Forty thousand dollars. That’s roughly your share of the U.S. national debt. That’s bad, but it’s nothing compared to the debt the government’s going to be racking up in the years ahead thanks mainly to America’s old-age welfare programs.

As the Baby Boomers retire, the bill for Social Security and Medicare will grow fast, setting off a debt tsunami. Economists can estimate the difference between how much government is on track to spend and how much it will raise from taxes. They call this “the fiscal gap.” That number is astronomical: $205 trillion dollars, or more than half a million dollars per person.[i]

Today you and millions of other young Americans are being drafted into debt. Like the military draft, the Debt Draft treats the lives of young people as the property of the state. You have been conscripted to finance other people’s retirement and health care needs, regardless of what impact this will have on your life. Your duty is to set aside your own happiness in order to serve the needs of the old.

Responsible individuals only take on debt they can manage, and only when it serves important goals and values: to go to college, buy a home, start a business. But imagine being forced to pay someone else’s student loan debt, or someone else’s mortgage, or someone else’s credit card bill. Would that be fair? Of course not. But that is what the Debt Draft amounts to.

Now, let me be clear. Whatever the parallels between today’s debt disaster and the military draft, there is a vast difference. The military draft left countless young Americans maimed or killed, which is something that we should be careful not to trivialize. But there is a parallel between that and the welfare state that we must not ignore. Both turn young people into servants.

The welfare state has always involved transferring wealth from the young to the old. Each generation was told, in effect: “Your parents’ and grandparents’ generation will exploit you today, but don’t worry — someday you’ll get to exploit your children’s and grandchildren’s generation for a whole lot more than you ever paid in taxes.” The difference is that the bill you’ll be handed is so large that its effects can no longer be ignored: unless we do something, it is going to rob you of many of your hopes and dreams.

The math is straightforward. Right now, the average elderly American receives $30,000 from the welfare state annually, with that number expected to rise to $40,000 two decades from now. Meanwhile, there will be fewer workers to carry that burden. When the welfare state was first created, there were forty workers to support each recipient. Today there are only three. As the Baby Boomers continue to retire, that number will drop to around two. That means you’ll be responsible for $20,000 a year to support your elders, in addition to whatever other taxes you’ll have to pay to support the government’s other functions. That’s the equivalent of buying someone else a new car each year — and, of course, we haven’t even mentioned state and local taxes yet.
[ii]

But let’s be clear: the Debt Draft isn’t a problem tomorrow — it’s a problem right now. The average college graduate starts out making about $45,000 a year. Well, you have to hand over 15.3% of that — $6,750 — to current retirees just to fund Social Security and Medicare Part A. That’s not a new car a year, but it’s more than enough to make monthly payments on a new car. Is it any wonder that young people are waiting longer to move out of their parents’ house, waiting longer to start families, and are saving next-to-nothing?

That’s the bad news. Here is the good news. A solution is possible — one that will not only ward off catastrophe, but one that will make America a freer, more prosperous, more moral nation. But we have to act soon.

Why You’re Being Exploited

Parents don’t generally steal from their children. On the contrary, they work hard to make sure their children will have a better life. So how did we get to where we are today?

America didn’t always have a welfare state. It is actually a relatively recent phenomenon. For the first 150 years this country existed, each person was responsible for supporting his own life through productive work (slavery being a deplorable exception). The government didn’t redistribute wealth. It didn’t take one person’s property and give it to others. As Jefferson warned, “To take from one . . . in order to spare others . . . is to violate arbitrarily the first principle of association, — the guarantee to every one of a free exercise of his industry, & the fruits acquired by it.”
[iii] Instead, the government protected each person’s right to work, to keep what he earned, and to use it to build a life for himself.

With government’s functions limited, its costs were low. With the exception of the Civil War, federal government spending during this nation’s first 150 years hovered around 3% of GDP (today it is more than 20%). Before the welfare state was created in 1935, federal debt never hit 40% of GDP, even in wartime, and often stayed below 10% (today our debt is closing in on 100% of GDP).
[iv]

It was during this era that America became the mightiest economy in history.

The Collectivist Revolt

Not everyone approved of this individualist system — most notably the leading intellectuals of the late nineteenth and early twentieth centuries. They called themselves “Progressives” for the reason that they believed America needed to “progress” beyond the principles of the Founding Fathers. They rejected the principles of limited government. They wanted a government with expansive powers that could be wielded for what they considered the “national interest.”

“You know that it was Jefferson,” recalled leading Progressive Woodrow Wilson, “who said that the best government is that which does as little governing as possible. . . . But that time is passed.” Instead of a limited government, he wrote elsewhere, “Government does now whatever experience permits or the times demand.”
[v]

The Progressives were collectivists. Their theories amounted to the view that, in philosopher Ayn Rand’s words, “the individual has no rights, that his life and work belong to the group . . . and that the group may sacrifice him at its own whim to its own interests.”
[vi] They did not approve of the American system, which enshrined individual freedom and individual responsibility. According to Herbert Croly, another leading Progressive, Americans needed to forswear their own happiness and devote themselves to “individual subordination and self-denial” for the sake of the collective. “[T]his necessity of subordinating the satisfaction of individual desires to the fulfillment of a national purpose,” he added, “is attached particularly to the absorbing occupation of the American people, — the occupation, viz.: of accumulating wealth.”
[vii]

When it came to the economy, then, a major part of the Progressive platform was the creation of an American welfare state. Welfare programs would transfer wealth from those who earned it to those who didn’t but allegedly needed it. Whatever the source of a person’s need — whether it was bad luck or bad choices or his own immorality — the sheer fact that he needed something would mean that others had a duty to serve him. Individuals would no longer be able to focus on making the most of their own lives. They would have to set their own hopes and dreams aside and spend a substantial part of their lives working to take care of the needs of others.

Social Security and Medicare

For nearly half a century, Americans rejected Progressive demands for a welfare state. The first major welfare program didn’t come until 1935. The Social Security Act was signed into law by Franklin Delano Roosevelt, who shared the basic philosophy of the Progressives but preferred to speak of “improving” or “updating” America’s founding principles rather than rejecting them.

Social Security was a government retirement scheme in which the government would tax current workers in order to pay for retirement benefits for the elderly (generally those 65 or older). The program would grow from a relatively small part of the government’s budget to the most expensive program in American history. Today Social Security takes more than $700 billion from workers each year and hands it out to retirees.

From the start, the Progressives also advocated a welfare program to cover health care. FDR sympathized with this goal, but the political opposition to a government takeover of health care was too intense in 1935. It would take another thirty years before Lyndon B. Johnson signed Medicare into law.

The details of Medicare are complex, but the basic idea is simple. Just as Social Security taxes younger Americans in order to provide retirement benefits to the old, so Medicare taxes younger Americans in order to provide health insurance benefits to the old.

When it came to the costs of Medicare, they went out of control almost immediately. Like Social Security, the program faced the problem of fewer workers supporting more and more beneficiaries. But it also encountered another problem: when people were offered virtually free health care, their demand for it turned out to be virtually unlimited. Shortly after Medicare was created in 1965, Americans were told it would cost $12 billion by 1990 — its actual cost was $98 billion. Today Medicare costs working Americans $600 billion a year — and that number is projected to nearly double over the next decade, reaching $1.1 trillion in 2023.
[viii]

Welfare State Exploitation

That’s where we are today. Remember that working Americans already pay 15.3% of our income to fund Social Security and Medicare — more than $6,000 a year for many of us. And, of course, those taxes will have to increase substantially to keep the system going in future years.
[ix]

Think of what this does to young people who are just trying to start out in life. Six thousand dollars a year — to say nothing of $20,000 — can sentence a person to a high-crime neighborhood, keep him from starting a family, or force him to stay at a dead-end job rather than following his dream to start a business.

The question we need to ask is: Why? Why did we create this system and why do so many people continue to support it? Is there any reason to support it? What could possibly justify exploiting America’s youth?

The conventional answer consists of five myths: (1) the Earned Benefit Myth, (2) the Generational Pact Myth, (3) the Poverty Myth, (4) the Security Myth, and (5) the Compassion Myth.

The Earned Benefit Myth

Myth: Young people are not being exploited. Older Americans earned their benefits by paying in to the system during their working years.

Fact: First of all, we need to realize that Baby Boomers are scheduled to receive about $300,000 more from the government than they ever paid in taxes. (Meanwhile, your future children are slated to pay about $400,000 more in taxes than they will ever receive from the government.)
[x]

More important, the money taken from the Baby Boomers when they were young was not saved and invested to provide for their future. If it had been, there wouldn’t be a debt crisis. Instead, every penny taken from them was immediately spent by the government. The only way for them to get their “earned benefit” is to take money from you and your children.

It’s true that some older Americans are dependent on Social Security and Medicare: a lot of the money they could have used to prepare for old-age was taxed away to support their parents and grandparents. But that doesn’t make their Social Security check an earned benefit. You cannot earn the right to exploit people — even if you were once the victim of exploitation. You don’t have the right to rob people just because you were once robbed.

Social Security and Medicare do not deliver earned benefits. They are welfare programs, plain and simple.

The Generational Pact Myth

Myth: Old-age welfare programs represent a pact between generations: our promise to take care of those who once took care of us.

Fact: There can be no such thing as a “pact” consisting of one generation’s determination to loot future generations.

Parents don’t breed servants — they create sovereign individuals. Children don’t choose to be born, and so while parents have an obligation to support their children, children have no moral obligation to support their parents. They might choose to do so out of goodwill, but their parents cannot demand it as a matter of right.

What’s true at the individual level goes doubly for society as a whole. If we don’t owe support to our own parents, we certainly don’t owe it to strangers we have never met.

In an individualist society, each person is responsible for his own life, including his own retirement and his own medical needs. If an elderly American needs help, he is free to seek others’ voluntary assistance. If a young American wants to provide help, he is free to do so. But no one is born into this world beholden to others.

The Poverty Myth

Myth: Without Social Security and Medicare, millions more Americans would be in poverty.

Fact: The path to prosperity is not welfare state looting but the free market. Had we continued to follow individualist principles, most Americans today would be far richer.

Before we examine the effect of welfare programs on the economy, however, we need to step back and look at the big picture. Poverty is mankind’s natural state. In the era before capitalism emerged during the early nineteenth century, even citizens of relatively prosperous nations lived on only a few dollars a day. The free market created by the individualist society gave individuals the greatest possible freedom and incentive to produce. Anyone with an idea for how to do things better was free to give it a try. And if he succeeded? The rewards were his to enjoy. The result was an outpouring of ability and ingenuity on a scale the world had never seen.

It was an era in which people’s incomes quadrupled, life expectancy climbed from under forty to over sixty, and science and technology revolutionized the way we lived. Millions of immigrants flooded into the country, seeking to make a life for themselves in “the land of opportunity.”

Life, to be sure, was still hard. It had always been hard. But it was better than it had ever been and it was improving faster than it ever had, as free individuals lifted themselves out of poverty and into prosperity.

It was when welfare state spending really took off during the late 1960s that America’s poverty rate stopped declining.
[xi] This shouldn’t come as a surprise. When the welfare state transfers money away from the people who create it, it undermines how much wealth gets produced in the first place.

If the individualist society provided people with the greatest possible freedom and incentive to produce, then the welfare state curtails that freedom and dampens those incentives by taxing work and subsidizing idleness and dependency. Social Security, for instance, incentivizes enormously productive workers — workers with decades of knowledge and experience — to stop working years before they might otherwise retire. (If you continue working and earning money after you apply for early benefits, your benefits are reduced.)

At the same time, a substantial portion of the wealth doled out by the welfare state is taken out of the hands of people who would have saved and invested it, and put into the hands of people who consume it, while also making people feel as if they have no need to save. This has contributed to the collapse of America’s national savings rate from around 15% to just about zero.
[xii]

This is a disaster: it is savings and investment that increase our standard of living over time. The less we save and invest in things such as more efficient factories, better machinery, and research and development, the less technological innovation, productivity, and prosperity we’ll see. That’s how we raise our standard of living. As individuals produce more, they earn more — and the more they earn and save, the more they can produce in the future. Rising productivity is the cure for poverty and the path to prosperity.

The welfare state did not end poverty — it reduced prosperity. The result, for the average American, has been to make our income far lower than it would have been had we never embraced the welfare state. By how much? It’s impossible to say precisely. But consider this: if, starting in 1870, economic growth had been just 1% lower each year than it was, our standard of living today would be lower than Mexico’s. One economist estimates that the welfare state has lowered the income of the average American by 25% before he pays a single penny in taxes.
[xiii]

It is in this context that we have to evaluate the fact that poverty among the elderly has declined significantly since Social Security was created. There is every reason to suspect that if Americans had been free to keep and invest their money, poverty among the elderly as well as other groups would have declined even faster.

In any case, we cannot ignore the victims of Social Security. To the extent Social Security made older Americans better off, it did so by making younger Americans worse off. In America before the welfare state, one person’s prosperity didn’t come at anyone else’s expense — his gains made others better off. Contrary to what we’ve been taught, it’s not capitalism that is dog-eat-dog: it’s the welfare state.

You might wonder at this point: If the welfare state is so economically destructive, then how is it that America has become richer in the years since Social Security? The short answer is that we have grown richer despite welfare programs, not because of them.

If welfare state programs were the cause of our prosperity, then it is curious that economic progress started more than a century before the welfare state was created and has slowed, not sped up, in recent decades. If welfare programs were the cause of our prosperity, then Western Europe — which has a much more expansive welfare state — should be the most prosperous place on the planet. Instead, countries such as Greece, Spain, and Italy are in crisis, with France doing only marginally better. And several countries, such as Sweden, have found that, after reining in their welfare state programs, their economies have gone from moribund to robust.

If you care about prosperity, your first priority should be resurrecting America’s free market. If you support the welfare state, you’ve given up any right to claim that you care about improving Americans’ standard of living.

The Security Myth

Myth: The individualist system creates immense economic insecurity among the elderly, who often cannot work and yet don’t have enough money to retire or to pay for needed medical care. Only a welfare state can provide a safety net to relieve this insecurity.

Fact: Creating a system in which other people can take your wealth whenever they decide they “need” it is the antithesis of security. True security means that you, your freedom, and your property are sacrosanct.

The free market not only provides that security and maximizes your ability to prosper in your younger years — but it enables you to use your resources to prepare for old age and create a robust private safety net.

For starters, you can diversify your investments or purchase annuities (in essence, guaranteed streams of income). You can purchase various forms of insurance. And not only familiar forms of insurance, such as health or life insurance. In America before the welfare state, individuals often insured themselves against economic risks including permanent disability and job loss.

As for health insurance, a free market provides ample ability for you to insure against old-age medical costs. In fact, before Medicare, most elderly people were able to get the health care they needed. A growing number (more than half by 1960) carried insurance, while the others paid out of pocket, relied on friends and family, or turned to private charity. (It’s worth noting that even with Medicare, today’s seniors are paying about the same amount out of pocket for medical services as they were before Medicare, and that their coverage does not even provide catastrophic protection: Hospitalized for over 150 days? Medicare doesn’t cover that. Need long-term care, such as a nursing home? Medicare doesn’t cover that.)
[xiv]

There were certain challenges faced by the elderly when it came to getting health insurance. But these problems were created by the government. In particular, the government gives huge tax preferences to health insurance purchased through one’s employer, and by the 1960s, many Americans were covered under employer-sponsored plans. The trouble was that many Americans eventually retired. At a time when their health risks were highest, these Americans found themselves having to purchase new health plans at rates far above what they had been paying. Absent this tax preference, few people would have elected to get insurance through their employer. Instead, they could have entered into long-term contracts directly with insurers to guarantee that they would have affordable coverage when they reached old age.

Finally, in a free market you can seek support from your friends and family if you need it. You may choose to spend your final years living with your children and grandchildren. Or, if you want to remain independent or don’t want to impose on your family, you are free to accept their financial support.

What would happen to very poor elderly Americans in an individualist society in cases where they have no friends, family, or neighbors they can turn to for help? They can ask for private charity, which has always been abundant in America. “In fact,” writes historian Walter Trattner of the era before the welfare state,

so rapidly did private agencies multiply that before long America’s larger cities had what to many people was an embarrassing number of them. Charity directories took as many as 100 pages to list and describe the numerous voluntary agencies that sought to alleviate misery, and combat every imaginable emergency.
[xv]

How effective are these strategies? If we look at history we find that the elderly did so well that, as late as World War I, even those pushing for an American welfare state did not argue that old age was a major source of poverty and insecurity in the United States.
[xvi] That’s incredible when you recall that capitalism had only started to remedy pre-industrial poverty, and that America was welcoming about a million immigrants a year, many of them poor, uneducated, and unskilled.

The welfare state, by contrast, makes old age more precarious. It saps us of resources when we are young and healthy and leaves us largely at the mercy of the government: our income consists of whatever politicians decide to give us at the moment. The Debt Draft isn’t making us more secure — it’s impoverishing us and may one day push the greatest nation in history off the edge of a financial cliff.

The Compassion Myth

Myth: The individualist system is immoral. It demonstrates a cruel lack of compassion for those who hit hard times and are unable to support themselves. Old-age welfare programs represent society’s compassion for some of its most vulnerable citizens.

Fact: A moral society is one which above all respects the rights of individuals — their right to make something of their lives and to dedicate their days and hours to the pursuit of their own happiness. It’s a society in which each of us is responsible for our own life, and we deal with others only on the basis of their voluntary consent. It is, in other words, a society based on the principle of individualism, not collectivism.

If you want to get a college education, a moral society is one in which you and your parents have to set aside income or find someone willing to give you a loan — you aren’t entitled to a subsidy at my expense. If a retiree wants the latest arthritis treatment, a moral society is one in which he has to pay for it or ask others to help him — he isn’t entitled to raid your savings account.

This does not represent a regrettable burden, but a great privilege. In a moral society, we get to decide what we want out of life and pursue it as we see fit — we aren’t forced into a one-size-fits-all retirement or medical program. Our only limitation is our ambition and ability.

But under the welfare state, you have no right to a single penny you earn if someone else “needs” it more. Your parents, for instance, might have worked sixty-hour weeks for twenty years in order to afford to pay for your education. But a welfare state has no compunction about seizing your college fund and giving it to elderly citizens if it decides their “need” outweighs yours.

When need is viewed as a moral entitlement to other people’s money, time, and effort, you get the worst injustice imaginable. People are punished for their success and rewarded for their failure. The more ambitious and self-responsible a person is, the more he owes to others. The more lazy and irresponsible he is, the more others owe to him. As for the tiny few who are truly helpless through no fault of their own, they are trotted out by welfare statists in order to disguise and whitewash this injustice.

Looting innocent victims is not compassionate but immoral. It’s immoral when rich people plunder poor people — and it’s immoral when poor people plunder rich people. It’s immoral when the powerful minority exploits the majority — and it’s immoral when the majority helps itself to the property of the minority. It’s immoral when young people mooch off the old — and it’s immoral when old people mooch off the young. If the essence of justice is that each person receives his due, then it is only a society that protects the rights of every citizen that can be called a just, fair, or human society.

The desire to show compassion is not a moral blank check that can justify treating other people as a means to your supposedly noble ends. If you want to help your grandfather or someone else’s grandfather pay his bills, then in an individualist society, you’re free to be compassionate with your own money. You’re not free to be “compassionate” with someone else’s.

The truth is that those pushing to expand old-age welfare programs have no right to claim they are compassionate. There is nothing compassionate about stifling economic growth and thereby sentencing more Americans to poverty. There is nothing compassionate about making the elderly dependent on welfare. There is nothing compassionate about drafting young people into debt and crushing their opportunities, hopes, and dreams.

For all their talk of compassion, the welfare state pushers are not really interested in helping people. If they were, they would be much more alarmed by the failure of the welfare state to lift people out of poverty, and they would be the most vocal champions of capitalism, which is the only system ever to create mass prosperity.

The Compassion Myth is not an argument but a smear designed to shame and silence those who dare question the welfare state. But we must question it. The welfare state is one of the cruelest, most inhumane, most immoral institutions ever devised. The most compassionate thing a person can do is fight for its abolition.

Ending the Debt Draft

During the Vietnam War, many defended the military draft using arguments virtually indistinguishable from those used to defend the Debt Draft. They said that Americans had a duty to serve society by fighting in the military. They said that the costs of a volunteer military would be too great. They said that only a draft could achieve national security. These arguments were plausible. Americans could not really project what the country would be like without a draft. But these arguments were false — and the institution they were used to defend was deeply immoral. The parallel to today’s Debt Draft is exact.

In an individualist society, we prosper, we protect ourselves from risks, and we do it all without looting or exploiting others. Had we never created Social Security and Medicare, the elderly would not be impoverished — they would be enriched. And young Americans would not be starting their lives hundreds of thousands of dollars in debt.

There is no justification for the Debt Draft. There is no reason why young people should have to see their futures washed away in order to support older Americans. And there was no reason older Americans should have spent their youth carrying the burdens of their elders.

It’s time to end our collectivist old-age welfare system and restore the free market and American individualism. In an individualist society, you have a right to exist for your own sake and deal with others on voluntary, mutually beneficial terms. You keep what you earn and you get to use it to pursue your goals and dreams. You are not your grandfather’s keeper. No one has the right to be kept.

Our aim should not be to save Social Security and Medicare, or make them affordable, but to abolish them. They are inherently immoral programs that force some people to serve the goals and purposes of others. They are tools of exploitation.

To be sure, we should not get rid of these programs overnight. They must be phased out over time so that those who have been rendered dependent on the government have time to adjust and adapt. But the goal is clear. A moral society cannot tolerate turning its citizens into servants.

What can you do to fight the Debt Draft? Help wage a moral crusade against the collectivist ideas that have led to it. The welfare state cannot exist without the consent of its victims. It counts on the people being exploited to accept that they are being sacrificed for a noble cause. If the victims ever rebelled publicly and said they do not consent to being victimized — that the Debt Draft is immoral — then the whole thing would collapse.

Speak out for the individualist ideas this country was founded on. Tell the world that you are not the property of society and that your duty in life is not to pay for other people’s retirement homes and hip replacements. You have a right to pursue your own happiness through your own independent effort.

Here are three small, simple steps you can take immediately.

1. “Like” the End the Debt Draft Facebook Page. Not only will this keep you up to date on our latest activities, but if we hit significant numbers, the world will know that there is a highly motivated group of Americans willing to stand up for their rights. Just visit www.facebook.com/debtdraft.

2. Educate Yourself. To win this fight, you must know your case. Start by visiting www.endthedebtdraft.com where you will find a ton of free resources that will leave you intellectually armed to the teeth and ready to fight the Debt Draft.

3. Distribute Great Content. We need to get our ideas heard. The highest leverage activity for most people is to find great content — persuasive books, articles, videos — and help them gain a wider audience. Start by distributing this pamphlet to your friends, family, and classmates.

During the Vietnam War, young Americans rallied against the military draft. Not all of them did so for honorable reasons. But there were some who recognized that your life belongs to you, not to others. It is time for a new student rebellion, a moral rebellion against welfare state exploitation.

About the Author

Don Watkins is one of today’s most vocal opponents of the welfare state, and coauthor, with Yaron Brook, of the national best-seller Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government.

A fellow at the Ayn Rand Institute, Don studies Social Security reform, the welfare state, and the moral foundations of capitalism. He has been interviewed on hundreds of radio and TV programs, and speaks regularly at conferences and university campuses, including Stanford, Brown, University of Virginia, and the University of Chicago, and he regularly debates supporters of the welfare state.

His writings have appeared in The Guardian, USA Today, Forbes, Christian Science Monitor, Investor’s Business Daily, The Daily Caller, and FoxNews.com, among many others.

Don’s latest book, RooseveltCare: How Social Security Is Sabotaging the Land of Self-Reliance, is a moral critique of the welfare state.

About The Author

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

The Federal Communications Commission recently caused an uproar when it launched a “Critical Information Needs” study of the nation’s news broadcasters. The agency planned to interview editorial staff about how stories are selected, whether the stations might be biased in their news coverage, and how responsive they are to “underserved populations” in several categories of news that the FCC deems critical.

The FCC later dropped the study after one of its commissioners, Republican appointee Ajit Pai, criticized it in a Wall Street Journal op-ed as an effort to influence news coverage. Pai pointed out that the nation’s broadcasters would be hard pressed to ignore the FCC’s desires for fear of losing their broadcast licenses, so the study would have to end up influencing coverage. As he later said in an interview with the Daily Caller, this and other FCC efforts like it are motivated by a desire “to either directly or indirectly nudge . . . news coverage in a certain direction.”

Responding to the uproar, a writer in the Huffington Post points out that the FCC was just doing its job: “The FCC is tasked with making sure the broadcast media — via the limited broadcast spectrum which is owned by we, the people — serves the public interest.”

She’s right, but that’s exactly the problem.

In the early 1960s, in response to a similar effort by the FCC to require higher standards in children’s broadcasting, Ayn Rand wrote an essay called “Have Gun, Will Nudge” that addresses a fundamental problem with regulations. She points out that laws requiring anyone to serve the “public interest” have to end up replacing the rule of law with the rule of bureaucrats, because no one can know what the “public interest” means. What, for example, constitutes the “public’s interest” in news broadcasting? According to the Critical Information Needs study, it means more coverage of the environment and “economic opportunity,” among other categories. Who knows what any of these things mean or require? Ajit Pai points out that Fox News and MSNBC have their own views of what the public wants. But under the unknowable “public interest” standard, the only way to find out is to ask the FCC, which gets to impose its decisions by force. So much for freedom of speech in broadcast news.

You can read “Have Gun, Will Nudge” here. And if you’re interested in delving deeper into the issue of government ownership of the broadcast spectrum, be sure to check out Rand’s essay “The Property Status of Airwaves” in Capitalism: The Unknown Ideal.

The problem that Rand identifies in Have Gun, Will Nudge is by no means limited to the FCC. Virtually all regulations are based on nonobjective standards, meaning that businessmen must constantly defer to the judgment of bureaucrats. Will a drug company be able to recoup the enormous expenses of developing a new drug? Ask the FDA. Will developers be permitted to build on their land? Ask the EPA. Will companies be permitted to merge with others? Ask the FTC and the Justice Department.

For more on this, see my blog post, Chilling Commerce, Tom Bowden’s Creeping Tentacles of the Antitrust Octopus, Doug Altner’s post on Dodd-Frank, and Keith Lockitch’s op-ed on FDA control of stem cell therapy.

About The Author

Steve Simpson

Former Director of Legal Studies (2013-2018), Ayn Rand Institute

We recently marked the fifty-year anniversary of Lyndon B. Johnson’s so-called War on Poverty, which set off the greatest increase in welfare state spending in American history. Today, America’s poverty rate remains virtually unchanged, and everyone from Barack Obama to Paul Ryan has put forward proposals to “fight poverty.”

The left says we need bigger welfare state programs. The right says we need smarter welfare state programs. We at ARI think the welfare state is immoral.

The welfare state seizes wealth from those who produce it and transfers it to people on the grounds that they need it. It forces some people to work, not in order to benefit their own lives, but in order to serve others. As Ayn Rand put it, “Whoever claims the ‘right’ to ‘redistribute’ the wealth produced by others is claiming the ‘right’ to treat human beings as chattel.”

You cannot end poverty by punishing people for being productive and rewarding them for being unproductive. The path to prosperity is to replace welfare state exploitation with economic liberation, i.e., laissez-faire capitalism.

Here are some links that say more about ARI’s point of view on the welfare state:

To Be Poor Doesn’t Mean You’ll Always Be Poor — Article by Don Watkins and Yaron Brook

America Before the Entitlement State — Article by Don Watkins and Yaron Brook

Changing the Debate: How to Move from an Entitlement State to a Free Economy — Video by Don Watkins

Entitlements Aren’t Commitments, They’re Coercion — Blog post by Don Watkins

Did Ayn Rand Advocate Harsh Treatment of “the Poor”? — Blog post by Don Watkins

Ayn Rand Lexicon:

Poverty

Welfare State

“Redistribution” of Wealth

About The Author

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

As Obamacare oozes into effect, shape-shifting to avoid the economic and medical realities its proponents desperately seek to evade, most debate centers on what adjustments are necessary to save it. The few opponents who still favor repeal have no plan to achieve what health care really needs: freedom from government control.

ARI’s radically different position on Obamacare starts with the view that health care is not a right. What one spends on doctors, medicines, and health insurance should be a matter of private budgeting, not political influence-peddling and tax-funded redistributions.

Yet government continues adding to the measures that were distorting health care markets long before Obamacare was enacted. Indeed, the act’s passage depended on scapegoating the free market for problems (such as “job lock” and high health insurance premiums) actually caused by government controls.

Now, as young people chafe under the burden of new obligations to pay for their parents’ and grandparents’ health care, people of all ages are searching for answers outside the well-worn pathways of Washington politics. Here are some links that say more about ARI’s point of view on Obamacare:

The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion — Article by Rituparna Basu

Obamacare Is Really, Really Bad for You, Especially If You’re Young — Op-ed by Rituparna Basu

Obamacare: What You Need to Know Now — Podcast episode #11

Health Care Is Not a Right — Article by Leonard Peikoff

Yaron Answers: What Is Wrong with Free Health Care? — Video by Yaron Brook

About The Author

Tom Bowden

Analyst and Outreach Liaison, Ayn Rand Institute

Is today’s government dysfunctional? Of course. But not because it can’t get things done. The problem is that it does so many things that it shouldn’t.

Happiness, prosperity and innovation aren’t gifts from politicians. They are achievements of the free human mind. We need government to protect that freedom. When it instead tramples on individual rights in pursuit of whatever politicians feel is in the public interest, it abandons defined limits and becomes an enemy of freedom and progress.

And yet, as then-Rep. Pete Stark, D-Calif., said in 2010, “The federal government, yes, can do almost anything in this country.”

The NSA peeks into our phone records at will. The IRS taxes away so much of our income that we effectively work more than a quarter of the year without pay. Social Security and Medicare turn seniors into government dependents.

The Federal Register, which lists federal government regulations, takes up more than 30 feet of bookshelf space, and our ever-growing regulatory regime costs us an estimated $1.5 trillion a year.

The Federal Trade Commission and the Justice Department put their antitrust cross hairs on any innovator who has the gall to make large profits. And, of course, there’s Obamacare, which nationalizes one-sixth of our economy.

Does this sound like a government that isn’t doing enough?

The question we need to ask, however, is not whether the government should do more or less, but what should it do.

For our money, that answer has already been supplied by thinkers such as Ayn Rand and the Founding Fathers.

“The sum of good government,” said Thomas Jefferson, is “a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”

This was the philosophy that made America the freest, most prosperous nation in history. If we want a better, brighter future, the key isn’t a more powerful government — but a free market revolution.

About The Authors

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Welcome to Obamacare, land of skyrocketing premiums, cancelled insurance policies, and a website that is exhibit A of government incompetence. If Republicans are serious about stopping this destructive law, they must criticize more than its rollout troubles, which are fixable. They must expose the law’s fundamental problems, which its supporters are determined to hide.

For example, Obamacare creates a new class of free riders in America. This is the purpose of the individual mandate, the law’s central provision, which requires most Americans, starting this year, to carry health insurance coverage or else pay a fine to the government.

Supporters portray the mandate’s function as the opposite. “We’re not going to have other people carrying your burdens for you,” said the president in 2009. “If you don’t have insurance and you need to go to the emergency room or unexpectedly get diagnosed with cancer, you are free-riding on others,” said Ezekiel Emanuel, a former Obama administration adviser, last year; “Insured Americans will have to pay more to hospitals and doctors to make up for your nonpayment.”

Now, not everyone without coverage has the intention to free ride — government distortion of insurance has priced people out of the market for decades. But even so, who are Obamacare supporters kidding with their feigned aversion to pawning off one’s medical expenses onto others? Free riding is the name of the game in American health care.

Why, for example, can someone walk into an ER expecting to free ride on the insured? Because federal law requires these facilities to treat him even if he has no intention of paying. Medicare (its mythical “trust fund” notwithstanding) and Medicaid similarly entitle more than 100 million seniors and lower-income Americans to free ride on younger generations and those of higher income. Employer-based coverage has also long been rigged by government so that older, less healthy workers free ride on younger, healthier employees, who are charged higher premiums to lower the costs of the former.

If Obamacare supporters were really offended by free riding, they’d call not for a law forcing people to buy coverage, but for the phasing out and eventual repeal of the government programs that allow it in the first place.

In reality, Obamacare’s proponents have no problem making one person’s medical bills the responsibility of another. Their real objection is that some people are not shouldering enough of others’ burdens, which is what the individual mandate actually enforces. Here’s how.

Recall a core goal of Obamacare: to make care cheaper for people with preexisting conditions. To achieve this, the law requires insurers to accept them and charge them the same premium they charge healthy people. But it’s a fact that someone who has diabetes, for example, has, on average, more than double the medical expenses of someone who doesn’t. Since insurers can’t charge higher-risk customers for their higher costs (the way auto insurers charge higher premiums to less safe drivers), insurers must pass on those costs to younger, healthier policyholders. Accordingly, 30-year-old nonsmoking men have, on average, seen their premiums more than double to pay for the various redistribution ploys in Obamacare.

How do you get people to buy a policy whose costs have been artificially raised? Enter the individual mandate. Its actual function is to coerce younger, healthier Americans into paying for other people’s health care. (This transfer is not, as Obamacare supporters say, inherent in insurance. If it were, we wouldn’t need Obamacare.)

If there were any doubt that this is the mandate’s purpose, the government’s recent actions have put that to rest. The penalty for not buying coverage in 2014 is the higher of $95 or 1 percent of your income, and for many the fine is negligible, compared to spending thousands of dollars on an Obamacare policy (the penalty increases in future years). Amid rising concerns that younger people won’t buy coverage this year, the government launched last summer a propaganda campaign to convince them to sign up. This media blitz, which enlisted sports teams and celebrities and even the mothers of these young people, was initiated because, if too few younger and healthier Americans choose to buy Obamacare’s overpriced policies, the law’s fundamental scheme will fail.

Obamacare’s individual mandate, far from ending free riding in America’s health care system, institutionalizes it on a national scale by force: the old and sick free ride on the young and healthy.

What does this say about Obamacare’s proponents, who continue to claim the opposite? That they think the American people can and must be fooled into accepting their policies. This fact alone should raise serious suspicion about Obamacare.

About The Authors

Rituparna Basu

Rituparna Basu was a researcher and analyst at the Ayn Rand Institute between 2011 and 2016.

Yaron Brook

Chairman of the Board, Ayn Rand Institute

As Obamacare’s troubles mount — premiums are soaring, millions of policies that people like are cancelled, and contrary to the president’s promise, many can’t keep their doctors — proponents try to convince us that the law was a good idea. How? By reiterating their fictitious tale of life before Obamacare.

“It is important to understand,” the president insisted recently, “that the old individual [health insurance] market was not working well, and it’s important that we don’t pretend that somehow that’s a place worth going back to.”

Why was it not working well?

According to proponents of Obamacare, the problem was that insurers had too much freedom. Premiums were continually rising, for example, because insurers were supposedly free to jack up rates whenever they felt like it. People with pre-existing conditions had difficulty finding insurance, they told us, because insurers were free to deny them coverage. On this view, the diagnosis was a lack of regulations, and the remedy prescribed was a heavy dose of government controls called Obamacare.

In reality, America’s supposedly free market was made a scapegoat for our health insurance woes. As I show in a new paper published with the Pacific Research Institute, available online, government has long regulated almost every aspect of the business.

Consider just three government controls in place before Obamacare, and their impact.

A major source of government distortion in the health insurance market is the tax code. If your employer pays for your health insurance, you don’t have to pay taxes on those premiums. But if you buy insurance directly from an insurer, you do. The tax exemption for employer-sponsored coverage has tied health insurance to our jobs (one reason why the individual market is so distorted). A consequence is that when people leave their jobs, they are eventually kicked out of their insurance plans. When reapplying for coverage, these individuals risk being turned down if they have developed a pre-existing condition.

Long before Obamacare, the government also restricted the kinds of health insurance products which could be sold. For decades state governments have dictated coverage that insurers must provide. Everything from in vitro fertilization to wigs have been mandated, and each mandate increases the cost of a policy (some states impose more than sixty different mandates). If you were looking for a policy without these services, good luck. It was illegal for an insurer to sell it to you.

Prior to Obamacare almost every state also manipulated how insurers priced polices, forbidding them from offering low-priced policies to those younger and healthier. Insurers were instead required to charge these individuals higher premiums in order to subsidize the coverage of those older and less healthy. When New York implemented these laws in the early 1990s, premiums for thirty-year-old single men almost tripled, and one in six New Yorkers with policies in affected markets had no choice but to drop coverage or see his employer drop it. As a result of the exodus of younger and healthier individuals from the market, premiums for everyone in the state rose higher than they were prior to regulation. Since then, premiums in New York’s individual market have been, on average, more than twice as high as those for the rest of the nation.

For decades, government controls in health insurance were pervasive: from licensing who can sell insurance and where to regulating how insurers organize their finances, to dictating how they price their policies, to decreeing to whom they must sell their services, to mandating what conditions they must cover, to restricting how they advertise. The list goes on and on.

Was the health insurance market plagued with problems?  Yes. The health insurance market was mostly controlled by government. 

And yet, despite the passage of Obamacare, the greatest expansion of government in almost fifty years, the free market continues to be blamed for our problems. For example, in light of skyrocketing premiums last year, a New York Times editorial called for “more [government] power” to fix the state of “lax regulations.” Talk about scapegoating! Not once did the Times consider the impact of distortions caused by Obamacare.

Here’s an idea: perhaps Obamacare is more of the poison that is killing the patient.

About The Author

Rituparna Basu

Rituparna Basu was a researcher and analyst at the Ayn Rand Institute between 2011 and 2016.

[T]he health insurance industry is the shark that swims just below the water, and you don’t see that shark until you feel the teeth of that shark.
— Senator Jay Rockefeller, February 2010

It was sentiments like these that President Obama’s signature legislation addresses. One of the main goals of the Patient Protection and Affordable Care Act, signed into law on March 23, 2010, is to control health insurance, an industry plagued with problems, all of which supposedly share a common diagnosis.

At the White House health summit, at which Rockefeller made the above comment, he continued (mixing metaphors), “Nobody has particular oversight of [health insurers]. . . . They can do what they want . . . . [Y]ou have to go at them to clip their wings in every way that you can.” He repeated, “This is a rapacious industry that does what it wants.”

Download PDF

Interview with the author:

About The Author

Rituparna Basu

Rituparna Basu was a researcher and analyst at the Ayn Rand Institute between 2011 and 2016.

With Obamacare in shambles and President Obama proposing his newest one-year plan to fix it, Republicans are experiencing a moment of schadenfreude. That’s understandable, but focusing on the Democrats’ failures will not lead the Republicans to success. Senator Mike Lee (R-Utah) understands this, and he is busy trying to articulate the Republican vision for America. Unfortunately, while the senator’s fans may view him as a champion of free enterprise, Lee’s vision isn’t fundamentally different from the president’s.

We know what President Obama’s vision is. America is a welfare state in which wealth and prosperity don’t come from free individuals working hard to improve their lives and be happy. They come from society. “No single person can train all the math and science teachers,” or “build the roads and networks and research labs,” said the president in his second inaugural address. Instead, “we must do these things together, as one nation and one people.”

This is the vision of “you didn’t build that.” Everyone built it. And if everyone built it — if “one nation and one people” are responsible for it — then why should you get to keep it? We know the left’s answer: you shouldn’t. Hence, businessmen, the wealthy — the hated “1 percent” — are castigated for their wealth, taxed to the hilt, and called upon to “give back.”

It is the vision of Obamacare. When the government is making medical and insurance decisions for “one nation and one people,” why would your desire to keep your own policy matter?

For the president and his allies, the essence of America is not individualism, but a mushy form of collectivism. Did you get good grades and major in something marketable? Did you work hard for that year-end bonus? Did you risk everything to build a successful business? You didn’t earn that! You are not ultimately responsible for your success, “we” are. And as “our” agent, the government’s job is to spread the fruits of your labors throughout society in the form of taxes, subsidies, and entitlements.

So what is Sen. Lee’s vision? A ringing endorsement of the American spirit of independence and productivity? Hardly.

“The United States did not formally launch our war on poverty in 1964, but in 1776,” the senator said at a recent Heritage Foundation poverty forum. Since then it “has waged the most successful war on poverty in the history of the world” by becoming the wealthiest nation on earth.

Really? American colonists fought the most powerful nation on earth as a precursor to a mid-20th century welfare program? Would it be too much to expect a simple “you did build that” from a senator put in office by the Tea Party? Apparently so.

“For all America’s reputation for individualism and competition, our nation has from the beginning been built on a foundation of community and cooperation.” Our political system is distinctive, according to Lee, not because it recognizes that we are independent individuals, but because it assumes that we are all dependent on one another. “Freedom means ‘we’re all in this together.’ The conservative vision for America is not an Ayn Rand novel. It’s a Norman Rockwell painting, or a Frank Capra movie: a nation ‘of plain, ordinary kindness, and a little looking out for the other fellow, too.’”

In short, the essence of America is . . . togetherness?

Sen. Lee no doubt views himself as a champion of America’s founding principles. But how do his views really differ from President Obama’s? They both think America’s defining purpose is its ability to solve big social problems. They both think America’s wealth comes from some group — “community and cooperation” in the senator’s view and “one nation and one people” in the president’s. Their only dispute seems to be about how we should distribute it. Lee opposes government enforced charity and cooperation. But if you concede that wealth, success, and prosperity come from “community and cooperation” rather than individual initiative, why shouldn’t government force us to “give back”? The government would never stand by while some people stole property from others. If we really think groups produced the nation’s wealth, then it is groups that own that wealth and government should “redistribute” it. “We’re all in this together,” under Sen. Lee’s view, becomes just a conservative version of “you didn’t build that.”

Is that really what America is all about? Of course not.

America was founded on the principle that each individual has the right to live for his own sake and to pursue his own happiness. The Declaration of Independence makes this pretty clear. The purpose of government, as the Founders understood, is not to implement the grand social welfare plans of any political party, but to protect our rights.

Does individualism rule out cooperation? Obviously not, and neither Ayn Rand nor the Founders thought anything of the kind. Cooperation is hugely important in a free society. But individuals can cooperate and build communities only when they are free to think, work, and produce as individuals. And, contrary to President Obama’s view, it is only individuals who think, work, and produce; groups — which are just collections of individuals — do not. For example, Steve Jobs did not create the iPhone alone. But he was the creative spark and the driving force behind it. And everyone who worked with him was responsible for his or her own contribution as an individual. They succeeded as a group only because each was allowed to work and succeed as an individual.

So Sen. Lee has it backwards. The true foundation of America is individualism, not “community and cooperation.” And President Obama is equally wrong to claim that only groups are responsible for success because cooperation is often necessary to get things done. Individuals built this nation and created the wealth and prosperity that pulled us out of poverty. Sometimes they worked together, sometimes they worked alone. But individuals built it, and they will keep building it, only if we recognize that individuals — their initiative, their thought, and their work — are the fountainhead of all progress.

There’s a reason many tea party protestors display signs with “Who is John Galt?” or quotes by the Founders, rather than pictures of Norman Rockwell’s Four Freedoms. They understand that what makes America great — and what separates it from all other nations — is its individualism. Ayn Rand and the Founders understood this. Maybe it’s time for all Republicans to understand it as well.

About The Authors

Steve Simpson

Former Director of Legal Studies (2013-2018), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Observe any hiring center for a new Walmart and you will see thousands of individuals eager to become a Walmart associate. Many already have jobs at fast food restaurants, supermarkets, or other retail stores. LaShawn Ross, 29, worked for McDonald’s and Winn-Dixie before taking a job at a brand new Walmart in Pinellas Park, Florida. Ross aptly summarizes the sentiments of many applicants: “They are huge, so I know there is a huge amount of opportunity.”

Yet, a few pundits, policymakers, and activists insinuate that these people should not be excited, but outraged at the company for its wages—and some groups are even calling for protests on Black Friday.

Walmart “can easily afford to pay $15 an hour,” says Robert Reich, Chancellor’s Professor of Public Policy at U.C. Berkeley, who is also urging shoppers to “[B]oycott Walmart on the most important sales day of the year, November 29.” “Their net income was $17 billion,” says Vincent Orange, a D.C. city councilman who voted to force Walmart to pay a minimum wage of $12.50 per hour in the nation’s capital, adding, “You don’t want to share a little bit with the citizens? Come on.” OUR Walmart—a union-backed activist group—accuses the company of showing disrespect to its employees because it doesn’t pay so-called living wages.

Well, nobody has to work at Walmart if he feels underpaid or underappreciated. He can always seek another job. So why do 1.4 million Americans choose to work at Walmart, many for well under $12 per hour?

Many entry-level Walmart jobs consist of comparatively safe and non-strenuous work such as stocking shelves, working cash registers, and changing price labels. Walmart also pays competitive wages, which, for these jobs, are generally under $12 per hour, because these positions require little or no work experience or technical skills. For anyone with modest credentials, these jobs provide good work experience—experience which they can use to eventually land a higher paying job.

Listen to the critics, though, and you’ll hear Walmart portrayed as if it is holding its employees down. But in fact the company offers incredible opportunities for any hard-working, ambitious person who wants to work his way up in retail. Three out of four Walmart store managers started out as hourly associates, and those managers can earn up to $170,000 per year. Some former hourly associates, such as Patricia Curran, have worked their way up to top executive positions. Curran was named by Fortune magazine as one of the 50 most powerful women of 2006. Walmart even encourages associates to complete training courses during fully paid work time and offers raises to associates who complete these courses.

Little wonder that when Walmart opens a new store, it’s not uncommon for as many as 10,000 people to apply for just 300 jobs.

For Walmart, the pay, opportunities, and perks it offers must serve its goals for long-term growth and profitability. It offers training and development because it judges this to be good business. Such programs reward talent, motivate employees and recruit managers with extensive firsthand knowledge of store operations. With regards to wages, the company pays what it needs to in order to recruit an enormous number of competent and content associates. And it recognizes that it does not make business sense to pay more than it needs to.

This is what many Walmart critics detest: the company will not offer higher wages and benefits when it calculates that it will not be good business. According to these critics, every Walmart employee should be paid at least $12 – $15 per hour, regardless of the role he fills, regardless of whether he has the skills or experience to justify such a wage, regardless of whether he is a model employee or a slouch, regardless of how many other individuals are willing and able to do his job for less, regardless of whether raising wages will be good for the company’s bottom line. In effect, their premise is that $12+ per hour wages shouldn’t have to be earned or justified; they should be dispensed like handouts.

Walmart’s relationship with its employees is win-win. Every wage that it pays is one that the employee accepts and a large number of individuals have successfully worked their way up the retail giant. So, let’s stop attacking Walmart for paying market wages.

About The Author

Doug Altner

Doug Altner was an analyst and instructor at the Ayn Rand Institute between 2011 and 2014.