Free marketeers should never let go of the proposition that taxation is theft.

However, as they are realists, they have also to concede – very grudgingly – that some money must be given to a government. As little as possible. Just enough for it to do what only a government can do: protect the country and the freedom of everyone in it.

So okay, governments may take a small percentage of earners’ incomes and label it “not stolen”.

But they always take more, and that’s morally abhorrent.

They make their immorality look honest by dressing it in laws.

Needless to say, the biggest thieves are the socialists. The more socialist a government is, the more it robs the nation. The fatter the government, the thinner the people.

Every now and then a government reveals its naked criminality. As now, for instance, in Cyprus, where the state is visibly extending its prehensile claw to snatch people’s money out of the banks. It calls the looting a tax.

This is from an article by Paul A. Rahe at Ricochet:

This weekend, the government of Greek Cyprus — under pressure from the European Union — negotiated a bailout that had as one of its provisions an assessment on the capital of those with deposits in the banks on Cyprus.

“An assessment on the capital” implies taxing, but the intention is to steal a portion of it.

Those with under 100,000 Euros in their accounts are slated to receive a 6.6% haircut while those with more than 100,000 Euros in their accounts will be docked 9.9%.

Rumor has it that the first proposal by the EU muggers in power was to seize 40%.

Whether the government can secure the approval of the Cypriot legislature for this unprecedented move remains unclear. There is talk of lowering the tax on deposits under 100,000 Euros to 3% and of raising the tax on larger deposits to 12.5%. But while the difference no doubt matters to ordinary Cypriots, whose savings are modest, and to the Russian oligarchs who have parked huge sums in the Cypriot banks, when viewed from a larger perspective, it matters not one whit. Indeed, at this point, it does not even matter whether the Cypriot government backs off from this plan altogether.

Banks are fiduciary institutions. They rely on trust; and, if there is a breach of trust, they are cooked. Individuals deposit money in banks instead of stuffing it in their mattresses because they believe that it will be safe there. Once they realize or even suspect that the money they put in the bank is anything but safe, they will take what is left of their money and run — and the bank will collapse. …

The Greeks will draw their own conclusions, as will the Spanish and the Italians and perhaps even the Irish and the French. No one who lives in a country that is in financial trouble and that may need emergency help from the European Union will entrust his loose change to a bank in his own country. The Euros in his mattress will retain their full value; those which he entrusts to the bank may, at least in part, be confiscated. …

That’s assuming the state won’t expropriate his Euro-stuffed mattress.

It would be hard to imagine what one could do to turn an ongoing crisis into a total catastrophe that would be more effective than the terms imposed by the European Union on Cyprus. That such a move is in contemplation is an indication of the degree to which the authorities in Brussels and Nicosia are in the grips of desperation.

And are foolish. And criminal.

Greek Cyprus got into in trouble in large part because of … Russian [mafia] deposits. The banks there had a great deal more money than they knew what to do with on the island, and so they loaned money to their less than creditworthy cousins in the republic of Greece. Now they have obligations that they cannot pay, and so they have turned to Brussels.

Had Greek Cyprus not joined the Euro, this problem would be relatively easy to solve. The government could simply devalue the currency and give the Cypriot banks’ Russian depositors a haircut in this time-honored fashion. That is what was done with considerable regularity in places such as Greece and Italy before they joined the Euro; and, if the Cypriots could do it now, it would have this virtue. The haircut imposed on their own citizens would — initially, at least — be less onerous. Abroad, the savings of the Cypriots would buy them less, to be sure. But, at home, for a while, it would buy them what it had before. Moreover, what the Cypriots produced at home would be more competitive in the world market — since its purchase would set the buyer back less — and as a tourist destination the island would be more attractive, since accommodations and food would for foreigners be cheaper than it had been. For a time, there might even be a boom.

I am not suggesting that devaluation is a joy nor that its long-term consequences are salutary. It isn’t a joy, and the consequences are not good. Inflation is apt to erupt, and inflation can all too easily become habitual. But a devaluation of the currency would not lead to a complete collapse of credit, which this tax on savings might well achieve.

Credit, you need to keep in mind, is what makes the world go round. Modern economies do not operate on cash. They operate on credit — which is to say, they rely on the very trust against which the European Union and the Greek Cypriot government have launched a devastating attack.

Bill Tatro points out that such robbery by the state could happen in America: 

To think those types of financial and economic events couldn’t happen here, hmmmmm…..In 1933, President Franklin Delano Roosevelt declared a national bank moratorium (he closed all banks.) Then, via Executive Order 6102, the government confiscated all gold and gold certificates, exchanging them for paper. Consequently, if you didn’t surrender your gold, you went to jail. The price of gold was set at $20.67 per ounce. Yet, within a year, the government reset the price to $35.00 per ounce, effectively fleecing the American public by 69%.

And speaking of rip-offs, just remember that … in 2009, President Barack Obama [when he bailed out GM] rejected the rule of law for GM senior and subordinated debtholders, thus relegating them to the back of the line. …

[And remember that] after extensive 2011 Congressional analysis failed to discover where the missing $1.6 billion of MF Global customer money had gone, J.P. Morgan was recently found to not have disclosed the risks taken and monies lost by the excess deposits as compared to the loans domiciled at J.P. Morgan. …

Following the “lost decade” of investment (2000-2009) which shed a very bright light on the failure of self-directed retirement accounts, former Treasury Secretary Tim Geithner discussed the possibility of nationalizing IRAs and 401ks [retirement savings accounts] …

So, regarding the current situation involving the third largest island in the Mediterranean Sea, can it happen right here in our country? …

It has happened, it is happening right now, and it will continue to happen.

An IBD editorial reports and comments:

Markets tumbled after Cyprus and the EU said they might tax private bank accounts to pay for a bailout. …

As bad as tumbling markets around the world are, they seem to be the only signal strong enough to catch the attention of Europe’s otherwise unaccountable bureaucrats who have long since learned to ignore street riots.

As stocks fell from Tokyo to New York, Europe’s leaders are scrambling to say they had nothing to do with the cause — the shutdown of all Cyprus banks and ATMs for at least three days and the expropriation of a large chunk of each now-captive account, as a “tax” to pay for Cyprus’ $13 billion EU bailout, Europe’s fifth.

Cyprus Prime Minister Nicos Anastasiades bitterly asserted he had been “blackmailed” by the EU and the International Monetary Fund to go along with the idea on Saturday, or there’d be no bailout. …

Aside from the fact that no fiscally responsible country should need a bailout and the roots of Cyprus’ financial crisis is based on long-term big-spending government and low-information voters, the bank shutdown nevertheless sets an ugly precedent rooted in the growing arrogance of EU power.

Until now, tax hikes and haircuts for bond-holders have been how Europe’s bailouts have been handled. …

Confiscating savings in banks and denying people access to their property without warning is something entirely different — and will do great damage to citizens’ willingness to save, invest and build wealth.

Oh sure, the rationale was that most of the depositors were shady foreigners, particularly from Russia, laundering money. But the photos of Cypriots banging on bank doors and protesting, much as the people of Argentina did when the same thing happened to them in 2002, tells a different story of human suffering.

The expropriation of the tiny country’s savings may have seemed like an easy test case for the EU because the population is small and some of the depositors are rich and unsympathetic, but the blowback will hit savings and investment — and future economic growth — all over Europe.

Worse still, it could catch on here.

Already Congressional Democrats are plotting the expropriation of Americans’ private 401(k) and IRA retirement savings accounts in favor of “a guaranteed income.”

If bank accounts can be casually expropriated in Cyprus to pay for big-spending governments and bailouts, there is no reason a nice slice of the $19 trillion in retirement accounts can’t get the same treatment.

It is certain* that General David Petraeus, as head of the CIA, lied to the nation about the armed attack on the US mission in Benghazi, Libya, which resulted in the death of Ambassador Stevens and three other Americans on 9/11/12. General Petraeus has now resigned, citing an adulterous love affair – not participation in a cover-up – as a moral lapse so grievous that it renders him unfit for high office.

In our judgment – and we are always and insistently judgmental – lying to the nation is a far worse moral offense than adultery. We would like to think that General Petraeus is of the same opinion.

The Obama administration has woven a tangled web of lies about the military defeat of the United States by Arab Muslims in Libya. Now they are desperately trying to cover up not only the truth but the lies as well. Ever more tangled the web becomes. So far, two Generals and an Admiral, all men of distinction and honor (see our posts Yet more about Benghazi – but still not enough, October 31, 2012, and Admiral fired in storm over Benghazigate?, October 31, 2012), have been entangled in it and brought down. Will the incredible luck that has sustained Obama throughout his political life keep him yet again from the disgrace he deserves?

We found that our suspicions about what might be the far more scandalous truth behind General Petraeus’s resignation are shared by Paul A. Rahe, who writes at his website Ricochet:

Here is what I wonder. Did David Petraeus allow himself to be blackmailed by the minions of Barack Obama?

The testimony Petraeus gave Congress on Benghazi shortly after the assassination of our ambassador to Libya was a restatement of the patently false narrative foisted on the country by Barack Obama, Hillary Clinton, and their underlings — to wit, that the assault on the American consulate was a spontaneous demonstration in reaction to [an anti-Islam] Youtube video.

Petraeus had to know better. The Benghazi bungle took place on the anniversary of 9/11. There was plenty of intelligence available to Petraeus prior to the event suggesting that Al Qaeda was becoming a real force in the region, and the e-mails that the CIA sent the White House at the time indicate that the folks in the agency knew within hours that the attack had been carefully planned and knew who in Benghazi was responsible.

So why did a man always known for his honor and integrity go before a Congressional committee and lie through his teeth? If Washington were Chicago, we would know the answer. Blackmail is, in Chicago, standard operating procedure. Is Washington now Chicago? Is Petraeus leaving office a disgraced and broken man because one act of dishonor and betrayal led him to commit another far more shameful?

I hope not. I greatly admire the man. … But I, nonetheless, have to ask, “Why did Petraeus lie?” And given the fact that the lie was part of a preposterous narrative being peddled by a President who knew that the truth might well be fatal to his reelection — and who depended on his lies being echoed by a pliable, servile press — I have to ask, “How did they get an honorable man to disgrace himself so utterly?”

If this line of questioning makes sense, then we have to entertain the possibility that David Petraeus is resigning because doing what he did in his testimony to Congress is distasteful in a fashion that a man of his mettle cannot long bear.

Congress should not let this pass. David Petraeus should be made to testify about Barack’s Benghazi Bungle. We have a right to know the truth. We had a right to know it well before the 6th of November. We now have a right to know why we were denied the truth.

Let’s conjecture that the Obama gang feared that the General would tell the truth when called to testify before Congressional inquiries next week. Obviously the head of the CIA is an indispensable  witness when a CIA mission was one of the targets in Benghazi and two of its men were killed. “So,” think the stoats and weasels in the White House, “let’s quickly get rid of the man who might reveal all that we’re trying to cover up – our incompetence, our callousness, our weakness, our bad judgment, our illicit dealings, our treachery – and stick another man in who will lie for us. Now on what grounds can we demand General Petraeus’s resignation? Well, there’s that love affair we know of. We’ll get him to say he’s so overcome by remorse for that he feels he must ask to be let go.”

Why does the General agree to do it? It’s another lie, even though the fact of the affair (finished some time ago) is true.  Let’s say he goes along with the new deception in order to be free to tell the truth. But will he tell the truth now as a private citizen? According to some media reports he will not be testifying before the closed-door Democrat-dominated Senate Intelligence Committee next week; the new conniving head of the CIA will be doing so in his stead.

But it is a different story with the Republican-dominated House whose inquiry into the Benghazi affair starts on Thursday. CNN reports:

Homeland Security Committee chairman Rep. Peter King, who is also a member of the House Permanent Select Committee on Intelligence, has been a vocal critic of the Obama administration’s handling of the September 11, 2012, attacks in Libya that killed four Americans including diplomat Chris Stevens. …

King said … that Petraeus is “an absolutely essential witness, maybe more than anybody else.”

“David Petraeus testifying has nothing to do with whether or not he’s still the CIA director, and I don’t see how the CIA can say he’s not going to testify,” King said. “I think his testimony is … certainly necessary … He was at the center of this and he has answers that only he has.”

If Petraeus does not testify as originally scheduled on Thursday, King said, “It should be very soon after that.”

When he does, if he tells the truth regardless of the consequences to the Obama administration or his own reputation, he will go a long way towards redeeming that reputation. If he shirks it, or endorses the administration’s lies yet again – great general though he is and deserving of all honor for his exceptional service to his country – his good name will be tarnished beyond redemption.

*

Secretary of State Hillary Clinton, who glibly stated that she “accepted responsibility” for what happened in Benghazi, is reported to have “turned down an invitation to testify before the House Foreign Affairs Committee next Thursday on the Benghazi attack”.

Note added 11/13/12. Go here to see what she will be doing that she considers more important than attending the inquiry into Benghazigate.

*

*We were wrong. There is no certainty about this. See the comment below by Loretta Landrum Richey 11/13/12.

Mark Steyn writes in The New Criterion:

Paul A. Rahe’s new book … is called Soft Despotism, Democracy’s Drift, which nicely captures how soothing and beguiling the process is. Today, the animating principles of the American idea are entirely absent from public discourse. To the new Administration, American exceptionalism means an exceptional effort to harness an exceptionally big government in the cause of exceptionally massive spending…

The professor opens his study with a famous passage from M. de Tocqueville. Or, rather, it would be famous were he still widely read. For he knows us far better than we know him: “I would like to imagine with what new traits despotism could be produced in the world,” he wrote the best part of two centuries ago. He and his family had been on the sharp end of France’s violent convulsions, but he considered that, to a democratic republic, there were slyer seductions:

I see an innumerable crowd of like and equal men who revolve on themselves without repose, procuring the small and vulgar pleasures with which they fill their souls.

He didn’t foresee “Dancing with the Stars” or “American Idol” but, details aside, that’s pretty much on the money. He continues:

Over these is elevated an immense, tutelary power, which takes sole charge of assuring their enjoyment and of watching over their fate. It is absolute, attentive to detail, regular, provident, and gentle. It would resemble the paternal power if, like that power, it had as its object to prepare men for manhood, but it seeks, to the contrary, to keep them irrevocably fixed in childhood … it provides for their security, foresees and supplies their needs, guides them in their principal affairs…

The sovereign extends its arms about the society as a whole; it covers its surface with a network of petty regulations—complicated, minute, and uniform—through which even the most original minds and the most vigorous souls know not how to make their way… it does not break wills; it softens them, bends them, and directs them; rarely does it force one to act, but it constantly opposes itself to one’s acting on one’s own … it does not tyrannize, it gets in the way: it curtails, it enervates, it extinguishes, it stupefies, and finally reduces each nation to being nothing more than a herd of timid and industrious animals, of which the government is the shepherd.

Welcome to the twenty-first century.

“It does not tyrannize, it gets in the way.” The all-pervasive micro-regulatory state “enervates,” but nicely, gradually, so after a while you don’t even notice. And in exchange for liberty it offers security: the “right” to health care; the “right” to housing; the “right” to a job—although who needs that once you’ve got all the others? The proposed European Constitution extends the laundry list: the constitutional right to clean water and environmental protection. Every right you could ever want, except the right to be free from undue intrusions by the state. M. Giscard d’Estaing, the former French president and chairman of the European constitutional convention, told me at the time that he had bought a copy of the U.S. Constitution at a bookstore in Washington and carried it around with him in his pocket. Try doing that with his Euro-constitution, and you’ll be walking with a limp after ten minutes and calling for a sedan chair after twenty: As Professor Rahe notes, it’s 450 pages long. And, when your “constitution” is that big, imagine how swollen the attendant bureaucracy and regulation is. The author points out that, in France, “80 per cent of the legislation passed by the National Assembly in Paris originates in Brussels”—that is, at the European Union’s civil service. Who drafts it? Who approves it? Who do you call to complain? Who do you run against and in what election? And where do you go to escape it? Not to the next town, not to the next county, not to the next country.

Now not even to the United States of America. He goes on:

Tocqueville’s great insight—that what prevents the “state popular” from declining into a “state despotic” is the strength of the intermediary institutions between the sovereign and the individual. The French revolution abolished everything and subordinated all institutions to the rule of central authority. The New World was more fortunate: “The principle and lifeblood of American liberty” was, according to Tocqueville, municipal independence. “With the state government, they had limited contact; with the national government, they had almost none,” writes Professor Rahe:

In New England, their world was the township; in the South, it was the county; and elsewhere it was one or the other or both… . Self-government was the liberty that they had fought the War of Independence to retain, and this was a liberty that in considerable measure Americans in the age of Andrew Jackson still enjoyed.

For Tocqueville, this is a critical distinction between America and the faux republics of his own continent. “It is in the township that the strengths of free peoples resides,” he wrote. “Municipal institutions are for liberty what primary schools are for science; they place it within reach of the people.” In America, democracy is supposed to be a participatory sport not a spectator one: In Europe, every five years you put an X on a piece of paper and subsequently discover which of the party candidates on the list at central office has been delegated to represent you in fast-tracking all those E.U.micro-regulations through the rubber-stamp legislature. By contrast, American democracy is a game to be played, not watched: You go to Town Meeting, you denounce the School Board budget, you vote to close a road, you run for cemetery commissioner.

Does that distinction still hold? As Professor Rahe argues, in the twentieth century the intermediary institutions were belatedly hacked away—not just self-government at town, county, and state level, but other independent outposts: church, family, civic associations. Today, very little stands between the individual and the sovereign, which is why schoolgirls in Dillon, South Carolina think it entirely normal to beseech Good King Barack the Hopeychanger to do something about classroom maintenance.

I say “Good King Barack,” but truly that does an injustice to ye medieval tyrants of yore. As Tocqueville wrote: “There was a time in Europe in which the law, as well as the consent of the people, clothed kings with a power almost without limits. But almost never did it happen that they made use of it.” His Majesty was an absolute tyrant—in theory. But in practice he was in his palace hundreds of miles away. A pantalooned emissary might come prancing into your dooryard once every half-decade and give you a hard time, but for the most part you got on with your life relatively undisturbed. “The details of social life and of individual existence ordinarily escaped his control,” wrote Tocqueville. But what would happen if administrative capability were to evolve to make it possible “to subject all of his subjects to the details of a uniform set of regulations”?

That moment has now arrived. And administrative despotism turns out to be very popular: Why, we need more standardized rules, from coast to coast—and on to the next coast. After all, if Europe can harmonize every trivial imposition on the citizen, why can’t the world?

Would it even be possible to hold the American revolution today? The Boston Tea Party? Imagine if George III had been able to sit in his palace across the ocean, look at the security-camera footage, press a button, and freeze the bank accounts of everyone there. Oh, well, we won’t be needing another revolt, will we? But the consequence of funding the metastasization of government through the confiscation of the fruits of the citizen’s labor is the remorseless shriveling of liberty…

But it seems like the way to bet. When President Bush used to promote the notion of democracy in the Muslim world, there was a line he liked to fall back on: “Freedom is the desire of every human heart.” Are you quite sure? It’s doubtful whether that’s actually the case in Gaza and Waziristan, but we know for absolute certain that it’s not in Paris and Stockholm, London and Toronto, Buffalo and New Orleans. The story of the Western world since 1945 is that, invited to choose between freedom and government “security,” large numbers of people vote to dump freedom every time—the freedom to make their own decisions about health care, education, property rights, and eventually (as we already see in Europe, Canada, American campuses, and the disgusting U.N. Human Rights Council) what you’re permitted to say and think…

When something goes wrong, a European demands to know what the government’s going to do about it. An American does it himself. Or he used to—in the Jacksonian America a farsighted Frenchman understood so well. “Human dignity,” writes Professor Rahe, “is bound up with taking responsibility for conducting one’s own affairs.” When the state annexes that responsibility, the citizenry are indeed mere sheep to the government shepherd. Paul Rahe concludes his brisk and trenchant examination of republican “staying power” with specific proposals to reclaim state and local power from Washington, and with a choice: “We can be what once we were, or we can settle for a gradual, gentle descent into servitude.” I wish I were more sanguine about how that vote would go.