Freedom: Political vs. Social

Libertarians, myself included, have been preoccupied with the notion of freedom from government coercion (I will heretofore refer to such freedom as political freedom.) For a society to be free, libertarians espouse, governments cannot coerce individuals or interrupt any unharmful (and libertarians take that word to its most limited sense) individual activity. What I have often disregarded, however, is social freedom. As Will Wilkinson puts it,

If we lived in a libertarian wonderland of minimal government, yet where social norms were so stringent that any woman who dared aspire to a career, or any man who dared love another man, or anyone who dared to deny God, would be faced with ferocious social ostracism, isolation, and exclusion, then we would have to say that all people in our society are not free in a very morally deep sense.

Indeed, a society of extensive political freedom can often be greatly unfree. The question is, does freedom aside from political freedom matter? Many libertarians, I am sure, will argue that as long as a society is not subject to coercion (in other words, it is politically free) the actual operation, or indeed the actual freedom, of that society is irrelevent. These arguments, however, miss the actual crux of libertarianism's emphasis on individual freedom - they confuse the ends with the means. For a libertarian, individual freedom must be the desirable end. Political freedom is merely a means to that end - lack of government coercion by itself means nothing, for what is really the difference between social coercion and political coercion? The libertarian should perhaps place more emphasis on social freedom than on political freedom, for social mores and pressures are just as effective as government coercion, and oftentimes more far-reaching.

Libertarianism's contradiction is that, like Homer with alcohol, government is both the problem and the solution. A government can actively attempt to enforce individual freedom by regulating harsh social constraints, but in doing so the government is using coercion that necessarily limits individual freedom. If a preacher in a small Texas town advocates ostracizing homosexuals, the government can either censure the preacher -a violation of individual expression through political coercion- or allow the homosexuals to be ostracized -a violation of individual expression through social coercion. In either case, freedom is compromised. A government can also conduct activities in so called "libertarian paternalism." This would involve a government "educating" citizens on every individual's right to social freedom. A government telling an individual to believe in freedom is irresponsible, however, for true freedom allows an individual to believe in whatever he wants. Wilkinson is ambivalent about what exactly a government should do to ensure total freedom, but puts much onus on the individual:

In my opinion, it is the responsibility of decent people concerned with liberty to at least denounce, if not actively work to tear down, the racist beliefs and norms that enable liberty-killing structural discrimination. If you don’t think ending discrimination is the government’s job–that this is the sort of thing that should be done by persuasion, not force—then you should take this responsibility extra seriously.

I am not usually a supporter of allowing societies to "figure themselves out," but in such a case as social freedom is concerned, government intervention appears to do more harm than good. That does not mean, however, that political freedom is to be valued more than social freedom - it is just that the two do not face a clear-cut tradeoff that would make effective policy easy to enact. Wilkinson is right in saying individuals play the ultimate role in promoting social freedom, for indeed individuals change society, not governments.

The Fair Tax and the National Savings Rate

The national savings rate in the United States is zero, or even negative. It is a large reason why the credit crunch and the housing market collapse have the potential to hurt the American economy so greatly - Americans haven't saved and thus have no safety net. Rising inflation in the United States contributes to a disincentive to save, as does America's culture of consumerism. Additionally, the Federal Reserve faces pressure, and indeed has bowed to pressure, to lower interest rates in order to stimulate America's economy, further reducing the incentive to save. A healthy savings rate is crucial, especially for an economy that faces a growing fraction of workers who will soon pass their peak earning years and approach retirement, as does the United States. Savings allow investment, which sparks long-term growth and economic health. How can America increase its savings rate in face of growing incentives to do just the opposite?

Mike Huckabee's Fair Tax is purported to be a fix-all solution to America's economic woes - it is said to increase the savings rate, simplify America's tax code, bolster the competitiveness of domestic goods and allow for more economic freedom. It will indeed help America's dismal savings rate. The Fair Tax is a flat sales tax that would replace the income tax - in effect, such a tax would provide an incentive to consume less and save more. Such is perhaps the Fair Tax's most redeemable quality - it almost makes the Fair Tax worthwhile. The tax however, has numerous disadvantages: it will indubitably lead to tax evasion and higher unemployment, it is inherently regressive, it stunts international trade by its system of rebates, it would require huge administrative effort and cost and will result in endless political bickering, and perhaps most importantly, it is not politically feasible in the United States. So if not the Fair Tax, then what?

The most effective explicit tool in manipulating the savings rate is the interest rate set by the Federal Reserve. A higher interest rate yields higher savings. Unfortunately the interest rate is likely to be lowered further in response to continuing economic concerns and slowdown - although a higher interest rate promotes more savings, a lower interest rate does promote growth, which is also needed. The interest rate, however, is not the most healthy means by which savings should be encouraged. A culture of savings must arise in America, not simply savings dictated by the will of the Fed chairman. In order to accomplish this, systemic changes must occur.

Americans' savings rate probably decreased over the past 10 years as a result of their increasing economic well-being, in addition to low interest rates. Not only did Americans take money out of savings and place it in the stock market and treasury bonds, they also simply consumed more, thinking that considering America's economic success (and especially the increasing value of their homes, which they could borrow against more and more easily), they were economically secure and did not have to allow as much for future "rainy days." In light of America's recent economic woes, savings will in all liklihood increase, but changes must still be made to ensure that higher rates of saving become permanent, not just reactionary.

There are a few ways that a higher savings rate can be encouraged - in my opinion, tax reforms that encourage saving by shifting the tax base towards consumption are most beneficial. This, of course, invokes Huckabee's Fair Tax - but a value added tax, coupled with lowered but more even more progressive income taxation, is a far better solution.