Richard Nixon’s Dirty Deed – 50 Years Later
It is perhaps fitting that on the 50th anniversary of Richard Nixon’s dirty deed in August 1971, the US Senate saw fit to pass a budget resolution that will add $3.5 trillion of additional girth to the nation’s already bloated and unaffordable Welfare State. As Forbes properly noted,
The Senate on Wednesday set the stage for the biggest expansion of the federal social safety net since the advent of modern-day food stamps, Medicare and Medicaid in the 1960s, approving a blueprint for a massive $3.5 trillion budget bill aimed at “restoring the middle class” through a slew of government initiatives – including universal preschool, tuition-free community college and a new federal health program – while combating climate change and hiking taxes for the ultra-wealthy.
We make the connection between the Senate’s latest welfare bonanza and Tricky Dick’s severing of the dollar’s link to gold because on that fundamental matter, Alan Greenspan was actually correct. We are speaking, of course, of the Greenspan of 1966 before he fell off the wagon in pursuit of government power, position, praise and pelf.
In his seminal but now forgotten speech called “Gold and Economic Freedom”, the proto-Maestro observed,
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation There is no safe store of value……The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
We have bolded the deficit spending part because it has been the lubricant that has enabled Washington to perennially dispense free stuff today while deferring the due bill to the bye-and-bye. Thus, when Greenspan spoke in 1966, the public debt was just $325 billion – virtually every penny of which had been incurred during wartime including LBJ’s Vietnam folly – and amounted to 40% of GDP. And that figure had been steadily falling from the WWII peak of 125%.
No more. The public debt now standards at $28.1 trillion and 127% of GDP, and is rising at breakneck speed. After all, on the eve of the Great Recession just 14 year ago (Q4 2007) that ratio had clocked in at only 62.7% of GDP.
While both today’s Warfare State and the Welfare State impose vastly excessive and unnecessary burdens on capitalist prosperity in America, it is the latter which has mushroomed since 1966 under the modern regime of chronic deficit finance.
We think the very best way to demonstrate that proposition is to compare total government transfer payments to the aggregate wage and salary compensation earned by American workers. That’s because in an honest and sustainable fiscal regime the producers of income must necessarily pay the taxes to fund transfer payments to the non-workers.
Alas, when Tricky Dick pulled the plug on sound money in 1971, there was only 15 cents of transfer payments at all levels of government for every dollar of wage and salary income. In money of the day, those figures were:
- 1971 Wage & Salary Incomes: $585 billion;
- Government Transfer Payments: $85 billion;
By the time Ronald Reagan took office in 1981, transfer payments were up to 20 cents on the dollar of wages and salaries, and by the time he had finished shrinking Big Government in 1988 that figure had been whittled back to, well, 19 cents.
Article from LewRockwell