It can be challenging to critique government action. Although anybody can proclaim that they disapprove of a piece of legislation, determining a basis upon which to judge the validity of government behavior can be difficult. After all, since government creates the law, unless it breaks its own rules, evaluating the legality of government action is unhelpful.*
Besides analyzing the legality of government action, however, are there higher laws that would establish the morality of government action? Specifically, what gives government moral justification to perform actions that are legally and morally discouraged at the individual level? This is a complex philosophical issue which is beyond the scope of this blogpost. However, in the remainder of this post, I want to use these questions to analyze a couple of actions that are illegal and immoral at the individual level, but generally accepted when performed by the government.
Does the fact that an action is being performed by the government rather than the individual make it morally permissible? If not, how does one make the distinction between moral and immoral government action? While I am not necessarily going to answer these questions in this post, think about them as you consider the rest of this discussion.
*[Admittedly, the U.S. government routinely violates constitutional law and I’m sure other governments behave similarly at times. However, although that would be an interesting topic for another discussion, I did not attempt to analyze the issue of the legality of government action in this blogpost. I merely wanted to mention this matter to set up the rest of my post.]
Inflation is a widely accepted negative inevitability. Nobody really likes inflation but at the same time, nobody is really motivated to get rid of it. It is generally expected that it will continue to exist and is often attributed to greedy business systematically raising their prices. However, as historian and economist, Murray Rothbard, notes, “If businessmen are so avaricious as to jack up prices 10 percent per year, why do they stop there? Why do they wait; why don’t they raise prices by 50 percent, or double or triple them immediately? What holds them back?” (“For a New Liberty” page 217). The answer to Rothbard’s final question is that consumers hold back businesses from operating in this way. After all, businesses (generally) cannot force consumers to buy their goods, regardless of the price being charged. Therefore, this is not a convincing explanation for the existence of inflation.
So what does cause inflation? Well, without getting into the technical intricacies of monetary policy, the simple answer is that the government causes inflation by increasing the supply of money. This increase in the supply of money causes the value of existing dollars to decrease. Additionally, the increase in the supply of money held by consumers relaxes their budgetary constraints, increasing their demand for goods. This increased demand causes the higher prices that are generally associated with inflation.
To look at it another way, imagine a world that has only ten units of currency and ten widgets. Each widget is then worth one unit of currency. If someone were to magically create ten additional units of currency and no additional widgets, then the relative price of the widgets would double since the ratio of units of currency to widgets increased. Note that the increased supply of currency was not at all associated with an increase in production.
At an individual level, the creation of currency is known as counterfeiting and is illegal and immoral. After all, by increasing the supply of money, the counterfeiter gains wealth at the expense of others. At its root, counterfeiting is a form of theft in the sense that it devalues the currency held by others. In terms of the immorality of stealing value from others, the Old Testament decries the act of using false weights on numerous occasions as an act of stealing value from others (Leviticus 19:35-36, Deuteronomy 25:13-16, Ezekiel 45:9-10, Hosea 12:7-8, etc.) and counterfeiting is similarly morally reprehensible.
So what gives government the right to do what is illegal and immoral at the individual level? You might say that government has the “greater good” in mind when exercising inflationary policy, but government uses inflation for the same reasons that individuals counterfeit: to increase their wealth at the expense of others. If you believe in human depravity you will likely sympathize with Rothbard’s analysis of the issue, “Since the interest of the counterfeiter is to print as much money as he can get away with, so too will the State print as much money as it can get away with, just as it will employ the power to tax in the same way: to extract as much money as it can without raising too many howls of protest” (“For a New Liberty” page 222). An increased supply of money gives the government an easy method for increasing spending without increasing more obvious taxes and creating these sorts of “howls of protest.”
Thus, inflation is a convenient tax on individuals that will often go unnoticed and will surely not be attributed to government policy by the majority of the population. However, its negative effects are numerous, ranging from decreased savings account values to higher prices. Author R.C. Sproul Jr. sums this topic up nicely, “For a private individual the practice of printing bogus, worthless paper and putting it in circulation is a criminal act, yet it is legal for governments to do it. The practice of inflating the money supply with fiat currency is an act of national theft” (“Biblical Economics” page 105).
As an accountant at a public accounting firm, I regularly think about taxes. And based on my interactions with individuals regarding taxation, I want to make two initial observations. First, nobody really likes paying their taxes. It’s a bit ironic that the same people who assert the importance of “contributing to society” will actually complain about doing their part. Second, those affected by high tax rates are actual people, not merely abstract corporations. Seeing a person, with an actual name and a family and a life lose >30% of his/her income is sobering. I want to be clear that the negative effects of taxation on individuals are real, not mere theories or abstractions. (Let me now move beyond this initial appeal to emotion.)
Many of you are likely familiar with the common phrase “taxation is theft.” And although I tend to agree with the sentiments of this phrase, it is a concise but inadequate description of the ideas at hand, which, without further explanation, often causes confusion and/or frustration. That being said, let me explain my thoughts.
Imagine I am a mob boss. I come to your house and demand money from you. Of course (unless you were feeling generous), you would likely turn me away because I have no claim to your money. But I happen to disagree, pointing out that I am actually providing you with a service. In return for your money, I will provide protection and if I do not receive your money, you will “likely” undergo some sort of harm. You would describe this behavior as extortion since you did not ask for my protective services and will be punished for failing to accept and pay for these services. Thus, this type of forced payment is both illegal and immoral at the individual level.*
Nonetheless, this type of extortion is analogous to what government does through taxation. Now you might disagree with me and say that taxes are the cost of living in a free society.** Think of all the public services that one benefits from by paying taxes. However, similar to the situation in the previous paragraph, what if I do not want any of these public services? I still have to pay all of my taxes or face government punishment. What if I only appreciate some public services and would like to only support those services that I need? I still have to pay all of my taxes or face government punishment. Thus, taxation is coercive by definition. On this issue Rothbard notes, “Anyone who persists in thinking of taxation as in some sense a ‘voluntary’ payment can see what happens if he chooses not to pay” (“For a New Liberty” page 62).
(Beyond the blatant issue of the coercive nature of taxation, there are more specific problems with the current tax system. The income tax in and of itself provides a disincentive to work, as more labor leads to a higher tax bill. That’s not even considering the moral issues of taxing the same dollar over and over again. Furthermore, the tax collection process forces employers to act as unpaid tax collectors and forces individuals to work at no pay (or to pay accountants) to verify the correctness of their tax bills. You might not think to describe this process as involuntary servitude, but since millions of individuals are forced to provide labor without any corresponding compensation, it is difficult to accurately describe it otherwise.)
*[Since extortion is very similar to theft, I would hope that you wouldn’t question the immorality of it. However, if you need specific examples of the Biblical condemnation of extortion, consider Ezekiel 22 where God denounces Israelites for committing extortion numerous times (vs. 7, 12, 29).]
**[Although, it is interesting to note that individuals do not choose what society they are born into. You might not want to live in a free society, and would prefer to live in a freer society where you don’t have to pay for services you don’t want. Ironically, this is the point where the free society becomes considerably less free and you are thrown into prison, which is quite the opposite of free.]
In the end, you might argue with the points laid out so far by saying that inflation and taxation are inherently different from individual theft because they are performed by the government. This statement would bring us back to one of the questions posed earlier: what gives government moral justification to perform actions that are legally and morally discouraged at the individual level? As science fiction writer Robert Heinlein asked, “Under what circumstances is it moral for a group to do that which is not moral for a member of that group to do alone?” (“Turn Neither to the Right Nor to the Left” page 159).
Without getting too deep into answering this question, it seems that if inflation and taxation are forms of theft, then justification of either of these government actions means affirming that theft is only wrong when performed by certain people. Now, you might dodge this issue by stating that without inflation or taxation, government would not have the funds to run properly. And, while that statement may be true, that is a utilitarian argument that ignores the underlying moral issues. Ultimately, we should not advocate “what works” if “what works” is clearly morally wrong.
Hopefully, I did not offend too many people with the radical ideas presented here. All in all, I am merely trying to think through many of these issues and formulate a consistent view of government and morality. If you heartily disagree with what I said or were intrigued by this new perspective, I’d love to hear your thoughts. Feel free to leave a comment or send me an email.
For further reading on these topics, check out “For a New Liberty” by Murray Rothbard, “Biblical Economics” by R.C. Sproul Jr., and “Turn Neither to the Right Nor to the Left” by D. Eric Schansberg.