Libertarians, while still a small minority, are growing in numbers. This is not in reference to Libertarian Party members, but philosophical libertarians. This, in tandem with a poor economy, leads to many libertarians being asked what their solution is to the bad economic conditions. There are many people out there who still don't know much about libertarianism and are genuinely curious. Unfortunately, there are also many people who do not like the answers. The reason is because people want to believe there is such a thing as a free lunch.
I consider myself to be a radical libertarian. But for the sake of this discussion, I am going to suggest some dramatic changes, without going all the way to a minarchist, panarchist, or anarchist society. These are solutions that could be adopted without eliminating the state.
The biggest drag on the economy is government spending. Everything that is spent by government is not being spent by the people who actually earned it. Everything the government spends is a misallocation of resources or a redistribution of wealth or both. In order to increase our standard of living and increase savings and production, there must be a dramatic reduction in overall government spending. For this discussion, I will just focus on federal spending for the U.S.
All wars must be ended. Not only are they immoral, but they are extremely expensive. In addition, most of the bases overseas should be closed and the troops should come home. (I did not say ALL bases, as I am trying not to be too radical for this post.) All foreign aid should be ended. The military budget should be cut by at least two-thirds. If there are no more wars and interventions, then the number of military personnel can be reduced dramatically. Even if it is just done through attrition, that process must start. But even employing a troop in America would be far cheaper than employing a troop in a country thousands of miles away.
Domestic spending must also be cut dramatically. The Department of Education should be eliminated. It would be up to the states if they want to make up the difference. The Departments of Labor, of Housing, of Agriculture, and of Energy should all be eliminated in a short amount of time. The federal government has no constitutional authority or any other business in these matters. There are many other departments and agencies that must go also. The federal war on drugs must also be ended.
So-called entitlement spending like Medicare and Social Security are more difficult because there are so many Americans currently depending on these programs. But something still needs to be done as they are unsustainable in their current fashion. The retirement ages to collect must be increased. It should be announced now and should be started soon.
The current tax rates must not go up. At the very least, they should be maintained and then lowered as spending is dramatically cut. While the tax code should be simplified and hopefully eliminated eventually, the amount of taxes being paid is more important than the method in collecting them.
The monetary system must change. The Fed should stop buying all government debt (which won't be necessary if there is no longer any new debt to buy). It should stop all monetary inflation. Legal tender laws should be repealed and all taxes on gold and silver should be repealed in order to allow for competing forms of money.
Regulations must be scaled back on a huge scale. It is extremely difficult to do business in America compared to what it once was. It is much easier now in other places like Hong Kong or Singapore. There are enough regulations at the state and local levels. We don't need a one-size-fits-all scenario where Washington DC is dictating the lives of over 300 million people.
If all of this were done in a short time span, then we would have a deep recession to clear out all of the previous malinvestment. But things would quickly recover and we would see a new prosperity that can only be dreamed of, especially when it is combined with current technology.
The one problem that is still difficult is the banks and the FDIC. Perhaps the government would have to bail out depositors (not banks) and the FDIC would have to be slowly phased out of existence. This is probably the hardest problem to solve for a libertarian right now.
Of course, none of this will happen, or at least not in the near future. But libertarians need to be ready with an answer on what to do about the bad economy. Our current system is very far away from a free market system. When government is cut dramatically and people are free to trade peacefully, then a strong economy will follow. Otherwise, we can count on more struggles ahead.