cars instead of tanks and guns); c) war-time price controls and rationing were abolished; d) the “regime uncertainty” as Prof. Robert Higgs would put it, was substantially relieved when FDR checked in at the pearly gates for whatever reward awaited him and there was much less “attack business” demagoguery spewing forth from incompetents in Washington.

6. From Andrew: “How did they get away with the gold seizures?”

Answer: The “state of emergency” during the several depressed economy provided an atmosphere wherein such unwarranted and totalitarian measures could be imposed with little public opposition. Moreover, as a sad commentary on judicial independence, wisdom and constitutional fealty, no court ever reversed the action and ruled that seizing our gold was unconstitutional. It was finally undone by Congress and private gold ownership was once again permitted in 1974.

7. From Hilmar: “The European Union intends to regulate speculation of agricultural goods in order to decrease prices now. What do you think of that?”

Answer: Not much. Speculation has long been a bogeyman to ignorant and demagogic politicians. They fail to understand that speculators perform valuable functions in a free market. For instance: If there’s good reason to expect that future supplies of something will be more or less plentiful relative to demand than is the case now, the action of speculators tends to smooth out price swings. If it looks like a freeze in Florida might cut the orange crop in a few days, for instance, speculators push up prices right now. Some say, “That’s awful because it doesn’t reflect current supply demand. The speculators are profiting off of the future misfortune of others!” But by boosting prices today for today’s supply, it tends to curtail today’s demand and push some of today’s abundant supply into the future when it will keep prices lower than would be the case if the freeze does happen. And of course, speculators are assuming risk here than many of us are not willing to take, and if the speculator’s speculations prove wrong, they will suffer the losses.

Beyond that, I have utterly no confidence in the silly central planners of the European Union. They are pretentious politicians who respond to political pressures, charlatans who fall for fallacies that keep themselves busy and holding jobs while others labor to overcome their stupid policies. Many of them, like our own politicians, might even be unemployable in the absence of a government sinecure. They should be fired and the market should be allowed to work.

8. From Constantin: “What are some of the primary causes of the upcoming depression? What can be done to avoid it”

Answer: If another Great Depression comes, it will be once again because we have allowed politicians and their appointees to possess a commanding height of the economy, namely, control of our money and credit supply. Secondarily, another Great Depression could also come, or be exacerbated by, extraordinary uncertainty and high costs (taxes, regulations, tariffs) imposed by politicians and the rapacious, largely unaccountable bureaucracies they create. There may be no way to completely avoid a serious downturn in the future even if we pursued the proper policies of ending the Federal Reserve System and massively cutting the spending and intrusions of government, unleashing the entrepreneur and reviving civil society and personal character. You can’t get drunk without a hangover, but at least you can stop imbibing the intoxicants, dry out, and get a new, sound, and sustainable foundation for growth, sound money and honest living.

So when statists denounce spending cuts, especially reductions in “sacred cow” entitlements, we must explain not only why their position is lousy economics and poor planning for the future. We must question their very moral fiber. They should be embarrassed by what their stance says about them. They should have a guilty conscience about perpetuating a system that jeopardizes the financial solvency and the freedoms of not just the present generations but of those innocent and yet-unborn. We need to ask them why they can’t muster the courage to do what’s right. We have to call them on the carpet for their apparent willingness to fund failed and unaffordable programs for some constituency’s short-term gratification. We need to ask them why they are such eager participants in massive theft that takes from the hard-earned treasuries of private people and transfers those earnings to the squandering wastrels of the federal treasury. If they have a conscience, let it be pricked now before it’s too late.

To those in power whose pending decisions will set the course of America for years to come: Stop thinking as though almost every problem in every country is a reason for you to put your own countrymen’s lives and treasure at risk. Read the Constitution not just one day of the year, but at every moment when you are considering a measure without first asking yourself, “Is this really my responsibility? Is it really within the power granted to me?”

Few things speak “hypocrisy” more plainly than calling for peace publicly but promoting war on the personal, economic and political lives of others. Remember that every time you spend more, you don’t get the money by selling cookies like the Girl Scouts do. You deploy force against your fellow citizens. That raises moral issues and is something which you must stop doing in such a cavalier fashion.

Please don’t assume you’re doing your duty by minor spending reductions that leave whole agencies, programs and Cabinet departments intact, only to grow back. Pull out, root and branch, what you or your predecessors shouldn’t have created in the first place. Start with entire departments like Energy and Education, which have neither Constitutional justification nor track records worth keeping.

Stop labeling as “tough choices” major spending reductions when in fact they ought to be the easy ones. The really tough choices are the token nips and tucks that only yield endless whining and future battles. Muster the courage to make the big ones now and you’ll avoid problems later. Don’t torture us with mere tinkerings.

Empowering this Leviathan State we now have, at the expense of your fellow Americans, is shameful, anti-social behavior. It is not what we expect of responsible adults.

Do your duty. Balance the budget—now. Raise no more debt ceilings. If you do these things, you will receive the gratitude of a restored nation and the rewards of a forgiving God. If you do not, prepare to bear the judgment of both.

Jefferson warned us that we must make the choice between economy and liberty or profusion and servitude. Will you who are in power go down in history as leaders who saved their country or as just another crop of barbarians who flung open the gates to their country’s destruction? It’s your call.

Lawrence W. Reed is president of the Foundation for Economic Education—with offices in Irvington, New York, and Atlanta, Georgia.

Cast Your Vote for Freedom Here!

November 22, 2010

Dear Friends,

What a year of success 2010 has been! FEE is on the move—in every respect and on all fronts.

Financially, we turned a corner. When our fiscal year ends in March 2011, I expect we will have generated the first positive bottom line in three years and begun to rebuild reserves. Programs are expanding. More students than ever are learning the life-changing lessons of freemarket economics, personal liberty, and moral character development. Additions of young, energetic staff are infusing new levels of professionalism and vitality into the organization.

We are especially proud of sponsoring an impressive schedule of week-long summer seminars for high school and college students. We held seven seminars in three places—Irvington, New York; Atlanta, Georgia; and Estes Park, Colorado—featuring many of the best speakers in the country. The nearly 700 students who participated represented 42 states and 40 countries. But this is about more than numbers; it’s about impact and outcomes. This was sent by a grateful mother of two daughters who attended our program:

“Thank you FEE staff and supporters – My daughters, Kelsey and Mary Kate, attended the seminar at Estes Park last week and they came home completely on fire to pursue the economic principles of a free society! Your program is life-changing and we so appreciate you!”

Your support empowers FEE to pass these principles we hold dear to our next generation of civic leaders, entrepreneurs, and thoughtful, engaged voters. There is plenty of room to grow: We had to turn away 350 qualified applicants for budget reasons. We gathered this level of enthusiasm by relying solely on our website and word of mouth for advertising.

You can see why we are devoted to spreading the word about FEE’s programs. Parents and students alike thirst for ideas about liberty and how a free economy works. Students appreciate our unique way of blending economics with moral character. A free society requires private property, the rule of law, and open markets, but none of those can arise or endure unless people practice high standards of honesty, patience, courage, responsibility, and self-reliance. Character is indispensable—that lesson resonates with our students, but it’s a lesson not being taught in government schools. (For more, visit FEE.org and click on Seminars.)

Visitors to the revamped FEE websites have tripled since last year. FEE has 15,000 Facebook fans generating conversation and bringing in new friends by the hundreds every month. Repostings and reprints of FEE materials and articles from our magazine, The Freeman, are soaring. Just in the past year we’ve seen articles reprinted in the Dallas Morning News, The Daily Reckoning, UnMondeLibre, Reason’s Hit & Run, Libertad Digital, Gizmodo, Indiana Policy Review, the Campaign for Liberty website, and many more.

Large crowds for FEE programs around the country, including our high school debate events, are encouraging evidence of a rekindled interest in the ideas of liberty and free-market economics. In August we held our largest “Evening at FEE” in history at our Irvington, New York, headquarters. Over 170 people gathered to hear me discuss “The Origin, History and Nature of Money.” People are craving more education on the tenets of a free society, and FEE is providing it to them!

In late September FEE launched The Informant, a web-based resource for home-school parents and high school teachers of economics. It supplies recommendations for text materials and curriculum guides while providing a forum for free-market educators to discuss their plans. In this way FEE is able to speak directly with those who instruct young people. We are already receiving excellent feedback on this new resource, including thousands of page views and this endorsement from a home-schooling mother:

“Wow, this is really fantastic. I’ve promoted it to our local home school network. The links, cross-referencing, key topics, skill levels–you couldn’t ask for more! THANK YOU FEE!”

Though I have already mentioned our magazine, The Freeman, I want to share with you some further observations about it. It’s been our flagship publication for half a century and a highly acclaimed leader among free-enterprise journals. No publication has covered the financial crisis from a pro-freedom perspective as thoroughly and as clearly as The Freeman. Issue after issue applied solid analysis to all aspects of the recession and has explained the free-market solution in banking and housing.

Likewise, we have relentlessly offered the case for the free market in health care and exposed the prevalent statist fallacies and proposals. Intellectual ammunition from FEE on these issues has become an important weapon in the arsenal for the pro-liberty side of the debate.

We have jumped on every major political-economic issue with clarity and consistency, while also attending to lesser-known threats to liberty and important episodes in economic history. We keep readers informed of the most important new books of relevance to champions of freedom.

The most respected names in the broad free-market movement grace our pages: Peter Boettke, James Bovard, Richard Epstein, Roger Garrison, Jeffrey Rogers Hummel, Sandy Ikeda, Israel Kirzner, Wendy McElroy, Gerald O’Driscoll, Ben Powell, Murray Weidenbaum, Lawrence White, Bruce Yandle—not to mention the best of the up-and-coming pro-freedom scholars and writers.

Our regular columnists are an all-star cast and include Charles Baird, Don Boudreaux, Steve Davies, Burt Folsom, David Henderson, Robert Higgs, editor Sheldon Richman, John Stossel, Thomas Szasz, and Walter Williams. All of this comes in the most attractive packaging in The Freeman’s history—and I don’t mean just the print version. The newly redesigned website, TheFreemanOnline.org, attracts hundreds of thousands of readers, who continue the lively debates by posting comments, emailing articles to friends and sharing The Freeman through social networking sites. We launched a Kindle edition in October and it met with immediate and unreserved enthusiasm. Please visit TheFreemanOnline.org at your earliest opportunity! And remember that contributors to FEE of $50 or more receive the magazine for a year.

So there in a nutshell is the good news about our work this past year. But you should know that we practice what we preach in every respect. We don’t think we’re entitled to anything, but we do hope we have earned your support. Ask yourself these questions as you ponder your year-end giving:

I hope you will answer all five questions with a resounding YES! Since our founding in 1946 FEE has relied exclusively on the voluntary, generous, and tax-deductible contributions of friends of liberty everywhere. We can’t do our work without you. Remember, we will never, ever pursue or accept any government funding.

Moreover, it is my hope that you will place great value on these crucial elements that define what FEE is all about:

Your generous support now will help us immensely as we prepare the budget for the next year. How many summer seminars should we plan for? How many students can we accept? Those questions are greatly affected by how our supporters respond in the final weeks of the calendar year. Funds permitting, we would also like to produce instructional videos for classroom use, expand the readership of The Freeman, schedule more speakers around the country, and provide educational materials to as many students as possible.

The work of FEE in promoting liberty, free markets, and personal character has never been more critical than it is today. We need your help to reach even more students next summer, when we will celebrate the 50th anniversary of FEE’s commencement of seminars! This year you can pledge support that will directly, profoundly, and indelibly impact the lives of our student participants! I urge you to take a moment and complete the pledge form in the envelope provided. Better yet, you can make your contribution quickly and securely online. Simply go to FEE.org and click on the Donate button.

Liberty—it makes all the difference in the world! Help us spread the word with a contribution today. We would be honored once again to count you as a friend of FEE!

With the deepest appreciation,

Lawrence W. Reed

President

P.S. – This remark from Benjamin Franklin is especially appropriate for this time of year. It expresses the wishes of the FEE staff for you and your family in this holiday season: “Be at war with your vices, at peace with your neighbors, and let every new year find you a better man.”

P.P.S – Don’t forget, anyone within the United States who contributes $50 or more receives The Freeman for one year. And, as an added thank you for your generosity, anyone who contributes $200 or more will receive a copy of one of the following books:

Cast Your Vote for Freedom Here!

IRVINGTON, NY—From its founding in 1946 until 2010, the Foundation for Economic Education (FEE) had one office: its headquarters facilities near the Hudson River in this Westchester County community, less than an hour north of New York City. Now, it has a second home in the heart of the South.

In early May, a branch office was opened at 260 Peachtree Street, NW, Suite 2200 in downtown Atlanta, Georgia 30303. Located in Atlanta’s financial district, the office houses four staff members at present and is just three blocks from the site of five of FEE’s summer 2010 student seminars, the Georgia-Pacific Building. The organization’s headquarters will remain in its historic mansion in Irvington.

Why Atlanta? FEE president Lawrence W. Reed explains: “There are many good reasons for a branch office in Atlanta: Local support is strong. Operational costs are low. Opportunities for FEE programs in the region are great. The proximity of a major airport hub makes Atlanta very accessible. And by putting roots down in a second community, we are broadening the base of FEE’s long-term support.”

No sooner was the office opened in early May than FEE staff in both New York and Georgia were immersed in the organizations’ highly successful summer seminars. Nearly 700 students from 40 states and 42 countries descended on Irvington, Atlanta, and a third site—Estes Park, Colorado—to hear many of the country’s top free market economists.

“Now that the seminars for 2010 are over and planning is underway for next year, we can really settle in to the new office and reach out to the local community,” says Ben Stafford, director of programs. “We’re excited about working with groups in the area to get the FEE message of liberty and free enterprise into the schools and colleges.” One of many new lecture programs will be an occasional “Evening with FEE” event, fashioned after the successful “Evening at FEE” programs at the Irvington headquarters.

FEE’s executive director, Carl Oberg, hailed the branch office opening as “a testimony to our new growth path” for the organization. “Our funding base is growing, our programs are reaching record audiences of young people, our new media exposure is soaring, and now we have a new office from which we can extend our reach,” he said. “People are responding to our unique approach of combining free market economics with the necessity of personal character, and that’s a cause for celebration!”

Democrats scored huge gains in the 1974 elections in the aftermath of Watergate. They took both houses of Congress from the Republicans in the depression year of 1932. Republicans swept to power in 1994 largely on fiscal issues, just as they had done in 1920 amid disenchantment with Woodrow Wilson’s tax-and-spend administration.

Predictions for the GOP in the 2010 mid-terms range from a pick-up of 35 to 50 seats. Even a figure at the lower end of that range would be regarded by pundits as large, but it pales in contrast to two massive realignments within the same decade, barely a hundred years ago.

The 1894 election was a whopper for party turnover. In a Congress with a hundred fewer seats than today’s, the incumbent Democrats lost 125 and the Republicans gained 130. The one issue on everybody’s mind that year was depression, heralded a year and a half earlier by the Panic of 1893. The party of President Grover Cleveland, a Democrat in the middle of his second (and nonconsecutive) term, took the heat for sky-high unemployment.

But just four years earlier, the Democrats nearly wiped the slate clean of Republicans. When the dust settled in the November 1890 mid-terms, Democrats had won an astonishing 235 seats in the House, leaving the Republicans with just 88. What was the number one issue of that campaign? Spending—reckless, feckless spending.

Grover Cleveland’s first term (1885-89) featured many battles with congressional Republicans over fiscal issues. A parsimonious Presbyterian who took his constitutional duties seriously, Cleveland vetoed more than twice as many bills as all of his 21 predecessors combined—414 vetoes in a single four-year term. “Though the people support the government,” he opined in a rejection of a measure to aid drought-afflicted farmers in Texas, “the government should not support the people.”

In his 1888 re-election bid, Cleveland won the popular vote but lost in the Electoral College to Republican Benjamin Harrison. With a small GOP majority in the Congress, and a passive president who largely deferred to his party’s congressional leadership, the spenders took the country on a grand ride. What Democrat Grover Cleveland had vetoed, the iron-fisted Speaker of the House, Maine’s Thomas B. “Czar” Reed, rammed through. The big spenders threw so much money at public works, defense and military pensions that a new political insult was coined, the “Billion Dollar Congress.” It was the first time in American history that Congress spent a billion dollars in a single two-year session.

The first half of the Harrison administration saw the Republicans not only breaking records for spending, but taking the country off the deep end on other fiscal matters as well. They squandered a budget surplus, passed the highest tariffs to date and put the federal government in the position of buying up nearly the entire annual output of the country’s silver mines for twice what the metal was worth. They also authorized the printing of a new paper money to help pay for it all. In massive numbers, voters repudiated the Billion Dollar Congress on November 4, 1890.

Here we are, 12 decades later, and the mood in the country is anything but tranquil. The first three of the four re-aligning conditions cited above are arguably in place. If you have doubts about the fourth (major scandal), think of how average Americans see the last 18 months of wasteful spending and bailouts of the politically well-connected. Some polls suggest that most people would think “scandalous” to be a rather charitable adjective.

Realignment elections demonstrate that Americans don’t much care for endless wars in faraway places, a sagging economy, spending and taxing binges, or politicians otherwise behaving badly. They’ve been known to turn a party out of power for perceiving it guilty of just one of those sins. If voters on November 2 see the Democrats as presiding over all four, a new benchmark in political history may be set.

Given how terribly disappointing the Republicans proved to be after they won control of Congress in 1994, how much difference a GOP tsunami this November will make in the years to come is anybody’s guess.

Lawrence W. Reed is president of the Foundation for Economic Education in Irvington, New York and Atlanta, Georgia.

Lawrence W. Reed is president of the Foundation for Economic Education, with offices in Irvington, New York and Atlanta, Georgia.

The cause of liberty lost a stalwart with the passing last evening (September 7, 2010) of Ralph Smeed of Caldwell, Idaho, at the age of 88. No one in the Gem State was ever more colorful and relentless in his defense of the free society.

“One of a kind” seems a trite understatement in Ralph’s case. If you knew him, you probably couldn’t think of anybody else quite like him. He was iconic and iconoclastic. He was gentle and grandfatherly on many occasions, cantankerous and irascible on others. He made everybody mad at one
time or another but it was almost always because he wanted to make us think—and he usually succeeded unless you were an utterly incorrigible statist. He always stood out in any crowd, partly because of his bolo ties but mainly because he was often the only one beseeching everybody else to stand for principle and not be afraid to defend it. He was known for his pithy, one-line zingers. He even improved upon Lord Acton’s famous remark (“Power corrupts and absolute power corrupts absolutely”) by adding, “And power attracts the corruptible.”

Thirty years ago, the free market movement could boast maybe four or five “think tanks” in the U.S., with all but one either located in Washington, D.C. or focused on national and international issues. The Foundation for Economic Education (FEE), on whose board Ralph proudly served, was the nation’s first but the earliest one founded within a state with programs focused in that state was the one that Ralph started in 1977 in Boise (later moved to Caldwell)—the Center for the Study of Market Alternatives (CSMA). That makes Ralph a think tank pioneer. I was privileged in 1984 to be called to Idaho by Ralph to run CSMA for almost three years.

Through CSMA, his newspaper columns, his conversations and his often painful prodding as Idaho’s libertarian gadfly, perhaps tens of thousands of Idahoans and other Americans were swayed toward liberty by this remarkable man. Among them were former U.S. Senator Steve Symms, who says, “There never would have been a Senator Steve Symms if it weren’t for Ralph Smeed. Ralph was always my biggest critic yet best supporter. When we weren’t together, we talked on the phone often. I will truly miss him.”

Ralph Smeed was born in Caldwell, Idaho on December 30, 1921. He was troubled by the bureaucracy he saw firsthand when he served in the Army during World War II but his intellectual blossoming really began in the late ‘40s when James Gipson of the venerable Caxton Printers gave him copies of Frederic Bastiat’s “The Law,” FEE’s journal, “The Freeman,” and other libertarian materials. He was a delegate for Goldwater at the 1964 Republican National Convention. In 1965, Ralph attended a FEE seminar where he came to know FEE’s founder, Leonard Read, and the works of such liberty luminaries as Ludwig von Mises, F. A. Hayek, Murray Rothbard, Henry Hazlitt and Ayn Rand. In short order, he became Idaho’s best known and most passionate, well-read and thoroughly principled lover of liberty.

Wayne Hoffman is one of those countless individuals whose life was changed by Ralph Smeed. A former journalist who once thought Ralph was off-base by suggesting the mainstream media possessed a statist bias, Hoffman later became a convert to free market ideas because of Ralph. He recalls Ralph’s own bias, a bias for action on behalf of liberty:

“Last year Ralph invited me to come to a regular Sunday brunch with his friends. That’s where we really debate the issues of the day, but Ralph always lamented that we didn’t accomplish anything at those meals. ‘We just meet, eat and retreat,’ he’d say. ‘We don’t do ANYTHING.’

“I got great value out of it, because those meetings helped me formulte many of my newspaper columns. The ‘meet, eat and retreat’ people did come up with a pretty neat idea, however, not long ago. After Ralph was diagnosed with pancreatic cancer and went on his trip to Houston for treatment, our brunch club, along with Dick Rowland and Chris Derry, came up with the idea of forming a leadership academy that will bear Ralph’s name. ‘Well, you finally did something besides meet, eat and retreat!’ Ralph said.”

Hoffman is now the president of CSMA’s successor organization, the Idaho Freedom Foundation—a group committed to the very ideas for which Ralph devoted his long life. IFF recently bestowed upon Ralph its first “Lifetime Achievement Award.”

Dick Rowland, president emeritus of the Grassroot Institute of Hawaii, fondly recalled Ralph this way in an e-mail to me a few days ago: “We, our children and our children’s children will be enriched and inspired by Ralph’s sturdy compass of passionate wisdom and hard work that produced accomplishments too numerous to count. He taught us to work harder, faster and smarter for cherished individual liberties. He urged us to make the statists say clearly what they stand for: a bigger, more intrusive government and a less effective citizen. ‘The bigger the government gets, the smaller you get,’ Ralph liked to say.”

Maurice Clements, one of Ralph’s closest and best friends for years, counts among Ralph’s lasting contributions the donation of hundreds of books and the funding of a vast libertarian library at Albertson College in Caldwell, formerly the College of Idaho. Clements notes that Ralph is even better known locally for constructing a 10 x 24-foot reader board sign at the edge of Caldwell near a freeway. For years it has “amused, tantalized and provoked the citizens of Idaho” to think about ideas and in ways they ordinarily wouldn’t. Among the comments Ralph posted on the board were these: “If you don’t believe in Christmas, don’t take the day off” and “What have you done today to save the republic?”

After one of Ralph’s recent hospitalizations, friends posted this on the reader board: “Ralph is back home from the hospital. Pray for him.” The when his health deteriorated, they posted this: “Ralph is back in the hospital. Pray for the staff.” Even Ralph laughed at that one. (Thanks to Smeed friend Laird Maxwell for information on the reader board.)

After a contentious and expensive ballot drive, voters in 1986 made Idaho the 21st right-to-work state. For the past 24 years, no worker in that state has been compelled to join or pay dues to a labor organization as a condition of employment. Many people worked to make that happen and significant credit goes to Ralph for planting the intellectual seeds that sprouted with that successful effort. It’s no small coincidence that since 1986, Idaho has been among the most economically healthy of the 50 states.

At FEE, we will always be grateful for Ralph’s work, his fealty to liberty and to our organization as a supporter and trustee. Most recently, in 2008, he teamed up with friend and fellow former FEE trustee Dave Keyston of California to fund the printing of a 50th anniversary edition of Leonard Read’s classic essay, “I, Pencil.” Ralph was passing it out by the hundreds right up until his health took a turn for the worse. He was pushing liberty 24/7 and never let up until his health forced him to.

I last spoke to Ralph on September 3, the Friday before he died. I called his hospital room. He answered, “Larry, how the Hell are you?” We quickly turned to a discussion of the health of “the cause.” One thing seemed to be uppermost in his mind at that moment: giving encouragement and credit to those who work for liberty. We don’t do enough of that, he explained. He never hinted at any need for recognition for himself, but he urged me to implore others in the movement to be constant encouragers of our kindred spirits. I assured him I would do that. It’s a sentiment I share, and I am proud to convey it here.

Kris Mauren of the Acton Institute (and a current FEE trustee) shares this sentiment with Ralph’s many friends and fans: “When I look back and think of Ralph’s single minded focus on liberty, I am embarrassed by how relatively little is my commitment, despite a professional life dedicated to promoting it. What a model of dedication, perseverance and energy he has been! The fight for liberty demands no less from each of us.”

Ralph Smeed, 1921-2010: A life devoted to the right things and never hesitant to say so. He is irreplaceable and will be sorely missed for a very long time.

Links to articles announcing the passing of Ralph Smeed:

Idaho Press-Tribune

IdahoStatesman.com

“We are pleased that Dr. Boettke has accepted our invitation. Pete has long been associated with FEE as both a writer and a speaker. His scholarship is exceptional and his knowledge of FEE’s distinguished history is considerable. He will provide many valuable insights and advice as a member of our governing body.”

Dr. Peter J. Boettke is the Deputy Director of the James M. Buchanan Center for Political Economy, a Senior Research Fellow at the Mercatus Center, and a professor in the economics department at George Mason University. Boettke was born and raised in New Jersey. He received his BA in economics from Grove City College and his PhD in economics from George Mason University.

Before joining the faculty at George Mason University in 1998, Boettke held faculty positions at Oakland University, Manhattan College and New York University. In addition, Boettke was a National Fellow at the Hoover Institution for War, Revolution and Peace at Stanford University during the 1992-1993 academic year. He has been a visiting professor or scholar at the Russian Academy of Sciences in Moscow, the Max Planck Institute for Research into Economic Systems in Jena, Germany, the Stockholm School of Economics, Central European University in Prague and Charles University in Prague.

FEE played an important role in the early development of Boettke’s economic thinking. “At the suggestion of my professor Hans Sennholz,” he says, “I made the trip from Grove City College to FEE more than three decades ago. That weekend proved to be a pivotal moment for me as a student and later as a teacher in the classroom. FEE is the home base for free market economics throughout the world. It is a privilege for me to be associated with FEE and its core educational mission.”

Boettke’s three-year term as a FEE trustee begins immediately. He joins 11 other distinguished individuals whose backgrounds include many years of experience in business, academia, banking, philanthropy and investments.

Thanking our friends and supporters for their generosity is a present I enjoy wrapping and giving many times over. In November, I sent you our year-end update and appeal. We posted it on the FEE web site and Facebook fan page. We e-mailed it to our “In Brief” subscribers and included a condensation of it on the inside cover of the January issue of “The Freeman” that was dispatched in December. We called many of you on the phone. Then we said a prayer, held our breath and watched the mail.

Our year-end letter is always very important to FEE, yielding as much as 30 percent of our annual budget. The most recent one was especially critical because the economy didn’t do us any favors in 2009, yet we very much wanted to build on the achievements of last year to do more and bigger things for liberty in 2010. (If you did not get a chance to read the letter, you can still see it here) .

It’s now far enough into January to close the books on 2009. We didn’t quite meet our optimistic budget projections but I’m happy to report that we came close—close enough that I want to supplement the normal thank you and receipt with this second note of appreciation. It may be trite to say so, but we really can’t thank you enough!

Our founder, the late Leonard E. Read, always believed that if you do your best and it’s of value to others, support will follow. No need to beg or borrow; just perform and make your case. Friends of liberty know that the cause is important enough to pitch in. He was proven right again. In spite of a difficult year for many of you, your gifts to FEE since late November will help us hugely to set new records for outreach in 2010. Though we fell a little short of projections, we’re not like the Congress. We’ll spend what we have, and not a nickel more.

You have many options with your hard-earned dollars. You’re under no obligation to give any of them away. No organization should ever feel “entitled” to any portion of what’s yours. At FEE, we want our work to merit your endorsement and we miss it greatly when for any reason you decide our work doesn’t measure up. So when you come through for us, we are grateful. Very grateful.

Thank you once again for being our partners for a noble cause. We promise you we will do our best (and get better at it every year), that we will not waver from the principles we share, and that our faith in our friends will never flag. Best wishes for the new year!

— Lawrence W. (Larry) Reed
President
Foundation for Economic Education

These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives everything its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as freedom should not be highly rated.

So began the first of 16 pamphlets under the title “The American Crisis,” by patriot Thomas Paine. These very words were read aloud to General George Washington’s forlorn and bedraggled men on Christmas 1776, the night before the Battle of Trenton.

Consider the backdrop: For the six months since the Declaration of Independence, Americans had been in almost constant retreat. To a disinterested observer, the American cause must have seemed hopelessly quixotic.To many patriots as well, it appeared all but lost. But Paine’s stirring words helped give the troops the morale boost they needed. The next day they accomplished the impossible, capturing nearly the entire force arrayed against them. Desertions plummeted and reenlistments soared.

Lovers of liberty need a little Paine today in the face of all the pain around us. It seems at times that the world has gone mad. Companies that lose billions are being bailed out by a government that loses trillions.The same federal Leviathan that outlaws competition in first-class mail delivery but still can’t deliver letters at a profit now supposedly knows how to run auto companies, banks, and insurance firms. Debt, deficits, bureaucracy, regulation, government spending–the depressing stuff already in frightful superabundance pre-financial crisis–now threaten our diminishing liberties more than ever before. The cover of the March 15 issue of Newsweek proclaimed, “We Are All Socialists Now.”

No Sunshine Soldiers

Maybe we have good reason to feel like those dispirited troops on Christmas Day in 1776, but we should learn from what they did just a day later. We can either be summer soldiers and sunshine patriots, or we can let the very principles we profess be our rallying cry for the battles ahead.

Eternal optimist though I am, I admit that pessimism really tugs at me when I read the morning papers. At every speech I give these days, there’s a sizable portion of the crowd that seems ready to crawl under a rock and let the world go to a statist hell in a hand basket.  

But then I ask myself, what good purpose could a defeatist attitude possibly promote? Will it make me work harder for the causes I know are right? Is there anything about liberty that an election or events in Congress disproves? If I exude a pessimistic demeanor, will it help attract newcomers to the ideas I believe in? Is this the first time in history that believers in liberty have lost some battles? If we simply throw in the towel, will that enhance the prospects for future victories? Is our cause so menial as to justify deserting it because of some bad news or some new challenges? Do we turn back just because the hill we have to climb got a little steeper?

Readers of this magazine should know the answers to those questions.

This is not the time to abandon time-honored principles. I can’t speak for you but someday I want to go to my reward and be able to look back and say, “I never gave up. I never became part of the problem I tried to solve. I never gave the other side the luxury of winning anything without a rigorous, intellectual contest. I never missed an opportunity to do my best for what I believed in, and it never mattered what the odds or the obstacles were.”

A Tradition of Courage

Remember that we stand on the shoulders of many people who came before us and who persevered through far darker times. The American patriots who shed their blood and suffered through unspeakable hardships as they took on the world’s most powerful nation in 1776 are certainly among them. But I am also thinking of the brave men and women behind the Iron Curtain who resisted the greatest tyranny of the modern age, and won. I think of those like Hayek and Mises who kept the flame of liberty flickering in the 1930s and ’40s. I think of the heroes like Wilberforce and Clarkson who fought to end slavery and literally changed the conscience and character of a nation in the face of the most daunting of disadvantages. And I think of the Scots who, 456 years before the Declaration of Independence, put their lives on the line to repel English invaders with these thrilling words: “It is not for honor or glory or wealth that we fight, but for freedom alone, which no good man gives up except with his life.”

As I think about what some of those great men and women faced, the obstacles before us today seem rather puny.We just need to gird our loins.We have to get a lot smarter and better at reaching more fellow citizens with a compelling alternative to the dead hand of the corrupt and incompetent State. We need to put confident smiles on our faces and sally forth.

Time to Rally

We should not squander a second feeling bad for ourselves.This is a moment when our true character, the stuff we’re really made of, will show itself. If we retreat, that would tell me we were never really worthy of the battle in the first place. But if we resolve to let these tough times build character and rally our dispirited friends to new levels of dedication, we will look back on this occasion someday with pride at how we handled it. Have you called a friend yet today to explain to him or her why liberty should be a top priority?

Nobody ever promised that liberty would be easy to attain or easy to keep. The world has always been full of greedy thieves and thugs, narcissistic power seekers, snake-oil charlatans, unprincipled ne’er-do-wells, and arrogant busybodies. Sometimes they’re nattily dressed in custom-tailored, pin-stripe suits and give good speeches; sometimes they’re bedecked in jewel-studded robes and give lousy speeches; on yet other occasions they wear well-worn street clothes and don’t bother with a speech at all as they hold you up. It doesn’t matter how they’re dressed or what they say. No true friend of liberty should just roll over and play dead for any of them.

Wipe that frown off your face and get to work. Liberty’s future depends on you.

Follow the link to the video posted on the Acton Institute’s website: Character and a Free Society.

The turpitude of the subsidy-seekers and handout con artists in Washington should rattle Americans of conscience to their very core. At the most basic level, it’s simply and inexcusably wrong to rip off a dollar from the innocent or the responsible and pass it on to the guilty or the irresponsible. Does it somehow become right if we do it a trillion times? Quite the contrary. It simply becomes a trillion times more wrong if not worse because the sheer magnitude means we can’t dismiss it with the palliative that “it’s only pocket change.”

This is a sign of neither strong character nor a sustainable economy. It reeks of the same moral cowardice and fiscal insanity that doomed great civilizations of the past. The bread and circuses that helped mightily to bankrupt ancient Rome come to mind. Where are the men and women of courage and integrity who will keep their hands in their own pockets?

As the fiscal alarm bells are going off, even state governments that once jealously guarded their financial independence are hearing dinner bells instead. Governor Mark Sanford of South Carolina is virtually alone in resisting the “come and get it” mentality.

Consider House Concurrent Resolution No. 2 of the 85th General Assembly of the State of Indiana, passed by that state’s House and Senate in January 1947. Written in the quaint, commonsense vernacular of the day, its sentiments probably couldn’t muster more than a handful of votes in the state legislatures of 2009. It begins thus:

Indiana needs no guardian and intends to have none. We Hoosiers—like the people of our sister states—were fooled for quite a spell with the magician’s trick that a dollar taxed out of our pockets and sent to Washington will be bigger when it comes back to us. We have taken a good look at said dollar. We find that it lost weight in its journey to Washington and back. The political brokerage of the bureaucrats has been deducted. We have decided that there is no such thing as ‘federal’ aid. We know that there is no wealth to tax that is not already within the boundaries of the 48 states.

So we propose henceforward to tax ourselves and take care of ourselves. We are fed up with subsidies, doles and paternalism. We are no one’s stepchild. We have grown up. We serve notice that we will resist Washington, D.C. adopting us.

The resolution urged the legislatures and citizens of all the states to “restore the American Republic and our 48 states to the foundations built by our fathers.”

If we had listened to the Indiana legislature in 1947, we might be several trillion dollars freer today.