Are We Really Helping the Natives?

When I stand before an audience of my peers I am often rebuffed by the majority of the room for talking about autonomy of all human beings and how the government has not taken our liberties and created order out of them. This is usually because, unlike conservative and pseudo-liberal positions, I can’t explain the Classical-Liberal stance in the form of a sound bite. The conservatives can argue, “Because freedom isn’t free” and the pseudo-liberals can argue, “Because healthcare is a right” which both sound great when they role off a politician’s tongue, and because of that no one questions the economics of their statements. But notice the difference between their sound bites and mine, mine goes as such, “We need to remove minimum wage” “we shouldn’t involve ourselves with the problems of the world” “legalize all drugs”. These don’t sound as good and are easily used against a libertarian campaign, but that’s because the economics of everything is far more complicated than “freedom isn’t free” or “healthcare is a right” and it’s those type of mentalities that bring us massive spending and more government overreach into our lives and the economy. Despite the 90% of professional economists who believe minimum wage stifles growth and employment, the Classical-Liberals are still labeled the bad guy. Despite all of the economists who said we can’t go to war with no room in the budget, the Classical-Liberals were labeled as unpatriotic and borderline treasonous. Despite economists who warned a government mandate will not lower healthcare cost and that they will increase instead, the Classical-Liberals are labeled as heartless. And of course, when the Classical-Liberals warned of an impending collapse of the government manufactured housing bubble, they were labelled as crazy. (Even the pseudo-liberals prized procession and Nobel Laureate, Paul Krugman, didn't see that one coming) 

There’s no doubt that being an intense advocate for a liberalized market and social order is about as close as someone can come to handing out open invitations to be chastised for something other than their policies. Most people begin their reprimand of a Classical-Liberal’s views before they are even able to explain themselves, often cutting in and insinuating that they must be a racist or lack all commiseration towards others, or both. They never think that maybe the Classical-Liberal is in favor of the Austrian business cycle and liberalized social policies because they believe it promotes racial equality and creates more wealth than any other economic system ever formulated. That thought never seems to cross their mind, instead the Classical-Liberal is believed to be behind a conspiracy to bring down the entire country and send us back to the 1800’s. (I have often been told that my policies will bring about the reemergence of slavery in American. One person even told me that if the Federal Government stopped funding K-12 education that there would only be dirt floors in the public schools). The absurdity of such claims made against the Classical-Liberal positions is never based on any facts and are often mere talking points to win over anyone listening to the debate. They know that if they can pin me as a racist (which is about the worst thing I could be) no matter how much sense I make, the audience will not listen or heed my advice.

The majority of cynicism towards the Classical-Liberal ideology seems to be rooted in the indoctrinated belief that government is good, so of course a Classical-Liberal is met with some degree of hostility or another when they tell that indoctrinated believer in government that everything they believed in is wrong. The hostility (not reasonable thinking) is what usually leads to them calling me a bigot, or unpatriotic, or some other fallacious name. And it takes getting over that initial hostility towards the anti-state liberals challenging their pro-regulation beliefs for them to offer any significant rebuttals.

It is here that I met an interesting argument against the laissez-faire approach to governing. A girl in a class of mine had heard my positions stated day after day in a very discussion oriented government class, she knew very well that I wasn’t a racist and that I was genuine in wanting to better the country. For that, I thank her and respect her. Other classmates of mine on the other hand, not so much. Nonetheless, we were discussing the pros and cons of regulations. I, of course, naturally opposed every single regulation that did not offer equal treatment under law that protects all people’s fundamental rights.  The girl, however, naturally favored any regulation that sounded good. I’ll admit, it is tempting to ignore the economics and favor the regulations that sound good, but I held strong to my convictions, as did she. Eventually I suppose it began to bother her that I was saying things like drugs should all be legalized, bars shouldn’t be required to have liquor licenses, and I should be able to carry a gun in any public area. She eventually snapped and said something to the effect of, When you deregulate you get Indian reservations. Indian reservations are little pockets of free-market economies and they’re terrible places if you’ve ever been to one.

The statement was certainly thought provoking and had me easily perplexed (I’m not a very quick thinker which usually puts me at a competitive disadvantage in live debates). I recalled the last time I had driven through an Indian reservation in Louisiana where I saw a guy passed out next to the street with an empty bottle next to him. I saw almost zero wealth, and if it weren’t for the lavish casinos I would have thought the place was a deserted Hollywood set from an old Clint Eastwood film. The air even smelled bad and the people looked more oppressed than the poorest regions of Appalachia. I saw signs for bare-knuckle boxing and gambling, drinks were cheaper than anything I could get at a grocery store in my hometown. The cost of living was cheap and the cost of goods was cheaper. It was almost everything a free-marketeer like me would hope for in-terms of the costs to purchase goods and services. Was this girl right? Is the cheap cost of living and cost of goods which the Classical-Liberal strives for through competition just a pipe dream that really causes mass poverty, broken families, and zero growth?    

I didn’t respond to the girl in class that day, I just nodded my head almost as if I was conceding the victory to her. Later that night, after some research, I came to realize that the response I should have given her was simply returning almost the same statement back to her; when you increase moral hazard, you get Indian reservations. That’s what I should have said.

Strangely enough, government intervention in Indian Reserves and the government’s cause of our current economic state has one remarkable similarity: moral hazard. What led to our current economic state involved many contributing factors including the Federal Reserve lending with artificially low interest-rates and pumping the economy full of fiat dollars, along with other economic tampering via the Bush administration (i.e –healthcare reform, social security reform, cutting taxes while boosting spending, stimulus checks, and subsidizing Fannie & Freddie). But one key element helped to build the housing bubble at an increased rate that ultimately led to a financial collapse.

In 2004 President George Bush called for the removal of all down-payment requirements for over 150,000 new homeowners, Economist and Historian Thomas E. Woods explains in his book Meltdown that:

[Bush] Declared, “to build an ownership society, we’ll help even more Americans to buy homes. Some families are more than able to pay a mortgage but just don’t have the savings to put money down.” The down payment, which traditionally serves to minimize defaults, was being swept aside by the president himself, and thus the trend away from traditional lending standards received a presidential imprimatur.    

So the believers in heavy regulation stand up and point to this one particular piece of legislation and blame the entire collapse on this one deregulation. They, of course, forget that it was regulation and the Federal Reserve that built the bubble so that it could bust in the first place, but that’s beside the point to them. They think their beloved bubble would have sustained itself perpetually into the future had it not been for that one, single, dreaded deregulation. But was it really a deregulation? Woods explains:

When the moral hazard of deposit insurance is combined with the “too big to fail” mentality, which will not allow large institutions to fail, the result (a conclusion compelled by common sense and bolstered by recent research) is that banks will take on considerably more risk than they would if they were subject to genuine market pressures.

This is the context in which regulation and deregulation have to be considered: a system so far removed from the free market that innocent third parties are on the hook for private firms’ foolish and risky decisions. In that context, is “deregulation” necessarily the best approach? Of course, REAL deregulation, which would abolish all monopoly privileges, establish free competition, eliminate the “too big to fail” presumption, and force banks to produce their depositors’ money on demand or declare bankruptcy –in other words, treating banking just like every other industry –would be the most welcome outcome of all.

In short, if you “deregulate” but increase moral hazard you are asking for more risky decisions. Removing the down payment requirement was merely a fraudulent deregulation that simply aided in the already massive housing bubble. If the down payment requirement is going to be removed, which I’m not against, you must also remove the FDIC. Before I get jumped on for wanting to abolish the FDIC, it should be pointed out that the FDIC only has enough money to cover 0.5% of total deposits so it couldn’t save anyone if there were to be a run on the banks. The government would just revert to the Federal Reserve to print more fiat dollars to further deflate the dollar’s worth.

How does this all tie into Indian reservations? We’ve given the Indian people their own communities to do, basically, whatever they want in them. And most Indian reservations are fairly unregulated, at least relative to our economy. But the government, because we invaded their country and stole all of their land, provides them with healthcare, Medicaid, food stamps, housing and other government benefits. Our government has set the Indian people up for failure, just as it did the banks. They are “deregulated” but the government has increased moral hazard. Why wouldn’t they be riskier with their money, drink more, and stay unemployed? The government will cover them. The median household income of Indians in North and South Dakota, for example, is just under $15,000, while the median income for the rest of the United States is nearly $44,000.[1] Shockingly and worryingly enough, 16% of Native Americans attending Bureau of Indian Affairs Schools in 2001 admitted to attempting suicide,[2] the amount of children being put up for adoption is eight times that of non-Indian children,[3] and on top of it all, 1 in 10 Native American deaths are alcohol related[4].

Obviously the government can’t just leave and give the entire land back over to the Native Americans, but the government would be wise to stop increasing moral hazard for the people. I understand, we came, we saw, and we concurred a land that was not rightfully ours, but that was a long time ago and the best way we can pay the Native Americans back is by giving them a chance to live a good life. We must learn from history, and if there’s one thing our current economic state has taught us, it should be that we cannot raise moral hazard while calling for phony deregulations. 


Now, along with the laundry list of names already in existence that only serve to falsely frame me as a bigot need to make room for one more, "He's against the Native Americans!"  

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[1] "Quality of Life of North Dakota and South Dakota Native American Reservations." Cranium Hostage Productions. Web. 08 Sept. 2011. .

[2] Shaughnessy, L., Doshi, S. R., & Jones, S. E. (2004). Attempted suicide and associated heath risk behaviors among

Native American high school students. Journal of School Health, 75(5), 177-82.

[3] North Dakota Indian Affairs Commission (NDIAC). History lesson: American Indians. Retrieved October 29, 2000 from the World Wide Web: http://www.health.state.nd.us/ndiac/history.htm

[4] "1 in 10 Native American Deaths Alcohol Related - Health - Addictions - Msnbc.com."Msnbc.com - Breaking News, Science and Tech News, World News, US News, Local News- Msnbc.com. Web. 08 Sept. 2011.