POV: What Is Capitalism?
by Ayn Rand | November-December 1965
In Pursuit of Wealth: The Moral Case for Finance
by Yaron Brook | September 30, 2017
Inequality Doesn't Matter If We’re All Paid According to the Value We Create
by Don Watkins | October 18, 2016
Who Cares about Inequality?
by Don Watkins | April 28, 2016
Equal Is Unfair: America’s Misguided Fight Against Income Inequality
by Don Watkins | April 19, 2016
Economic Inequality Complaints Are Just A Cover For Anti-Rich Prejudice
by Don Watkins | April 14, 2016
Equality of Opportunity Doesn’t Exist in America — and That’s a Good Thing
by Don Watkins | April 06, 2016
Inherit The Wind . . . And Not Much Else
by Don Watkins | April 05, 2016
Equal is Unfair: America’s Misguided Fight Against Income Inequality
by Don Watkins | October 20, 2015
Religion in America
by The Editors | December 05, 2014
Religion vs. Freedom
by Onkar Ghate | December 03, 2014
Debate: “Inequality: Should We Care?”
by Yaron Brook | May 08, 2014
Economic Inequality: Who Cares?
by The Editors | March 25, 2014
Our Poverty Problem?
by Don Watkins | March 11, 2014
Is Inequality Fair?
by Yaron Brook | March 05, 2014
Government tries to do too much: Opposing view
by Don Watkins | January 26, 2014
“You didn’t build that,” conservative style
by Steve Simpson | December 09, 2013
Why Do 1.4 Million Americans Work At Walmart, With Many More Trying To?
by Doug Altner | November 27, 2013
Atlas Shrugged Is A Book About Pride In One’s Work, And The Success That Results
by Steve Simpson | November 08, 2013
Bernie Madoff, Steve Jobs, and Wall Street Greed
by Don Watkins | September 26, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Be Born Poor Doesn’t Mean You’ll Always Be Poor
by Yaron Brook | April 12, 2013
We Should Be Embarrassed by the Sequester Debate
by Yaron Brook | March 20, 2013
“Give Back” Is One of the World's Most Impoverishing Commands
by Yaron Brook | March 12, 2013
Capitalism in No Way Created Poverty, It Inherited It
by Yaron Brook | February 25, 2013
3 crucial lessons Ayn Rand can teach us today
by Yaron Brook | February 02, 2013
Capitalism without Guilt
by Yaron Brook | January 21, 2013
President Obama Duels With Ayn Rand Over What Makes America Great
by Don Watkins | October 29, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
The Virtue of Employee Layoffs
by Yaron Brook | September 06, 2012
Ayn Rand’s Atlas Shrugged: A Paean to American Liberty
by Don Watkins | August 17, 2012
President Obama vs. My Grandfather
by Don Watkins | July 30, 2012
The Dog-Eat-Dog Welfare State Is Lose-Lose
by Don Watkins | July 12, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
Private Equity Firms Want Acquisitions To Profit, Not Fold
by Doug Altner | June 05, 2012
Opposing view: Celebrate private equity
by Don Watkins | May 29, 2012
The “On Your Own” Economy
by Don Watkins | March 09, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
Happy Birthday, Ayn Rand — Why Are You Still So Misunderstood?
by Don Watkins | February 02, 2012
America Before The Entitlement State
by Don Watkins | November 18, 2011
How Did Ayn Rand’s Atlas Shrugged Predict an America Spinning Out of Control?
by Onkar Ghate | October 31, 2011
What We Owe Steve Jobs
by Don Watkins | October 06, 2011
What’s Missing From The Budget Debate
by Don Watkins | July 12, 2011
Does America Need Ayn Rand or Jesus?
by Onkar Ghate | June 29, 2011
When It Comes to Wealth Creation, There Is No Pie
by Yaron Brook | June 14, 2011
It’s Time To Kill The “Robin Hood” Myth
by Yaron Brook | May 06, 2011
Using Ayn Rand's Values to Create Competitive Advantage in Business
by John Allison | April 04, 2011
In Defense of Finance
by Yaron Brook | February 15, 2011
The Tea Party Will Fail — Unless it Fully Embraces Individualism as a Moral Ideal
by Tom Bowden | January 21, 2011
How About Tax Reparations for the Rich?
by Don Watkins | January 18, 2011
The Guilt Pledge
by Don Watkins | September 22, 2010
How To Succeed In Business: Really Try
by Don Watkins | September 13, 2010
The U.S. Anti-Business Epidemic
by Don Watkins | August 17, 2010
Atlas Shrugged’s Timeless Moral: Profit-Making Is Virtue, Not Vice
by Yaron Brook | July 20, 2010
Capitalism: Who Needs It — Ayn Rand and the American System
by Yaron Brook | June 09, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Commercialism Only Adds to Joy of the Holidays
by Onkar Ghate | December 18, 2009
Why is Ayn Rand Still Relevant: Atlas Shrugged and Today’s World
by Yaron Brook | August 10, 2009
The Corrupt Critics of CEO Pay
by Yaron Brook | May 2009
America’s Unfree Market
by Yaron Brook | May 2009
Energy at the Speed of Thought: The Original Alternative Energy Market
by Alex Epstein | Summer 2009
Is Rand Relevant?
by Yaron Brook | March 14, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
Vindicating Capitalism: The Real History of the Standard Oil Company
by Alex Epstein | Summer 2008
The Right Vision Of Health Care
by Yaron Brook | January 08, 2008
Deep-Six the Law of the Sea
by Tom Bowden | November 20, 2007
The Influence of Atlas Shrugged
by Yaron Brook | October 09, 2007
The Morality of Moneylending: A Short History
by Yaron Brook | Fall 2007
Say “No Way!” to “Say on Pay”
by Yaron Brook | May 22, 2007
Atlas Shrugged — America's Second Declaration of Independence
by Onkar Ghate | March 01, 2007
Pay Is Company’s Prerogative
by Yaron Brook | January 08, 2007
Religion and Morality
by Onkar Ghate | October 18, 2006
Net Neutrality vs. Internet Freedom
by Alex Epstein | August 16, 2006
Why Are CEOs Paid So Much?
by Elan Journo | May 11, 2006
To Outsource or to Stagnate?
by Onkar Ghate | August 01, 2004
Ayn Rand's Ideas — An Introduction
by Onkar Ghate | June 02, 2003
Capitalists vs. Crooks
by Elan Journo | July 22, 2002
Forgotten Heroes of 9/11
by Onkar Ghate | May 17, 2002
Religion vs. America
by Leonard Peikoff | 1986
The Sanction of the Victims
by Ayn Rand | November 21, 1981
Egalitarianism and Inflation
by Ayn Rand | 1974
The Moratorium on Brains
by Ayn Rand | November 14, 1971
What Is Capitalism?
by Ayn Rand | November 19, 1967
Is Atlas Shrugging?
by Ayn Rand | April 19, 1964
The Fascist New Frontier
by Ayn Rand | December 16, 1962
America’s Persecuted Minority: Big Business
by Ayn Rand | December 17, 1961
The “New Intellectual”
by Ayn Rand | May 15, 1961
Capitalism vs. Communism
by Ayn Rand | 1961


Government And Business in Voice for Reason
Government & BusinessCapitalism

We Should Be Embarrassed by the Sequester Debate

by Yaron Brook and Don Watkins | March 20, 2013 |

The sequester debate is a national embarrassment — though not for the reasons you might think.

We are debating whether shaving a few percent off the government’s bloated budget will bring the country to its knees. It’s a good thing the Founders are long dead, because if George Washington or James Madison saw this, they would regard it as a shameful farce.

A few percent off the budget? Their question would be: What happened to the idea of principled limits on government — limits which, if adhered to, would mean reducing the size of government more on the order of 60 percent, 70 percent, or more?

What is the sequester?

The sequester is a group of automatic cuts in government spending that resulted from an agreement struck during the debt ceiling compromise of August 2011. It consists of $1.1 trillion in cuts spread over the next nine years, split primarily between defense and discretionary spending programs.

That may sound like a lot, but in the context of how much the government spends, it’s puny. In 2013, for example, sequester cuts will consist of a measly $85.4 billion of the federal government’s projected $3.8 trillion budget — less than 3 percent.

To make matters worse, the word “cut” is deceiving. It does not mean an absolute reduction in government spending. Under the sequester, overall government spending will actually increase — just less than the government had planned. Some cut.

Will the sequester harm the economy?

Sequester doom-and-gloomers like President Obama have argued that spending drives the economy — especially government spending, which exceeds the budget of any single private organization by a mile. They claim that when government spends, the economy grows, when government shrinks, the economy collapses, and so cutting government spending could provoke another recession.

On a scale from “wrong” to “very wrong,” this notion is “very, very wrong.”

Historically, substantial cuts in the rate at which government spending grew, such as the one in Canada in the 1990s, have led not to economic collapse but economic expansion. From 1992 to 1997, the Canadian government nearly froze spending. The results? According to Reuters:

The deficit disappeared by 1997 and the debt-to-GDP ratio began a rapid decline — it is now at about 34 percent…After wrestling the deficit to the ground, Canada enjoyed what Crowley calls the payoff decade, outperforming the rest of the G7 on growth, job creation and inward investment. From 1997 to 2007, it averaged 3.3 percent economic growth, while U.S. growth averaged 2.9 percent.

Same story more recently in Baltic states such as Estonia. Estonia dramatically cut spending — genuine cuts that reduced the overall amount government was spending — and saw its economy outpace even Hong Kong’s.

All of this is to be expected. Spending doesn’t drive an economy. Prosperity comes from production — from free individuals discovering new and better ways to create wealth. But government doesn’t produce anything. When it spends money, that money has to come from people in the private sector who have produced.

Those who claim that the sequester will harm the economy are really saying, “If we take money from the individuals and businesses who earned it and give it to politicians and bureaucrats, we’ll achieve prosperity — but if we allow them to keep what they earned, we’ll sink into poverty.”

Utter nonsense.

If you’re concerned about economic growth, then the sequester cuts are not too big — they are far, far too small.

So is the sequester a good policy?

Government spending is hampering economic progress and has the potential to devastate it. But spending is a symptom. The deeper problem is that our once-limited government is now unlimited.

Sure, there are some things government doesn’t try to do — although there are disturbingly few of those left. But there are virtually no principled limits on what it can do.

Principled limits come from having a clear view of the purpose of government. When America was created, the Founding Fathers assigned to it a strictly defined role: to protect the individual’s rights to life, liberty, property, and the pursuit of happiness — basically, to protect freedom. The fundamental policy question, on that approach, was: Does this measure protect freedom or not? If not, then it wasn’t the province of government. (Whether those limits were always consistently enforced is another matter.)

What about today’s leaders? What do they think is the purpose of government? To the extent they even have a view, it would be something like “Whatever we feel is best for the country.”

That is the basic problem today. Instead of protecting our freedom, the government does “whatever” our leaders, or the majority of voters, or an influential minority want.

And what they want covers basically every aspect of life:

  • Subsidizing farmers
  • Deciding what we can eat, drink, and smoke
  • Restricting imports of certain goods such as sugar
  • Prescribing who is allowed to do anything, from selling real estate to cutting hair
  • Saving failed companies that are “too big to fail,” or breaking up via antitrust successful companies that they decide are just “too big”
  • Dictating the future of energy and funneling billions into “green” boondoggles such as Solyndra
  • Corralling older Americans into the government’s own unsustainably expensive health insurance scheme

You get the picture. Is it any wonder that spending is out of control? If there are no limits to what government does, how could there possibly be any limits to what government spends?

On the other hand, if we restore government to its proper function, the spending problem takes care of itself. Wars aside, from the Founding era through the nineteenth century, the federal government never cost Americans more than 3 percent of GDP — about a tenth of what it costs today.

All of this highlights what’s wrong with the sequester: it does not distinguish between the proper, freedom-protecting functions of today’s government and the freedom-destroying functions. On the contrary, its cuts are highly skewed against the military — which is a proper function of the state.

As in any policy debate, our focus here should be: Does this function of government protect American freedom? If yes, then spending is proper. But if not — if money goes toward restricting freedom or redistributing wealth — then that spending should be cut.

We’re going to need a bigger knife.

About The Authors

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute