Travelers queue up at the security checkpoint in Denver International
The sequester is supposed to be about government self-control, but Washington has once again made it politics.The mandated reductions of $44 billion, about 1 percent of the budget (which is still larger than last year’s budget), are supposed to be spread out among all departments, each taking a haircut. Suddenly we hear stories of airports with two TSA lines being cut down to one line, a 50 percent reduction. This isn’t math, its politics.
Politicians use scare tactics, threats, and target public services that people need when they want money. If they cut the pork, nobody will care, so they talk about airport congestion and cuts in border security, and other things the government does that are important to people. They do not talk about spurious research grants, reduced building in Washington, congressional staff layoffs, a delayed ramp-up of Obamacare, or IRS layoffs.
American citizens had their taxes raised more than 1% last year, causing them to figure out how to live with less money, and most of them, poor or rich, highly educated or street educated, are able to figure out how to adjust. Taxpaying citizens have been learning how live with haircuts in the form of tax creep since income tax was passed in 1913. The current threats by government officials are a symptom of a government trying to hold its citizens hostage, not a government trying to live with a haircut. Continue reading →
One way we can improve the U.S. system of government is to change the nature of U.S. Supreme Court appointments. Anyone watching the appointment process realizes that there is a bitter partisan rivalry in which the money funding Democratic and Republican interests is highly involved, resulting in judges more serving oligopolic and ideological interests than serving the general society and Constitutional principles, with legal skills as top Constitutional scholars.
Another problem with the Supreme Court, in retrospect, is that it generally serves the consolidation of federal power, having little desire to see the states as a check on federal power. This is, in part, because it is part of the federal government, appointed by federal elites, and the power and prestige of the federal government reflects on the Court. Continue reading →
The U.S. Constitution was to Restrain Government and Consolidation of Power
In a December 30 editorial in the New York Times, Georgetown professor of constitutional law talks Louis Michael Seidman wrote about ideas in his book On Constitutional Disobedience, arguing that the failure of the U.S. government lies in archaic and evil provisions of the U.S. Constitution. I would argue that we should not treat the constitution as an inerrant eternal document that judges prooftext like theologians do sacred scripture, but much of our current dysfunction stems from ignoring the vision and principles behind it and the legal changes made in the two hundred years following its creation. In addition, I agree with him that the Founders could not anticipate many of the changes in technology and society. However, he is offering little hope that he would apply founding principles to these developments like large corporations and a global economy.
In his first example, Seidman argues that we should not care whether the tax plan originate in the Senate or the House. In some respects he is right because the 17th Amendment gutted the original Constitution of the very important reason to have two houses in the first place–the concept of checks and balances on power, with the States appointing Senators, and the populace electing their representatives. In that case it was important that the people paying the taxes–not elites–determine how their own money would get spent. Otherwise there is theft and dysfunction, which we know have in spades. With the passage of the 17th Amendment, the people elected representatives in both houses, so the concept of a Senator became gutted of its meaning except the “representatives” in the Senate serve longer terms. However, they represented the same group, so an important check and balance that helped to keep the system functional was made dysfunctional. In the present case, with no checks and balances, it would be more efficient to have a unicameral legislature. Continue reading →
Article 1, Section 8, of the U.S. Constitution forbids the existence of any federal agency like the BATF, FBI, TSA, or Homeland Security which trains military or policing activity at the federal level. It clearly says that the individual states should have militias that the Federal Government can call up, but it does not provide the federal government with the power to create militias or police forces. To grant such power would be a clear violation of necessary checks and balances between the states and the federal government.
The Federal government was to have military forces, but they were not to be deployed domestically. They were to defend the nation against an invasion, protect our embassies, and protect national property, but nowhere were they given authority to police citizens. In the language and philosophy of the U.S. Constitution, “national police” would be an oxymoron. Continue reading →
Government Debt Is a Form of Involuntary Slavery and A Violation of Fundamental Human Rights
Most Governments are Guilty of Slavery
One of the most serious social problems in the world today is government debt. Most of this debt is legally owed by individuals who never agreed to take on this debt obligation, but it was imposed on them by their governments. Such government debt ought to be viewed as a fundamental violation of human rights. Most countries that are members of the United Nations engage in this form of slavery that is more subtle, but no less pernicious and abhorrent than the physical slavery so publicly decried.
Article 4 of the UN International Declaration of Human Rights states:
No one shall be held in slavery or servitude; slavery and the slave trade shall be prohibited in all their forms.
The bankruptcy of San Bernardino analyzed by a Reuter’s article yesterday is a study in the growing dysfunctionality of governments in which public unions and politicians are creating total chaos by spending obligations that defy the laws of math and morality. Fifty years ago San Bernardino was a prosperous middle class city. Today over 1/3 of the population lives below the poverty line while a police lieutenant can retire with a one-time payout of $230,000 and a guaranteed pension of $128,000 per year after that. Nearly 75% of the city’s entire budget goes to the police and fire departments and its largest creditor, Calpers (the California State public employee fund), is owed $143 million. But Calpers says San Bernardino would have to pay $320 to leave its system, because it has banked on a mystical 8 percent projected return on its investment in San Bernardino. The second largest city debt is a list of private creditors that hold $46 million in pension bonds. They are threatening to sue.
Calpers and many other large public funds rely on Wall Street returns. In fact, many of them have entrusted hundreds of billions of dollars to Wall Street fund managers who are paid the huge Wall Street fees regardless of fund performance, and take up to a 20% commission if funds perform. As government pension funding projects further shortfalls (actuaries estimate public pension funds are now only funded with 41% of their obligations) they invest in higher risk stock and hedge funds–treating funds held in trust for government employees with much less respect than the employee would treat his own money. Some public employee pension funds appear no safer than Bernie Madoff’s schemes–they just play by looser rules (GASB vs. FASB) and expect taxpayer bailouts or future generations will pay for money they take from public treasuries. Continue reading →
Our current United States tax structure values slavery more than work. Let me unpack this statement a bit. We tax capital gains at 15% while we tax income on wage labor at 28% to 35%, about twice the rate. This means people will have a higher incentive to earn income through capital gains on investments than to work for a living. However, capital gains on investments are generated by someone else’s work, so one who invests in stocks or bonds is earning an income on someone else’s labor. This can be viewed as a variation on the concept of slavery.
From a moral standpoint, one is more entitled to the fruits of ones own labor than to the fruits of the labor of another. Hold on! you might say. Your capital is providing jobs for other people who voluntarily entered into the wage arrangements that will generate the wealth for the investor. I will not argue against the value of capital investments and the concept of capitalism in general. In fact, I am a supporter. My concern is with who controls capital and for what reasons. I will maintain that a system of taxation that encourages the exploitation of the labor of another more than individual work is morally suspect. I would much rather see people encouraged to invest capital in their own businesses. Current tax laws discourage that.
From a practical standpoint, this tax system encourages the demise of the American middle class, for the capital accumulated in investment funds is generally invested in production facilities in other countries and distribution through chain stores in the United States that pay less for labor. Ironically, the American middle class—both Democrat and Republican—have created this system and fueled it with tax exempt and tax-deferred pension funds.
Democrats often complain about the 1% and Wall Street corruption and corporate welfare that this system generates, but Democrats are as heavily invested in pension funds driving this system as are Republicans. The psychology driving this system is less than noble. It basically boils down to the concept that “I want to earn money and retire on profits generated by someone else.”
Continue reading →
Lower capital gains taxes fueled a Wall Street bubble.
While recently engaged in a dialogue with an individual who was upset with the greed on Wall Street and wanted to increase corporate taxes, I realized that he was unable to understand the difference between corporate taxes and capital gains taxes, and that neither political party or the media have been very helpful in educating American citizens about the difference—and the difference is huge.
Capitals gains taxes are taxes on profits that investors make on investments in corporate stocks.
Capital gains are also profits on other types of asset appreciation, including land, homes, and other non-paper investments. However, with the large increase in managed portfolios for retirement funds, capital gains on paper investments like corporate stocks have played a significant role in reshaping the US economy. No longer are just a few venture capitalists hoping to strike it rich on Wall Street, but tax deferred 401k and 403b retirement accounts have turned most government and corporate employees, both Democrat and Republican, into investors in corporate stocks. Wall Street has become a Main Street idea. Republicans like Mitt Romney, who worked at Bain Capital, argue that these taxes should be kept low so that individuals will invest their money in corporations. Reductions in capital gains taxes were part of the “Reaganomics” strategy that brought in more investment capital and led to the rebirth of the American economy and jobs in the 1980s that is worthy of being called “miraculous.” Their success has caused many people to advocate low or no taxes on capital gains as a way to create jobs, and this is a priority on the Republican Party Platform.
The Wall Street boom that accompanied the increased investments in the 1980s led to many opportunities, challenges, and changes on Wall Street. Large concentrations of money in one place led to many temptations, wider acceptance of greed, higher payouts, and bought-off regulators in the SEC. Banks wanted to begin investing, using money from FDIC guaranteed depositors to speculate on the market. Both Republicans and Democrats received increased contributions from Wall Street and banking lobbyists. There were inadequate checks and balances in the system to prevent this behavior and politicians in both parties turned a blind eye, letting the “good times roll.” Continue reading →
The Federalist Papers: The Best Argument for the Constitution
Today I was sent an article by a friend asking for my response. It is titled “The Birth of the Administrative State: Where It Came From and What It Means for Limited Government” written by Ronald J. Pestritto, Associate Professor at Hillsdale College. It shows how understanding the Federalist Papers can lay bare many common errors and misconceptions about government in our culture and political parties today. I encourage you to read this article, and you will find my response to my friend Alan below.
This is an excellent article. It makes many of the main points that I have been making on this blog, and sheds light on the actions of some particular individuals like Woodrow Wilson, Dewey, and Goodnow who, like Obama, were academics sheltered in the cocoon of their ivory towers and failed to display any real understanding of human nature, incentive, and the production of goods. I think this sentence pointed out the main mistake of the progressives: Continue reading →
The Federalist Papers: The Best Argument for the Constitution
Paragon House has made available a new edition of the Federalist Papers designed for e-book readers. Rereading them might be a good place to start in understanding how to rein in the out-of-control growth of U.S. governments.
The Federalist Papers were written over 200 years ago as an argument for New York State to ratify the U.S. Constitution. They contain an understanding of human nature, political power, and core principles often ignored by today’s political leaders, courts, schools, and the media. This ignorance has led to the breakdown of our political systems and to an unchecked growth of government. The application of these principles to our current governments can unleash the freedom, human energy, optimism, and economic productivity, necessary to provide a foundation for peace. Continue reading →