Politics, Economics, and the Law
Part 3: The Roots of Prosperity
By the second page of part three, Santorum has quoted both Benjamin Franklin and Adam Smith. He cites Franklin’s opinion that marriages in the United States were at the time both entered into earlier, and more generally, than in Europe. Also that the greater number of American children was due to the vast land, and opportunities to leave said children with plenty. Quoting from Smith’s ‘Wealth of Nations,’ he agrees with Smith that the mark of a nation’s prosperity is its numbers of people.
Santorum believes that a strong economy promotes healthy families. I would agree to the truth of this. As I mentioned in my notes on part two, a strong economy provides employment, which is turn gives a measure of security for both a person’s present, and future well-being. This security, and the hope for a better future, are boons to a family. It makes more sense to get married and have children if you believe that everyone can be provided for. Santorum states his belief that he considers the reverse true, as well. That strong families are the basis for a strong economy. I’m not completely sure I know what he’s driving at here, and it’s the kind of statement that might look coherent if you squint.
His economic ideas will appeal to the majority of fiscal conservatives. Low taxes, few regulations, a stable currency, etc. There’s nothing in the broad strokes that appears intolerable. However he seems to take at face value the claim that the Federal Reserve is an independent banking body which the government merely watches over. Of course this is hardly the case. He also appears to accept fiat currency as simply the way things are. He mentions the need for a stable currency, but apparently believes this is achievable with the dollar, so long as it’s managed properly. There is no mention of truly stable alternatives, such as commodity currency (or at least commoditybacked currency).
[…]“we must instill in the disadvantaged an entrepreneurial spirit through economic and financial literacy.”
I would assume, and I believe Santorum has said as much while on the campaign trail, that there should be economics and money-management classes in schools. The obvious question concerning economics classes would be: “Whose economics?” Shall we teach Chicago School? Keynesian? Austrian? Something else entirely? Most Americans don’t read about economics, either for business or as a hobby (which is why teaching them about economics would be necessary to begin with), but saying “We’ll be teaching you economics” is a bit like saying “We’ll be teaching you religion.” There’s a great variation of ideas, and many of those ideas don’t play nice with one another. The end result would of course be that the economics the state would teach reflect the schools and theories which support its wider ideology. You don’t, after all, teach a person those things that would reflect poorly on you. Realistically, this is most likely neither here nor there. I imagine that by “economic literacy” he actually envisions a program to teach general money management, and retirement planning.
Santorum was part of the welfare reform process in 1996 which would transition the country from the ‘Aid to Families with Dependent Children’ program to the ‘Temporary Assistance for Needy Families’ program. Santorum argues that the welfare program, as it had previously been structured, had a corrosive effect on families, and created a whole class of dependents. He presents study results, and statistics in support, and does a respectable job making his case. I would add here that social welfare programs are ultimately a self-serving enterprise for the government, as they create an underclass who are at best obligated to support those powers that provide their livelihood, and at worst are made apathetic and uninterested in politics, so long as their checks keep coming (or should I reverse those?). The politicians are not simply providing handouts, they’re buying support.
Of course this goes both ways: To much the same degree which entitlement programs narrow the range of political action which can be undertaken by the group receiving them without harming their own self-interest, the programs also create constituencies which will muster to vote if a politician dares to cut their benefits. This is why social security for the elderly has created such a powerful political lobby. Cut benefits and the Gray Bloc will turn up to oust you from office, next election. Entitlements become entrenched, and neither the giver nor the receiver can stray too far without being punished. When taken to its logical conclusion, acknowledging the deleterious effects of entitlement programs means that we should strive to eliminate those programs and return charity to the churches, NGOs, and community groups. With the federal budget running consistent trillion-dollar deficits, this may well be a foregone conclusion. The fiscal health of the state demands their elimination, but this is politically impossible. Government will take some kind of “third way,” seeking to have its cake and eat it too. The result of this impossible endeavor will be disastrous.
On pg. 152-153 Santorum writes about his idea for a “Kids Investment and Development Savings” (KIDS) account. The idea is that the government would give every child in America $500, placed in an account and invested in mutual funds. This could be doubled to $1000 for children born into families below the median income line. Other people, or organizations would be able to deposit money is this account as well, and the government would match their contributions dollar-for-dollar, up to $500. The money that has built up in this account could be withdrawn after the child turns 18, but $500 must remain, to eventually be “used for postsecondary education, or buying a home, or else rolled over into an IRA and saved for retirement.”
“Upon reaching 18 the child must pay back to the federal government any federal contribution to the fund; the federal contribution is like a no-interest loan for up to 18 years.”
If the money the federal government provides must be paid back at the very first moment the money can even be withdrawn, then what is the point of giving it in the first place? It can be used as a base which will be invested in those mutual funds he mentions, but what if those don’t pan out? Ensuring the money goes where it should, and everyone has their forms stamped properly would create new employment opportunities for small-time bureaucrats I suppose. Santorum insists this program would create a sense of ownership, and foster a tendency to save, but if your savings is made up entirely of money that has been given to you by someone else I’m not sure that is the lesson it will teach in practice.
The next topic discussed in the state of Social Security. For the sake of argument, and because I don’t care enough right now to look up the pertinent figures, I will assume that the things he claims were true, or could at least be interpreted as being true, when the book was copyrighted in 2005. The prediction that government debt would continue to increase has indeed come true, but to a far greater degree, and far quicker than he believed would happen. Perhaps the general feeling in ’05 was that Social Security was salvageable, but the writing is on the wall now. Debt has now surpassed 100% GDP, Social Security takes a fifth of the federal budget, and there’s a rapidly declining ratio of payer-to-recipients. I don’t know anyone within my demographic (late 20s) who believes they’ll ever see a payout from Social Security. Santorum argues for the privatization of the system, and that’s fine, but he also insists on keeping the government part of it. Money will still deducted from your paycheck, and managed by the government. A government bond fund is even mentioned. Perhaps this seemed like a good plan in 2005, but seven years, one economic collapse, and trillions of dollars in added public debt later, I’d just as soon put my money under the mattress.
The last couple of chapters of this section are chock-full of anecdotes about private institutions loaning money, or building and hiring in the inner cities where revitalization is desperately needed. In most of these instances, government plays a small role at best. Santorum writes as though he believes this is the best way for things to be done, and he talks about economic freedom. But he stops short of taking this to its logical conclusion by removing the government from the economy entirely.