Gary North: How the welfare state props up cronies and monopolists

October 3, 2013 by History in a Hurry

I have excerpted the relevant paragraphs of this piece by Gary North in case you don’t have time to read the whole thing. “Crony capitalism” could also correctly be called fascism, which is represented by the collusion of big business and big government. Read on for an eye-opener.


Crony Capitalism and the American Welfare State: Joined at the Hip

Gary North – September 28, 2013

Remnant Review

October 1 is the day of the new fiscal year of the United States government. Little known to the general public, it is the supreme day of celebration for the American Establishment. Let me explain why. It has to do with government spending, specifically this: Who wins? Who pays?

The American welfare state is generally supported by the very rich. They clean up by means of the welfare state. Why? Because the welfare state is seen by political liberals as justifying the expansion of the federal government, and the federal government then protects the interests of the super rich. This has gone on for so long that it is astounding to me that the chattering class — mostly Leftists — does not understand it.


Now let’s look at the biggies: Social Security and Medicare/Medicaid. They constitute 45% of federal spending. Who pays? Working stiffs. The Social Security taxable salary cutoff is about $110,000 a year. So, the worker and his employer pay about $16,000 a year, max. For the super rich, this tax is irrelevant — invisible.

Do you see what the voters have done? They have created two gigantic, politically untouchable welfare programs that the working class finances. These programs are so huge that no new major spending program will be imposed. They have put a ceiling on the growth of the welfare state. The welfare state cannot touch them. They are now immune.

ObamaCare? The workers will pay. Small business owners will pay.

How about food stamps, called SNAP? This costs $75 billion a year. Who gets this money? Agribusiness. In short, food stamps are a subsidy to the super rich in the name of helping the poor.


What terrifies the super rich is laissez-faire. If the government shrank back to where it was before 1900, the super rich would have to compete. They would find that more difficult to do than capturing the federal government. All of the talk about wealth redistribution for the last century has led to a system in which the super rich run the show economically. You would think that liberals would learn, but they don’t. Rhetoric is what matters; the facts do not matter.


The political Left sees that the rich are getting richer, and its response is always the same: more welfare state. They don’t understand that the federal government is what has created the existing distribution of income, which favors the super rich. They don’t learn that welfare state politics makes things worse for the poor. They have been barking up the wrong tree ever since 1896, when William Jennings Bryan got his first nomination by the Democratic Party for President. His candidacy killed the old Democracy, best represented by Grover Cleveland, a limited-government vision of politics, and firmly committed to low tariffs and the gold standard. It did not survive Bryan’s three runs for the presidency.

The Left wants more welfare programs, but the Left is not going to get them. The Left wants high taxes on the rich, but if they did not get that during Obama’s first term, when the Democrats controlled both houses of Congress, they are unlikely ever to get it again. We are seeing the last hurrah for the Democratic Left. Even if they were to win both houses of Congress and the presidency in 2016, the cupboard is now bare. In any case, that is not how power works in the United States. It works by stealth behind the scenes, and this has been going on since 1896. It is not going to change. It has only accelerated over the years. The Great Depression and World War II solidified the system.

Social Security and Medicare/Medicaid are guarantees that the welfare state, as proposed by the Democratic Left, will never come into existence. If there is any welfare money left to spend, granny is going to get it, and the working class is going to put up the funds. These were the greatest political bait-and-switch scams in American history. In the name of soaking the rich, the middle class and the poor created a welfare state funded by them.


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