Mark Skousen: America Has Been in a State of Permanent Inflation Since WWII

[FULL TRANSCRIPT BELOW] “Within the law, rule of law, and in a robust competitive model, you want to maximize freedom … Economic freedom, in the context of the rule of law, is the best formula for success and prosperity.”

Mark Skousen is said to be one of the top 20 most influential living economists in the world. He’s written over 25 books on personal finance and investing, including two of America’s definitive textbooks on economics.

“We have to make the right decisions to encourage, to increase our standard of living. That is the ultimate purpose of economics—to tell us how to do that,” says Mr. Skousen.

He’s also the producer of the annual libertarian FreedomFest conference. In anticipation of the event next month, we sat down to discuss some of the major myths and misconceptions about our economy today.

“Even the stock market, by the way, is at an all-time high. But in real terms, after inflation, it’s the same [as] it was in 2021,” says Mr. Skousen.

He says that since World War II, America has been in a state of permanent inflation, and that returning to the Adam Smith model of economics is the only way to get back to what he calls “enlightened capitalism.”

“I judge every economist on whether they are defending and improving upon the Adam Smith model of economic liberty, or are trying to tear it down and build their own system of socialism, Keynesianism, totalitarianism, and so forth,” says Mr. Skousen.

Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

FULL TRANSCRIPT

Jan Jekielek:
Dr. Mark Skousen, such a pleasure to have you on American Thought Leaders.

Dr. Mark Skousen:
My pleasure, Jan. It’s a real pleasure to be here at Epoch Times which is so great.

Mr. Jekielek:
In the early 2000s, you wrote a book on the history of economic thought that gets the most amazing praise. Today, we have all these economic indicators that tell us things are pretty good. The stock market is high, and there is a lot of rhetoric saying things are great.

Dr. Skousen:
They say that unemployment is at its lowest level, that kind of thing.

Mr. Jekielek:
Exactly. There is new job creation. At the same time, when we go out into communities across America, everyone tells us things are extremely expensive. How do we make sense of what’s going on with this opposing information?

Dr. Skousen:
I’m a professor of economics at Chapman University. I’ve taught at Columbia Business School, Rollins College in Florida, and at a number of locations. There is a great dearth of sound economic thinking among the general public. A lot of people take courses in economics, but it’s not taught particularly well. It is taught by academics who haven’t had any real-world experience.

They don’t have real-world experience, so they accept the supply and demand curves, aggregate supply and demand, and Keynesian economics. They get confused and it’s very easy to see that.
Reality is very different from the statistics. For example, look at job creation. There was a report that last month that 265,000 new jobs were created, and the stock market went up. Actually, you need 265,000 new jobs created just to keep up with population growth in the United States, so there really is very little growth there.

People are concerned about what is happening in the economy, largely because of inflation. They have a concern that their job isn’t particularly secure, or that the stock market is overvalued. They live in fear that they’re going to lose their job or their wages are not going to keep up with inflation. That is the angst that consumers and workers feel in this current market economy.

We just went through a treacherous period of lockdowns in 2020 through 2021. Nobody really trusts that the government is going to do the right thing in a crisis situation anymore. Most people think that what we did with the lockdown was a major mistake. I certainly think so. Maybe we’ve learned our lesson, but it’s really hard to say.

I have written two textbooks on economics. One is called, “Economic Logic,” a textbook that starts not with supply and demand, but with the profit and loss statement which represents the dynamics of the economy. In accounting, we call it the P&L statement, where you look at sales and profits and losses. That represents the dynamics of the economy. The only textbook that does that is “Economic Logic.”

My second book is a history of the great economic thinkers. It has caught on as a very popular textbook because it actually has a story to tell. It has a plot with heroes and enemies. The hero wins in the end and this is the story of Adam Smith.

In the system of natural liberty, economic freedom with the rule of law is the best formula for success and prosperity, so I make Adam Smith my hero. I have an Adam Smith tie-on, Ben Franklin.
They represent economic freedom, entrepreneurship, economic growth, and prosperity. I judge every economist on whether they are defending and improving upon the Adam Smith model of economic liberty or trying to tear it down and build their own system of Keynesianism, socialism, or totalitarianism.

This has been a battle forever. We ultimately win with the collapse of the Berlin Wall and the Soviet central planning system. Since then, capitalism has essentially won the debate. There are fights over what level of capitalism. But we don’t have a system like North Korea, where the government owns everything. Most economists now, including socialists like Bernie Sanders, don’t want to nationalize everything. That is a victory for the Adam Smith model. That’s what my second book, “The Making of Modern Economics,” is all about.

Mr. Jekielek:
Adam Smith talked about the invisible hand of the market and you’re arguing that this is by far the best model. Does economic thought actually start with Adam Smith? Was Aristotle thinking about economics? We have these great thinkers that Western civilization is built on. Where does the theory of economics originate?

Dr. Skousen:
From the very beginning, we have lived on an earth that has tremendous potential. It has raw land, sand, iron ore, copper, silver, and gold. You can look at what we have here today; the clothing we’re wearing, the computer that you’re looking at, the books, and the cell phone. All of these things were created from these raw commodities. They went through complex stages of production to produce these finished products.

By the way, that’s what GDP [Gross Domestic Product] is. It’s a measure of how many goods and services we produce on an annual basis. I also have a gross output statistic that measures all the stages of producing the final product which is called gross output or G.O. That’s the top line in national income accounting, and GDP is the bottom line.
I’m trying to explain basic economics. The situation is that you have this tremendous scarcity of usable goods and services. How do you get these raw commodities to go through these stages of production? What technology do we need to know?

The cell phone didn’t exist 30 years ago because the technology was not there yet, but the raw commodities were there. The glass, the metals, and all of that were in natural form. But how do you turn it into something really useful called a cell phone? The answer is innovation and technology. It’s what’s up here in our intellect that we have developed and trained. These entrepreneurs are the big difference.

Capitalism is all about providing the proper incentives. I always say to my students, “Give me one word to describe economics.” They could respond with the words scarcity, price, cost, choice, or capital. There are lots of terms that could be used. I like the term incentives because we need to provide the proper incentives to produce the products and goods and services that we enjoy and that create a higher standard of living.

Do we want to live in a basic, crude economy? There is a danger that if we don’t produce these products, we’re going to fall into a recession or depression and contraction. We have to make the right decisions to increase our standard of living. That is the ultimate purpose of economics—to tell us how to do that.

Mr. Jekielek:
When did we start to think about economics?

Dr. Skousen:
In my history of economics I cover the pre-Adamites, which means they came before Adam Smith. Of course, I talk about Aristotle and the Greek philosophers. Then you move on to all the other philosophers, like Thomas Aquinas. But it wasn’t until Adam Smith actually wrote a big, fat book called “The Wealth of Nations,” that economics came into its own as a science. He studied how to get out of scarcity, how to get out of limited resources, how to get out of unlimited demand, how to increase the standard of living, and how to create progress.

That is Adam Smith. You will notice the title of his book, “The Wealth of Nations,” was about how to create and improve upon the wealth of nations. He has a whole section on government policy. He asked, “What government policy is ideal to increase the wealth of nations and to improve the standard of living of individuals? What does the government do that slows down or destroys our economic growth?”

His focus was on wealth and the standard of living. He was the first economist to really put that all together. You mentioned the invisible hand of Adam Smith. The invisible hand is what private individuals do on a day-to-day basis to improve their standard of living. Adam Smith said, “Every person always tries to improve their lot in life and for themselves and for their children and grandchildren. We all have that innate drive. Economics explains how that happens.

Mr. Jekielek:
You make Adam Smith out to be a hero with that vision, and the hero of the story. But there are other systems that take things in a different direction.

Dr. Skousen:
Yes. I’ll give you an example that I use with my students. I write up on the board, “From each according to his abilities, to each according to their needs.” I don’t say where it’s from, but I say, “How many think this represents the ideal society? You get 60 to 80 percent saying, “Yes, you work hard, you get what you need. Isn’t that what it’s all about?

Then I say, “Now, put your economics hat on. Let’s analyze that statement. What do you need to live on?” In Michigan they say, “$35,000 a year. That’s all I need to live on.” In California, it’s $100,000 or more. One student said, “I need a quarter of a million dollars to live comfortably.” I said, “Let’s just say it’s $100,000 for California students. What if you earn more than that? Where does that money go? Do you get to keep that money under this system?”

“You get what you need, but anything beyond that goes into the community pot. What for? To help those who don’t make $100,000, who maybe only make $30,000, they get more to meet their needs. Everybody gets what they need. I said to my students, “What is the marginal tax rate under this system?”

It is 100 percent. In other words, there is no incentive to earn more than $100,000. Now, maybe out of the goodness of your heart, you earn more than $100,000. There are some communitarian societies that are based on that idea. But the point is that you’re greatly discouraged from earning more than $100,000.

Then I said, “What about those who make $30,000? Do they have any incentive to earn more?” The answer is, “No, because they get $100,000 whether they work hard or not.” This is why socialist systems never work, because they don’t have the proper incentives for working hard and earning more money. This is a great teaching exercise. Then after it’s through, I say, “Now, who said this? It was Karl Marx.”

How should the capitalist system work? I call it enlightened capitalism, not exploitative. Enlightened capitalism means they develop their skills and produce productively, and they can earn way more than $100,000. What do they do with that money? They can give it to charity institutions and volunteer organizations that help those who are less fortunate. That’s a voluntary society and it works beautifully when you have enlightened capitalism.

I use the “Henry Ford, $5 a day” story. In 1914, for the first time, this capitalist shared his wealth with his workers who were only earning $2 a day. He more than doubled their wages. Why? Because he made record profits and he wanted to share the wealth. This was a revolutionary change.

He destroyed the Marxist argument of exploitation in just one day in 1914 by saying, “We’re going to take all these profits and share them with our workers.” For the first time, workers could afford to buy the car they were making, the Ford Model T. Today, Marxists hate Ford. They call it Fordism.

There is an alternative to the socialist model, and it’s called the democratic capitalist model. John Mackey of Whole Foods calls it conscious capitalism. That’s the new model today. It’s the stakeholder philosophy, with everybody benefiting in the capitalist system.

Mr. Jekielek:
Then the question of fairness comes up

Dr. Skousen:
That’s a legitimate concern, is the system fair? You don’t want to destroy the initiative of hard work by imposing high taxes to make it fair for everyone. Then you destroy the golden goose and there’s nothing left to achieve. I always say that socialism is sharing poverty, and capitalism is sharing wealth.

But it’s democratic capitalism, which means profit sharing. It means stock options for your workers. It means higher wages. Like the Ford model, if a company has higher profit margins, then they pay their workers more. Studies show the benefits of this over and over again, so we need to encourage corporations to invest their money in this way. It’s trickle-down economics, but it’s also an MBA-style program of teaching the stakeholder philosophy.

I use the A&W principle. I have a drink of A&W root beer that I hand out to all the students after I give this exercise. What is the A&W principle? The letter A stands for accountability. If you go into the store and buy something, you are the one paying for it, and you need to have accountability. You have to know what costs are, you have to shop around, and you have to work hard. That’s an accountability principle.

The letter W stands for the welfare principle. This is where fairness comes in. You need to help those who need help. Part of the welfare principle is that you don’t help those who don’t need help. It has to be the right balance. The A&W principle is about a tension between the two. But you don’t want to overdo it, because if you give people food and medical services and education, why should they work? It’s a balanced approach to this fairness.

Let me also mention the Index of Economic Freedom. This is a really important index done by the Fraser Institute in Canada and the Heritage Foundation in the United States. It shows that those citizens that live in countries that have the highest level of economic freedom have the highest standard of living. Those with very little economic freedom have very poor standards of living. This is a balance and this is the Adam Smith model. It is a robust competitive model where you maximize freedom and stay within the rule of law.

What is freedom? It means the freedom to choose what you want to buy, who you want to hire, what you want to pay for wages, and what prices you are going to charge. Government should not interfere with any of that. Let the robust competitive model play out within a system that has the rule of law. You will have things to warn against fraud, because business people will engage in questionable, deceptive business activities, and you want to moderate that. You can’t totally eliminate it in any system. There is always going to be some form of corruption. But you can develop a system to moderate the passions, and this is what the Adam Smith model is all about. That’s what I talk about in my “The Making of Modern Economics” textbook.

Mr. Jekielek:
When you push hard for that fairness, you end up lowering everybody’s standard of living, on average.

Dr. Skousen:
I’m going to a memorial service for Tom Phillips, my original publisher, who was very generous. He was very successful as a newsletter publisher and also published about human events. He was very good to his employees and I was one of them. I had a very successful newsletter through him. He kept most of the profits, but he paid me and his employees generously.

But he also gave a lot of money to nonprofit and volunteer organizations, and to political causes. Where did that money come from? It came from a successful business. Business is really the key to success. You don’t want to kill the golden goose, which leads to creating entrepreneurship, innovation and technological advances.

Mr. Jekielek:
No one cared very much about Marxist thought until after the Bolsheviks won in Russia. They started pushing the propaganda that it was a great system with the success of the proletariat over the bourgeoisie. That is astonishing, considering Marxist economic thought was thoroughly discredited by 1900. Please explain that for us.

Dr. Skousen:
Many times, new theories take a while to develop. The Marxist concepts of materialism and economic determinism took a while to catch on. In this case, it was in 1917 when the Bolshevik Revolution occurred and they introduced Marx as one of their heroes. Lenin certainly was a big factor in that. They actually smuggled in Marx’s book Das Kapital and had it translated into Russian.

The censors in Russia accepted it because it was a book about making money and they thought that it would be okay. They didn’t really read Das Kapital, which, by the way, is one of the headache books in economics. If you have ever read it, it is really difficult to figure out. To me, it is almost immaterial that it was promoted.

What we need to look at today is why is Marxism so appealing and why has it filtered into so many disciplines? It’s not just in economics. In fact, it hasn’t had much influence in economics. But in political science, in history, in literature, in literary theory, and in anthropology, there are many discussions about Marxism. Particularly in sociology, you will hear about the bourgeois way of thinking.

You’ll have an argument with a Marxist and they will say, “I know why you’re thinking that. It’s because you’re bourgeois. That’s the way you think and there’s no way you can change your way of thinking.” You’re seeing this today when they are saying, “Because you are white, you are racist and there’s nothing you can do about it.” That’s Marxism.

It is so frustrating to think that you’re in a box and there’s no way you can get out of it. I’ve lived long enough to know what racism was like in the American South. You really had serious racism. Today, they bend over backwards to make sure that racism does not exist. However, it’s always going to be there to some extent.

Again, the Marxists and the socialists have really lost this battle about economics, because the standard of living is clearly higher in the capitalist countries than in the socialist countries. The Index of Economic Freedom demonstrates that pretty clearly.

Mr. Jekielek:
The Marxists say, “That’s because of the exploitative nature of capitalism. You’re just stealing from all of us.

Dr. Skousen:
Yes, you do get that. In fact, Pope Francis said that if you don’t voluntarily give to the people in need, then you are stealing. There is that type of thing in the Marxist-oriented thought. They don’t understand that everybody can benefit from the capitalist system. This is why I call it democratic or conscious capitalism.

I’ll give you an example. In the very beginning at Microsoft, Bill Gates gave stock options to his employees. Not just the executives, but all the employees qualified. Even with their lower salaries, they got stock options. Today, Microsoft employees are multi-millionaires because they were given stock options and got to participate in the capitalist system.

This has destroyed the revolutionary zeal of the workers. This is why workers have rejected Marxism and communism. They are participating, not only in 401(k) plans, but also stock options, partnerships, higher wages, retirement, paid vacations, insurance, and all medical expenses paid for. There are all kinds of benefits.

Peter Drucker, the great management guru, once asked, “What is the ideal social institution to provide for our basic needs? Is it the government? Do they do a good job with Social Security and Medicare?” Probably not. Is it the churches? The churches used to provide, and some do provide some kind of welfare and helping people out.

The answer is profitable, big business that has an enlightened capitalist view which provides all of these benefits and services. That’s what we need to encourage and develop this proper business philosophy. One of the courses that is taught in college is the role of business in society and that’s the kind of course that I teach.

What is the best role of business? Because business is the key. You can’t have big charities or NGOs without successful businesses that are funding those things. It’s really business that provides these things for our culture.

Mr. Jekielek:
That’s true. We’ve also seen problems with that model, especially when business gets into promoting certain types of ideology. Sometimes the larger a nonprofit becomes, the less it is fulfilling its mission.

Dr. Skousen:
Some of Rockefeller’s funding of nonprofits would be a classic example of that.

Mr. Jekielek:
Some of these small nonprofits are very mission-oriented and trying hard to make the thing happen. But along the way the institutional need to survive takes on a life of its own. Big business with its funding can put its finger on the scale to push things in a particular direction. This town is full of lobbyists doing exactly that.

Dr. Skousen:
Adam Smith was actually not particularly favorable toward business people, per se. He liked the commercial society as long as you had a robust, competitive model, so that business people were forced to do the right thing. But money is power, and so politics and money go hand in hand. We’ve seen this with the Big Tech and social media companies like Facebook. Mark Zuckerberg and George Soros are examples of this.

You have counterexamples of this with Elon Musk, Charles Koch, and even The Epoch Times. All of this couldn’t have happened without successful business. That’s really a key factor. But I also think that education is extremely important.

I’ll go back to something that Milton Friedman, the great free market economist from University of Chicago, once said. I asked him, “What do you think about all this current divisiveness?” He said, “Mark, If people were taught sound economics and a sound philosophy of life, 90 percent of us would agree on pretty much everything.”

I try to stay away from Left-Right and liberal-conservative viewpoints and look for the best solutions to our problems. We put on a conference called Freedom Fest every year and it’s called, “The Largest Gathering of Free Minds.” We want people to come there with an open mind for civil, formal debate, so that you’re not yelling at each other and talking over each other.

It’s a unique contribution that I have made to try to develop a more cooperative group. Even though people disagree, we all listen to each other, and maybe we can learn from each other. I say Freedom Fest is all about learning from each other, networking, socializing, and celebrating liberty. That’s the idea.

Mr. Jekielek:
We enjoy attending Freedom Fest. Our first time was in South Dakota.

Dr. Skousen:
At Mount Rushmore.

Mr. Jekielek:
Right. At the time, we were getting away from the shelter-in-place policies.
Your uncle was Cleon Skousen. People may not remember, but he wrote the famous book, “The Naked Communist.”

Dr. Skousen:
Yes, that’s what put him on the map across the country. It was actually an underground bestseller and sold two to three million copies. The publisher went to China to get it printed. It was prohibited from being printed in China because of the strong language that my uncle used in describing communism and Marxism as the biggest threat to American freedom and liberty.

That is still true, even though communism has failed in a lot of ways. There are still some major countries, China being the principal one, that still have official communist doctrine. Cleon was a former FBI agent and a special assistant to J. Edgar Hoover. He then moved to LA and was assigned to Hollywood and the Organized Crime Unit, so he had a pretty interesting story.

He was a big defender of the Constitution. He was very pro-Israel, by the way, and that comes out in the book. My wife and I compiled and edited his private journals. His book was a truncated version of about 500 pages. It would have been 1,500 pages long if people had read all of it. His journals reveal a lot about his life as an FBI agent, as a professor of religion at BYU, and about his many tours of the Holy Land. Then he gave his constitutional seminars through the Freeman Institute. He was quite active until his passing in 2006.

Mr. Jekielek:
I didn’t think the book was that dated.

Dr. Skousen:
It is still in print. It’s dated in the sense that the last edition was in the 1960s. However, it does have one thing that everybody really focuses on,
which are the 50 communist goals that are listed. This list is still making the rounds on the Internet. Of course, one of the communist goals is taking over public education.

Half of these communist goals have already been achieved. They have an agenda. They’re interested in objective economics, and we’re seeing this in modern monetary theory. I confronted these Marxists who were writing about modern monetary theory. They basically say that you can print as much money as you want so long as you’re printing your own currency and that you can never go bankrupt. They have never heard of hyperinflation and what that does to an economy.

I was talking to them at an American Economic Association [AEA] meeting. They had written a book on economic growth and macroeconomics, and I said, “You’ve written an entire book on macroeconomics and you have nothing on economic growth theory. That doesn’t make any sense at all.”
It was really fun to confront them on the sins of omission in their textbook. I said, “There’s lots of countries that have done better because they lived within their budget.”

One of the things we suffer from today is Keynesian economics. We’ve gone off the gold standard, and as a result, we have serious deficit spending on a regular basis in the fiscal policy. We have out of control government spending. It’s becoming a monster, and we can’t seem to get rid of it.

Then in monetary policy, we have the Federal Reserve that oscillates between tight money and easy money, but they have an actual policy of inflation. Their goal is 2 percent inflation a year. But the fact is that since World War II, we have entered an era of permanent inflation. There’s a really good chart that I show in one of my articles, “Economics of Life Made Simple,” that has that graph where inflation just goes up and then comes back down. But since World War II, it has risen permanently.

We have entered an era of permanent inflation, and people need to do whatever they can to protect themselves against an inflationary environment. It’s not easy and you have to take risks. You have to invest in the stock market. You have to invest in gold and silver. You might buy Bitcoin. You have to protect yourself and your assets from runaway inflation, which is a serious danger in this world of Keynesian economics.

Mr. Jekielek:
You say that Marxist economics has failed. In China, they’re not really practicing communism anymore, because they allow people to make money, but there is a high level of control. Communism is an ideological system masquerading as an economic system. Of course, we all know that it’s an ideological system. But often people imagine that if you’re not doing the economic part of communism anymore, then it’s not communism. Do you have any thoughts on that?

Dr. Skousen:
The Chinese communists were much smarter than the Russian communists. The Russian system collapsed because they refused to adopt any aspects of capitalism. Socialism is really just spreading poverty around in society instead of wealth. Mao was a disaster in every way, both economically and politically. Then his successor, Deng Xiaoping, came up with the idea that to be rich is beautiful.

Mr. Jekielek:
He also said that to be rich was glorious.

Dr. Skousen:
Glorious, that’s right. He adopted what we call state capitalism. That’s the model they promote with the state allowing more economic freedom. It used to be 80 percent government control and 20 percent free enterprise. Now, it’s really the opposite of that. There’s a lot of free enterprise that is allowed to happen.

Mr. Jekielek:
But much of it is only on the surface, because everything has to conform to the industrial policy of the state.

Dr. Skousen:
Yes. But there is definitely an opening up and the allowing of entrepreneurship. Jack Ma and people like that were able to become billionaires and create new products and increase the standard of living. A lot of it was the investment of U.S. companies like Apple going over there and producing those products. We know that iPhones are made in China.
They have really made tremendous improvements in their standard of living. There is no question about that.

But the reason I say they were smarter than the Russians is that they knew that by creating wealth, they could maintain their political control. They have been able to do that so far under a state capitalism model. The problem is that once these entrepreneurs become wealthy, they want political power.

Now, President Xi knows that there are competitors like Jack Ma and others. That’s why he’s going after those people and squelching them. Jimmy Lai is a classic example of a billionaire who is now in prison for the rest of his life because he spoke out in Hong Kong.

Mr. Jekielek:
There is a lot of rhetoric out there that says that the economy is fantastic. There are indicators that say that it is good. There are other people saying exactly the opposite. Please explain to us the current reality of our economy.

Dr. Skousen:
This is where country-to-country comparisons are really helpful. I was in Singapore a couple of months ago where they have a balanced budget. They have very little inflation and very low unemployment. They encourage entrepreneurship and foreign investment. They have one of the highest standards of living in the world and they’re doing a lot of really good things.

They do have some government intervention for sure. They have some forms of state capital. There’s no question about that. But overall, they really have their act together. You don’t have that angst that you see other than fear of China maybe militarily taking action against Singapore. But other than that, you have a stable environment. You don’t have a huge debt problem.

But look at the United States. We don’t even have an official budget that Congress actually passes every year. They are continuing resolutions. They have this debt ceiling debate and the possible closing down of the government. This is not the stable environment you want for people. They don’t want to worry about the government and just enjoy life and pursue their own interests.

We have serious problems that are growing. People are bothered by the government not living within its budget. Who is going to pay for it? Who is going to pay for the $100,000 average debt for every citizen that we face with the $35 trillion national debt? The Federal Reserve has $4 trillion of government securities and mortgages. How are you going to pay those? They tried to reduce quantitative easing a little bit.

Mr. Jekielek:
They tried to reduce quantitative easing. Please explain what that means.

Dr. Skousen:
What does that mean? In 2008 and 2009, the crisis was so bad that the government started directly buying government securities and mortgage securities and putting that on their balance sheet. It eventually came up to $4 trillion. They have to pay down those debts at some point and they’re having difficulty doing that.

That suggests to me that inflation is their only solution. It is to constantly print more money to pay the interest that the government is raising. There is a sense that a crisis is coming and nobody seems to care about it. The key here is the interest on the debt.

The interest on the national debt is now like $400 billion. They’re starting to get worried that at some point the crisis is going to come home to bite them. They wonder, “What can we do to control this and get our budget in balance and cut government spending?” Because right now the Biden administration is just spending money like water.

I’m not sure Trump was really that good in that way. No question, he was good at deregulation, tax cuts, and corporate tax cut reduction. Those were good moves. But we’re not living within our means at all and this bothers people. They are living paycheck to paycheck.

Most Americans don’t have more than $1,000 to $2,000 in savings to draw upon if they lose their job, so that is a concern. Wages are rising, but they’re not keeping up with the inflation, so they feel like they’re being left behind. How many people can afford to buy a new home? You can’t even afford to sell your home and buy a new one because the mortgage rate is going to be twice as much.

They’re struggling financially, and that is feeding into this feeling of uncertainty and nervousness. That’s the problem. That’s why I think that Donald Trump is likely to win reelection, even from jail. Even the stock market is at an all-time high. But in real terms, after inflation, it’s the same it was in 2021.

Mr. Jekielek:
There seems to be a lot of focus on the stock market being up as an indicator of success.

Dr. Skousen:
Right, and also low unemployment. But remember, with the low unemployment rate, a lot of people have dropped out of the workforce. The employment involvement in the community is near an all-time low, about 60 percent of full-bodied Americans. The employment participation rate is quite low compared to what it was 20 or 30 years ago.

Many people are dependent on other forms of income. Some are staying at home and just giving up. Some are living on welfare. The welfare system has blossomed. People are on food stamps and Medicaid at record levels. We need to go back to the 1996-97 welfare reform act, which said that after five years, if you’re able-bodied, your Section 8 housing and food stamps and Medicaid will be cut off.

That worked for a while. The number of people using food stamps actually declined in the 2000s. Then the 2008 crisis came, Obama was elected, and he discontinued the welfare reform act. There are solutions to our problems, we’re just not facing them. At some point, there is going to be a crisis.

Mr. Jekielek:
What does that crisis look like?

Dr. Skousen:
Interest rates will rise to pay for the national debt. There will be the printing of more money, so there’s going to be more inflation as a result. The deficits are going to get worse because we’re going to have another 2008-type of financial crisis. We got bailed out at the last minute by the Fed and by TARP [Troubled Asset Relief Program].

But we paid some of it back. The TARP money was paid back, but the quantitative easing hasn’t been paid back. Financially, we’re in worse shape now than we were before. Treasury securities used to have a triple-A rating. Now it’s double-A. There has been a slight decline, and it may decline even further to where it becomes below investment grade.

If that happens, interest rates will spike again. We need a white knight to come along and say, “We have to become fiscally sound.” We need a Ben Franklin, who once said, “There’s no revenue sufficient without an economy.” We need to have an economy across the board and we can’t just grow ourselves out of the economy.

This is what the supply side is all about. You can’t just say, “We’ll cut taxes, and we’ll grow out of this problem.” If you grow out of it, that means you increase revenues because the economy is doing well. The government says, “We have more money, let’s spend more,” and that creates a deficit. You have to have a balanced budget amendment and have control of the size of your tax increases.

Mr. Jekielek:
This requires a type of policy where people would have to suffer more.

Dr. Skousen:
Yes, there is such a thing as shock therapy. That is what President Milei is doing in Argentina. Who knows if that’s going to be successful or not. It was done in Russia and Eastern European countries and other countries with mixed results. Normally, when you can privatize a lot of companies, there are ways to create jobs and keep the economy going, even as you try to control your expenditures.

But I’m a firm believer in the supply side arguments of stimulating production and entrepreneurship, tax cuts and deregulation, and stable monetary policy. I agree with all of that. But you have to have a balanced budget on top of it. You need two limitations—a balanced budget amendment and a tax limitation amendment.

By doing that, you can adopt the Singapore model. We have to reform Social Security and Medicare. These are out-of-control programs that should not be as generous as they’ve been in the past. We need to depend more on the private sector. Singapore does that with their Medisave program.

Mr. Jekielek:
Dr. Marty Makary, in his books about corporate corruption and medical systems, says that too much is going out to the people, but also too much is going out to the providers. There are lots of middlemen and there is a lot of bloat.

Dr. Skousen:
Medicare is definitely a problem. The medical insurance policies are just way out of balance. Again, Singapore solved this problem with their Medisave plan because they have health savings accounts. Every individual has a health savings account. They do shop around and they also have transparency. You know exactly how much every doctor visit and every surgery is costing.

Sean Flynn at the Claremont Institute has written a book on the Medisave program called “The Cure That Works.” We could learn a lot from that program. If you wanted to sum it up, economists have really solved all of these problems. It’s just we don’t have the courage to adopt the solutions. Sometimes it’s difficult to adopt them because we’re so used to having this inflationary environment, and this spending that we don’t control.

Mr. Jekielek:
It would be politically unpopular because it will cause some hardship for the population and you might get voted out.

Dr. Skousen:
But I go back to the example of Argentina. They ruined their country so badly that finally the young people asked, “Is this the future we want?” They voted for this radical libertarian Milei who is now trying to get through to their Congress. You campaign in poetry, but you rule in prose, and that definitely applies to what’s happening there. He may not be successful, just like Schwarzenegger tried to make changes in California, and finally gave up. He got reelected, but only because he dropped his agenda of controlling California, and that could be happening to Milei right now.

Mr. Jekielek:
Hopefully, this country doesn’t need the lesson of Argentina.

Dr. Skousen:
Or Venezuela, which is even worse.

Mr. Jekielek:
Exactly.

Dr. Skousen:
Venezuela, by the way, is one of the great tragedies of this century. Here is a country that has the richest oil deposits in the world, even more than Saudi Arabia. It’s the wealthiest country in terms of natural resources of any South American country. Now, it’s a basket case. It went from richest to poorest because of the socialist Marxist doctrines. I’m trying to think of the name of the man who took over.

Mr. Jekielek:
Hugo Chavez.

Dr. Skousen:
Yes, Hugo Chavez. Chavez came from the military, and learned from Pinochet how to control the military. Otherwise, the military would come in and create a coup and remove you from office, so he took over the military. That’s why Venezuela is a basket case today. It is a complete tragedy.

Mr. Jekielek:
Mark, this has been a fascinating conversation. Any final thoughts as we finish up?

Dr. Skousen:
I want to suggest there is optimism, despite all of the problems that we face. Economists like Milton Friedman, Friedrich Hayek, and myself have proposed solutions with the work that we do. The real question is do we have the courage to follow these solutions. Americans have always been problem solvers, so we need to solve these problems.

Mr. Jekielek:
Dr. Mark Skousen, it’s such a pleasure to have you on the show.

Dr. Skousen:
My pleasure. Thank you, Jan.

Mr. Jekielek:
Thank you all for joining Dr. Mark Skousen and me on this episode of American Thought Leaders. I’m your host, Jan Jekielek.

This interview was edited for clarity and brevity.