Government, Taxes & Spending – XIII

In the previous essay in this series, I began an examination of the havoc wrought upon our nation by the statists’ unscrupulous manipulation of the Constitution’s usage of the phrase “to promote the general welfare” (as it is worded in the Preamble) and “to provide for…the general welfare” (as it is worded in Article I, Section 8).  The question could be raised, “Just what havoc has been foisted upon us because of this phrase?”  True, in the previous essay I only outlined the warnings given by those opposed to the ratification of the Constitution regarding the potential abuse of this phrase.  Space does not permit me to include all that has been passed by legislators down through our history, the executive orders issued by various presidents, or even more so, the astronomical abundance of regulations vomited upon our freedom and liberties by the faceless horde of bureaucrats manning the insidious agencies established by different Congresses over the years.  However, I will give you a few examples and you can then readily name others that come to your mind.

We need go back only as far as FDR’s “New Deal” (or more appropriately his “Raw Deal”) to see examples of this destructive manipulation.  Take the Social Security Act ─ was that not put forth as being a program that would be for “the general welfare”?  (Of course there was LBJ’s expansion of this with the passage of Medicare and Medicaid, again for the same reason, our “general welfare”.)  Yet, of all the programs of our society today, which ones most threaten to topple our economy and with it, our society?   During that same time there was the passage of the Fair Labor Standards Act which would guarantee a “decent minimum wage” for all workers and limit the hours an employer could require them to work.  Again, such lofty ideals were trumpeted to be for “the general welfare”.  However, as such economic giants as Milton Friedman, F.A. Hayek, and authors such as Ayn Rand and Alan Greenspan have written, such restrictions have had exactly the opposite effect.  A minimum wage mandated by governmental fiat will, in the long run, suppress wages and cause a higher rate of unemployment ─ something you could hardly categorize as being for “the general welfare”

Consider if you will some more recent forays by the general government against our freedom and liberties.  The Departments of Agriculture, Education, Energy and Environment ─ just to name a few ─ were all created to aid “the general welfare” of the nation; but instead, what they have done is squander billions upon billions of our earnings taken from us by the government through the intimidation of the Internal Revenue Service.  For example, President Carter established the Department of Energy in order to make the nation less dependent upon foreign oil.  Forty years and a bloated bureaucracy later, do you see where this goal has been achieved?  The Department of Education has done nothing to elevate the level of education among our populace as it was intended to do.  While academic scores have declined since its inception, this agency has provided the conduit though which local parental control over the education of their children has been usurped by the general government.  Do I even need to go into our most recent example of this, the passage of “Obamacare”?  No, I think not; this is enough to paint the picture of how devastating this phrase has been to our freedom, liberties, and our way of life.

Permit me in the remainder of this post to share with you the thoughts on this subject of that champion of liberty and the author of our Declaration of Independence, Thomas Jefferson.  This stalwart defender of the principle of republicanism saw much danger in this phrase and with great clarity foresaw its abuse in enslaving us under a despotic “nanny” state.

In a letter dated September 9, 1792, replying to a request made by then President George Washington for his opinion on a matter being promoted by Jefferson’s arch rival Alexander Hamilton (the architect of our current all-invasive central government), Jefferson attacked this danger head-on, asserting that Hamilton’s proposed concentration and extension of the government’s power was both a sham and a perversion of the Constitution:

“…in a Report on the subject of manufactures (still to be acted on) it was expressly assumed that the general government has a right to exercise all powers which may be for the general welfare, that is to say, all the legitimate powers of government:  since no government has a legitimate right to do what is not for the welfare of the governed.  There was indeed a sham-limitation of the universality of this power to cases where money is to be employed.  But about what is it that money cannot be employed?  Thus the object of these plans taken together is to draw all the powers of government into the hands of the general legislature, to establish means for corrupting a sufficient corps in that legislature to divide the honest votes & preponderate, by their own, the scale which suited, & to have that corps under the command of the Secretary of the Treasury for the purpose of subverting step by step the principles of the constitution, which he has so often declared to be a thing of nothing which must be changed” [emphasis added].

As if that was not blunt enough, in his letter to Eldridge Gerry on January 26, 1799, he affirmed his opposition to what we see today ─ a bloated bureaucracy with legions of bureaucrats draining our financial resources and piling up mountains of debt, all in the name of “the public good” (or “general welfare”):

“I do then, with sincere zeal, wish an inviolable preservation  of our present federal constitution, according to the true sense in which it was adopted by the States,…I am for preserving to the States the powers not yielded by them to the Union,…and I am not for transferring all the powers of the States to the general government….I am for a government rigorously frugal & simple, applying all the possible savings of the public revenue to the discharge of the national debt; and not for a multiplication of officers & salaries merely to make partisans, & for increasing, by every device, the public debt, on the principle of its being a public blessing [emphasis added].

Yet this is exactly what happens when a welfare state with a mixed economy is created wherein fifty percent of the citizenry contributes nothing to the government treasury.  Instead, they  live on the public dole of sundry “general welfare” programs; as a result they continue to support those statists who maintain their positions of power by taking from the producers in society and giving to those who are not.  This is the result when the Constitutional rights and powers of the states are stripped away from them and absorbed by the central government.  This is why those of us who stand as the heirs to Jefferson’s republicanism and original intent in regards to the Constitution must stand and let our voices be heard in opposition to all that is done under the guise of “general welfare”.  If we do not, then we will sink beneath the waves of fascism, weighted down by these burdens which no free society can bear.

He further stated the wisdom of a federal system built upon the principle of republicanism in a letter to  Gideon Granger on August 13, 1800, as it relates to leaving things that are concerned with matters of general welfare to the governments closest to the people, and that the general government should be concerned with a very few explicit responsibilities:

“The true theory of our constitution is surely the wisest & best, that the states are independent as to everything within themselves, & united as to everything respecting foreign nations.  Let the general government be reduced to foreign concerns only, and let our affairs be disentangled from those of all other nations, except as to commerce, which the merchants will manage the better, the more they are left free to manage for themselves, and our general government may be reduced to a very simple organization, & a very unexpensive one; a few plain duties to be performed by a few servants [emphasis added].

If the general welfare clause authorizes the broad expanse of power that so many statists claim it does, then why did the framers enumerate a list of powers following the opening section in Section I, Article 8 of the Constitution?  In response it is argued that those enumerations were listed as the “main powers” or as mere “examples” but were not meant to be all-inclusive.  Really?  Let us turn again to Jefferson’s thoughts on how he viewed this approach to interpreting the Constitution:

“When an instrument admits two constructions, the one safe, the other dangerous, the one precise, the other indefinite, I prefer that which is safe & precise.  I had rather ask an enlargement of power from the nation, where it is found necessary, than to assume it by a construction which would make our powers boundless.  Our peculiar security is in possession of a written Constitution.  Let us not make it a blank paper by construction….If it has bounds, they can be no others than the definitions of the powers which that instrument gives.  It specifies & delineates the operations permitted to the federal government, and gives all the powers necessary to carry these into execution” (Letter to Wilson Cary Nicholas, Sept. 7, 1803) [emphasis added].

As you look over the landscape of the current makeup of our central government with all its bureaucracies, established to carry out the copious “general welfare” programs that have been brought into existence over the years, does it appear to you to be a “simple organization” ─ one with limitations on its powers ─ or a behemoth whose powers have been enlarged to the point where the Constitution has been made into nothing more than “blank paper”?  Does the argument in favor of applying an expansive meaning to the phrase “general welfare” strike you as being “safe and precise” or “dangerous and indefinite”?  I believe the reality of our government today speaks for itself in answer to that question, and it is not the answer given by Jefferson.

He who wrote that “all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are Life, Liberty and the pursuit of Happiness” also pointed out that if we as a people are to realize this right to happiness it cannot be attained if we have a government that wastes the fruit of our labors by assuming the responsibility of providing for each and every necessity under the guise of it being for our general welfare:

“If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy” (Letter to Thomas Cooper, Nov. 29, 1802).

He went on to warn in a letter to Joseph Cabell on Feb. 2, 1816, that the threat to this happiness comes from the consolidation of power into the hands of the central government instead of it being dissipated down through more local channels.  From such division of authority, he asserts, comes the protection of our liberties by providing a strong network of checks and balances on the powers of these various levels of government against one another:

“…the way to have good and safe government, is not to trust it all to one, but to divide it among the many, distributing to every one exactly the functions he is competent to….It is by dividing and subdividing these republics from the great national one down through all its subordinations, until it ends in the administration of every man’s farm by himself; by placing under every one what his own eye may superintend, that all will be done for the best.  What has destroyed liberty and the rights of man in every government which as ever existed under the sun?  The generalizing and concentrating all cares and powers into one body,…” [emphasis added].

Given this, then, and our current state of affairs, what would Jefferson have us do?  Did he foresee the possibility of his beloved Republic becoming what it is today?  To these questions he did give answer, just seven months before his death.  In a letter to William Branch Giles, dated December 26, 1825, he detailed what has become our fate and what steps we must attend if we are to regain the liberties which are being swallowed up by the tyranny that our central government has become:

“I see, as you do, and with the deepest affliction, the rapid strides with which the federal branch of our government is advancing towards the usurpation of all the rights reserved to the States, and the consolidation in itself of all powers, foreign and domestic, and that, too, by constructions which, if legitimate, leave no limits to their power.  Take together the decisions of the federal court, the doctrines of the President, and the misconstructions of the constitutional compact acted on by the legislature of the federal branch, and it is but too evident, that the three ruling branches of that department are in combination to strip their colleagues, the State authorities, of the powers reserved by them, and to exercise themselves all functions foreign and domestic.  Under the power to regulate commerce, they assume indefinitely that also over agriculture and manufactures, and call it regulation to take the earnings of one of these branches of industry, and that too the most depressed, and put them into the pockets of the other, the most flourishing of all.  Under the authority to establish post roads, they claim that of cutting down mountains for the construction of roads, of digging canals, and aided by a little sophistry on the words ‘general welfare,’ a right to do, not only the acts to effect that , which  are specifically enumerated and permitted, but whatsoever they shall think, or pretend will be for the general welfare.  And what is our resource for the preservation of the constitution?  Reason and argument?  You might as well reason and argue with the marble columns encircling them.  The representatives chosen by ourselves?  They are joined in the combination, some  from incorrect views of government, some from corrupt ones, sufficient voting together to out-number the sound parts; and with majorities only of one, two, or three, bold enough to go forward in defiance.  Are we then to stand to our arms,…?  No.  That must be the last resource, not to be thought of until much longer and greater sufferings….We must have patience and longer endurance then with our brethren while under delusion; give them time for reflection and experience of consequences; keep ourselves in a situation to profit by the chapter of accidents; and separate from our companions only when the sole alternatives left, are the dissolution of our Union with them, or submission to a government without limitation of powers.  Between these two evils, when we must make a choice, there can be no hesitation[emphasis added].

Is it not evident that Jefferson saw so clearly the beginnings in his own day on a small scale what we see today played out before us “from sea to shining sea” on a much broader and expansive plain?  And what does he give us as our alternative as an answer to this assault upon our freedom and liberties?  Not reason and argument ─ this is something which we know will not work with the fascists who dominate the Democrat Party in Congress and the Obama Administration.  Armed rebellion ─ the reason we have the right to bear arms guaranteed to us by the second amendment?  Possibly, but only as a last resort.  Secession of States from the Union?  When the only choice left is liberty or tyranny, yes; however, such a likelihood was squashed by Lincoln when he launched the unconstitutional invasion of the southern states who tried to do just that. 

That leaves us with relying upon our elected representatives to do the right thing by us and the Constitution.  But I must ask, how has this option worked out ─ especially as of late?  Not very well, as we have too many men and women ensconced in their positions in Congress who are more in love with their status and power than they are with the principles of freedom, liberty, and the obligation of their oath to uphold the Constitution, and who have sold out our freedom and liberties for a bowl of pottage.  Jefferson stated we must have patience with them until they come to realize their mistaken judgments, but the time for patience has run out.  It is time that we resort to the only peaceful remedy left us, namely, the voting out of office all those who have made a career of using, in Jefferson’s words, “sophistry”.  These sophists who distort the intent of the Constitution so as to aid and abet their grasp on power, must be replaced with men and women who have a love for the principles upon which this nation was founded ─ men and women who will put principle above personal gain and prestige.  Only then can we begin the dismantling of this monolithic monster which has been erected upon the perverted foundation of “the general welfare”.



Government, Taxes & Spending – XII (or “How the Confederacy ‘Got It Right'”)

Perhaps no greater damage has been done to our Republic through a twisting of the Constitution by unscrupulous politicians than the claim that the so-called “general welfare” clause authorizes the central government to spend money on anything and everything they deem to be within the description of these two words.  The phrase occurs twice in the Constitution ─ in the Preamble, and in Article I, Section 8 ─ and perhaps the fact of its repetition is what the advocates of a large centralized government rely upon as the strength of their argument in expanding the control of the government into our lives by its profligate spending.

The Preamble to the Constitution reads:

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America” [emphasis added].

As a preamble’s purpose is to set forth the purpose of a document, its general framework, it is argued that the purpose of establishing the central government was to do whatever deemed necessary to “promote the general Welfare.”  This “truth” is furthermore argued to be buttressed by the empowerment statement in the opening sentence of Article I, Section 8:

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;” [emphasis added].

What is most telling about how dangerous this phrase was viewed by those states who seceded and formed the Confederate States of America, is amplified in the wording of its Constitution, which was in most parts a mirror image of the US Constitution.  That these states had a constitutional right to secede from the Union will have to wait for another discussion, but note the glaring omission in the preamble of the Constitution of the Confederate States of America:

“WE, the People of the [United States] Confederated States, each State acting in its sovereign and independent character, in order to form a [more perfect Union] permanent Federal government, establish Justice, insure domestic Tranquility [provide for the common defense, promote the general Welfare], and secure the Blessings of Liberty to ourselves and our Posterity, invoking the favor and guidance of Almighty God, do ordain and establish this Constitution for the [United] Confederate States of America. ”

The phrases in italics are what they added to the preamble of the US Constitution, and those enclosed in brackets were the words or phrases they omitted.  Most notably absent was the phrase under consideration in this essay, namely, “to promote the General Welfare.”  Compare again the wording of Article I, Section 8 of the US Constitution with Section 8 of the CS Constitution:

“The Congress shall have Power

To lay and collect Taxes, Duties, Imposts and Excises, for revenue necessary to pay the Debts [and], provide for the common Defence [and general Welfare of the United States; but], and carry on the government of the Confederate States;

What was it that these states saw in this phrase that would prompt them to omit it from theirs?  The answer is quite simple ─ they saw the havoc it was causing to the system of republicanism upon which the country had originally been founded.  I need not delve into how even greater havoc has been unleashed upon us in the century and a half since their attempted secession.  During the debates over the ratification of the Constitution, those who opposed its usage warned of the danger posed by the twisting of this phrase in eroding our freedom and liberties.  Most notable among those who issued this warning, though he did support the Constitution’s ratification, was that great champion of republicanism, freedom and liberties, namely, Thomas Jefferson.  In the remainder of this essay, I will share with you quite a number of quotes from these patriot founders so that you may see what they foresaw as the angst we groan under today.

In-as-much as I began this current series of essays on the topic of taxation, allow me to begin these quotes with one from the Antifederalist writing under the pseudonym “Centinel”.  In an essay published on October 5, 1787, he points out that this phrase will give the central government the power to levy any and all kinds of taxes, to dictate the taxes that states may levy, and use force of arms (which Alexander Hamilton did use in 1791, but today is done through the intimidation of the IRS) to collect taxes, just so they can spend it on whatever program suits its fancy:

“The celebrated Montesquieu established it as a maxim, that legislation necessarily follows the power of taxation….and all external objects of revenue, such as unlimited imposts upon imports, etc. ─ they are to be vested with every species of internal taxation;─ whatever taxes, duties and excises that they may deem requisite for the general welfare, may be imposed on the citizens of these states, levied by the officers of Congress, distributed through every district in America; and the collection would be enforced by the standing army, however grievous or improper they may be.  The Congress may construe every purpose for which the state legislatures now lay taxes, to be for the general welfare, and thereby seize upon every object of revenue.”

In this same essay, Centinel continued to argue the merits of federalism which would mitigate against the general government from using this argument of “general welfare” to expands its power because those things most needed for the general welfare of the citizens would be best served by the state and local governments:

“If one general government could be instituted and maintained on principles of freedom, it would not be so competent to attend to the various local concerns and wants, of every particular district, as well as the peculiar governments, who are nearer the scene, and possessed of superior means of information;”

Contrast Centinel’s comments above with the impossibility of what those who twist the meaning of this phrase in Article I, Section 8 of the Constitution ─ that this was to be for “the general welfare of the United States.”  The word “general” implies a broad, all-encompassing concept, applicable to a majority, which in this case includes the entire United States!  Yet, the task involved in providing the multitude of items by our central government for which this phrase has been used as justification is utterly impossible due to its sheer magnitude.  In November 1963, Nathaniel Branden wrote in a short essay on “Capitalism’s Practicality”:

“…the more complex an economy, the greater the number of choices and decisions that have to be made ─ and, therefore, the more blatantly impracticable it becomes for this process to be taken over by a central government authority.”

This echoes the principle repeatedly argued by F.A. Hayek in a number of his works.  Given the expansiveness of a society (such as that of the United States), it is impossible for any one individual or group of individuals to adequately effect the central planning in behalf of that entire society because it is impossible for them to know all of the facts necessary to make the proper decisions and plans.

Foreshadowing this principle argued by Branden and Hayek was another Anti-Federalist who wrote under the pseudonym “The Federal Farmer.”  In arguing against the states being swallowed up into one centralized government under the proposed Constitution, he stated:

“…that one government and general legislature alone, never can extend equal benefits to all parts of the United States: Different laws, customs, and opinions exist in the different states, which by a uniform system of laws would be unreasonably invaded.”

In other words, what might be construed as a matter of “general welfare” in one part of the country (or by some states) would not of necessity be so considered by another part (or other states).  Consider some of the more hotly debated issues of our time ─ gun control, socialized health care, illegal immigration ─ the difference in viewpoints varies considerably both in viewpoint and intensity from one region or state to another.

When the Pennsylvania Convention ratified the Constitution on December 12, 1787, by a vote of 46 to 23, those who had opposed the ratification issued a “Minority Report” in which they warned that the central government being created by the Constitution would eventually use these broad clauses such as “general welfare” to pass just about any law it pleased:

“The Congress might gloss over this conduct by construing every purpose for which the state legislatures now lay taxes, to be for the ‘general welfare,’ and therefore as of their jurisdiction.”

I ask, has this dire prediction not come to pass in our day and time?  Have not the states become the mere vassals of the central government obliged to do its bidding in order to continue to receive the financial crumbs thrown to them ─ crumbs that came from the bread produced by and taken from the mouths of the very citizens of the states?   Later in their report this minority went on to decry how this would ultimately destroy individual responsibility, industry, and self-reliance:

“Miserable is the lot of that people whose every concern depends on the WILL AND PLEASURE of their rulers.”

Yes, indeed!  How miserable we have become, have we not?!  Today, to whom does the majority of our populace turn to for help and assistance with almost every one of life’s necessities?  Is it not our central government in Washington, D.C.?  Not surprisingly the rulers and bureaucrats of our central government happily oblige these requests in return for the support of these slaves in keeping them in power.

This point was eloquently expounded by one of the most articulate of the Anti-Federalists, Robert Yates, writing under the pseudonym “Brutus”.  In his essay published on October 18, 1787, he wrote:

“The powers of the general legislature extend to every case that is of the least importancethere is nothing valuable to human nature, nothing dear to free men, but what is within its powerIt has authority to make laws which will affect the lives, the liberty, and property of every man in the United States; nor can the constitution of laws of any state, in any way prevent or impede the full and complete execution of every power given….there is no limitation to this power unless it be said that the clause which directs the use to which those taxes, and duties shall be applied, may be said to be a limitation; but this is no restriction of the power at all, for by this clause they are to be applied to pay the debts and provide for the common defence and general welfare of the United States,…and they only are to determine what is for the general welfare; this power therefore is neither more nor less, than a power to lay and collect taxes, imposts, and excises, at their pleasure; not only is the power to lay taxes unlimited, as to the amount they may require, but it is perfect and absolute to raise them in any mode they please [emphasis added].

He went on a little later in his essay to state that (in regards to the phrases in the 8th section of the 1st article of the Constitution):

“The powers given by this article are very general and comprehensive, and it may receive a construction to justify the passing of almost any law”  [emphasis added].

Re-read the parts of these quotes I have emphasized and ask yourself if what we see today by the “progressives” in Congress and the Obama Administration are not in fact doing exactly what Yates said they would do all the while claiming Constitutional authority for their actions!

Such a claim to power is an absurd abstraction that will be arbitrarily applied by whichever group holds the reins of power at any given time.  Once more, I give you the erudite commentary of Brutus, written on December 27, 1787:

“…in the very clause which gives the power of levying duties and taxes, the purposes to which the money shall be appropriated, are specified, viz., to pay the debts, and provide for the common defence and general welfare.  ‘I would ask those, who reason thus, to define what ideas are included under the terms, to provide for the common defence and general welfare?  Are these terms definite, and will they be understood in the same manner, and to apply to the same cases by every one?  No one will pretend they will.  It will then be matter of opinion, what tends to the general welfare; and the Congress will be the only judges in the matterTo provide for the general welfare, is an abstract proposition, which mankind differ in the explanation of, as much as they do on any political or moral proposition that can be proposed; the most opposite measures may be pursued by different parties, and both may profess, that they have in view the general welfare; and both sides may be honest in their professions, or both may have sinister views….

It is certainly right and fit, that the governors of every people should provide for the common defence and general welfare; every government, therefore, in the world, even the greatest despot, is limited in the exercise of this power.  But however just this reasoning may be, it would be found, in practice, a most pitiful restriction.  The government would always say, their measures were designed and calculated to promote the public good; and there being no judge between them and the people, the rulers themselves must, and would always, judge for themselves[emphasis added].

So I ask you ─ when you survey the intrusiveness into our lives by this monolithic Minotaur called our “Federal Government”, accompanied by its minions of bureaucracies and their unaccountable agents spewing forth repressive regulation upon repressive regulation, all of which is purportedly for our “general welfare” ─ which Constitution “Got it right? The US Constitution or the Constitution of the Confederacy?”  I would submit to you, in viewing the damage done to our freedom and liberties under the cover of the phrase “provide for the…general welfare”, on at least this one point, the Confederates “got it right.”

– Epaminondas

Government, Taxes & Spending – XI

In the first ten essays of this series I examined the constitutional basis for taxation, the various kinds of taxes employed or proposed to be employed by our general government, and how destructive our current income tax system is to both our freedom and liberties, and our economic strength and prosperity.  I have also set forth what I and many others believe to be the best solution to our economic ills as far as taxation is concerned ─ the passage of H.R. 25, The Fair Tax Act, into law ─ a system of taxation which would eliminate all income-related taxes.  However, as I closed the previous essay, how to best provide revenue to the general government is only part of the problem we face today ─ the other part is the kind and amount of spending of this revenue by the government.

As I have stated before, the right of the general government to levy and collect taxes is totally proper and within its constitutional powers.  That Congress has the power to enact oppressive taxation can hardly be disputed.  In order to better understand how we arrived at our present condition, perhaps it would be best to return to our roots and see how this journey began. 

The Constitution authorizes all revenue (tax) bills to originate within the House of Representatives.  Article I, Section 7, Clause 1 states

“All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”

The reason for this was simple ─ the House of Representatives was composed of elected individuals who were to be closest to the people ─ those who would ultimately bear the burden of any and all taxes enacted by the Congress.  Therefore, it was believed that those representatives would be the fieriest guardians of the interests of their fellow constituents in protecting them from unreasonable and onerous taxation ─ a prime instigation for the War of Independence.  During the Constitutional Convention of 1787 much heated debate raged over this clause.  Elbridge Gerry, a delegate from Massachusetts who had proposed this clause, originally worded it where all such tax bills were to originate within the House with no right of amendment given to the Senate.  The reason was to protect the people from the Senate which Gerry (and many others who were fearful of an overly-powerful general government) feared would become an aristocratic body not as empathetic to the people.  Such a Senate would weaken the power of the House (representing the people) to protect the citizen taxpayers.

On the other side of this issue were those who favored a strong central government and who had little love for states’ rights or individual liberties which the concept of federalism afforded individual citizens.  Alexander Hamilton, for instance, was one of the staunchest promoters of this view of what should be the nation’s new government.  Aided in the opposition on this issue was James Wilson of Pennsylvania who proposed the addition of the latter part of this clause giving the Senate amendment rights.  In the compromise that resulted in the clause being adopted into the Constitution, history has shown the power to control tax legislation has been greatly diluted.  In effect, we have seen over the years how this so-called “Origination Clause” has been routinely subverted by not only the Senate but by the Treasury Department and its sub-department, the IRS, inasmuch as the seed for many revenue bills have their germination in these agencies.  Indeed, just in the closing days of 2010 we have seen a massive “Continuing Resolution Bill”, laden with all kinds of “pork projects”, originate in the Senate instead of with the “Peoples’ Representatives” in the House ─ the people ─ you, me and our descendants ─ who would have been burdened with more debt and the threat of higher taxation to repay it.

Consider if you will the following requirement placed upon Congress regarding the spending of the money collected by the general government, as found in Article I, Section 9 of the Constitution:

“No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

Notice the severe restrictions of the words used in this clause:  No money”, butby Law, “regular Statement and Account…of all…Money shall be published….”  Does this sound like how our tax monies are being accounted for?  When was the last time we saw a published accounting of just where all these trillions of our tax dollars was spent ─ and if it were to be published, what would the likelihood be of it being “transparent”, forthright, and understandable?

Article I, Section 8 contains the so-called “enumerated powers” that the sovereign nation-states granted to the general government, all the while retaining all other powers to themselves (Amendments 9 and 10).

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and Post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings; And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

As you read through this list, notice just how few powers granted to Congress and the general government actually require money and therefore are the only explicitly authorized expenditures by the Constitution Congress is authorized to make.  Summed up, these limited authorized expenditures are as follows:

  • To pay the debts (resulting from the enumerated authorization to “borrow money on the credit of the United States”);
  • Provide for the common Defence (and hence further down in the list, the authority to pay for wars which may be declared, which then requires the “raising and support of an army”, “the provision and maintenance of a navy”, “to provide for organizing, arming, and disciplining, the Militia”, and the “erection of Forts, Magazines, Arsenals, dock-Yards”);
  • To coin Money (which obviously requires funds to produce such coinage);
  • To establish Post Offices and Post Roads (Note that this is one of the few “centrally-controlled”  businesses that the Constitution authorizes and which has been proven now to be grossly inefficient and costly.  Furthermore, take note also that it authorizes the building of “post roads” ─ not any and all roads in general such as the interstate highway system started under President Eisenhower, which was a massively mismanaged project.  The early history of the nation is replete with examples of how local and private endeavors to construct roads and canals were much more efficient and successful than those attempted by the general and even state governments).
  • To constitute Tribunals inferior to the supreme Court would obviously entail the rent or construction of court houses and the salaries of judges appointed to serve in those tribunals.
  • and other needful Buildings ─ a general authorization, but most certainly not one that authorizes buildings on an indiscriminate scale ─ only those justified as being “needful”.

 Through all of these we can see some common threads woven together.  Much of what is delineated has to deal with the defense of the union from outside forces or internal insurrections ─ situations in which the combined might of all of the states would be required under a unified command.  The other items have to deal with assisting the union of the states in their connectivity with each other through communication (post offices & post roads), and the provision for the judiciary so that citizens in the various regions of the country would have access to the dispensing of justice should it be required.  Tying all of these together is the obvious necessity of establishing the means of producing a common currency to pay for all this and to aid in the exchange of commerce between the states. 

Clearly, the vast majority of what the central government spends our money on today is far and away outside the scope of these items.  However, those who argue for the extensive governmental interference in our lives and the justification for taxing us to that end point out that the opening clause of this section details three general areas which the Constitution authorizes revenue expenditures:  to pay the Debts and provide for the common Defence and general Welfare of the United States.  With the second of these three, there is no disagreement, as I have pointed out in my preceding comments.  That debts honorably incurred ought to be paid will also not garner any objections (although the reasons for the incurring of the debt certainly are open for dispute).  It is with the final phrase that has become the “catchall” authority for all of our massive government spending that we see today.

So the question is, “Does the clause, ‘provide for the…general welfare of the United States’ justify the bloated budget of our modern-day central government?”  Just what did the founders intend when they inserted this phrase?  The answer is, “It depends upon which founder you have in mind.”  In the next essay we’ll take up this issue and examine this phrase which has come to wreck so much havoc on our society today and lies at the root of the loss of much of our freedom and liberties.


Government, Taxes & Spending – X

In the previous two essays in this series, I have set forth the arguments in favor of replacing our current income tax system with a national consumption tax known as “The Fair Tax”, which legislation (H.R. 25) is currently bottled up in committee in Congress.  In the first seven essays, I covered the history of our income tax, the options that have been set forth as alternatives (all of which are not alternatives but are additional taxes on top of the income tax, e.g., the Value Added Tax), the evaluations of reports, recommendations by leading economists, and even quotes from the former head of the IRS on how oppressive and anti-liberty our tax system really is. 

The Fair Tax has its shares of critics, primarily individuals who would lose their ability to influence those in power to benefit them over the welfare of the nation as a whole.  This includes politicians who are able to manipulate the tax system in order to benefit certain groups that will help keep them in power, or to award “tax breaks” to certain segments in our society in an effort to “buy off” their votes at election time.  Sadly, too many of our fellow citizens have been too easily deceived by such manipulations; too often have we sold our freedom, liberties, and property rights for nothing more than some cheap “beaded necklace” trinket!

To recap how the Fair Tax will work, a retail tax of 30% will be levied on all products and services sold or provided, which is equal to the 23% that studies have shown is the embedded income tax cost in all products and services we purchase.  The result of this is, as I gave an example of, a $100 pair of shoes (which comprises a cost of $77 plus $23 of embedded income taxes and related costs) will cost you $100.10 under the Fair Tax – yet, in order to earn that $100 to purchase the shoes you will only have to earn $100, not the $130 that you now have to earn under our current tax system in order to have a take-home pay of $100 (based upon an income tax bracket of only 15% and the FICA tax)! 

In answer to the criticism that this tax will fall most heavily on the poor as it will tax the “necessities of life”, the Fair Tax has a “prebate” built into the tax.  Each month the government sends a check or direct deposit to every family in the nation based upon their family size and the current year’s poverty level.  As a position paper on The Fair Tax Organization’s website explains,

The monthly prebate check is calculated by multiplying the annual poverty level spending published each year by the Department of Health and Human Services times the FairTax rate and dividing by twelve. Poverty level spending represents what it costs families of varying household size and composition to buy their necessities.”

This means that the poor will not pay any consumption taxes on life’s necessities, nor will anyone else.  Everyone will be treated “equally before the law”, which is after all a basic fundamental of our American system of government, is it not (or at least it used to be)?  To see what this would have calculated as in 2009, you can read this position paper at 2009 Fair Tax Prebate Schedule.

Some have objected that certain items such as food, medicine, etc, should be excluded from the tax, but this is not wise.  Once you begin down that road of exempting this and that from being taxed, you end up with a complex and manipulatively-susceptible system like we currently have.  The key to making any tax system fair is to make it applicable to all people in all things across the board in equal fashion, which is precisely what the Fair Tax does.  This is also the point in favor of it that Adam Smith set forth in his classic work, The Wealth of Nations.  The only criticism that Smith lodged against a consumption tax was its effect upon the less wealthy in respects to the necessities of life and the prebate removes that objection.  In truth, since all products and services have a built-in 23% cost related to income taxes, although the lower-income members of our society may end up paying little or no income taxes, they do have the payroll tax of 7.65% which when coupled with that embedded cost in their purchases actually make the income tax system more oppressive upon them than the Fair Tax would be.   Under the Fair Tax they get to keep 100% of what they earn.

Our nation currently suffers from unemployment and under-employment levels not seen since the time of the Depression of the 1930s’.  This problem that refuses to be reeled in, despite a one-trillion dollar “stimulus” plan, can be laid squarely at the feet of our income tax system.  Before an individual can be employed there must first be an employer who has the capital to develop business and create a demand for its products or services.  Yet, the more money government takes out of that capital pool which the employer has, the less it obviously has for the development required to create jobs for those seeking employment; and therein is the crux of the problem.  Our nation with its onerous income tax system has the highest corporate marginal tax rate on businesses in the developed world!  Despite this, whom do the “progressives”, aka fascists, in Congress and their supporters blame for the outsourcing of jobs overseas?  The “evil greedy” corporations, of course, when in truth it is they and their taxes that are driving these jobs out of the country and creating more unemployment!  In addition, for those products and services produced within our country with such a tax disadvantage against foreign-produced products, is it any wonder that those foreign products are less expensive, thus boosting their sales at the expense of the American made goods, resulting in a lower demand for the American products and subsequent layoffs and more unemployment?

In his testimony before the Subcommittee on Select Revenue Measures, Committee on Ways and Means in the House of Representatives in 2006, Leo Linbeck, Jr testified how other nations who have adopted a border-adjusted destination-based consumption tax have this tax advantage over the United States:

“Border-adjusted taxes are, quite simply, the most potent weapons foreign producers have against U.S. producers and workers. Border-adjusted taxes are consumption taxes removed on export by the producing nation and assessed upon imports as ad valorem taxes. At this point in time, 29 of 30 OECD countries enjoy border-adjusted tax regimes. Only one – the U.S. – refuses to adopt a border-adjusted tax system in order to continue to rely upon an origin principle, direct, world-wide income tax system that taxes returns to capital multiple times. We do so at our peril.”

Couple this with the testimony given before Congress by John Loffredo, the vice president and chief tax counsel for Daimler-Chrysler after Daimler-Benz purchased the ailing Chrysler Corporation, on the impact that tax systems played on the decision as to where to headquarter the new corporation:

“The U.S. tax system puts global companies at a decisive disadvantage,… This issue became a major concern, and when the time came to choose whether the new company should be a U.S. company or a foreign company, management chose a company organized under the laws of Germany.”

He went on in his testimony to give an example of the advantages of the German tax system over the U.S. system and concluded by stating that the headquartering of the corporation in Germany versus the U.S. would result in “a total effective tax of around 44%, rather than 67.5%.”  That, my fellow Americans, is a staggering 23.5% greater tax burden for a U.S.-based corporation!!  Is it any wonder, then, that our income tax system is driving business, along with employment and tax revenue overseas?

The obvious question, then, is “How does the Fair Tax solve this issue?”  The answer is simple ─ every other nation in the world has an income tax of some kind; none of them have a consumption tax like the one proposed in H.R. 25.  If you had the option of locating your company and your production facilities in a country with an income tax system and all its regulatory compliance costs or in a country with no such taxes, where would you locate?  The answer is rather easy to see, is it not?  I give you this stunning statistic ─ read it slowly and allow the impact of it to sink in deeply:

“When Bill Archer (R-TX) was chairman of the House Ways and Means Committee, he routinely quoted an informal survey of five hundred international companies located in Europe and Japan.  These companies were asked, ‘What would you do in your long-term planning if the United States eliminated all taxes on capital and labor and  taxed only personal consumption?’  Eighty percent ─ that’s four hundred out of five hundred ─ said they would build their next plant in America.  The remaining twenty percent ─ the other hundred companies ─ said they would relocate their business to American altogether” (Fair Tax: The Truth, Neal Boortz & John Linder).

With this kind of inflow of business into the country, can you not see how this would alleviate our unemployment problem?  With this kind of business influx comes more spending which generates more tax revenue, and thus reduces the cost of American-made products, thereby giving the U.S. a competitive advantage over those produced by other nations.   Such an advantage would turn our trade deficit into a surplus, and through it all, with the increased revenue give the government the necessary funds with which to begin reducing the debt burden that threatens our very existence as a nation!

Is it any wonder, then, that over eighty economists from around the country sent a letter to Congress urging them to pass the Fair Tax Act (see Open Letter Concerning Reform of the Tax Code), or that economist Laurence J. Kotlikoff of Boston University would proclaim it as his preferred method of taxation? ─

“My preferred reform is the FairTax, which has three highly progressive elements.  First, thanks to the prebate, poor households would pay no sales taxes in net terms.  Second, the reform eliminates our highly regressive FICA tax.  Third, the sales tax will effectively tax wealth as well as wages:  When the rich spend their wealth and when workers abroad spend their wages, they will both pay sales taxes.  By broadening the effective tax base to include the corpus of wealth, not just the income earned on it (much of which is currently exempted or taxed at a low rate), one can lower the required sales tax rate and, thereby, reduce the tax burden on workers” (“Averting America’s Bankruptcy with a New, New Deal,” The Economists’ Voice, February 2006).

There are so many other arguments and facts like these that I could give to convince you of the merits of the Fair Tax and how it will answer the ills that so beset our economy and our nation, but I trust that these are sufficient enough for you to see the need for our Representatives and Senators to pass this legislation.  I urge all who are readers of my blog to research this topic more and to contact your Representative and Senators and press them on this matter before our economy completely implodes under the massive debt and tax burden pressing upon us.  This is why, should I decide to become a candidate for Congress in the 2012 elections, the passage of the Fair Tax Act will be the number one focus of my campaign and my efforts in Congress, should I be fortunate enough to win election.  To learn more I recommend the two books written by Neal Boortz and Representative John Linder (the original sponsor of H.R. 25), The Fair Tax Book and Fair Tax: The Truth ─ Answering the Critics, as well as the website of Americans for Fair Taxation, Fair

To sum up, herewith are the main benefits to be reaped from the passage of the Fair Tax, as stated on the above listed website:

  • Enables workers to keep their entire paychecks
  • Enables retirees to keep their entire pensions
  • Refunds in advance the tax on purchases of basic necessities
  • Allows American products to compete fairly
  • Brings transparency and accountability to tax policy
  • Ensures Social Security and Medicare funding
  • Closes all loopholes and brings fairness to taxation
  • Abolishes the IRS

What more could citizens ask for than this?  If you recall Ayn Rand’s statement that you cannot have political freedom unless you have economic freedom, then it is clear that the Fair Tax delivers on the economic side of her quote, thus helping to ensure that we can maintain our freedom on the political side of the equation.  Yet this is only one side of the coin to return us to economic prosperity ─ the back side of the coin is to control government spending, for what good does it do to increase revenue if all the government does is spend more instead of reducing debt?  We’ll begin taking a look at this side next.



Published in: on November 10, 2010 at 9:02 PM  Comments Off on Government, Taxes & Spending – X  
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Government, Taxes & Spending – IX

In an October 25, 2010 article in the Wall Street Journal on income tax breaks, it listed three prominent ones as being in the cross-hairs of the Obama Administration: home mortgage interest deductions, child tax credits, and the ability of employees to deduct their health insurance premiums on a pre-tax basis from their gross pay.  In the closing of the previous essay in this series, I pointed out that the motivation for holding onto an income tax in the face of the evidence against it,  and the overwhelming evidence in favor of a consumption tax, known as “The Fair Tax”, are but two ─ politics and power.  By holding onto a repressing and economically-stagnating tax system as is the income tax, those in Congress and the Administration can manipulate the tax code so as to woo support from special interest groups that will support them and keep them in power.  Perhaps this is no more evident than the attitude quoted by the WSJ quoted in an article regarding this attitude of the Obama White House:

“The tax benefits are hugely popular with the public but they have drawn the panel’s focus, in part because the White House has said these and other breaks cost the government about $1 trillion a year.”

 Just what is an income tax “break”?  Bluntly stated, it is the government telling us that they have deemed it acceptable to them to allow us to keep some of our own money.  This is precisely the attitude manifested in this statement made by the Obama Administration, i.e. for them to allow these tax breaks to continue would cost them, the government, one trillion dollars annually.  Whenever something costs you or me money, it is money that belongs to us that must be paid out.  So for these tax breaks to cost the government that amount belies the attitude in which Obama and the Democrats in Congress view it as money belonging to them and not us!  This attitude on the part of the central government is precisely one more reason why the income tax must be eliminated and replaced with the Fair Tax.

With the income tax and the subsequent payroll deduction mechanism that was foisted upon us by the Roosevelt Administration during World War II, you have no control over when or how much tax you are to pay.  Such is not the case with the Fair Tax.  Since taxes under that system are paid whenever you make a purchase and the amount of the tax depends upon the value of the item you purchase, you decide both when to pay the tax and how much to pay by the control you have over your buying habits.  If you decide that you need a $4,000 HD flat-screen television and you can afford it, then you will pay more in taxes than if you decide that you can be satisfied with an $800 set purchased at a discount from a wholesale warehouse.  You can decide to reduce your tax bill by reducing your purchases and setting aside the extra funds into a savings vehicle for your retirement, your children’s college tuition, or any other future goal.  The progressives who wish to use the income tax system to force the wealthy to pay more in taxes should be championing the Fair Tax, as under it the wealthy will obviously pay more in taxes because they spend more money, and their purchases will be items with a higher price tag than those items purchased by the middle and lower classes.  Despite the Fair Tax accomplishing its stated goal of making the wealthy “pay their fair share”, Progressives instead misrepresent and rail against it because the purpose of the income tax, in their political philosophy, is not the funding of government but rather the power to control the lives of individuals.  The Fair Tax takes that control out of their hands and leaves it in the hands of every individual consumer.

This, however, is not all – there are many more benefits to be had by the enactment of the Fair Tax bill.  By throwing this yoke of the cost of both these income-related taxes and the compliance costs associated with them off the shoulders of businesses, they can now apply their freed-up capital to the expansion of their plants and equipment, the hiring of more employees, and pouring more resources into research and development from which will come new and improved products for society.  No longer will businesses have to try and second guess what the government will do to them by Congress’s manipulation of the income tax code but instead can focus their attention on their primary goal ─ that of making a profit and expanding their business ─ a goal that benefits those currently employed, the investors in the firm’s stock (including retirees), those currently unemployed, and society in general.  Progressives (or as I prefer to call them, Fascists) need to come to the realization that “profit” is not a dirty word; it’s what makes the economic engine of a society run.  If you take away the profit motive, and redistribute the wealth in order to achieve the socialist nirvana of “equality”, you get the economic stagnation along with its high unemployment in which our nation is currently mired.

How do I know that our current tax system obstructs investment and expansion by business, whereas the Fair Tax would encourage it?  The answer comes from the pen of James Madison who wrote in The Federalist Papers, No. 62, in 1788:

 “In another point of view, great injury results from an unstable government.  The want of confidence in the public councils damps every useful undertaking, the success and profit of which may depend on a continuance of existing arrangements.  What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed?  What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government?  In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady system of national policy”  [emphasis added].

We are being told in news reports that many businesses are sitting on their capital primarily because they are uncertain as to the impact of what tax policy changes being either debated or delayed by the Obama Administration and the Congress will have on their financial health in the near future.  There is also more and more evidence of higher costs coming out of the recently passed “Obamacare” legislation, which again adds to this uncertainty as businesses try to navigate this massive regulatory millstone that has been placed around their necks.  Then there is the proposed “Cap & Trade” (or as it should more accurately be titled, “Cap & Tax”) legislation that Obama and his fellow Fascists in Congress have their sights set on enacting.  This would have a devastating impact on every business throughout the nation.  In the words of Madison from over two centuries ago: What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed?  What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government?”

How then does the Fair Tax resolve this problem?  Very simply ─ it answers Madison’s problem of an unstable government causing uncertainty among business owners from the small entrepreneur to major corporations.  It provides absolute concrete certainty as to what tax burdens businesses will bear ─ NoneThe only tax burden they must account for in their operations will be the consumption tax on any products or services that they purchase at the retail level.  Can you then see how this would unshackle the restraints currently holding back businesses by the income tax system and the agenda of the fascists, freeing them to make their plans and put them into action ─ plans and actions that will drive up our GDP, expand employment, and attract more business investment and jobs from other parts of the world.  As Alan Greenspan testified before Congress in 2005, the predictability in the tax code would “facilitate better forward-looking decision making by households and businesses.”

One of the major criticisms lodged against the Fair Tax by its opponents is that it will be the harshest on lower income families.  Such is not the case and I will deal with this more in detail in a later essay.  Allow me to address this false accusation head-on at this juncture by offering the positive side to the argument.  The following information was the result of a study conducted in 2005 by noted economists Lawrence Kotlikoff of Boston University and Sabine Jokisch of Stanford University.  Their report states

“the capital stock will be 13 percent higher under the FairTax system than under the current system by 2010, and 41.4 percent higher by 2030, and that long-run interest rates would be 150 basis points lower than under the current system. Their study states that, ‘the shift to the FairTax raises marginal labor productivity and real wages, over the course of the century, by 18.9 percent and long-run output by 10.6 percent. . . . These macroeconomic gains have important microeconomic welfare implications. In the long run, low-income households experience a 26.7 percent welfare gain, middle-income households experience a 10.9 percent welfare gain, and high-income households experience a 4.7 percent welfare gain‘ “ [emphasis added].

In light of this, how is it that opponents can argue that the poor will suffer the most when clearly they will have the greatest gain?  Those who profit the least from this move away from an income tax system to the Fair Tax are the wealthy.  Since the poor benefit the most and the wealthy the least under the Fair Tax, it can only be surmised that under our current income tax system the opposite is the case, and that is just what is true.  But the poor don’t pay income taxes, so how are they the most repressed by it, cries the Progressive?  The answer is simple ─ they still have non-income related payroll taxes deducted from their incomes, plus everything they purchase comes with that embedded 23% income tax cost that I’ve mentioned in previous essays.  I recently read an opposition article by a CPA in Las Vegas that was laughable in that the gentleman was both a CPA and an MBA.  In his article he mentions that the Fair Tax would not be fair because it would do away with the corporate income tax and instead the poor, who now pay no taxes, would be burdened with a sales tax that they currently do not pay.  You would think that a CPA with an MBA degree would know better than to talk about corporations paying income taxes.  No business anywhere pays income taxes ─ the taxes they remit to the government are simply included, as the researchers at Boston, Stanford, Harvard, and other such universities have pointed out, in their prices and passed along to the consumers ─ which include the poor!  Adam Smith pointed this out over two hundred years ago in his classic work, The Wealth of Nations.  I would think a CPA and MBA graduate would be acquainted with Smith’s monumental exposition on economics!  Thus another great benefit from the Fair Tax is how it will increase the incomes of the poorest among us ─ a true and successful assault in the government’s so-called “War on Poverty.”

So far I have just scratched the surface of this solution posed by the Fair Tax to the economic malaise which is draining the life out of our economy and threatening the very future of our nation as a free republic.  In the next essay I will continue this examination of the Fair Tax and answer more of the objections thrown against it by those whose only motives are their own selfish designs on their own wealth and power.  In the meantime, to learn more of the scholarly research that has been compiled on the tax, you may go to this website:  About the Fair Tax – Research Papers.


Published in: on November 1, 2010 at 8:58 PM  Comments Off on Government, Taxes & Spending – IX  
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Government, Taxes & Spending – VIII

In an interview published in the May 1956 issue of U.S. News & World Report, T. Coleman Andrews, the former director of the Internal Revenue Service for the Eisenhower Administration, was asked why he felt the income tax was unfair.  His answer was both surprising and pure Lockean/Jeffersonian in tone:

“I don’t think it’s fair because of the manner in which it is applied.  I don’t think it’s fair because I object to invasions of the people’s right of property by the Government.  I also think the discriminatory manner in which the rates are graduated is unfair” [emphasis added].

In his answer to the follow up question, “Do you believe in the principle of the capacity to pay?”, he pointedly rejected this Marxist tenet which is the basis for an income tax system:

“No, I don’t.  I don’t believe he” [i.e., a man who earns more] “ought to be penalized by being required to pay nearly 50 times more on only 10 times more income,…I don’t believe we ought to take it away from people just because they’ve earned it.  I don’t think we ought to use tax legislation to enforce social ends” [emphasis added].

Mind you, these comments did not come from a “tax protester” but from one who was responsible for the enforcement of the regulations pertaining to and the collection of income taxes!  Yet, the irony behind those promoting the income tax is precisely that it is the only way in which taxation can be made fair.  The question to be posed to such individuals remains ─ “Fair for whom?”   Certainly not to those who are taxed more heavily in an inverse  proportion to their endeavors!  As I have pointed out in the previous seven essays, the income tax is nothing more than a means for the fascists in Congress to tighten their grip of power upon the populace and to advance their economic-stagnating, impoverishing agenda of wealth re-distribution ─ a distribution in which the result is the complete elimination of all wealth and a reduction of the entire country to an existence characterized by mediocrity and demoralization.  Such is, as I have quoted in this series, the opinions of such esteemed greats in the field of economics as F.A. Hayek and Milton Friedman.

So what is the answer?  I am in agreement on one point with those who advocate for the income tax, i.e., that a government’s system of taxation should be fair.  So I give you as an answer to what is a fair method of taxation ─ The Fair Tax.  No, I am not being coy with that answer ─ that is the name of the proposed change to our tax system as found in the House Bill H.R. 25 and its Senate version S.296.  The Fair Tax has been referred to as a national sales tax or just a plain consumption tax as Adam Smith referred to it in his classic work, The Wealth of Nations

There are many who attack this kind of tax, yet when they do they misrepresent how it is laid out in the two bills in Congress (I will deal with these attacks in the following essay).  In criticizing this method, claiming that a “sales tax” would be oppressive to those in the lower income levels, opponents who support the status quo of an income tax overlook the fact that all income taxes are equivalent to sales taxes as they are ultimately paid by the consumer ─ the only difference is the consumer is not aware of them or just how much of the tax is imbedded within their purchases.  Adam Smith lays out the case for this in his section on taxes and wages in The Wealth of Nations.  He points out that income taxes increase the cost to those who produce goods or render services and that the only way they can recover those costs is to pass that cost on to the consumer:

“A direct tax upon the wages of labour, therefore, though the labourer might perhaps pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it.  In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him.  The final payment would in different cases fall upon different persons.  The rise which such a tax might occasion in the wages of manufacturing labour would be advanced by the master manufacturer, who would both be entitled and obliged to charge it, with a profit, upon the price of his goods.  The final payment of this rise of wages, therefore, together with the additional profit of the master manufacturer, would fall upon the consumer….In all cases a direct tax upon the wages of labour must, in the long-run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities….The declension of industry, the decrease of employment for the poor, the  diminution of the annual produce of the land and labour of the country, have generally been the effects of such taxes….together with the profit of those who advance it, must always be finally paid by the landlords and consumers.”

Notice the points advanced by Smith in these statements regarding the income tax:

  • Income taxes cause a decrease in productivity and an increase in unemployment among the poorer classes in society.
  • Income taxes are buried within the price of goods and services individuals purchase.
  • As a result, income taxes cause a rise in the cost of these goods and services.
  • The consumer thus ultimately pays the income tax as they become part of the price of his/her purchases.

So the income tax is just as much a consumption tax as The Fair Tax, but with more insidious consequences.  Thus it is that Smith gives this concluding assessment of income taxes ─ Absurd and destructive as such taxes are, however, they take place in many countries” [emphasis added].

Although I stated that the amount of increased costs caused by the income tax are buried within the prices of all goods and services and are not as evident as a sales tax that we see printed out on our sales receipts whenever we make a purchase, thanks to millions of dollars spent on studies conducted by economic scholars at such learned institutions as Harvard, Stanford, and others, we do know what this cost is.  For every $100 we spend on all goods and services we pay an average of $23 to the central government to cover the imbedded income taxes and their associated compliance costs that businesses must bear.  This means then that those goods and services actually cost us only $77, but the government adds their share onto it to make up the $100 price.  So not only are you having snatched from your labor an arbitrary amount in the form of income tax withholding, you are also paying for it again in the purchases you make to the tune of 23%!

So just how is the Fair Tax structured and what makes it “fair”?  Let me begin by pointing out what would happen to our current tax system if the two previously referenced bills in Congress were passed and signed into law.  If passed, the Fair Tax would eliminate the following taxes:

  • The individual income tax
  • The alternative minimum tax (AMT)
  • Corporate and business income taxes
  • Capital gains taxes
  • Social Security taxes
  • Medicare taxes (and other related payroll taxes)
  • The self-employment tax
  • Estate taxes
  • Gift taxes

In place of all of these taxes the Fair Tax would stand as a single tax, applied to all new purchases of goods and services at a standard flat rate for everyone.  As you can see, unlike the VAT (Value Added Tax) being considered by President Obama’s “Debt Reduction Commission”, the Fair Tax is a replacement tax, whereas the VAT is an additional, imbedded and hidden tax in addition to the income tax.  This is a critical distinction to keep in mind as opponents try to paint it as a tax that will be on top of the prices we already pay.  Such a depiction is not only patently false, but if set forth knowingly, a duplicitous lie.  The result of the Fair Tax on the prices we pay for goods and services would amount to about the same as what we currently pay. 

Let’s use the example of a purchase of a pair of shoes which costs $100.  Out of that $100, $23 is the amount that the government takes as its “cut” in imbedded income taxes and their associated business costs.  This means that the actual price you are paying for the shoes is only $77 and the remaining amount is income tax costs, or what economists term an “inclusive tax rate”.  To put it another way, in order for you to have $100 to spend under a tax rate of 23%, you would have to have earned $130 ($130 * 23% tax rate = $30 in taxes; $130 earned – $30 taxes = $100 to spend on shoes).  If you really want to see just how much in income taxes you are paying for that $100 pair of shoes, you should add the amount of taxes you paid out of your earnings to net out the price for the $100 shoes plus the imbedded income taxes within the cost of those shoes and you will see where you are actually paying the government $53 in income taxes for those shoes (granted, only $30 of that amount are your personal income taxes and the rest are the taxes of those who produced and sell the shoes, but income taxes are income taxes)!

With the elimination under the Fair Tax of all income-related taxes, those same shoes will still cost $77 (remember that $23 of imbedded income tax cost is no longer present in the shoes).  At the checkout register you will be charged 30% in sales taxes, which comes to $23.10.  When you look at your sales receipt you will see that you are right back where you were before in purchasing the shoes ($100.10) but with one huge difference ─ you no longer have to earn $130 just to net the necessary $100 to purchase the shoes!  With no income tax you keep every penny you earn, pay within pennies the same amount for products and services you currently pay, and the government receives the same dollar amount in revenue!  However, this is only the beginning of the boost to our economy.

Consider how much revenue is not collected by the IRS from income generated by the “underground economy”.  This is a broad label that applies to everything from income generated from illegal activities (drug dealing, prostitution, etc.) to legitimate work paid for with cash that the recipient never declares, not to mention the “creative” bookkeeping entries that some businesses may employ to circumvent reporting income and paying taxes.  Latest estimates on the amount of income generated in this underground economy are conservatively placed at approximately one trillion dollars – that’s $1,000,000,000,000 upon which no income tax is paid!  What happens to most of that one trillion dollars?  Some of what is earned by illegal immigrants is sent back to their families in their home country.  Others might save some of that undeclared income, but a good portion of it is spent on products and services, and those who earn that income through illegal activities will typically spend it on high dollar items.  Just for argument’s sake let us suppose that 60% of that one trillion is spent and as a result of the Fair Tax that 23% formerly imbedded income tax is now collected as a sales tax (30%) ─ the government reaps an additional $180 billion dollars which it is currently not collecting!

In 1997 a Congressional Joint Committee on Taxation issued a report compiled by a number of leading economists who had conducted a modeling analysis of our current income tax system with some modifications that were being proposed at the time along with models of changing the system completely to a consumption tax.  You can read their entire report at Joint Committee on Taxation.  On page 19 of their report it states that

“From the medium to long-run perspective, the consumption tax produced a stronger positive growth effect than the unified income tax….”  Then on page 34 it goes on to state that “…tax restructuring in the form of a consumption tax will ultimately produce higher economic growth….” 

The benefits that aided in producing these results were spelled out to be the following:

  “…reducing the cost of capital through less taxation of capital provides an incentive for additional investment; reducing the marginal tax rate on labor provides an incentive for increased labor effort; increasing the returns to labor through capital deepening can provide an incentive for more labor; and,…reducing distortions in investment decisions by eliminating differential taxation of different types of capital promotes a more efficient allocation of resources.”

In short, moving to the Fair Tax, according to this report, would be the stabilizing boost our economy so desperately needs:

  “The broad consensus of all the modeling approaches, that moving from the present-law income tax base to a uniform consumption tax base will result in a long-run increase in GDP, capital investment, and labor effort, provides some assurance that economic analysis can provide useful qualitative information about the long-run macroeconomic effects of major tax policy changes.”

Again, there was another telling consensus regarding the preferability of the Fair Tax over an income tax:

“Most economists support fundamental tax reform because of the expected improvements in economic efficiency.  The current income-tax system is highly distortionary, because it taxes income at different rates depending on the sources or uses of the income.  Taxes on capital income are fingered as a major culprit, because: (i) capital income is difficult to measure accurately, and hence difficult to tax uniformly across different types of assets, and (ii) even with perfectly-uniform capital taxation, such a tax creates an intertemporal distortion.  Established tax preferences such as the mortgage interest deduction also contribute to the distortions among different sources or uses of income.  Hence, many economists believe that the most effective way to enhance the efficiency of the tax system would be to move toward a consumption-based tax with a flatter rate structure and broader, more neutral base.

To go all the way, we could move to a proportional, single-rate consumption tax.  This switch can be said to have several distinct effects on efficiency.  First, the ‘flattening’ of the progressive tax rate structure reduces individual disincentives.  Second, the leveling of the playing field is expected to reduce the distortionary effects of taxes.  Third, the switch from an income base to a consumption base involves a reduction in the interterporal distortion in exchange for a larger labor-supply distortion, and so may increase or decrease the inefficiency of the tax system.  Most economists seem to expect a positive overall effect on efficiency from such a tax change, especially when combined with lower rates.”

In light of this scholarly analysis and conclusion then why have we not moved to the Fair Tax?  After all, this study was conducted and published thirteen years ago!  The answer is simple ─  politics and power.  Due to lobbyist groups and special interests our current members of Congress lack the fortitude to make the changes that would truly move us back to the path of prosperity and security.  Furthermore, they like the power that the income tax gives them.   By “tinkering” around the “edges” of the tax code they can curry favor with these groups that will in return help to keep them ensconced within their seats of power.  Instead, they prefer to throw up objections to the Fair Tax that amount to nothing more than battling the proverbial “straw man”.  In the next essay, I will delve further into this solution to our tax and economic woes and answer some of the critics.


Published in: on October 24, 2010 at 10:09 PM  Comments Off on Government, Taxes & Spending – VIII  
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Government, Taxes & Spending – VII

According to F.A. Hayek, progressive income taxes are a fraud; John Stuart Mills calls it a “mild form of robbery”; J. R. McCulloch characterizes it as “simply hateful arbitrariness”; and Milton Friedman stated that it does nothing that it is purported to do.  I have shown from these distinguished scholars over the past six essays that progressive income taxes are discriminatory, pitting one class of citizens against another because of envy, inviting cheating by the taxpayers.  Furthermore, they reduce savings and capital formation, hinder productivity, strangle innovation and business expansion, thereby blocking the answer to the problem of unemployment, and fall heaviest on the middle-class and the poor as the wealthy live off their investments which are taxed at half the rates of the upper income bracket.  Those are just the beginning of its ills!  I have also quoted from our founders, as well as these men who warned that such a system knows no limits, that with a progressive income tax in place, the government has the power to take 100% of your earnings, and during the previous century for a span of approximately ten years, it did almost that for those in the highest marginal tax bracket.  The consensus of all these men ─ Madison, Jefferson, Yates, Melancton Smith, Adam Smith, Hayek, Friedman, and others ─  is that such a system is unjust, tyrannical, oppressive, and unethical!  The obvious question then becomes, “How did we come to have such a system of taxation and why is it that it continues to be the basis of the revenue stream for our government?”

Allow me to reiterate what I stated in the first essay of this series, that government has both the right and expectation for citizens to provide the means it requires to carry out the obligations society has placed upon it.  Citizens in turn should not harbor resentment toward the payment of taxes to the government which they established, provided, as in the words of Thomas Jefferson, it is a “wise” government, one “frugal” with the “bread of labor” produced by the individual citizens.  “We the people”, in Article I, Section 8 of the Constitution, granted the central government the power to “lay and collect taxes”, which at first glance would appear to include the income tax.  However, after stating that taxes can be levied and collected that same clause went on to specify that the taxes to be levied were to be of the nature of “Duties, Imposts and Excises”  and that they “shall be uniform throughout the United States.”   Section 9 of Article I of the Constitution further states that “No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”  The import of this added clause is that an income tax would be unconstitutional, as it is a direct tax and is not proportioned according to the census.  This proportionality requirement means that in order to levy a direct tax it must be proportioned according to the census numbers of each state.  Therefore, a state which contains 15% of the nation’s population would be required to supply 15% of the aggregate revenue required by the central government, regardless of its economic condition or the ability of its residents to pay that amount.  So it was, then, in every instance when an income tax was attempted, even though it may have been allowed for a short period of time (as during the Civil War), it was eventually ruled unconstitutional and subsequently abandoned.

It was during the Civil War that the income tax was first introduced by both the Union and the Confederacy to finance their respective war efforts.  The defeat of the South brought about the cessation of their income tax, but it continued in the newly re-united nation until, due to protests, it was eliminated in 1872.  In Springer v. United States, a case in which William Stringer sued claiming that the income taxes levied on his earnings as an attorney were unconstitutional, the Supreme Court, in a 7 – 0 vote, upheld the government’s position that the tax was permitted under the Constitution.  In 1894 Congress again debated the issue of an income tax on both individuals and corporations during the passage of the Wilson-Gorman Tariff Act, and in the debate the argument made by those favoring it was “the wealthy are not paying their fair share.”  This time, however, in Pollock v. Farmers’ Loan & Trust Company, a closely divided Supreme Court ruled that this tax imposed by the Act was unconstitutional.  In the majority opinion the justices ruled that it amounted to a direct, unapportioned tax and was unconstitutional, thus violating the above referenced Article I, Section 9 of the Constitution.

The Progressives (the American version of the Italian Fascists) were not to be deterred.  The campaign platform of the Democrat Party in both the 1896 and 1908 elections included a “plank” advocating the instituting of an income tax.  In April 1909 Senator Joe Bailey, a conservative Democrat from Texas, introduced a bill that would authorize the income tax.  Though he was opposed to the concept, his introduction of the bill was a blatant attempt to embarrass the Republican Party in the upcoming 1910 elections as he expected them to oppose the measure.  Thus Democrats would be able to paint the Republicans as “favoring the rich over the ‘little man'” (sound familiar?).  However, his plan backfired when the liberals in the Republican Party, led by the Progressive Teddy Roosevelt (yes, he was a Progressive, just like in the Democrat Party) came out in support of the bill.  In a panic, the conservatives of the Republican Party met and devised a strategy in which they told those supporting the bill that they would  support instead a constitutional amendment authorizing the income tax, believing that surely the state legislatures would defeat the amendment, thus derailing Bailey’s campaign strategy.  Senator Norris Brown of Nebraska then introduced what is now our 16th amendment which passed the Senate by a vote of 77 – 0 and the House by a vote of 318 – 14!  Much to the surprise of the Republican Senators who had advocated this strategy, the legislatures, due to a concentrated campaign by the Democrats across the country with a “soak the rich” slogan,  bowed to the pressure of their residents and ratified the amendment. Thus the amendment became a part of our Constitution on February 12, 1913.

As you can clearly see, nothing has changed in over one hundred years ─ the same arguments (based upon class warfare and envy as pointed out by Hayek) made by the Progressives to enact the income tax are still parroted by the Fascists dominating the Democrat Party today. 

During World War II, in an effort to smooth out the government’s “cash flow”, a proposal was made to change the income tax from an annual payment method to the employer-withholding system we have in place today.  In 1942 plans were set in motion to pass legislation  allowing for the withholding of taxes.  Congress feared if they were to raise the tax rates outright and thereby increase dramatically the amount of the check individual taxpayers would have to write,  the citizens would revolt and refuse to pay.  So the notion of withholding was sold to the public as both a patriotic step to support the war effort and as a means to make things “easier” for them to pay their taxes (rather than having to set money aside during the year to cover their tax liability).  In order to help “sell” this duplicitous scheme on the citizens of the nation, the government enlisted the aid of Donald Duck ─ that’s right, Mickey Mouse’s sidekick ─ to produce some short propaganda films promoting the idea.  Despite Donald’s best effort, however, the public still was not swayed until a plan was hatched offering to expunge all taxes owed in 1942 in exchange for supporting the withholding option starting in 1943.  And so it came to pass that our birthright of freedom from oppressive taxation was sold for a “pot of pottage” ─ a one-year forgiveness of taxes!

Now Congress can raise our tax rates on our incomes at will with only the threat of not being re-elected the only barrier preventing it.  Furthermore, our employers are obligated under the threat of severe penalties to withhold from our earnings the taxes dictated by the Internal Revenue Service.  It should not come as a surprise that the Progressive/Fascists of today want to ignore the original intent of the amendment since they rebuff attempts to point back to the original intent of other parts of the Constitution.  Erik M. Jensen, writing in The Heritage Guide to the Constitution on the 16th amendment stated:

“The general understanding among contemporary scholars is that the taxing power is so broad that Congress alone determines what can be reached by an income tax.  This view of unbounded congressional power conflicts with the original, limited role of the amendment however, and it requires rejecting several old Supreme Court decisions that took the language of the amendment seriously: for an unapportioned tax to be authorized by the Sixteenth Amendment, it must be on ‘incomes'”  [emphasis added].

With all of this before us, then, why did politicians press for an income tax and why do we continue it if it is so detrimental to our economy and an invasion upon our freedom, liberties and unalienable rights?  You need look no further than the emboldened words in the quote you just read ─ the answer is there in a single word:  power!  Money is power, and the more you possess and control it, the more power you have ─ which is not necessarily an evil thing.  Without money you are powerless to provide for your basic necessities of life and to care for your family.  This is why we work ─ we exchange parts of our lives (time) for an agreed upon amount of money from our employers in order that we might buy things such as houses, food, clothing, medicine, etc, and to fulfill that unalienable right to “pursue happiness.”  This is why I call those who promote and defend the income tax Fascists.  The income tax is all about supporting the state which through its tax rates and heavy-handed enforcement methods determines just how much of your earnings it deems appropriate to allow you to keep.  Remind yourself of the wording being used by those on the left regarding the current debate over extending the reduced tax rates put in place in 2001 ─ that to extend them for the “wealthy” (who are arbitrarily defined to be anyone earning over $250,000 per year) is something  the government “cannot afford”.  What they are saying is they “cannot afford” to let you keep your own money you worked and gave up a portion of your life to earn!

Besides this, there is this misguided notion of equality those on the left, be they Socialists, Communists or Fascists, always want to push.  Hence the class warfare they have waged ever since the notion of an income tax was first proposed.  They fail to understand the true nature of the equality of man (and I use the word “man” here in  its broad context of “humanity”).  True, “all men are created equal and are endowed by their Creator with certain and unalienable rights”,  but that equality has to do with the essence of what each individual is and nothing more.  No two individuals will ever be equal in talent, abilities, opportunities (or “luck” if you prefer that concept), intellect, or  hard work, so why should they be consigned by an outside force to be equal in what by their efforts and other unequal traits they earn?  Yet such is exactly the driving force behind the concept of “wealth redistribution”.  It is pure, unadulterated power that drives these statist ideologues (Obama, Reid, Pelosi, et al)  in their attempt to force an equality upon the citizenry that is not only completely contrary to the law of nature, but also against the liberty and individualness of each and every citizen.

This is the reason behind the class warfare and envy rhetoric (as Hayek so ably underscored) the leftists constantly fall back upon to push this form of taxation.  To close out this week’s post I give you perhaps the most damning evaluation ever given against our current tax system.  In the May 26, 1956 issue of U.S. News & World Report, T. Coleman Andrews, the former head of the Internal Revenue Service, gave an interview in which he completely shredded the very tax system the agency he had formerly led was tasked to enforce!  This link will take you to a copy of the full interview, albeit the quality of it is very poor:  (Interview with T. Coleman Andrews, former head of the IRS).  In his remarks you will see many of the points I have been setting forth in the previous six essays of this series, but these are coming from one with much greater authority than I.  Herewith are the highlights of what he had to say in that interview [with emphasis added]:

“For absolutism in one form or another is the inevitable end of ‘deeply graduated’ taxes on income and inheritances, and absolutism in any form is slavery….we’ll continue to penalize outstanding ability and success until the will to achieve has been destroyed throughout the nation and we’ve all been reduced to the aimless status of an indifferent conglomerate of bone, tissue and blood….

Our country’s economic growth has been produced with the direct and indirect savings of the people, and  those savings have come from the people who have had enough on the ball to do better than just earn a living.  If we keep on at the present rate of taxation, we will come eventually to the point where no one will have anything to invest and the ‘man on horseback’ will be upon us.  The Government will own everything and we’ll be forced to do the bidding of commissars imbued with the idea that they know better how to spend our money than we, and vested with the authority to do it.

We’ve done it” [i.e. raise revenue] “for the whole 43 years of the income tax to enforce social reforms ─ to reduce everybody to the lowest common denominator economically.  I don’t believe in using tax legislation to force social reforms upon the people or to punish sin.”

When asked the question “Shouldn’t everybody have the same income?  President Franklin Roosevelt said nobody should have more than $25,000 ─”, he replied

“You know, I don’t subscribe to such socialistic demagoguery as that.  I say everybody should have what he can make honestly, with a minimum of taxes.  Everyone should be able to keep a much larger share of his income than he can at present, and everyone’s right to expect to be protected in his possession of what he makes should be respected, especially by the Government.

He was next asked whether or not he thought the purpose of the income tax was to destroy the middle class and whether or not it was a conscious purpose or merely the result of the policy.  His response was classic Hayek:

“There was no question in the world about the consciousness of that purpose.  Go back to 1894.  In that year an income tax was adopted which was part of the Tariff Act of 1894.  That was declared unconstitutional about a year later.  That tax was deliberately, avowedly, and unashamedly enacted to get at the ‘rich’ people.  There wasn’t any apology for it at all.  On the contrary its proponent boasted that it was aimed at the rich and would hit only 85,000 out of 65 million people, which according to my arithmetic was about one eighth of 1 per cent of the  population.  And to this day the ‘soak the rich’ purpose prevails.  I heard it the other day in a committee hearing in Congress ─ the whole idea is to get at the rich.  It was conceived in vengeance and it has been that way ever since.  It has never been anything different….

I am convinced that this law has reached the point of incurable infirmity, and I doubt that any full-scale income tax, rigidly enforced, can be made a primary source of a great nation’s income without leading eventually to dictatorship, which I am convinced is happening under the present law….

I don’t believe we ought to take it away from people just because they’ve earned it.  I don’t think we ought to use tax legislation to enforce social ends….

We’re confiscating property now.  That’s one of the reasons why I don’t like the income tax….every time we talk about these taxes we get around to the idea of from each according to his capacity and to each according to his needs.  That’s socialism.  Its written in the Communist Manifesto.  Maybe we ought to see that every person who gets a tax return receives a copy of the Communist Manifesto with it so he can see what’s happening to him.”

When he was asked whether or not he felt that everyone should be taxed equally, either at the same amount or same percentage, he continued to hit at this being a punishment for achievement.

“Of course not.  That would merely shift injustice from one class to another.  I want to end the ‘soak the rich’ business because we don’t soak the rich ─ we penalize outstanding ability and ultimately destroy ourselves.

We’ve been soaking the rich so long that there aren’t any rich any more.  But there are people with a lot of knowhow, and instead of a tax climate that encourages achievement of one’s full potentialities, we have one in which the reward for outstanding performance is forced down as performance goes up.  Thus, instead of soaking the nonexistent rich, we penalize high performance and foul the spark plugs of our hopes for sustained and growing leadership.  It doesn’t make sense does it?…

Asked if there should be a distinction drawn between taxing earned and unearned income (recall the statement of Jensen’s that Congress’ power is now so broad that it alone can determine what is included as taxable income) and his answer was emphatic:

“No, I do not.  Why penalize investment?  We’re doing it now by penalizing success and we’re digging our own grave as a nation when we do.  Investment puts people to work.  It buys machinery….There are only two ways in the world that business activities can be financed.  One is through savings.  The other is through Government handouts.  May the Lord deliver us from the latter.”

Yes indeed – Lord, please, deliver us from the latter!  Next week ─ the solution.


Government, Taxes & Spending – VI

You load sixteen tons, and what’da ya get?

Government keeps a spendin’ so we’re deeper in debt.

St. Peter don’t you call me ’cause I can’t go ─

the IRS man done stole my dough!

With all due apologies to the late great Tennessee Ernie Ford, I think the slight alteration of his well-known hit song pretty much sums up the feelings of most Americans.  To quote a line from a more recent hit song, “You work hard for the money” and you want to keep it, as rightfully we all should.  Retaining the “fruits of our labor” is the principle of property rights as championed by John Locke, heralded by our founders as sacrosanct, and infused within the precepts of our Declaration of Independence and Constitution.  Yet as I have been setting forth in the previous five essays in this series, the income tax shreds every fiber of this principle.  Last week I began to set before you the consequences of our current income tax system with its onerous progressive rates, which the Obama administration and the democrat-controlled Congress seem determined to raise.  None of the consequences I covered in that essay are compatible with a free society governed by a constitutional representative republic and based upon the principles of federalism, and neither are the remaining ones that I shall try and conclude in this week’s post.

As I did in last week’s essay, I shall share with you the wisdom and insight of two of the twentieth century’s greatest economists, Nobel laureates in economics and Presidential Medal of Freedom recipients ─ F.A. Hayek and Milton Friedman.  By way of reminder, you will recall that both men pointed out that not only will progressive income taxation fail to promote prosperity in any economy, but it is a total fraud, of which the inherent danger is it contains no logical stopping point.  The central government has the authority to lay claim to 100% of your income if it so chooses, and during two spans of time in the middle part of the last century, it has come close to just that.  The highest marginal tax rate reached 94% for the two years of 1944-45 and 91% for almost a decade following those two years.  You cannot get much closer to slavery than that.  I am confident those who were subjected to such confiscatory rates during those years must have felt as though they lived under the ancient Roman Republic instead of the modern-day Republic of the United States!

One of the most hotly contested aspects today regarding the extension of the tax cuts enacted in 2001 is the cutoff point of income above which the income tax rates will be raised.  It is completely an arbitrary, subjective decision made by Obama and his fellow fascists with no objective criteria given to substantiate their drawing the line at that level.  This is what Hayek said was a result of progressive taxation, namely that it creates within the minds of the majority of people what they consider to be an “acceptable” level of income ─ a level above which is thus decadent and excessive, yet one completely without foundation:

“One of the chief reasons why progressive taxation has come to be so widely accepted is that the great majority of people have come to think of an appropriate income as the only legitimate and socially desirable form of reward”  (The Constitution of Liberty).

Obviously, so long as an individual is part of that “great majority”, whatever level that is set is acceptable ─ that is until they exceed that income level, and then suddenly “it’s not fair!”  It also ignores another major issue, which is, what is “wealthy” for one person or in one region of the country may be considered middle-class to another individual or in another region.  Thus the cry for a fair and equal taxation system cannot be had by a progressive income tax unless built into it are considerations for the cost of living in different regions of the country ─ a factor which our current system fails to incorporate.  In fact, it is due to higher levels of cost of living and the subsequent higher levels of tax rates into which those incomes push people that wages are pushed even higher, thus resulting in a never ending upward spiral of wage inflation and taxation!

Another negative impact of this form of taxation is how it disheartens individuals from being more productive.  As a certified payroll professional, employees will tell me that they do not want to work a lot of overtime because the IRS will just take most of their extra earnings in greater taxes.  It simply isn’t worth the extra time, labor, and absence from their families to put forth the extra effort to earn more income.  Returning once more to Hayek’s previously quoted work he commented on this problem thus:

“…progressive taxation necessarily offends against what is probably the only universally recognized principle of economic justice, that of ‘equal pay for equal work.’…A man who has worked very hard, or for some reason is in greater demand, may receive a much smaller reward” [i.e., after taxes] “for further effort than one who has been idle or less lucky.”

As a line from a movie which has come to be used in our popular phraseology, if you want me to produce more, then “show me the money”!  And, if I can’t keep the lion’s share of the money I earn, then “I’m not interested.”  Why do you go to work and give up time away from your family or from engaging in activities that you would rather pursue?  Is it not because you want to provide for your family or to have the means wherewith to pursue those other activities (provided you can find the time to pursue them)?  Yet if the government is going to step in and demand its “pound of flesh” before you “pocket” those increased earnings, what incentive do you have to sacrifice even more of your limited time if by doing so you experience what economists term the effect of “the law of diminishing returns”?  The obvious answer is that you don’t, and so not only is your earning potential suppressed, but since there is less income to be taxed so is the revenue to the government.  In effect, the system has the very opposite effect for which it is intended, namely to raise revenue.  Thus it is that whenever tax rates on income have been reduced, total revenues to the government have increased.  So why the debate over extending the lower tax rates ─ why is Obama and the Democrat Fascists insisting on raising the rates?  That will be the topic for either next week’s post or perhaps the one after.

However, before going on to the next consequence I will allow Dr. Friedman to weigh in with his evaluation in respects to this consequence of a negative impact on productivity.

“By general consent, the personal income tax is sadly in need of reform.  It professes to adjust the tax to ‘ability to pay,’ to tax the rich more heavily and the poor less heavily and to allow for each individual’s special circumstances.  It does no such thing….the law is riddled with so many loopholes, so many special privileges, that the high rates are almost pure window dressing….

The corporate income tax, too, is highly defective.  It is a hidden tax that the public pays in the prices it pays for goods and services without realizing it.  It constitutes double taxation of corporate income ─ once to the corporation, once to the stockholder when the income is distributed.  It penalizes capital investment and thereby hinders growth in productivity.  It should be abolished” (Free to Choose) [emphasis added].

This penalization in the matter of capitalization leads to yet another negative consequence of a progressive income tax system.  How many times have you heard government officials bemoan the lack of savings on the part of the American people?  How often have we been castigated for not being as thrifty as the citizens in some other nation, the implication being that we are too much interested in spending on ourselves?   If that is the government’s criticism of us it has no one to blame but itself because its tax system discourages and even penalizes us for saving.  If we are going to be taxed on the income generated by our savings, thus reducing what meager return we may earn (I say meager because constant and inept government intervention in our economy and free markets has the effect of impeding the economy from generating greater returns on our investments), then why save?  Spend what you have so that you might “enjoy the fruits of your labor!”  Dr. Hayek addressed this issue as well:

“We can also briefly mention the very serious effect of progressive taxation on the supply of savings….The socialist answer to those who are concerned about this effect on savings is, in fact, no longer that these savings are not needed but that they should be supplied by the community, i.e., out of funds raised from taxation.  This, however, can be justified only if the long-term aim is socialism of the old kind, namely, government ownership of the means of production.”

And just how does the “community”, i.e. the central government, supply the funds to run businesses if not from the savings of investors?  Why by confiscating the funds by taxing the income generated by those savings, or by taxing it away before it could be invested and saved!  Either way, you lose!

If individuals do not save and thus do not either supply banks with the funds to loan businesses or aid businesses in raising capital by investing in those businesses’ stocks and bonds, then again the economy will contract instead of expanding because businesses do not have the capital to expand.  If businesses cannot expand, then neither does the economy ─ the only thing that will see expansion is the nation’s unemployment rate.  In his book “Good to Great”, Jim Collins studied companies to see what separates good companies from great ones, and one of his observations was that in the companies considered to be great, they exhibited a high level of entrepreneurial method of operation.  When we think of those who are entrepreneurs, we typically think of those who step outside of their comfort zone to take risks in order to produce a new or better product or service.  The result of the efforts of these individuals is the expansion of goods and services for society as a whole, as well as expanded employment opportunities for those they hire to produce and provide those products and services.  Yet progressive income taxation kills this kind of initiative by making it difficult and costly for these entrepreneurially minded individuals.  These individuals are wealth-producers, and they pay the price of a graduated income tax system, not those who are already wealthy who seldom touch their “stock” of accumulated wealth, but rather live off of the returns that wealth generates, which returns are taxed at half the rate of the income of those wealth-generators!

Hayek ties together this fact of progressive taxation on income being restrictive of capital formation with the consequences of it also blunting overall business expansion by both entrepreneurs and larger corporations and an introduction of inequality and discrimination into the business of the economy:

“Closely connected with this problem is the effect of progressive taxation on an aspect of capital formation….It is one of the advantages of a competitive system that successful new ventures are likely for a short time to bring very large profits and that thus the capital needed for development will be formed by the persons who have the best opportunity of using it….The taxation of such profits, at more or less confiscatory rates, amounts to a heavy tax on that turnover of capital which is part of the driving force of a progressive society.”

Note these points Hayek makes regarding just who generates growth and the attitude manifested by a government, namely ours, which punishes those generating this capital.  It is necessary if an economy is to be based upon a competitive free-market foundation that individuals be able to generate the capital necessary to establish and sustain a fledgling venture through greater profits.  He further states that those who best know how to put this increase of capital produced by these profits to use are those behind the venture from which it came; yet to tax these profits at the rates that are normally used amounts to thievery and strangles this turnover of capital which is essential to the life and growth of companies.  Contrast that with the attitude of our government which believes that there is a level of profits above which it deems to be excessive and that therefore it should confiscate those profits as it knows better how to use those funds than those who generated them!  That is fascism, pure and simple – “Tutto nello Stato, niente al di fuori dello Stato, nulla contro lo Stato” (everything for the state, nothing outside the state, nothing against the state) ­– Benito Mussolini, the father of Fascism.

Continuing with Hayek’s comments on this point, he went on to say

“The most serious consequence, however, of the discouragement of individual capital formation where there are temporary opportunities for large profits is the restriction of competition.  The system tends generally to favor corporate as against individual saving and particularly to strengthen the position of the established corporations against newcomers.  It thus assists to create quasi-monopolistic situations.  Because taxes today absorb the greater part of the newcomer’s ‘excessive’ profits, he cannot, as has been well said, ‘accumulate capital; he cannot expand his own business; he will never become big business and a match for the vested interests.  The old firms do not need to fear his competition: they are sheltered by the tax collector.  They may with impunity indulge in routine, they may defy the wishes of the public and become conservative.  It is true, the income tax prevents them, too, from accumulating new capital.  But what is more important for them is it prevents the dangerous newcomer from accumulating any capital.  They are virtually privileged by the tax system.  In this sense progressive taxation checks economic progress and makes for rigidity'” (L. Von Mises, Human Action, quoted by Hayek here in his work, The Constitution of Liberty).

Today all we hear from Obama and his cohorts is how these greedy corporations must be punished by levying higher tax rates against them.  Yet all this, as Hayek so ably exposes, is just fine with these large, established corporations as these tax policies, though aimed at them, are ones they can survive, whereas those who would in the future become their competitors, cannot.  Hence the corruption we witness among elected officials and the financial payoffs they receive from these companies (yet again another reason for the establishment of term limits within our Constitution).

So who really suffers from such a consequence as this?  It is the consumer who suffers.  Because competition is squelched by the tax code, innovation, new inventions, and progress in countless areas that would benefit society generally will never see the light of day.  It is truly a remarkable achievement that we have witnessed as much advancement as has occurred in spite of our prejudicial system of taxation ─ just imagine how much more could and would be achieved it this noose around our necks was removed!  Colin Clark echoed this fact in his work, “Welfare and Taxation”:

“Many upholders of high taxation are sincere opponents of monopoly; but if taxation were lower and, especially if undistributed profits were exempt from taxation, many businesses would spring up which would compete actively with the old established monopolies.  As a matter of fact, the present excessive rates of taxation are one of the principal reasons for monopolies now being so strong.”

Lionel Robbins, in a paper titled “Notes on Public Finance”, written in 1955,  also concurred with Clark and Hayek:

“The fact that it has become so difficult to accumulate even a comparatively small fortune must have the most profound effect on the organization of businesses; and it is by no means clear to me that these results are in the social interest.  Must not the inevitable consequence of all this be that it will become more and more difficult for innovation to develop save within the ambit of established corporate enterprise, and that more and more of what accumulation takes place will take place within the large concerns which ─ largely as a result of individual enterprise in the past ─ managed to get started before the ice age descended?”

Today President Obama is touring the country campaigning for Democrat candidates and trying to make the case that to vote against these individuals who in the past two years have supported his fascist agenda would be to “return us to the failed policies of the past that got us into this mess in the first place.”  Yet it is significant to point out that the quotes of the three men I have just shared with you were all written in the time period in which the highest marginal tax rate was at either 94% or 91%, and what policies does Obama want us to turn to instead of the lower tax policies of the past?  He wants us to return to the past policies which were in place when these men wrote, when as they all proclaim, capital accumulation and innovation, both of which would have benefited society, was all but snuffed out!  Growth, prosperity and advancements in all areas have always abounded when tax rates were lowered, so just imagine what would happen if all taxes on income, personal and business, were eliminated?!  (This will be the solution I will expound upon when I reach the conclusion of this series of essays.)

Yet there is one more consequence brought forth by Hayek that I want to mention in passing, and that is our graduated income tax system promotes inequality despite the claims made in favor of it “redistributing wealth” so that all share more equally in the wealth:

“An even more paradoxical and socially grave effect of progressive taxation is that, though intended to reduce inequality, it in facts helps to perpetuate existing inequalities and eliminates the most important compensation for that inequality which is inevitable in a free-enterprise society.”

Perhaps this was best stated by the renowned political statesman from Florence, Italy, who in 1538 wrote in opposition to the tyrannical reign of the Medici family who instituted a high, progressive tax system that

“The equality which we must aim at consists in this, that no citizen can oppress another, and that the citizens are all subject to the laws and authorities, and that the voice of each who is admissible to the Council counts as much as that of any other.  This is the meaning of equality in liberty, and not that all are equal in every respect….It is not liberty when one part of the community is oppressed and maltreated by the rest, nor is it the end for which we have sought liberty, which was that each should with security be able to preserve his proper state[emphasis added].

So the question which remains to be answered is, if all these negative consequences are what a progressive income tax produces, how and why did it come about and why does it survive?   The answer to this question will be the topic of next week’s essay. 

In closing, let me give as a final evaluation of the income tax this one posited by Hayek, namely that this system of progressive taxation is the tool of a government which is acting in an unethical and unjust manner:

“In the last resort, the problem of progressive taxation is, of course, an ethical problem, and in a democracy the real problem is whether the support that the principle now receives would continue if the people fully understood how it operates.  It is probable that the practice is based on ideas which most people would not approve if they were stated abstractly.  That a majority should be free to impose a discriminatory tax burden on a minority; that, in consequence, equal services should be remunerated differently; and that for a whole class, merely because its incomes are not in line with those of the rest, the normal incentives should be practically made ineffective ─ all these are principles which cannot be defended on grounds of justice.  If in addition, we consider the waste of energy and effort which progressive taxation in so many ways leads to, it should not be impossible to convince reasonable people of its undesirabilityYet experience in this field shows how rapidly habit blunts the sense of justice and even elevates into a principle what in fact has no better basis than envy [emphasis added].

This is why, my fellow citizens, if we are to throw off the chains that keep us enslaved to the central government we must educate all of the citizenry of just how heinous the income tax system of our nation is.  Ayn Rand once said, “…political freedom cannot exist without economic freedom”.  To this I would add economic freedom cannot exist under a progressive income tax system.

 – Epaminondas 

Published in: on September 26, 2010 at 8:32 PM  Comments Off on Government, Taxes & Spending – VI  
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Government, Taxes & Spending – V

Last week’s essay closed on the note that our government (and society in general) has tried to ignore the principle that every action results in a specific consequence.  The method by which a government levies taxes upon its citizens is no exception to this rule.  So now the question before us in considering our current taxation system based upon income is whether or not its consequences are acceptable and if these consequences are the best results for the maintenance and furtherance of our society and nation.

The motive behind our income tax system is to achieve the Fascist/Marxist/Socialist goal of a redistribution of income so that citizens within the society are more “equal” in the naive utopian view of these political philosophies and those who adhere to them ─ which in our current day are  the leftists controlling the Democrat party, the leadership of Congress, and the most fascist of them all, President Barak Hussein Obama.  But this matter of why we have the income tax will be the subject of our investigation in a future post.  For the moment, the income tax is what we have to deal with; so what are its consequences, and does it produce a positive or negative impact upon our nation?  Some of this I touched on in last week’s essay, but beginning with this week’s post I will develop the subject matter in more detail.

There were two giants in the field of economics in the past century and early part of this one who understood how economic control and taxes by a centralized government would ultimately strangle the very breath of freedom and liberty out of the soul of a nation.  These two men, F.A. Hayek and Milton Friedman, both Nobel laureates in economics and Presidential Medal of Freedom recipients, will be the source of much of what I share with you in the following paragraphs.  When there are two men of this stature who render the same evaluation of the kind of tax system that we currently labor under, it bears listening to and taking notice.

To begin with, both men considered the concept of a progressive graduated taxation on income to be a failure and a fraud.  The Fascists (or “Progressives” if you prefer the more benign term) love to trumpet the advantage of this progressive structure of tax rates as a vehicle that makes the rich pay “their fair share” (read, “wealth redistribution” by government coercion).  Friedman, in  Free to Choose, totally refutes this claim:

“By general consent, the personal income tax is sadly in need of reform.  It professes to adjust the tax to ‘ability to pay,’ to tax the rich more heavily and the poor less heavily and to allow for each individual’s special circumstances.  It does no such thing….the law is riddled with so many loopholes, so many special privileges, that the high rates are almost pure window dressing[emphasis added].  

He expanded on this notion in another book, Capitalism and Freedom, by pointing out that progressive income tax rates do not fall upon the rich, the “über” wealthy, that the left sets up to be its straw man as the target in its class warfare rhetoric, but rather on the middle class and those entrepreneurs who take the risk to start and build businesses, to expand employment and the economy.  He makes the case in that work that the rich do not pay that much in income tax as instead they pay capital gains taxes on an increase in wealth that their basic “stock” of wealth produces, which rate come January 1, 2011 will be one-half of the highest income tax rate.  Their amassed wealth remains relatively untouched by these progressively high income tax rates, yet those individuals who are trying to generate and create wealth for themselves, their families, and others ─ they are the ones upon whom these oppressively high tax rates fall because what they generate is not capital gains but income.  So this notion of “soaking the rich” is a complete myth and a lie that the leftists use upon an unwitting populace in order to manipulate them and keep themselves in power.  To this myth Hayek also weighs in with this comment in his monumental work, The Constitution of Liberty:

“If the belief that the high rates levied on the rich make an indispensable contribution to total revenue is thus illusory, the claim that progression has served mainly to relieve the poorest classes is belied by what happened in the democracies during the greater part of the period since progression was introduced.”  

The greatest danger posed by this progressive form of taxation is not necessarily the consequences that I will be discussing in the remainder of this post but, as both Friedman and Hayek point out, there is no logical stopping point to the level at which the government can wrest the fruit of our labors from us.  Indeed, at one point in time the highest marginal tax rate was 94% in 1944-45 and then 91% from 1951-63; keep these astronomical rates in mind when I get to some of the consequences of such mind-numbing thievery. 

When the income tax was proposed, it was sold to the citizenry as something that would only affect the rich – that the government would make these filthy rich “robber barons” pay to provide for all of the “little people” (now a century later, the rhetoric and justification of the Fascists hasn’t changed one iota), and even then it would only be a small percentage.  One of the major political writers and statesmen of fifteenth century Florence, Italy,  wrote the following about the nature of progressive taxation which was introduced in Florence when the Medici family came to power:

“It lies in the nature of things that the beginnings are slight, but unless great care is taken, the rates will multiply rapidly and finally will reach a point that no one could have foreseen” (“La decima scalata,” Opere inedite, ca. 1538).

Florence, Italy, 1538 ─ the United States of America, ca. 20th and 21st centuries ─ it simply proves the old saying that “the more things change, the more they remain the same!” 

Hayek explained why this is so in his work The Constitution of Liberty:

“The real reason why all the assurances that progression would remain moderate have proved false and why its development has gone far beyond the most pessimistic prognostications of its opponents is that all arguments in support of progression can be used to justify any degree of progression….the argument based upon on the presumed justice of progression provides for no limitation, as has often been admitted by its supporters, before all incomes above a certain figure are confiscated and those below left untaxed….It is no slur on democracy…that…once it embarks upon such a policy, it is bound to go much further than originally intended….Progression…indicates no halting point for its application, and the ‘good judgment’ of the people on which its defenders are usually driven to rely as the only safeguard is nothing more than the current state of opinion shaped by past policy.”

Clearly, based upon Hayek’s evaluation, this is not the wisest method upon which to base a system of revenue for a government, and as such, is ripe for the following eight very undesirable and destructive consequences of a progressive income tax system.

The most obvious consequence of this kind of system that is rampant throughout is consequence of cheating it produces among the populace.  Consider just how many individuals Obama either appointed to high-level positions within his administration or attempted to appoint who were revealed to have either cheated on or avoided paying their income taxes altogether ─ including Timothy Geitner who serves Obama as the Secretary of the Treasury, of which the Internal Revenue Service is a subsidiary!  In “Free to Choose”, Friedman quotes Graham Turner, a British tax authority as stating this obvious fact:

“I think almost everybody now feels that the tax system is basically unfair, and everybody who  can, tries to find a way round that tax system.  Now once there’s a consensus that a tax system is unfair, the country in effect becomes a kind of conspiracy ─ and everybody helps each other to fiddle.”

Elsewhere, in Capitalism and Freedom, he stated that “…so long as the individual income tax is as highly graduated as it is now, there is strong pressure to find devices to evade its impact.”  The point of these quotes is the government, by reason of its oppressive, unfair and unjust tax system, invites its citizens to become law breakers as this system descends into a lack of respect for law itself ─ obviously not a healthy attitude for the maintenance and continuance of any civil society.  Friedman refers to a case of a couple who were taken to court for starting a business to compete with the U.S. Postal Service in Freedom to Choose.  The case went all the way to the Supreme Court where the couple ultimately lost, and in commenting on the wife’s reaction to the verdict he wrote:

“Pat…is expressing a natural human response to the attempt by other people to control her life when she thinks it’s none of their business.  The first reaction is resentment; the second is to attempt to get around obstacles by legal means; finally, there comes a decline in respect for law in general.  This final consequence is deplorable but inevitable.”

The notion that progressive taxation is a vehicle to determine at what various levels individual citizens are to have their wealth confiscated depends, as the saying goes, on “whose ox is being gored.”  Clearly this system creates a divisiveness within a nation and causes an evil that, outside of the realm of taxation, leftists hold as a cornerstone of their philosophy to correct ─ discrimination.  To expose this consequence I will return to Hayek’s work I previously referenced:

“…in the case of progression, the so-called principle adopted is no more than an open invitation to discrimination and, what is worse, an invitation to the majority to discriminate against a minority, the pretended principle of justice must become the pretext for pure arbitrariness….

That a majority, merely because it is a majority, should be entitled to apply to a minority a rule which does not apply to itself is an infringement of a principle much more fundamental than democracy itself, a principle on which the justification of democracy rests….

Even if progressive taxation does not name the individuals to be taxed at a higher rate, it discriminates by introducing a distinction which aims at shifting the burden from those who determine the rates onto others….Progression provides no criterion whatever of what is and what is not to be regarded as just.”

As you read that first paragraph of the quote above, did the current debate over the extension of the tax cuts passed in the Bush administration spring to your mind?  What logic do we hear spewing forth from President Obama for not extending the lower rates for all individuals?  It is, of course, that the rich don’t deserve to have their lower tax rates continued; the government can’t afford to give them back that much of their money!  And just where does he draw the line demarking who comprises this wealthy group?  Why those wealthy undeserving citizens who make over $250,000 per year!  And upon what basis is that the cutoff point?  Who knows?   As Hayek said, “the pretended principle of justice must become the pretext for pure arbitrariness”!

For example, when different amounts of taxes are taken from two individuals who receive the same gross pay, it is nothing more than a another form of discrimination.  Or, in another case, continuing Hayek’s thoughts:

“Not only may services which before taxation receive the same remuneration bring very different rewards; but a man who receives a relatively large payment for a service may in the end be left with less than another who receives a smaller payment.  This means that progressive taxation necessarily offends against what is probably the only universally recognized principle of economic justice, that of ‘equal pay for equal work.'”

Yes, indeed, “equal pay for equal work”; how often have we heard that cry from these leftists when it comes to labor issues, yet somehow it becomes a deafening silence when brought into the arena of taxation!  In Capitalism and Freedom, Friedman gives an example that brings this concept down to such a simple level that even the most myopic of Obama’s drones should be able to see the light:

“Suppose you and three friends are walking along the street and you happen to spy and retrieve a $20 bill on the pavement.  It would be generous of you, of course, if you were to divide it equally with them, or at least blow them to a drink.  But suppose you do not.  Would the other three be justified in joining forces and compelling you to share the $20 equally with them?  I suspect most readers will be tempted to say no.  And on further reflection, they may even conclude that the generous course of action is not itself clearly the ‘right’ one.  Are we prepared to urge on ourselves or our fellows that any person whose wealth exceeds the average of all persons in the world should immediately dispose of the excess by distributing it equally to all the rest of the world’s inhabitants?  We may admire and praise such action when undertaken by a few.  But a universal ‘potlatch’ would make a civilized world impossible [emphasis added].

What is most striking about this is the closing application and conclusion that Friedman makes of his example, when on September 16, 2010 the following is reported in the news about Obama’s “Science Czar”:

“In a video interview this week, White House Office of Science and Technology Director John P. Holdren told that he would use the ‘free market economy’ to implement the ‘massive campaign’ he advocated along with Population Bomb author Paul Ehrlich to ‘de-develop the United States.’

A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States,’ Holdren wrote along with Paul and Anne H. Ehrlich in the ‘recommendations’ concluding their 1973 book Human Ecology: Problems and Solutions.

De-development means bringing our economic system (especially patterns of consumption) into line with the realities of ecology and the global resource situation,’ Holdren and the Ehrlichs wrote.

Resources must be diverted from frivolous and wasteful uses in overdeveloped countries to filling the genuine needs of underdeveloped countries,’ Holdren and his co-authors wrote. ‘This effort must be largely political, especially with regard to our overexploitation of world resources, but the campaign should be strongly supplemented by legal and boycott action against polluters and others whose activities damage the environment. The need for de-development presents our economists with a major challenge. They must design a stable, low-consumption economy in which there is a much more equitable distribution of wealth than in the present one. Redistribution of wealth both within and among nations is absolutely essential, if a decent life is to be provided for every human being‘”

My fellow Americans, this is the thinking of the man Obama chose to advise him on scientific matters, and if this does not leave you speechless and trembling at the power this man and all the other fascists Obama has surrounded himself with posses, then I have failed miserably to sound the alarm of the ominous threat against our freedom, our liberties, and our very way of life that these who hate the principles upon which our republic was founded have. 

And just how will these Fascists accomplish this transition to a one-world styled government with themselves at the helm, having reduced the greatest country to ever cross the stage of world history into a third-world nation by re-distributing its wealth?  Until next week when I shall continue our examination of the eight consequences of a progressive income tax system, I leave you with the answer from Hayek that I quoted in last week’s post:

“Whatever may happen in the future, for the present at any rate, progressive taxation is the chief means of redistributing incomes, and without it, the scope of such a policy would be very limited(The Constitution of Liberty) [emphasis added].

– Epaminondas

Government, Taxes & Spending – IV

In the beginning, Jefferson said, a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.  This is the sum of good government, and this is necessary to close the circle of our felicities” (1st Inaugural Address, March 4, 1801) [emphasis added].

Seventy-one years later Karl Marx wrote in The Communist Manifesto:

“The proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie,…in the most advanced countries, the following will be pretty generally applicable:…(2) A heavy progressive or graduated income tax. (3) Abolition of all right of inheritance….(5) Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly” [emphasis added].

Fifty-six years later the Socialist Party of the United States had in their party platform in the 1928 elections, the following as their 14th plank:

“Increase of taxation on high income levels, of corporation taxes and inheritance taxes, the proceeds to be used for old age pensions and other forms of social insurance.”

Finally, today, in 2010, what rhetoric do we hear coming from the mouths of the Fascist Democrats  in Congress and the Obama Administration?  Are they the words of Thomas Jefferson, the author of our Declaration of Independence and staunch defender of individual liberty and limited republican-based government, or the words of the father of Communism and the American Socialists who grew out of the Progressive Movement ─ a movement that began in the later part of the nineteenth century and which molted into the Democrat party of Woodrow Wilson and FDR?  To paraphrase the words of the slogan for a brand of cigarettes aimed at women, “You’ve come a long way, USA”!

As we now turn our attention to the onerous income tax system under which our economy struggles, it is very evident that we are far from being the free people who first heard those words of Jefferson as he assumed the office of President in 1801.  Milton and Rose Friedman clarified that you cannot have freedom without being economically free, and you cannot be economically free unless you have complete control over your property, or in Jefferson’s words, “the mouth of labor the bread it has earned.”  In their book, Free to Choose, they wrote:

“An essential part of economic freedom is freedom to choose how to use our income: how much to spend on ourselves and on what items; how much to save and in what form; how much to give away and to whom.  Currently, more than 40 percent of our income is disposed of on our behalf by government at federal, state, and local levels combined” [mind you, this was written in 1979 and this is most certainly an even higher percentage now].

“Freedom to own property is another essential part of economic freedom….We refer to ourselves as a free private enterprise society, as a capitalist society.  Yet in terms of the ownership of corporate enterprise, we are about 46 percent socialist” [again, this number is now significantly higher since in just the past eighteen months Obama has nationalized major sectors of our manufacturing, financial and healthcare industries].

The argument made in support of the income tax is classic Marxist/Fascist class warfare, namely it is not “fair” that certain individuals should by the use of their talents, ingenuity, hard work and sacrifice acquire more wealth than others in society, and therefore they must be punished by having the government take a larger portion of their wealth and “redistribute” it to those who are less wealthy.  This idea of using coercive taxation policies to assist those less fortunate is a direct assault on liberty.  Again, in Free to Choose, the Friedmans stated:

“There is no inconsistency between a free market system and the pursuit of broad social and cultural goals, or between a free market system and compassion for the less fortunate, whether that compassion takes the form, as it did in the nineteenth century, of private charitable activity, or, as it has done increasingly in the twentieth, of assistance through government ─ provided that in both cases it is an expression of a desire to help others.  There is all the difference in the world, however, between two kinds of assistance through government that seem superficially similar; first, 90 percent of us agreeing to impose taxes on ourselves in order to help the bottom 10 percent, and second, 80 percent voting to impose taxes on the top 10 percent to help the bottom 10 percent ─ William Graham Sumner’s famous example of B and C deciding what D shall do for A.  The first may be wise or unwise, an effective or an ineffective way to help the disadvantaged ─ but it is consistent with belief in both equality of opportunity and liberty.  The second seeks equality of outcome and in entirely antithetical to liberty[emphasis added].

Clearly this is the nature of our current income tax system and as I mentioned earlier, the rhetoric of the Fascist Democrats reverberate with Sumner’s equation mentioned by Friedman.  The more they proclaim the need to “make the rich pay ‘their fair share'”, the more the lower classes who pay no income tax whatsoever cheer them on and back them at the ballot box.  F. A. Hayek bluntly stated that this amounts to nothing more than a tyranny of the majority to satisfy their envy of those who are better off than they.

“It has come to be generally accepted once more that the only ground on which a progressive scale of over-all taxation can be defended is the desirability of changing the distribution of income and that this defense cannot be based on any scientific argument but must be recognized as a frankly political postulate, that is, as an attempt to impose upon society a pattern of distribution determined by majority decision….The only major result of the policy has been the severe limitation of the incomes that could be earned by the most successful and thereby gratification of the envy of the less-well-off(The Constitution of Liberty) [emphasis added].

What is most striking about this argument of equality set forth by these individuals who, as Friedman and Hayek have shown are the enemies of liberty, is that while they want the equality of the benefits of wealth re-distribution, they reject the notion of equality of taxation.  Returning to Hayek’s monumental work quoted previously, he wrote:

“J. R. McCulloch expressed the chief objection in the often quoted statement: ‘The moment you abandon the cardinal principle of exacting from all individuals the same proportion of their income or of their property, you are at sea without rudder or compass, and there is no amount of injustice and folly you may not commit.’…the general attitude was still well summed up in A. Thiers’s statement that ‘proportionality is a principle, but progression is simply hateful arbitrariness,’ or John Stuart Mill’s description of progression as ‘a mild form of robbery’….

The social reformers, while generally disavowing any desire to alter the distribution of incomes, began to contend that the total tax burden, assumed to be determined by other considerations, should be distributed according to ‘ability to pay’ in order to secure ‘equality of sacrifice’ and that this would be best achieved by taxing incomes at progressive rates.  Of the numerous arguments advanced in support of this, which still survive in the textbooks on public finance, one which looked most scientific carried the day in the end….Its basic conception is that of the decreasing marginal utility of successive acts of consumption….Modern developments within the field of utility analysis itself have, however, completely destroyed the foundation of this argument….There can now be little doubt that the use of utility analysis in the theory of taxation was all a regrettable mistake (in which some of the most distinguished economists of the time shared) and that the sooner we can rid ourselves of the confusion it has caused, the better[emphasis added].

Despite this evidence of a failure from a scientific and economic basis on the income tax to deliver as promised, much less that of a candid review from the standpoint of justice, the question must be asked, why then does it persist as a means of funding the government?  The answer is not to be found in the science of economics, but rather in the halls of power and tyranny.  Clearly, the income tax, as these above quotes indicate, is the main instrument of stirring up class enmity and hatred so as to cement the power base for these Fascists.  As Marx defined it in the Communist Manifesto, “Political power, properly so called, is merely the organized power of one class for oppressing another.”  This is completely antithetical to the philosophy of our founders in their construction of our Constitution, which was to allow the voice of the majority to prevail, but not to the point of the oppression of the minority.  Indeed, one of their primary concerns, both Federalist and Anti-Federalist, was to strike a balance between these two groups so that the minority could not checkmate the will of the majority, but at the same time to give protection to the rights, liberties, and voice of the minority.  The reason that we still have the income tax and will continue to have it is we have Fascists in control of our government whose sole interest is their own grip on power ─ a grip that can only be maintained by employing divisive tactics among the citizenry, using the envy of those who have less to wage war against those who have more by promising to “redistribute” the income of the one class to the other.  As Hayek said back in 1959 when he wrote The Constitution of Liberty, “Whatever may happen in the future, for the present at any rate, progressive taxation is the chief means of redistributing incomes, and without it, the scope of such a policy would be very limited.”

The income tax will continue to oppress us until we elect men and women to Congress who will not bow to the special interests by “tinkering” around the fringes of the tax code, but instead will champion the interests of we, the people ─ rich, poor or middleclass ─ men and women who will put the future of our children, grandchildren, and all future generations above any personal ambition and who understand and will follow these economic truths from the wisdom of men such as Friedman and Hayek.

In his inaugural address Jefferson also stated that not only should a wise government “not take from the mouth of labor the bread it has earned” but that such a wise and good government would also be “frugal”.  I hesitate to even ask if you feel the portion of your “bread” produced by your labor that is taken from you by our government is spent wisely, and if the central government acts frugally in its dissemination of these monies.  Adam Smith, in his classic work, The Wealth of Nations, gave this assessment of the impact of money taken by the government out of the private sector:

“All taxes upon the transference of property of every kind, so-far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labour.  They are all more or less unthrifty taxes that increase the revenue of the sovereign, which seldom maintains any but unproductive labourers; at the expense of the capital of the people which maintains none but  productive.”

So according to Smith, the only result that taxes on income can produce is a decrease in the productivity that would otherwise be possible had those taxes not removed that capital out of the hands of the laborers.  Instead, he says, those taxes go into the treasury of the government which seldom creates any productivity.  Contrast this with what you hear constantly coming from the Obama Administration that it is the responsibility of the government to increase taxes so that they can use the money for the creation of jobs!  Clearly, Obama’s economic philosophy towards taxation and job productivity is at odds with the renowned Adam Smith!

Words and actions have consequences, no matter how hard those on the left try to expunge that basic principle from our society and government.  Since that principle still holds true, though, exactly what are the consequences of our current tax code, and specifically a system of taxation based upon income?  Adam Smith’s statement above has already brought one consequence to the fore ─ that being a reduction of productivity.  But, that is just the tip of the iceberg ─ there are many, many more devastating consequences of the income tax upon not just our economy but upon our freedom and liberties, all of which demand its elimination.  This will be the subject matter of next week’s post.

– Epaminondas

Published in: on September 12, 2010 at 5:55 PM  Comments Off on Government, Taxes & Spending – IV  
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Government, Taxes & Spending – III

Thus far in this series of essays we have covered four of the five basic questions that I set before you in the initial essay, namely “Does the government have the right to tax?”, “What are the kinds of taxes?”, “Upon whom should the taxes be levied?”, and “What proportion of the taxes should these individuals pay?”  It is now time to ask the all-important question, which is “What are the legitimate purposes for which government should collect taxes?”  The importance of this question is readily apparent for it drives all of the other questions and especially the issue of how much in taxes citizens should have to pay.   For American citizens that answer was laid down in the limited and enumerated powers granted by us, the people, to the central government in our Constitution.  But before delving into that sacred document, consider these words by Montesquieu, a brilliant political philosopher who had an enormous impact upon the thinking of our founders, in his classic work, The Spirit of the Laws:

“The revenues of the state are a portion each citizen gives of his goods in order to have the security or the comfortable enjoyment of the rest

In order to fix these revenues well one must consider both the necessities of the state and the necessities of the citizens.  One must not take from the real needs of the people for the imaginary needs of the state.

Imaginary needs are the ones sought by the passions and weaknesses of those who govern, the charm of an extraordinary project, the sick envy of vainglory, and a certain impotence of spirit in the face of their fancies.  Often those who, with restless spirit, were at the head of public business under a prince have thought that the needs of their small souls were the needs of the state. 

There is nothing that wisdom and prudence should regulate more than the portion taken away from the subjects and the  portion left to them” (Part II, Book 13, Chapter 1) [emphasis added].

Notice if you will that he establishes the point I made in the previous post of this series, namely that each citizen should contribute something to the maintenance of the government, as every citizen benefits from the security, freedom and liberties provided by it.  Next, he points out that the state should not take money from the people, thus denying them both the right and the means by which to care for their needs themselves, to fund what those in power deem to be the needs of the government but which are in reality not within the purview of government at all.  Third, he touches on the notion that all of our personal wants and needs are not necessarily those of the state, i.e.,  “those who, with restless spirit,…have thought that the needs of their small souls were the needs of the state.”  In this one short statement Montesquieu rips out the underpinnings of our modern-day welfare state!  Finally, he sums up what we see today so sorely lacking in our Congress and Administration, the wisdom and prudence regulating the approach that those in power are to use in their levying of taxes upon us.

Our current system of taxation clearly indicates that today, according to James Madison, we do not have a just government.  In defining the political meaning of “property”, its relation to individuals, and a government’s responsibility and limitation towards it, he wrote:

“In its larger and juster meaning, it embraces every thing to which a man may attach a value and have a right; and which leaves to every one else the like advantage….In a word, as a man is said to have a right to his property, he may be equally said to have a property in his rights.

Where an excess of power prevails, property of no sort is duly respected.  No man is safe in his opinions, his person, his faculties, or his possessions….

Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses.  This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own….

That is not a just government, nor is property secure under it, where the property which a man has in his personal safety and personal liberty, is violated by arbitrary seizures of one class of citizens for the service of the rest….

That is not a just government, nor is property secure under it, where arbitrary restrictions, exemptions, and monopolies deny to part of its citizens that free use of their faculties, and free choice of their occupations, which not only constitute their property in the general sense of the word; but are the means of acquiring property strictly so called….

A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species:….

If the United States mean to obtain or deserve the full praise due to wise and just governments, they will equally respect the rights of property, and the property in rights:  they will rival the government that most sacredly guards the former; and by repelling its example in violating the latter, will make themselves a pattern to that and all other governments” (published in the National Gazette, March 29, 1792) [emphasis added].

So what say you?  Are you of the opinion that our central government looks upon your “property” as something that belongs to you and has therefore as its responsibility to protect from seizure, or that it looks upon your “property” as belonging to it and its right to seize your “property” at will, according to its desires, and to distribute to whomever and for whatever reason it deems “good” (remember Obama’s frequent reference to his intention to “spread the wealth around”, i.e., your wealth taken from you and spread around to others who never worked for it)?   Would our government today pass the “just government” test as outlined by Madison in the preceding statements?  I feel my question bears no need of a spoken answer.

Having established the obvious regarding the failure of the central government to protect our properties, we should return to the question at hand, namely, for what legitimate purposes should the government be allowed to levy taxes upon us and to what extent.  I addressed the extent to which taxes are to be collected in last week’s post, but I will, for summary, repeat the quote I gave from Montesquieu’s Spirit of the Laws:

“Public revenues must not be measured by what the people can give but by what they should give, and if they are measured by what the people can give, it must at least be by what they can always give” (Part II, Book 13, Chapter 1) [emphasis added].

The purpose for these taxes that we as citizens should (in Montesquieu’s words) willingly and cheerfully forward to the central authorities are not the “imaginary needs” (Montesquieu’s words again) that congress and presidents envision for their own aggrandizement, but only those that are authorized by our Constitution ─ specifically those enumerated powers outlined in Section I, Article 8.  As you read down this list you will be struck by the thought that today we have many, many  more objects of government expenditure than what is contained in that constitutional list.  So how is it that our government spends so much more on things apparently not authorized, which in turn requires more in taxes for these imagined expenditures than what we should be obligated to pay?  The answer is found, according to Alexander Hamilton’s argument in The Federalist No. 33, in the last part of that portion of the Constitution, namely the so-called “necessary and proper” clause:

“To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

Regarding this statement in the Constitution and its application Hamilton argued

“What is the power of laying and collecting taxes but a legislative power, or a power of making laws to lay and collect taxes?  What are the proper means of executing such a power but necessary and proper laws?”

The obvious question then becomes, Who is to decide what is “proper and necessary”?, to which Hamilton went on in this issue of The Federalist Papers to answer

“But it may again be asked, Who is to judge of the necessity and propriety of the laws to be passed for executing the powers of the Union?” (and by extension, from his previous statement, the judge of what taxes and how much are to be levied upon the citizenry)  “…I answer in the second place that the national government, like every other, must judge, in the first instance, of the proper exercise of its powers, and its constituents in the last.  If the federal government should overpass the just bounds of its authority and make a tyrannical use of its powers, the people, whose creature it is, must appeal to the standard they have formed,” [i.e., the Constitution] “and take such measures to redress the injury done to the Constitution as the exigency may suggest and prudence justify.”

So there you have it my fellow citizens ─ it is the government itself that can determine what is “necessary and proper”, and our only redress is to point the Congress back to the Constitution and assert that it has overstepped its bounds.  Now, how many of you truly believe that this is an effective means of correcting our oppressive tax burden, brought about by extravagant, reckless and unconstitutional spending by our legislature?  No, I don’t believe so either!  We the people have reached the unfortunate point in time where those in our present Congress have become too entrenched in their lauded positions of prestige and power to respond to our voices.

What is most striking, however, is that Hamilton’s co-Federalist, James Madison, appeared not to view this clause to grant as broad of latitude in power as Hamilton did in his essay.  I would commend for your reading Federalist Papers numbers 41 – 45, written by Madison, on the powers of the proposed federal government.  In Federalist No. 44 Madison addressed this issue of Congress exceeding its authority (which would include its power to lay and collect taxes):

“If it be asked what is to be the consequence, in case the Congress shall misconstrue this part of the Constitution and exercise powers not warranted by its true meaning, I answer the same as if they should misconstrue or enlarge any other power vested in them;…in the last resort a remedy must be obtained from the people, who can, by the election of more faithful representatives, annul the acts of the usurpers.  The truth is that this ultimate redress may be more confided in against unconstitutional acts of the federal than of the State legislatures, for this plain reason that as every such act of the former will be an invasion of the rights of the latter, these will be ever ready to make the innovation, to sound the alarm to the people, and to exert their local influence in effecting a change of federal representatives.

Here at least we see the proposed solution by Madison to the situation we find ourselves in today ─ the casting out of those “tenured” representatives who have lost touch with us, the people, and electing in their stead men and women who will be faithful to the original intent of the founders as expressed in our Constitution.  The other half of the solution is a return to the federalist structure of the Congress by repealing the seventeenth amendment so that senators are once again appointed by and therefore answerable to the state legislatures, who will then also act as watchmen against federal encroachment upon their authority as well as the freedom and liberties of their citizens. (See my previous essays on Term Limits and the Senate and the Seventeenth Amendment.)

You may feel by this point that aside from referencing the enumerated powers in Section I, Article 8 of the Constitution, I have yet to address the original question for what exactly may the government collect taxes?  Allow me to present to you the answer provided by Madison in The Federalist No. 45:

“It is too early for politicians to presume on our forgetting that the public good, the real welfare of the great body of the people, is the supreme object to be pursued; and that no form of government whatever has any other value than as it may be fitted for the attainment of this object.  Were the plan of the convention adverse to the public happiness, my voice would be, Reject the plan.  Were the Union itself inconsistent with the public happiness, it would be, Abolish the Union.”

If left at this point it would appear as though Madison was stating the same thing as Hamilton did in Federalist 33 ─ that anything deemed by the government to be for the public good would qualify as a legitimate pursuit of the government, funded though its power of taxation, to whatever degree and amount necessary to the attainment of that end.  Fortunately, Madison did not leave the issue there, but went on in this essay to state that

The powers delegated by the proposed Constitution to the federal government are few and defined.  Those which are to remain in the State governments are numerous and indefinite.  The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected.  The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

The operations of the federal government will be most extensive and important in times of war and danger; those of the State governments in times of peace and security.  As the former periods will probably bear a small proportion to the latter, the State governments will here enjoy another advantage over the federal government.  The more adequate, indeed, the federal powers may be rendered to the national defense, the less frequent will be those scenes of danger which might favor their ascendancy over the governments of the particular States[emphasis added].

Based upon this, then, does it appear to you that the central politburo of our current government has adhered to these guidelines, or has it overstepped these limits, as expounded by one who was the lead author of the Constitution, and taken over what he said was to be within the purview of the State governments?  As in previous questions, no answer need be given to this one either; the answer is readily apparent.

Of these dangers the Anti-Federalists gave warning over and over again.  One such author, Melancton Smith, wrote on June 23, 1788:

“Our duty is to frame a government friendly to liberty and the rights of mankind, which will tend to cherish and cultivate a love of liberty among our citizens.  If this government becomes oppressive it will be by degrees:  It will aim at its end by disseminating sentiments of government opposite to republicanism; and proceed from step to step in depriving the people of a share in the government….But now it is proposed…to remove all barriers; to give the New Government free access to our pockets, and ample command of our persons;[emphasis added].

Perhaps the most succinct and clarion warning penned by an Anti-Federalist about the condition in which we find ourselves today was penned by none other than Robert Yates, the brilliant judge from New York who wrote under the pseudonym “Brutus”.  I will close with his words, written on October 18, 1787, which I shall use as the springboard into next week’s post on our most  onerous form of taxation, that of the income tax.

“It” [i.e., the federal government] “has authority to make laws which will affect the lives, the liberty, and property of every man in the United States; nor can the constitution or laws of any state, in any way prevent or impede the full and complete execution of every power given.  The legislative power is competent to lay taxes, duties, imposts, and excises ─ there is no limitation to this power, unless it be said that the clause which directs the use to which those taxes, and duties shall be applied, may be said to be a limitation:  but this is no restriction of the power at all, for by the clause they are to be applied to pay the debts and provide for the common defence, and they only are to determine what is for the general welfare; this power therefore is neither more nor less, than a power to lay and collect taxes, imposts, and excises, at their pleasure; not only is the power to lay taxes unlimited, as to the amount they may require, but it is perfect and absolute to raise them in any mode they please….It is proper here to remark, that the authority to lay and collect taxes is the most important of any power that can be granted; it connects with it almost all other powers, or at least will in process of time draw all other after it; it is the great means of protection, security, and defence, in a good government, and the great engine of oppression and tyranny in a bad one[emphasis added].

– Epaminondas

Published in: on September 5, 2010 at 10:56 PM  Comments Off on Government, Taxes & Spending – III  
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Government, Taxes & Spending – II

‘Forward, the Tax Payers!’

Was there a man dismay’d ?

Not tho’ the payer knew

Congress had blunder’d:

Theirs not to make reply,

Theirs not to reason why,

Theirs but to pay & die,

Into the valley of Oppression

Rode the American Citizen.

If you are an aficionado of English literature, specifically poetry, you will recognize my adaptation above of Alfred Lord Tennyson’s famous ode to the charge of the Light Brigade.   If you are not familiar with the history behind this famous poem, it was written to commemorate a suicidal charge of light cavalry of the British army in the battle of Balaclava (Ukraine) in the Crimean War (1854-56). Of the 637 men who began the charge, 247 of them were killed or wounded and the attack failed miserably.  Today, as I write this, our congress and president are poised to order the taxpayers of this nation to commit a similar economic suicide charge that will cripple our ability to recover from the oppressive recession that they, though their reckless and irresponsible fiscal decisions, have brought upon us. 

On January 1, 2011 the tax rates that all Americans pay on their income from all sources will increase dramatically.  Every income tax bracket will increase and one more will be added.  Those on the lowest end of the economic spectrum will see their rates jump by fifty percent (from ten percent to fifteen percent) ─  this despite almost universal warnings from economists from one shore to the other that raising taxes during a recession will put the economy into a crash dive that we may not be able to pull out of.

In my introductory essay on this topic I established the case that government does have a legitimate right to levy taxes in order to carry out the responsibilities that its citizens have assigned to it.  I also covered some of the basic kinds of taxes that are used by all levels of government in our nation, including one insidious tax that the Obama Administration is considering adding to our tax burden, the Value Added Tax (or VAT).  We are today awash in taxes (hence my adaptation and modification of Tennyson’s poem).  Various tax watchdog organizations have compiled lists of the various taxes to which we are subjected and the longest list I found had over fifty different taxes listed (and I doubt it was exhaustive)!   None of the lists I encountered included the VAT currently under consideration, nor any of all of the other taxes hidden within the recently enacted Health Care “Reform” Law, nor any of those proposed by the so-called “Cap and Trade” legislation that has been proposed in congress and advocated for by the Obama Administration. 

So just what is the most effective kind of tax that should be employed by our government in order to carry out its obligations?  I shall leave for the moment to a future post this second question of the five I raised in the opening of the previous essay of this series.  Instead I would like to proceed to the third question which was, “Upon whom should the taxes be levied?”  If an individual receives gifts constantly for which he or she has to put forth no effort or sacrifice, those gifts or benefits quickly lose their value in the eyes of the recipients – they are neither appreciated nor well taken care of.  As I intimated in the previous post, governments exist to protect civil society and our government has been charged with the responsibility of providing a secure society in which all men (and women) are free to pursue life, liberty and happiness, and to make of their lives whatever talents and ambition which they have, drives them to achieve.  Everyone in this nation receives the benefits accorded by the government; hence a failure to contribute something, even if only a small portion, will cause them to adopt an entitlement mentality towards the freedom and liberties accorded to them by our constitution and government and to fail to appreciate just how precious these liberties and freedom are.  Just considering the income tax (a topic  I shall deal with in either the next post or the one following it), according to the latest figures available for the tax year 2007, the top one percent of tax payers, those earning an Adjusted Gross Income of $410,096 or greater, paid 40.42% of the entire income tax burden collected by the Internal Revenue Service.  The top five percent, those earning an AGI of $160,041 or more, paid 60.63%, and the top twenty-five percent, those who earned an AGI of only $66,532 or more, paid 86.59% of the income tax burden.  A full forty percent of income tax filers paid no income tax at all!  Is it any wonder then that the fascists in the democrat party are so ably adept at playing the class warfare card in order to garner votes and keep themselves in power?!  The following quote has often been misattributed to Benjamin Franklin but was most likely penned by an earlier historian in Europe (although the exact authorship is debated); nevertheless, its words ring as true as though struck from a bell cast of the purest gold regarding our situation today:

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been about 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage”  [emphasis added].

President Obama supposedly feels that everyone should have a stake in this nation by supporting it, but his tax policies and class warfare rhetoric belie this exchange he had with reporter George Stephanopoulos in early January 2009:

OBAMA:   “What we have to do is to take a look at our structural deficit, how are we paying for government, what are we getting for it, and how do we make the system more efficient?”

STEPHANOPOULOS:   “And eventually sacrifice from everyone.”

OBAMA:   “Everybody is going to have to give. Everybody is going to have to have some skin in the game. “

Though Obama pays lip service to this principle, his actions speak to the opposite position.  In the Biblical story of God’s punishment of King David for his arrogance in taking a census of the people of his kingdom, the pestilence sent by God as punishment was halted at the threshing floor of a man named Araunah.  David wished to purchase the property from Araunah in order to offer a sacrifice to God, but Araunah declined, instead offering to give the king his property.  To this offer David gave an answer that bespeaks the principle of personal responsibility and appreciation:  “No, I insist on paying you for it.  I will not sacrifice to the Lord my God burnt offerings that cost me nothing[emphasis added].  Neither should anyone enjoy the fruits of freedom and liberty when it costs them nothing.  I will offer what I feel has been set forth as the fair remedy to this in a later post; but suffice it at this time to have established the point that everyone who benefits from being a citizen in this nation should have a part, even a small one, in the maintenance of it.  Is it no wonder then that Obama was elected and his minions keep getting re-elected because those groups that make up the core constituency of their party have learned that by voting for them they are voting “themselves largesse from the public treasury.”

The fourth question that I posed in that initial essay was “In what proportion should taxes fall upon those who pay them?”  This has been the central question about taxation for centuries.  The celebrated Montesquieu, in his monumental work The Spirit of the Laws, contradicted our current tax system ─ a system that is the backbone of every Marxist, Socialist and Fascist government ever erected:

“Public revenues must not be measured by what the people can give but by what they should give, and if they are measured by what the people can give, it must at least be by what they can always give” (Part II, Book 13, Chapter 1) [emphasis added].

Contrast this with Karl Marx’s statement in his 1875 Critique of the Gotha Program, “From each according to his ability, to each according to his need.”  This has been part of the party platform of every tyrannical government that has ever existed, whether you call it Communist, Fascist or Socialist.  This is what is behind the oft-repeated phase uttered by Obama and his fascist democrat cronies, that there must be a “spreading of the wealth around” ─ i.e., a forceful taking of wealth from those who created it by their efforts and distributing it to those who did nothing for it, according to what the central government sees as “fair and equitable.” 

This ploy is as old as the fable of Robin Hood ─ the demonizing of those who are wealthy (which is anyone who has at least one dollar more than you do) and his justifiable robbery of them in order to give the plunder to the poorer inhabitants of the land.  But what else would you expect from one whose experience has not been in creating jobs, opportunities or wealth, but instead was a rabble rouser who cut his teeth on the teaching of the Marxist Saul Alinsky?  Alinsky’s thirteenth rule in his section on tactics in his book, Rules for Radicals, on stirring up animosity within a community, society or nation, is to “Pick the target, freeze it, personalize it, and polarize it.”  Such is exactly the tactic used in the class warfare waged by Obama in his speeches regarding taxing the wealthy so that they “pay their fair share.”  Furthermore, consider the thrust of what Alinksy held were the purposes of tactics (Alinsky’s son described Obama as the most expert student of his father’s principles of anyone who had been a follower of him):  “Here our concern is with the tactic of taking; how the Have-Nots can take power away from the Haves.”  Combine this with his fifth rule of tactics and you can readily see how in the area of taxation and “wealth-spreading”, Obama is applying these Marxist principles of community upheaval on a national scale:  “…the fifth rule:  Ridicule is man’s most potent weapon.  It is almost impossible to counterattack ridicule.”  Listen carefully to the words Obama uses the next time you hear him speak on this subject and see if you don’t recognize these tactical principles in his attack upon our society.

Having said this, however, still does not answer the question, which is, just how much should each individual pay in taxes?  What is “fair” to everyone concerned?  What “should” each individual pay, to go back to Montesquieu’s statement.  Clearly, someone who earns $500,000 is able to pay more taxes than someone who only earns $50,000, but is it fair that just because he can he should?  We are right back then to where we started with the quote from Montesquieu.  Or in the words of President Obama, just how much “skin” should each individual “have in the game”?  This whole notion of Marx and the “spreading of the wealth around” harkens back to the concept that everyone should be equal ─ that no one should have more than anyone else.  To this belief the Nobel prize-winning economist and political philosopher, F.A. Hayek, argued in his book, Individualism and Economic Order:

“I can see no reason for trying to make people equal as distinct from treating them equally. While individualism is profoundly opposed to all prescriptive privilege, to all protection, by law or force, of any rights not based on rules equally applicable to all persons, it also denies government the right to limit what the able or fortunate may achieve. It is equally opposed to any rigid limitation of the position individuals may achieve, whether this power is used to perpetuate inequality or to create equality. Its main principle is that no man or group of men should have power to decide what another man’s status ought to be, and it regards this as a condition of freedom so essential that it must not be sacrificed to the gratification of our sense of justice or of our envy.

If all men were completely equal in their gifts and inclinations, we should have to treat them differently in order to achieve any sort of social organization. Fortunately, they are not equal; and it is only owing to this that the differentiation of functions need not be determined by the arbitrary decision of some organizing will but that, after creating formal equality of the rules applying in the same manner to all, we can leave each individual to find his own level … There is all the difference in the world between treating people equally and attempting to make them equal[emphasis added].

We can see how this concept of political correctness and equality is invading more and more areas of our lives, such as the absurdity of everyone being a winner in any kind of contest – that there are no such things as “winners and losers”.  Thus those who possess superior skills in athletics, the arts, or any other area must not be recognized for the superiority of the gifts they possess, just as those who use their talents and ambition to succeed financially must be punished for their efforts by having the fruit of their labor taken from them and distributed to others.  Many can see this absurdity in these other areas, but are blind to it when it comes to the subject of taxation.  To this Ayn Rand aptly said, Whoever claims the right to redistribute the wealth produced by others is claiming the right to treat human beings as chattel!”  Remember this, then, that the next time Obama talks about redistributing wealth he is viewing you and me as nothing more than chattel, to be manipulated by the government in the way it (he) sees fit!  What is fair is you having the control over how much you pay in taxes, not the government ─ you deciding how much and when to pay taxes, and for everyone to have that same decision-making power and responsibility is the only fair way to levy taxes.  This is exactly the solution proposed by the “Fair Tax”, which I will delve into in more detail when this series of essays concludes. 

Perhaps, though, the over-arching question is the fifth question I initially raised, which is, “Just what are the legitimate purposes for the collection of taxes?  For America, that answer lies in our Constitution, which for years has been abused in this subject of taxes and which abuse has created the burdensome and onerous tax system that afflicts us today.  In my next post I will take a look at just what the Constitution authorizes, how Congress has over the years twisted it to justify the taxes taken from us, and look at just a few of the abuses this has led to.

– Epaminondas

Government, Taxes & Spending – I

“Render unto Caesar, the things that are Caesar’s…” ─ so taught Jesus Christ in the gospels. Perhaps nothing brings out more ire and anger in citizens than the subject of paying taxes, and
in most cases, not without good reason.  Most thoughtful citizens realize that taxes are necessary if a civil society is to be maintained and the general welfare of a nation to be provided for, so they are happily willing to support a government that fulfills those needs.  The rub comes when that government exceeds its authority in the levying of taxes so that the burden of bearing those costs is inequitable, or the citizens see that the monies taken from them are foolishly wasted by those in the government who have the fiduciary responsibility over the disbursement of those funds.

In considering the subject of taxation there are several matters that come into play.  First is the fact that, as the Biblical quote in my opening sentence intimates, government has the right to expect to be supported by its citizens, and citizens hence have the moral responsibility to contribute to the functioning of their government.  Second is the consideration as to what are the most effective kinds of taxes (since there are several kinds) that the government should use in order to fulfill its obligations.  Third is the question of once the kind of tax to levy is decided, upon whom should the taxes be levied, and fourth, in what proportion should they fall upon those who are to pay them?  Finally, that which will affect the amount of taxes needed is the all-important question of what are the legitimate purposes for collecting these taxes?  These five matters will serve as the platform for the remainder of this essay and the one to follow, while subsequent ones will deal more with the history of taxation in our nation and delve more into the merits of our current tax system (or as I intend to show, the lack of merit) and explain the alternative of what I feel is the answer to our tax problem as well as our economic threat.

Government is necessary for the preservation of a civil society, and in order to do that funds must be collected.  This has been the case from the very first government that mankind formed.  So if we wish to reap the benefits of a government, then we are obligated to support it financially.  On this point I see no argument or disagreement. 

Down through history governments have used various methods of taxation.  In the oppressive empires of antiquity, much of their revenue was raised though the extracting of “tribute” from nations they had conquered as well as through trade and fees for goods passing through their territory.  There was also the rampant corruption in the Roman empire where the basic means of taxation was the bidding out to “contractors” the responsibility to raise a set amount of money from an assigned region and those individuals then being given free reign (with the backing of the Roman army) to raise whatever amounts they could extort from the people.  After the assigned funds were turned over to the Roman government, these individuals were allowed to keep the balance of the amounts they had extorted from the people – obviously a system rife with corruption, causing much hatred among the citizens. 

In more modern times (by which I mean the past two or three centuries) the methods of taxation have been more refined, but there still remains what many feel to be that old feeling of oppression, extortion and corruption.  One primary method of taxation early on in this time period was the tariff – the imposing of a tax on imports and exports of goods from and to other nations.  Although this method was widely in use at the time of founding of our nation, it was and continues to be unto this day a sore point between nations.  It was the British export tariffs upon products such as tea shipped to America that helped to spark the American Revolution (and there were others in addition to this one). 

The conflict arises whenever one nation raises its tariffs on the imports of another nation, obviously making those products more expensive in order to protect industries within their country that may produce similar products.  This of course will cause the exporting nation to retaliate by raising their tariffs on imports from that country, and a full-blown trade war will erupt in which neither nation wins and revenues in both governments will decline.  In our current climate, there is much debate over the notion of “free trade”, especially over the NAFTA treaty.  America espouses this concept of free trade, and yet the trading nations with whom we trade the most do not reciprocate, thus putting American products at a decided disadvantage in those countries.  The dilemma we now face is that due to a failure of the government to bring adequate pressure on these nations, allowing this trade inequity to “flow along”, our trade deficit and dependence upon the imports from these other countries is now at the point where we have lost most, if not all, leverage to use against these nations to entice them to relax their tariffs on our imports and to “play fair” in the matter of global trade.  Tariffs have today become an economic weapon that one nation can use against another in an attempt to affect the economic stability of that nation and therefore they should be recognized as being just that – a weapon aimed at wounding the productivity of our economy.

Another very ancient tax which was used in the early part of our nation but has been discarded is what is properly called the “capitation” tax (also known as a “poll” or “head” tax).  This tax is a flat amount levied upon individuals.  If you are a student of the Bible you will be familiar with this tax that was imposed upon the first-born males of the nation of Israel, referred to in Scripture as the “redemption price of the first born”, an example of which can be found in the book of Numbers 3:44-47.  Typically a capitation tax is the same for everyone upon whom it is levied, regardless of the variance among those taxed in regards to their wealth or ability to pay.  A capitation tax can be levied upon every citizen or only upon a designated group within the nation.  In early America, this would have been levied upon only men who were property owners and therefore eligible to vote in elections (hence the application of the term “poll” tax to this form of revenue).  It was subsequently eliminated in our nation as it was used in the ante-bellum South as a means to prevent the newly liberated slaves from exercising their rights to vote.  Surprisingly, it wasn’t until 1964 when the twenty-fourth amendment was ratified that the use of the poll tax, property ownership, or the payment of any other kind of tax was prohibited from being a prerequisite to having the right to vote.

Property taxes are another form that has been in use for centuries.  This has taken the form of either a direct tax upon the valuation of the property (which we still have today on state and local levels), or a tax upon what Adam Smith wrote about in The Wealth of Nations as a tax upon the rental income of property (which in essence becomes a tax upon income).  In most localities across our nation this is the primary method for funding our public education institutions.  The problem of arriving at a fair evaluation of a piece of property has been at the heart of dispute over this form of tax from the very beginning of its introduction.  The issue that is at the core of its injustice, however, is not the methodology of determining the taxable value of a particular property, but rather its intrusion upon the right of individual property ownership by the government.  Again, as I have written in previous essays, the individual right to property was a primary basis for our founders’ understanding of liberty and freedom and was therefore of the utmost importance for protection against government seizure.  You think you own your home and property, even if it is completely paid off?  Just try and not pay your property taxes and you will quickly learn that you do not own your property, but that the government has the right of claim over it for they will seize it for your failure to pay those taxes.  Listen to this very charge made by the Anti-Federalists in Pennsylvania who issued a report once they lost the ratification vote in that state to ratify the Constitution (issued on December 18, 1787):

“The power of direct taxation will further apply to every individual, as congress may tax land, cattle, trades, occupations, etc. in any amount, and every object of internal taxation is of that nature, that however oppressive, the people will have but this alternative, except to pay the tax, or let their property be taken, for all resistance will be in vain.  The standing army and select militia would enforce the collection” [emphasis added].

There are also various kinds of sales or consumption taxes that have been used down through the years.  There is the common sales tax with which we are familiar that is levied at the retail level on products as a percentage of the value of the sale.  This is a fairly straight-forward tax that you can readily see, as it appears on your sales receipt.  There is also a tax that is being considered by President Obama’s administration and the Congress that is very insidious and invisible, called the Value Added Tax, or better known simply as the VAT tax. 

A VAT tax is in principle a sales tax that is levied at every step of the production process.  I’ll use the example of manufacturing a common number two lead pencil to illustrate just how insidious this tax is, as  you will never know the true amount of tax included in the final price of the pencil.  First a tree is harvested from a forest and sold to a lumber mill, and a tax is charged on that transaction.  After the lumber is milled, it is sold to a middle-man who handles the supply of raw materials to a pencil manufacturer, and a tax is levied on that transaction.  Of course, the charge made to this middle-man includes the cost of that initial tax charged to the lumber mill, so the value of the lumber now includes two taxes.  The middle-man sells the wood to a pencil manufacturer, and yet another tax is added to that transaction.  At this point, in this simplified example, there have already been three taxes added to the value of the lumber and not a single pencil has yet to have been made.  Once the manufacturer completes the production of the pencils from the lumber it purchased, it may sell them to a wholesaler of office supplies, and you guessed it, another tax is included on that sale.  On and on this process goes until it finally reaches the office supply store and you purchase a box of pencils and pay a final sales tax on the value of the pencils that will have hidden in it countless numbers of previous taxes.  So as a result, you will never know just how much in taxes you are paying to the government, and even worse, you will never know the exact rate of taxation as the government can raise these rates which will then become buried in the cost of all of the products you purchase.  Since this is a consumption tax, as Adam Smith pointed out, the burden of the entire tax system falls upon the consumer, and most heavily upon those least able to bear it.

An alternative to this is a consumption tax presently before Congress as H.R. 25, commonly referred to as the Fair Tax.  This is not a VAT tax, but a sales tax levied on all products sold at the initial retail level, and unlike the VAT, it is not levied at any other level; thus you know exactly the amount of tax that you pay with each purchase.  However, the key to this tax is that it is in place of all other taxes related to income and payrollthe VAT tax is in addition to your income and payroll taxes (i.e., Social Security and Medicare).  As a result, the cost of all products will be less as they will not have all of these taxes rolled into them, and in the end, even with this consumption tax, you will pay about the same amount as you would have paid in our current market economy.  Also, unlike any other sales-related kind of tax, a rebate on life-sustaining necessities will be made to all families so that unlike the VAT in particular, it will not adversely impact the lower income families among us on items necessary to the sustaining of life.  However, I will have more to say on this in a later essay, but this will at least set forth the best alternative when it comes to consumption-styled taxes – especially since it is intended to replace all income-related taxes.

This brings us to the final tax for consideration, which is a tax upon income.  What is it about the income tax that stirs such animosity among us?  The answer is simple – it is a direct assault upon our property rights, which as I’ve said before, was sacrosanct in the eyes of our founders.  To quote the catch line of a current commercial by a loan agency, “It’s my money and I want it now!”  It’s our money and we want to keep it, as we worked for it, yet the government dictates to us just how much of those earnings it deems proper for us to retain.  What is even more significant is that when an income tax was initially attempted, it was struck down by the Supreme Court as being unconstitutional.  Hence, the only way it was able to be enacted was to modify the Constitution, which was done with the ratification of the sixteenth amendment.  There is much I intend to go into on this specific tax since it is the most oppressive, unjust and economically-deadly of any tax that can be imposed upon a nation, so I will leave the topic of the income tax for that later discussion.

The power of taxation, how it is levied and upon what it is expended is, according to our forefathers, one of the most dangerous threats to liberty and freedom that can be placed in the hands of a government.  This is why I wish to devote the next several essays in this new series to this all-important topic.  In next week’s post we will take a look at the remaining matters mentioned in the beginning of this essay that were not covered in this one.  I will close by leaving you with this warning written by the Anti-Federalist who used the pseudonym “Brutus”, which was part of an essay written in opposition to the ratification of the Constitution published on October 17, 1787:

“It”  [i.e., the general legislature] “has authority to make laws which will affect the lives, the liberty and property of every man in the Unites States;….The legislative power is competent to lay taxes, duties, imposts, and excises ─ there is no limitation to this power, unless it be said that the clause which directs the use to which those taxes, and duties shall be applied, may be said to be a limitation: but this is no restriction of the power at all, for by this clause they are to be applied to pay the debts and provide for the common defense and general welfare of the United States; but the legislature…are the sole judges of what is necessary to provide for the common defense, and they only are to determine what is for the general welfare; this power therefore is neither more nor less, than a power to lay and collect taxes, imposts, and excises, at their pleasure; not only is the power to lay taxes unlimited, as to the amount they may require, but it is perfect and absolute to raise them in any mode they please….It is proper here to remark, that the authority to lay and collect taxes is the most important of any power that can be granted; it connects with it almost all other powers, or at least will in process of time raw all other after it; it is the great means of protection, security, and defense, in a good government, and the great engine of oppression and tyranny in a bad one[emphasis added].

– Epaminondas

Published in: on August 16, 2010 at 10:32 PM  Comments Off on Government, Taxes & Spending – I  
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The Death of Our Beloved American Republic (1788 – 2010) – XVII Pivotal Events in Its Demise

I closed my last essay with the accusation that this seventh and final “seal” which has “sealed” the fate of our Republic was the ascension of the most leftist-driven, anti-American ideologue to the office of president that has ever been elected.  I shall refer to President Obama throughout this final essay in this series by his initials, BHO, since he has followed in the fascist footsteps of FDR and LBJ, and has taken  the chains of enslavement forged by them and has hastened to bind them around our nation in such rapidity that those who refuse to see the dangers he poses will be unable to break free of them by the time the shroud of adoration falls from their eyes.  By then, unfortunately, it will be too late for us who see the danger and are sounding the alarm to break free as well.  Along with former fascist presidents Woodrow Wilson, FDR and LBJ, BHO forms the “four horsemen” of the apocalyptic fall of the Great American Republic.  However, before turning our attention to him, there was a precursor to his election which set the stage for the destructive force he has unleashed upon our Constitution, our Representative Republic, and the Declaration of Independence in which our unalienable rights are asserted.  That precursor was the seizure of the control of both houses of Congress by the radical fascists of the democrat party.  In 2006 our nation sowed the wind ─ in 2008, we reaped the whirlwind.

In the 2006 election cycle the Republican Party was swept out of power in both houses of Congress, and rightfully so.  No party has a claim on power unless they remember from whom power in this nation is to flow, or as Thomas Jefferson put it in his letter to William Jarvis on September 28, 1820:  “I know of no safe depository of the ultimate powers of the society, but the people themselves….”  When those chosen to represent the people become drunk on the heady wine of power and intoxicated with their own egos and agendas, they no longer deserve to be given the confidence of the people.  Such was the case of the Republicans in power prior to that year.  It is unfortunate for our nation, though, that in punishing them we in turn are being more severely punished by those voted into power in their stead.

With control of the Congress the Democrats, under the leadership of Nancy Pelosi, began to show their fascist stripes.  Perhaps the clearest example of this occurred in May 2008 when executives from some of the major oil companies were being grilled before a House of Representatives Committee about the sky-rocketing gasoline prices.  During the hearing, Representative Maxine Waters had her Fascist “coming out of the closet” moment when she let slip the following words:

“”And guess what this liberal would be all about. This liberal will be about socializing … uh, um… Would be about, basically, taking over, and the government running all of your companies. …” [you can view a video of this at Maxine Waters on Nationalizing Oil Companies].

Then there was the Emergency Economic Stabilization Act 0f 2008, supported by President Bush, that in effect inserted the government into an ownership position in the private market.  True, there was a crisis, but it was one brought about by the very government interventionists who now thought they knew how to bail out the mess they had created.  Instead, they just made the situation worse.  Prior to the bill being passed, over 100 of the country’s leading economists sent a letter to Congress voicing their opposition to the bill.  In the letter they stated

“We see three fatal pitfalls in the currently proposed plan:

Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries “systemic risk.” The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.”

You can see how this falls right in line with the threat of Representative Waters to nationalize the oil companies.  Under The Troubled Assets Relief Program (TARP), which was part of this bill, the government used our tax money to buy troubled assets from banks and investment houses who had made these unwise investments, which in effect meant that the central government now had a financial stake in these financial organizations.  That is nationalization, pure and simple!  Not surprisingly then, shortly after this and the election of BHO (which I’ll get to momentarily), it should not have been a surprise to see the appointment of a “Pay Czar” who would then dictate to these companies, now partially owned by the government, as to what their executives could receive in their compensation packages.  What we witnessed in late 2008 and onward, my fellow citizens, was the death of our free-market system ─ a system which has brought to this earth the greatest economic engine ever witnessed and the highest standard of living ever provided to the people of any nation in history!  The sad part of this is that it wasn’t just the Fascist Democrats who perpetrated this upon us, but those also in the Republican party who feigned allegiance to the principles of our founding and betrayed both those principles and us.  Those who pushed this (and the subsequent bailouts that were to follow in 2009) failed to heed this warning issued by F. A. Hayek in his classic work, The Road to Serfdom (a book that should be required reading for all Americans, especially elected officials):

“…there is some danger that our impatience for quick results may lead us to choose instruments which, though perhaps more efficient for achieving the particular ends, are not compatible with preservation of a free society.”

Read that final clause once more and let it sink deeply into your soul:  “…are not compatible with preservation of a free society.”  In their rush to attempt to “save the nation” from the apparent catastrophe that they created, those in control of this Congress and BHO have driven the proverbial final nail into the coffin of our Constitution, our Republic, and along with them, our freedom, liberties, and our “unalienable rights.”

This brings us to the rise of BHO, from a leftist community organizer, steeped in the radical, anti-American teachings of the Marxist Saul Alinsky, and part-time obscure state senator and mostly absentee rookie US Senator, to the most powerful position in the most powerful nation on earth.  To use BHO’s own words, “let me make one thing perfectly clear”:  BHO is a totalitarian-minded ideologue who hates this country (as evidenced in his antagonism towards our founding principles and documents) and has as his agenda to destroy what has taken over two centuries to build and to remake it into a state-controlled society, i.e., a fascist state.  Those are pretty harsh words, I readily admit, but allow me to set before you the evidences that will support what you may consider an outlandish statement.

During his campaign for the nomination of his party (and subsequently after his election), BHO has repeatedly talked about the need to “redistribute wealth” for the sake of “fairness”.  What is ironic is that he claims that in so doing he will not be punishing those who have been successful and have through their efforts earned that wealth (see his exchange with “Joe the Plumber” during the 2008 presidential campaign: BHO on Spreading the Wealth Around).

The radicalism of his position on this matter was revealed many years earlier in a radio interview on an affiliate of the taxpayer funded NPR in 2001:  BHO explains how to redistribute wealth.  Notice that he does not say that taking money from one group who earned it and giving it to others as the government sees fit is morally wrong, but he only discusses the challenges of how the mechanism for doing so must be engineered! 

Consider also how the divisiveness and pitting of one class of citizens against another is shown in this testimony before Congress by BHO’s chief economic advisor after he had been elected but before taking office (also note the outright statements by Representative Charlie Rangel and Robert Reich that their plans intend to hammer the states into “our way or the highway” corner and thus destroy the power of the states): Robert Reich & Charlie Rangel on Redistribution of Wealth.

During his campaign as well as the months following his election, as he has bounced from one crisis to another (“never let a good crisis go to waste” – Rahm Emmanuel, BHO Chief of Staff), BHO has repeatedly used divisive statements to fracture this nation.  He has pitted the greedy executives on Wall Street against the average citizen on Main Street (never mind the fact that those greedy executives contributed more money to his campaign than to those opposed to him); Big Oil against the Consumers; Wealthy against the Poor or Middle Class; and on and on.  This is precisely the tactic necessary in order for him to justify his “spread the wealth” agenda.  Such is nothing more than government-sanctioned stealing, and the government is the one doing the stealing!  As Ayn Rand put it, Whoever claims the right to redistribute the wealth produced by others is claiming the right to treat human beings as chattel.”  

Such tactics play upon the simple and gullible among us (listen to these women waiting in line to get their “Obama Money”: Get Your Obama Money).  These are the tactics of one who aspires to be a dictatorial tyrant, as explained once again by Hayek in The Road to Serfdom:

“It is, as it were, the lowest common denominator which unites the largest number of people.  If a numerous group is needed, strong enough to impose their views on the values of life on all the rest, it will never be those with highly differentiated and developed tastes ─ it will be those who form the ‘mass’ in the derogatory sense of the term, the least original and independent, who will be able to put the weight of their numbers behind their particular ideals….

a potential dictator…will have to increase their numbers by converting more to the same simple creed.

Here comes in the second negative principle of selection: he will be able to obtain the support of all the docile and gullible, who have no strong convictions of their own but are prepared to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently.  It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.

It is in connection with the deliberate effort of the skillful demagogue to weld together a closely coherent and homogeneous body of supporters that the third and perhaps most important negative element of selection enters.  It seems to be almost a law of human nature that it is easier for people to agree on a negative program ─ on the hatred of an enemy, on the envy of those better off ─ than on any positive task.  The contrast between the ‘we’ and the ‘they’ the common fight against those outside the group, seems to be an essential ingredient in any creed which will solidly knit together a group for common action.  It is consequently always employed by those who seek, not merely support of a policy, but the unreserved allegiance of huge masses…The enemy,…seems to be an indispensable requisite in the armory of a totalitarian leader[emphasis added].

Lest you think these words were written in just the past two years as an observation of BHO and his rise to power (Hayek died in 1992), I will point out that they were originally penned in 1944 as Hayek drew upon his observations of the rise to power of Hitler and the Nazis in Germany and the Fascists in Italy under Mussolini!  These words are a chilling testament to the fact that truth and its principles do not change, and as a result we can see them playing out once again in our nation.  If you cannot see BHO in these words of Hayek, then I would urge you to re-read them.  Better yet, acquire a copy of the book and read the entire volume, for we are indeed clearly well on our way down the Road to Serfdom

BHO has appointed over thirty “czars” in agencies and positions created that have not ever existed in any administration before.  Some of those that he appointed to these positions, but subsequently had to be withdrawn, were avowed Marxists.  Others hew to a socialist view of government and the right of the state to control the lives of the citizens, which can only ultimately end in a fascist-styled state.  Consider if you will H.R. 675 which BHO supports.  This bill would greatly expand various agencies of the central government to police the citizenry of this country in a manner not in keeping with the Constitution.  Allow me to give you just a few highlights of this legislation. The Secretary of Defense and the Attorney General of the United States would be the ones invested with the power to determine the regulations carried out under this law, which would include the following:

“(1) to execute and serve any warrant or other process issued under the authority of the United States; (2) to make arrests without a warrant — (A) for any offense against the United StatesGuidelines on Exercise of Authority- The authority provided under subsection (a) shall be exercised in accordance with guidelines issued by the Secretary of Defense and approved by the Attorney General.”

Couple this attempt to circumvent The Posse Comitatus Act of 1878 (which prohibits the military from such activity) with BHO’s call for a civilian national security force equally armed and empowered as our military, and you have the makings of an American Gestapo that would certainly make Adolf Hitler and Heinrich Himmler proud!

Most recently there is the attempt to force individuals to purchase a product (currently, health insurance, but possibly others to come at a later time) whether they wish to or not, or face fines and possible imprisonment.  Within this legislation is another seizure of power, namely the mandating of what employers who offer health insurance coverage must provide within those policies.  This is certainly nothing new in that for years the central politburo in Washington as dictated to the auto manufacturers the standards their products must meet (i.e., the so-called CAFE standards), which have over time been demonstrated to have increased the number of automobile fatalities (which is proof that it isn’t about what is good for the individual, but rather what is good for expanding the power of the state over private enterprise).

There are also the repeated stories of how the EPA is running rampant and unrestricted over our liberties.  It shut down an irrigation system in California to “save” a two-inch minnow fish and in so doing ruined thousands upon thousands of the most fertile farm land in that state and put tens of thousands of individuals out of work.  It ruined countless numbers of farms and made those products grown by them more scare and costly to the consumers of this nation.  This rouge agency also, with the blessings of this administration, seeks to tell us what kind of light bulbs we must have in our lamps, how much water our commodes use with each flush, and most recently, its intent to hold farmers accountable and punishable should dust from their fields that is stirred up from their plowing escapes beyond their property lines!  Of course there is the proposal to limit, tax, and fine those who exceed certain carbon dioxide emissions under the so-called “Cap-and-Trade” bill (which makes you wonder if that could include individuals since we inhale oxygen and exhale carbon dioxide?).

You have to wonder also about BHO’s agenda and attitude towards the Constitution when he nominated the newest member of the Supreme Court who, during the questioning in the Senate hearings on her nomination, refused to answer the simple question “Does the government have the right to tell individuals what they can and cannot eat?”  The obvious implication is that by not answering in the negative, she does believe that the government has this authority.  She also failed to come out strongly and confirm that she believes in individual “inalienable rights” during another line of questioning.  This is certainly what you would expect from one who harbors disdain for the rule of law and our Constitutional principles.

There is so much more that could be added, but I will not weary you further as with many of these you are most likely already aware.  However, to show just how abusive BHO is in his exercise of power and how so much like a dictatorial tyrant he is, I give you one final example.  Because the central government provided bailout funds for the Chrysler Corporation, it now has a 65% controlling interest in the company.  The newly created “Car Czar” position, headed by a man with no automotive or managerial experience of any kind (and appointed by BHO without congressional confirmation), put together a list of dealerships that were to be shut down as an alleged “cost-saving” measure.  What is startling about this is that of the 789 dealerships marked for closing, 788 of them had made campaign donations exclusively to Republican candidates during the prior election (information that was made available to the “Car Czar” by his wife, the former finance committee chairwoman of the Democratic National Committee who, as such, had access to all of the political donations made to both parties from everyone in the nation).  The lone exception was a dealership who had made a contribution to Hillary Clinton’s campaign – BHO’s opponent in the primaries!  Simply a matter of coincidence, or the victor using his power to punish and destroy his opponents?  There is much more to this story, but space prohibits me from enumerating all of these blatant abuses of fascist political power. However, you may read it all at this newspaper’s website: Furor grows over partisan car dealer closings.

In the world that BHO wants to create for us, he paints such a lovely world of idealistic utopia.  But heed well this warning of Hayek on what will happen to the individual citizen in BHO’s world:

Individualism must come to an end absolutelyA system of regulations must be set up, the object of which is not the greater happiness of the individual, but the strengthening of the organized unity of the state for the object of attaining the maximum degree of efficiency, the influence of which on individual advantage is only indirect. ─ This hideous doctrine is enshrined in a sort of idealism.  The nation will grow into a ‘closed unity’ and will become, in fact,…’Der Mensch im Grossen'” (i.e., “the man enlarged”, meaning the state has become singular in its absorption of all individualism; individuals no longer will exist) [emphasis added].

Before closing, I want to give you the proof of why I stated that BHO is intent on tearing down everything this country stands for.  As I said at the outset, he is a true disciple of the teachings of Saul Alinsky, having even conducted seminars on his principles of community organizing while himself an organizer in the city of Chicago.  In fact, Alinsky’s son has stated that BHO is perhaps the best at executing his father’s principles. Now, instead of just communities within the city limits of Chicago, BHO is intent on carrying out these principles on a national scale.  Here are just a few of these guidelines enunciated by Alinsky in his book Rules for Radicals ─ I will leave you to draw your conclusion as to whether or not you can identify these guidelines in BHO’s actions over the past eighteen months:

“From the moment the organizer enters a community he lives, dreams, eats, breathes, sleeps only one thing and that is to build the mass power base of what he calls the army….Change comes from power, and power by organization….Power is the reason for being of the organization….Power and organization are one and the same….

The organizer simultaneously carries on many functions as he analyzes, attacks, and disrupts the prevailing power pattern….

The first step in community organization is community disorganizationThe disruption of the present organization is the first step toward community organization.  Present arrangements must be disorganized if they are to be displaced by new patterns that provide the opportunities and means for citizen participation.  All change means disorganization of the old and organization of the new…” (remember the slogan, ”Change You Can Believe In”?)

“The organizer dedicated to changing the life of a particular community must first rub raw the resentments of the people of the community; fan the latent hostilities of many of the people to the point of overt expression.  He must search out controversy and issues, rather than avoid them, for unless there is controversy people are not concerned enough to act….An organizer must stir up dissatisfaction and discontent….

When those prominent in the status quo turn and label you an ‘agitator’ they are completely correct, for that is, in one word, your function ─ to agitate to the point of conflict[emphasis added].

The next time BHO takes to the airwaves to talk about the need for more regulations, controls, better government organization of this or that, and couches his language in terms of one part of our nation pitted against another, now you will understand why ─ and fear.

I leave you now with one final word from Dr. Hayek.  As I mentioned previously, Hayek wrote The Road to Serfdom in 1944 after having witnessed the rise of Fascist governments in Europe.  Speaking of the German and Italian people, he made this observation with which I bring this series of essays to a close:

“…experience has made them wiser and sadder men: they have learned that neither good intentions nor efficiency of organization can preserve decency in a system in which personal freedom and individual responsibility are destroyed.”  May we learn this lesson from them and not have to repeat their history in order to learn it.

The free constitutional Republic of America (1788 – 2010): RIP


Published in: on August 7, 2010 at 5:28 PM  Comments Off on The Death of Our Beloved American Republic (1788 – 2010) – XVII Pivotal Events in Its Demise  
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The Death of Our Beloved American Republic (1788 – 2010) – XVI Pivotal Events in Its Demise

“I watched as he opened the sixth seal.  There was a great earthquake” ─ so goes the graphic description in the Biblical Book of Revelation of the judgments of God against the Roman Empire in bringing about its ultimate collapse.  So too, the sixth “seal” in my seven “seals” that have “sealed” the fate of our republic, along with our freedom and liberties, was a great earthquake, better known as “The Great Society”, created by president Lyndon B. Johnson in the mid-1960s’.

With the ascension of LBJ to the presidency, the fascist tentacles of the central government, first extended into the lives of free Americans by Woodrow Wilson and then extended further by FDR, expanded and multiplied in all directions, attaching its suckers to the very core of what being American stood for, until today its stranglehold threatens to choke the very last drop of our founding principles from our nation.  As with all progressive (or fascist) programs the professed aim is for the “good of society.”  Thus LBJ, like all good fascists who use the war imagery (see my previous essay on Woodrow Wilson, The Death of Our Beloved American Republic (1788 – 2010) – XIII Pivotal Events in Its Demise), declared his “war on poverty” program that would usher in a utopia in which all poverty would be eliminated, and in the words of the prophets of old Israel in their depiction of paradise, every man would “sit under his vine and fig tree.”    That this was LBJ’s aim was clearly set forth in the commencement address which he delivered on May 22, 1964 at the University of Michigan:

“The Great Society rests on abundance and liberty for all.  It demands an end to poverty and racial injustice, to which we are totally committed in our time.  But that is just the beginning…The Great Society is a place where every child can find knowledge to enrich his mind and to enlarge his talents.  It is a place where leisure is a welcome chance to build and reflect, not a feared cause of boredom and restlessness.  It is a place where the city of man serves not only the needs of the body and the demands of commerce but the desire for beauty and the hunger for community.”

He couched this panorama of paradise against the backdrop of “liberty”, but it is not the liberty of the founders, the liberty of the individual to pursue happiness as spoken of in the Declaration of Independence, but rather of the liberty from fear, wants, and all needs ─ everything that a citizen should need provided for by the community, i.e., the state.  That, my friends, is pure socialism, which can only be realized when the state becomes supreme in the lives of the individual, which, according to Benito Mussolini, the father of Fascism, is at the very heart of a Fascist government.  To create this utopian paradise by the central government, it would obviously require agencies, legislation, and regulations to carry the “battle” to these societal enemies.  And so came into existence the Department of Health and Urban Development (HUD) whose mission was to eradicate homelessness and poor housing conditions among the citizenry; Medicare and Medicaid, to eliminate the danger of the elderly not having adequate medical care; food stamps so that everyone would be fed; welfare payments so that other needs could be met; and on and on it went ─ the great cornucopia of the central government providing to everyone according to his needs.  What should have raised an alarm greater than it did, especially during the height of the “cold war” and the war being fought in the jungles of Vietnam (purportedly to stop the advance of Communism), is that such a principle was a brick in the very foundation of Communism, as expressed by none other than Karl Marx himself:  “From each according to his ability to each according to his needs.”  It is not my intent to cover all the faults of the welfare state in this essay, as there have been books upon books written by eminent men in the field of economics on this topic, but rather to touch just briefly on the matter of how this system has served to destroy our Republic.

To begin with, the very title of LBJ’s grand and ambitious drive to remake American society has its roots in radical socialism.  The phrase actually came from a book written in 1914 by the co-founder of Fabian Socialism (which has become the Labour Party in Great Britain), Graham Wallas, titled The Great Society.  Hence, it should not come as any great shock that the programs that grew out of Johnson’s Great Society would be aimed at transforming America into a truly socialist state though the fascist centralization of power in the hands of the “federal” government.  The justification for this assault on our system of constitutional, federal, representative republicanism was the assertion that these needs to be supplied by the government though its various new agencies were “rights” and not “privileges”.  Indeed, as Jonah Goldberg points out in his book Liberal Fascism: The Secret History of The American Left from Mussolini to the Politics of Change,

“Michael Harrington, whose ‘The Other America’ laid the moral groundwork for the War on Poverty, led a group of thirty-five left-wing intellectuals, grandiosely dubbed the ‘Ad Hoc Committee on the Triple Revolution,’ which proclaimed that the state should provide ‘every individual and every family with an adequate income as a matter of right‘” [emphasis added].

Compare these asserted “rights” of these “Progressives” with those in the Declaration of Independence and see if you think they reach that high bar set forth by Thomas Jefferson.  Are these “rights” “certain and unalienable”, “endowed upon us by our Creator”?  The answer is clearly that they do not (see my essay The Concepts of “Freedom”, “Liberty” and “Rights”).

If you will permit another Biblical reference, the phrase that bests applies to all of these programs is “by their fruits you shall know them.”  And just what are the fruits of LBJ’s “Great Society”?  Allow me to share with you some observations cataloged by a couple of Nobel Prize-winning Economists – Milton Freidman and F. A. Hayek.

To begin with, since LBJ styled his remodeling of America on a war-facade footing, what say you – are we winning the war ─ have we won it yet?  After trillions of dollars spent, has poverty decreased, housing improved, homelessness decreased, etc?  Hardly!  In fact, things have actually worsened and made the future of all Americans more bleak.  During the 1960s protestors ranged across the streets and campuses of this nation in protest of the Vietnam War because we were waist-deep in a quagmire with no foreseeable way out.  Today, we see the same thing from these same-minded leaders of the democrat party towards the war against terrorism, yet they keep throwing more and more money at their societal war with even less progress to show for it than these actual “wars”!  The reason we don’t see the protests against these programs like we do the military conflicts just mentioned is that there are protests against not enlarging these insatiable pits of freedom-eating Minotaurs even more than they have already been enlarged!  Through these programs their power over greater areas of our lives can be continuously expanded, making the continuation of this never-ending “war” acceptable to the Fascists.  The abject failure of public assistance was set forth by Friedman in his book, Free to Choose, in the chapter titled “Cradle to Grave”:

“Once people get on relief, it is hard to get off.  The country is increasingly divided into two classes of citizens, one receiving relief and the other paying for it.  Those on relief have little incentive to earn income.”

Thus, instead of uniting the country, the citizens are divided, one group against the other, with one continuing to support the Fascists and their agenda (since they benefit from it) while the others, who are the producers in society, come to resent the other group and those in power who cater to them.  The sad part is, those who live off of the public dole will eventually learn, as the gingerbread man who accepted a ride across the stream on the back of the fox, that eventually their freedom and liberties will be swallowed in whole by their Fascist benefactors!

An obvious by-product of these programs has been the proliferation of agencies which produce their regulations without answerability to the people as they are guided by unelected bureaucrats.  This can mean but one thing, and that is a loss of freedom and liberties.  I will, however, leave the discussion of the insidious growth in this area and its subsequent failure to deliver on the promises made by the architects of “the Great Society” for a later series of essays.  Let us instead return to the matter of the assault of the welfare state upon the foundational principles of our Republic.

Returning once more to Dr. Friedman’s work, he summed up the danger with these words:

“…spending tends also to corrupt the people involved.  All such programs put some people in a position to decide what is good for other people.  The effect is to instill in the one group a feeling of almost God-like power; in the other, a feeling of childlike dependence.  The capacity of the beneficiaries for independence, for making their own decisions, atrophies through disuse.  In addition to the waste of money, in addition to the failure to achieve the intended objectives, the end result is to rot the moral fabric that holds a decent society together….Voluntary gifts aside, you can spend someone else’s money only by taking it away as the government does.  The use of force is therefore at the very heart of the welfare state ─ a bad means that tends to corrupt the good ends.  That is also the reason why the welfare state threatens our freedom so seriously” [emphasis added].

To Dr. Friedman’s words on the threat of the “Great Society” on our freedom and liberties Dr. Hayek added his concurrence in his voluminous work, The Constitution of Liberty.  So that you may feel the full impact of his words, I offer to you the following quotes without any interruptive commentary on my part.

“…we must realize that, as a service agency, it” [i.e., the state] “may assist without harm in the achievement of desirable aims which perhaps could not be achieved otherwise.  The reason why many of the new welfare activities of government are a threat to freedom, then, is that though they are presented as mere service activities, they really constitute an exercise of the coercive powers of government and rest on its claiming exclusive rights in certain fields….

What goes under that name” [i.e., the welfare state] “is a conglomerate of so many diverse and even contradictory elements that, while some of them may make a free society more attractive, others are incompatible with it or may at least constitute potential threat to its existence….

The distinction, then, is that between the security of an equal minimum income for all and the security of a particular income that a person is thought to deserve.  The latter is closely related to the third main ambition that inspires the welfare state: the desire to use the powers of government to insure a more even or more just distribution of goods.  Insofar as this means that the coercive powers of government are to be used to insure that particular people get particular things, it requires a kind of discrimination between, and an unequal treatment of, different people which is irreconcilable with a free society.  This is the kind of welfare state that aims at ‘social justice’ and becomes ‘primarily a redistributor of income.’  It is bound to lead back to socialism and its coercive and essentially arbitrary methods….

The chief danger today is that, once an aim of government is accepted as legitimate, it is then assumed that even means contrary to the principles of freedom may be legitimately employed….

If government wants not merely to facilitate the attainment of certain standards by the individuals but to make certain that everybody attains them it can do so only by depriving individuals of any choice in the matter.  Thus the welfare state becomes a household state in which a paternalistic power controls most of the income of the community and allocates it to individuals in the forms and quantities which it thinks they need or deserve….

It is sheer illusion to think that when certain needs of the citizen have become the exclusive concern of a single bureaucratic machine, democratic control of that machine can then effectively guard the liberty of the citizenSo far as the preservation of personal liberty is concerned, the division of labor between a legislature which merely says that this or that should be done and an administrative apparatus which is given exclusive power to carry out these instructions is the most dangerous arrangement possible.  All experience confirms what is ‘clear enough from American as well as from English experience, that the zeal of the administrative agencies to achieve the immediate ends they see before them leads them to see their function out of focus and to assume that constitutional limitations and guaranteed individual rights must give way before their zealous efforts to achieve what they see as paramount purpose of government.’

It would scarcely be an exaggeration to say that the greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regard as the public good….It is inevitable that this sort of administration of the welfare of the people would become a self-willed and uncontrollable apparatus before which the individual is helpless, and which becomes increasingly invested with all the mystique of sovereign authority…” [emphasis added].

As you have read through these gems of wisdom enunciated by Hayek, I think it clear that there is certainly no need for me to even attempt to add to them.  The “Great Society” thus is anything but “Great”; instead it is the “Great Enslavement” of our individualism which was the heart and soul of our forefathers view of what made Americans “exceptional.” 

In the final installment of this series we will wrap up with the final seal that has sealed the fate of our once free republic, the elections of the Fascists on the radical left of the democrat party in 2006 and the follow up election of the most leftist driven anti-American ideologue to the office of president in 2008.  Until then, I leave you with one final quote from Dr. Hayek’s previously referenced work:

“Many of the policies intended to combat particular evils have actually made them worse.  And some of the more recent developments have created greater potentialities for a direct control by authority of the private life of the individual than may be seen in any other field of policy” [emphasis added].


Published in: on August 2, 2010 at 7:50 PM  Comments Off on The Death of Our Beloved American Republic (1788 – 2010) – XVI Pivotal Events in Its Demise  
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