After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - March 25th, 2014

History 101

(Originally published February 12th, 2013)

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s where the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As did our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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Abortion and White Supremacy

Posted by PITHOCRATES - February 27th, 2014

Politics 101

Slavery made the South more like an Old World Aristocracy than a New World Meritocracy

Democrats don’t like people of color.  Never have.  The Democrat Party’s lineage goes back to Thomas Jefferson’s Democratic-Republican Party.  Thomas Jefferson was one of our Founding Fathers who, as the Democrats love to remind us, owned slaves.  In fact, the Democratic-Republican Party was the party of the planter elite.  And of slavery.  While the opposition party, the Federalists, whose members included George Washington, John Adams and Alexander Hamilton, preferred manufacturing and commerce for the future of the United States.  Not just plantations and slavery.

It was these southern planters who made the Three-Fifths Compromise necessary.  Slaves couldn’t vote.  So the North didn’t want to count them in determining the number of representatives a state had in the House of Representatives.  The planter elite did not like this.  As the anti-slave North had more free people and would end up controlling the government.  Possibly passing anti-slave legislation.  Well, without the southern states there would be no United States.  So they compromised and counted some of their slaves.  Giving the planter elite greater power in the new federal government than their population would otherwise have allowed.  And to seal the deal they agreed not to discuss the issue of slavery again for 20 years.

The minority power in the South, the planter elite, who were Democratic-Republicans, brought a lot of slaves to the United States during that 20 year moratorium on the slavery issue.  Swelling the slave population in the South.  But once the 20 years were up Congress banned the slave trade.  So from that point forward all slaves would have to be born on U.S. soil.  But the minority power in the South had built their little fiefdoms by then.  Owning large estates.  With their lands worked by their large slaveholdings.  Making the South more like an Old World aristocracy than a New World meritocracy.  And the planter elite liked having so much power vested in so few of their hands.  From having their few numbers control the federal government.  To their absolute control of so many human lives on their plantations.  They were an elite few.  A superior people.  And they liked it.

The South used the Power of the Federal Government to Suppress States’ Rights in the North with the Fugitive Slave Act

Over time as the north pursued the dreams of Washington, Adams and Hamilton immigration began to swell the population in the industrial North.  Leading to the South losing their control over the House of Representatives.  And threatening their elitism.  By then the Democratic-Republican Party had become the Democrat Party.  Which pushed to protect the institution of slavery.  To protect their southern aristocracy.  And their elevated status as a superior people.  They used the power of the federal government where they could.  Such as passing the Fugitive Slave Act to force free states against their will to return free blacks in their states to slavery.  Then they argued that their states’ rights were at risk with all of the North’s abolition talk.  Where the North might one day do what the South did to them.  Use the federal government to force a state to do something against their will.  Such as they did with the Fugitive Slave Act.

Their fight for the Senate led to further compromises to keep the union together while accommodating the planter elite.  The Missouri Compromise (1820) had prohibited slavery in the new territory in the Louisiana Territory above approximately the southern border of Missouri (but permitted it within the borders of Missouri).  Each state gets two senators.  So with the House lost the Democrats needed more of the new states from the Louisiana Territory entered into the Union as slave states.  Even those above the southern border of Missouri. Which they did with the Kansas–Nebraska Act.  Which repealed the Missouri Compromise and replaced it with popular sovereignty.  Where the people would chose whether they wanted to be a slave state or a free state.  Setting off a mad rush by both sides to get to these territories so they could vote the slave status of these new states their way.  Leading to a bloody civil war in Kansas.

Then another blow fell to the southern aristocracy.  Abraham Lincoln.  With the election of Republican Abraham Lincoln the southern aristocracy lost not only the House of Representatives but the presidency as well.  Worse, the Republicans were an anti-slavery party.  So even if they were somehow able to hold onto the Senate the Republicans in power would challenge the planter elite’s supremacy.  Break up their fiefdoms.  And challenge their power.  Something this elite few were willing to fight to prevent.  Well, they were willing to have others fight for them.  To maintain the social order in the South.  Leading to cries about states’ rights.  And an over-powerful federal government.  Despite their having used the power of the federal government to suppress states’ rights in the North with the Fugitive Slave Act.

Democrats see Benefits for Blacks as a Necessary Evil to keep them in Power

Most southerners were poor farmers.  Who owned no slaves.  Yet they rose to fight for states’ rights.  And to protect the South from northern aggression.  At least, that was what the planter elite had them believe.  Who sent many of these poor farmers to their deaths in the American Civil War.  When it was over approximately 8.6% of the South’s population was dead.  By comparison World War II killed approximately 405,399 Americans.  However, if we had suffered the same death rate as the South did in the American Civil War our World War II dead would have totaled over 12 million.  This is what the southern aristocracy was willing to—and did—sacrifice to maintain their power and privilege.  Their supremacy over other people.  Especially over their black slaves.

Such a feeling of superiority allows you to do some pretty horrible things.  Just review the history of Nazi Germany to see some of the atrocities a ‘master race’ can do.  In the post-war South the Democrats did not lose with grace.  They resented the martial law in the South after the war.  And they hated Republican rule.  Protecting their former slaves.  Even allowing them to run for government office.  It was all too much for the fallen southern aristocracy.  To remind people of the proper order of southern society they formed the KKK.  And unleashed a terror across the South.  Killing their former slaves.  And Republicans.  To codify their white supremacy the Democrats turned to the legislature.  And passed laws to segregate the ‘inferior blacks’ from their superior selves.  Jim Crowe Laws.  Separate but equal.  With the emphasis on ‘separate’.  In time pressure grew against the southern Democrats.  But they held strong in Congress.  Fighting against any civil rights legislation.  Including the Civil Rights Act of 1964.  Where Democrat Senator Robert Byrd (and former Exalted Cyclops of the KKK) filibustered against the Civil Rights Act for 14 hours and 13 minutes.  To keep the blacks segregated from their superior selves.

Things are a lot better these days.  But Democrat feelings of superiority die hard.  Even though they would have us believe they like blacks today.  Despite their past hatred of blacks.  And their seething anger of having lost them from their plantations.  But they found a way to ‘get them back on the plantation’.  By making them dependent on government.  In exchange for their vote.  Which keeps them in power.  Back where they believe they belong.  And are entitled to be.  Because they are a superior people.  So benefits for blacks are a necessary evil to Democrats.  For they still don’t like them.  As evidenced by where they live.  Where some of the richest Democrats (such as Nancy Pelosi) live in the whitest of neighborhoods.  And their apparent racial purification of society.  Through the guise of women’s rights.  The most important thing to women, according to Democrats, is abortion.  And they do their best to make abortion readily available.  Especially to women of color.  Like in New York City.  And Mississippi.  Where black women are having far more abortions than white women.  Making America whiter.  More like the neighborhood where Nancy Pelosi lives.  And more like the color Democrats have fought to keep America since the Three-Fifths Compromise.  The Fugitive Slave Act.  Popular Sovereignty.  The KKK.  And Jim Crowe Laws.

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Georgia Specialty Plate to Include Confederate Battle Flag

Posted by PITHOCRATES - February 23rd, 2014

Week in Review

Between combat and disease the American Civil War claimed some 620,000 lives.  The bloodiest war in U.S. history.  Killing more than all the wars from the Revolutionary War through the Vietnam War.  The North lost about 360,000.  While the South lost about 260,000.  So the North suffered about 100,000 more dead than the South.  However, the population of the South at the end of the war was approximately 3,000,000.  While the north had about 29,000,000.  So as a percentage of their population the North lost about 1.3% of her population.  While the South lost about 8.6% of her population.  Which is why some in the South want to honor their war dead (see Group puts Confederate flag on Ga. specialty tag by AP posted 2/19/2014 on Yahoo! News).

Georgia officials have once again approved a specialty license plate featuring the Confederate battle flag, infuriating civil rights advocates and renewing a debate among those who believe the symbol honors Confederate heritage and those who see it as racially charged.

Southerners call the American Civil War the War of Northern Aggression.  In which they fought for states’ rights.  After their control of the federal government faded thanks to the population growth in the north.  They lost control of the House.  And the only way to keep control of the Senate was by admitting new states into the union as slave states.  Finally, the Fugitive Slave Law was the last straw for some in the north.  Requiring them to capture and return runaway slaves even though those slaves were legally free in those northern states.  So a large federal government was good when it helped southern slave owners.  And states’ rights were bad when it didn’t help southern slave owners.

The rich southern planters controlled the government in the South.  They had the wealth.  And the slaves.  Their lives were like the lives shown on the plantations in the movie Gone with the Wind.  A landed aristocracy.  Just like it was in feudal Europe.  Only with slaves instead of peasants.  Wealth and power were concentrated in few hands.  Creating great wealth inequality.  Most southerners were dirt poor and worked on family farms and were too poor to even own a slave.  But it was these people the rich planters used to fight a war for them to preserve their landed aristocracy.  Not the American dream the Founding Fathers envisioned.  Or the dream these dirt-poor southern farmers were trying to live.  The freedom to be left alone to work their own land.  Which is, of course, why they went to war.  Someone was invading their land.

No government is going to allow a Nazi swastika on a license plate to commemorate the SS.  Because the SS did some bad things.  Some would even say they were evil.  The Confederate soldiers, though, were not evil.  They were Americans.  Who were lied to by the planter elite.  So they could maintain their Old World aristocracy.  These men fought bravely in battle.  And suffered horrible casualties.  Even Abraham Lincoln held no ill will towards these men.  When a general asked Lincoln how the defeated Confederates should be treated he said, “Let ’em up easy.”  All they had to do was sign paroles saying they would no longer fight and they could go home and resume their lives.  There were to be no retributions.  For once the war was over they were fellow countrymen again.

So putting a Confederate battle flag on a license plate is less of a sign of racism and more of a remembrance for those who fought in the battlefields of the Civil War.  Especially for the 8.6% of the population who perished.  Leaving behind widows.  And orphans.  So many that it was hardly possible for someone in the South not to have lost someone in that war.

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Abortion and Tax Revenue

Posted by PITHOCRATES - January 27th, 2014

Economics 101

(Originally published January 21st, 2013)

The Population Growth Rate fell during the Sixties and Seventies from 19% to 11% due to Birth Control and Abortion

Taxpayers are born.  Yes, immigration helped populate America.  But it was really the children of immigrants that made the country grow.  For a large population having babies will increase the population far more than immigration can.  Why?  Where do immigrants come from?  Babies.  Having babies is like compounding interest.  For babies grow up and have babies of their own.  So babies are good.  Especially for a government that wants to spend money.  Because the more babies we have the more taxpayers we will have.  So high-spending governments need a growing population growth rate.  To provide ever more taxpayers.  Who provide ever more tax revenue.  But sometimes the population growth rate doesn’t always increase.  Sometimes it even falls.  (See Population, Housing Units, Area Measurements, and Density: 1790 to 1990.  The population numbers are from the decennial census numbers.  The population growth rate is the percentage of population growth from one decade to the next.)

Although the population has always grown the population growth rate has not always grown.  In fact, the rate of growth has been falling over time.  Taking steep declines during war.  During the American Civil War the growth rate fell from 36% down to 23% by the time of the next census.  The census before and after World War I saw a decline from 21% to 15%.  The rate plummeted from 16% to 7% before and after the Great Depression.  With so many people out of work and struggling to survive the last thing families needed was another baby to feed.  The rate actually increased during World War II.  But that had more to do with people not having babies during the Great Depression for economic reasons.  After World War II the rate rose to 14%.  Which was still a point less than after World War I.

The following table shows the decrease in population due to war.  (Raw numbers are pulled from United States military casualties of war.)

Note that the most devastating of American wars was the American Civil War.  Where approximately 2% of the population died.  In terms of percentage loss of population the next costliest war was the Revolutionary War.  Then World War II.  Then World War I.  These wars saw millions of men in uniform (except for the Revolutionary War).  Away from their wives for years.  Which put a crimp in baby making.  And the large number of wounded and dead compounded that problem.  Resulting in large dips in the population growth rate during these wars.  Despite the large loss of life in numbers of America’s other wars those losses were all less than 0.10% of the population.  Making the impact on the population growth rate negligible.  One thing these numbers don’t explain, though, is the decline in the population growth rate after 1960.  During the Sixties and the Seventies the growth rate fell from 19% down to 11%.    But it wasn’t the Vietnam War that caused that decline.  So what did?  Birth control.  And abortion.

Couples having only 2 Children can’t Support an Expanding Welfare State but Couples having 3 Children Can

The U.S. approved the sale of the birth control pill in 1960.  Which corresponded with the era of free love and the sexual revolution.  People were having more sex.  While having fewer babies.  Then Roe v. Wade made abortion legal in 1973.  Since then there have been on average about 1.4 million abortions a year.  Dwarfing the 156,250 killed a year in America’s most devastating war.  The American Civil War.  Which has brought the population growth rate to its smallest numbers that weren’t due to war or depression.  Because of that compounding nature of babies (growing up to have babies of their own).  And because babies become taxpayers this has a big impact on future tax revenue.  We can see this by looking at how 100 abortions ripple through the population.

Let’s assume those 100 abortions happen in Year 1 (Y1).  Had these abortions not happened these babies would have grown up and entered the workforce about 20 years later (Y1+20).  And split off into pairs to have babies of their own.  (If each couple has one baby they have a total of 50 babies.  If each couple has two babies they have a total of 100 babies.  Etc.)  Who would grow up and enter the workforce about 20 years later (Y1+40).  And so on.  The above graph adds up all the people for each 20-year period produced by the Y1 babies (children, grandchildren, great grand children, etc.) divided by 100 (those original babies not aborted).

If the Y1 people only have one baby they and their descendants disappear from the world in about 2 centuries.  If they have 2 children the population never grows larger than 4 times the original Y1 people.  Two children to replace two parents.  It’s not until you get to three children that you see an increase in population.  As well as an increase in tax revenue.

Assume each of the people, or taxpayers, at 20-year intervals earn a median income of $50,000.  They pay an effective federal income tax rate of 18%.  In addition to 12.4% for Social Security taxes (both employer and employee).  And 2.9% for Medicare.  Added together they total 33.3%.  This tax rate on total income at each 20-year interval produces the tax revenue in the above graph.  Note the revenue graphs are the same shape as the population graphs.  Showing a direct correlation between tax revenue and the population growth rate.  The tax revenue provided by couples having only one child disappears within two centuries.  Revenue provided by couples having only two children peaks out at $6,660,000.  As couples only have enough children to replace themselves.  Maintaining a constant of 4 taxpayers (2 parents and 2 children) after 80 years.  Showing that couples having 2, 1 or 0 children cannot support an expanding welfare state.  But a couple having 3 children can.  As long as it’s not too big of a welfare state.

You just can’t have an Expanding Welfare State with a Falling Population Growth Rate

The more children a couple has the greater the tax revenue.  For the more children they have the more people enter the workforce and become taxpayers.  If 50 couples have 3 kids each (as do their descendants) they will add $30.4 million in federal tax revenue in one century.  If they have 4 kids they will add $99.9 million in revenue.  If they have 5 kids they will add $264 million.  And if they have 6 kids they will add $599.4 million.

In two centuries these numbers are even more profound.  Couples having 4 kids will provide $3.2 billion in federal tax revenue.  While couples having 5 kids will provide $25.8 billion.  And couples having 6 kids will provide $145.6 billion.  If, that is, 100 pregnancies weren’t aborted 2 centuries earlier.

In the long-term revenue would soar if people simply started having babies again.  For birth control and abortion have greatly reduced the number of babies we’re having.  Causing tax revenue to fall.  We can bring revenue back up by having more babies.  But after some 30 years this baby dearth has pushed us into the flat part of these graphs.  Requiring up to a century or more to make large population gains.  And large gains in tax revenue.   And without these gains in revenue we simply cannot afford an expanding welfare state.

It is rather ironic that two tenets of liberalism clash here.  Liberals believe in both a welfare state.  And free birth control and abortion on demand.  They believe in one thing that requires women to have a lot of babies.  And another that helps women to have as few babies as possible.  Which is another reason liberalism will ultimately fail.  Paradoxes like this.  For you just can’t have an expanding welfare state with a falling population growth rate.  If you try you get trillion dollar deficits.  And $16.4 trillion in accumulated debt.

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FT198: “Obamacare will fail because you can’t incentivize people to make their lives worse.” —Old Pithy

Posted by PITHOCRATES - November 29th, 2013

Fundamental Truth

Stores used the Incentives of Black Friday to get People to do what they Wanted

A belated happy Thanksgiving.  And a belated happy Black Friday.  We say belated because Black Friday was already here by the time Friday woke from its sleepy slumber.  No more waiting in line Friday morning for those stores to open.  No.  Today if you snooze (i.e., spend Thanksgiving with the family at home) you lose.  Because it’s first come first served.  Which means if you wanted to get some of those deep discounts before they run out you didn’t let anything silly like celebrating Thanksgiving with the family get in your way.

Now everyone loves a bargain.  It’s why we scan the Sunday sales papers.  And search online for the best price.  But in the Obama ‘recovery’ there isn’t a whole lot of spending going on.  As there isn’t a whole lot of employment going on.  Since President Obama assumed office his policies have destroyed some 10 million jobs.  And one thing about unemployed people.  They definitely want a bargain.  Especially if they want a good Christmas for their family during the dark times of the Obama presidency.

But there is a greater lesson Black Friday can tell us other than President Obama is a bad president.  Especially in things economic.  Why are stores opening on Thanksgiving?  Because they’re cruel and evil forcing their workers to slave away during a holiday?  No.  It’s not that.  In fact, some employees love working on a holiday.  For they get paid more working on a holiday than they normally would.  Allowing them to earn extra money to give their families a good Christmas during the dark times of the Obama presidency.  As it turns out shoppers and workers alike like Black Friday.  For it allows each to have more for less.  And that is the great lesson of Black Friday.  Getting people to do what you want by offering them something they want.  Or, in other words, offering them an incentive.

The Kansas–Nebraska Act of 1854 pitted Northern Republicans against Slave-Owning Southern Democrats

Slaves working in the planter South had no desire to be slaves.  Yet they were slaves.  Why?  There weren’t slaves in the North.  Only in the South.  The blacks in the north chose not to be slaves.  While those in the South had no choice.  The planter elite in the South, the ‘Old World’ planter aristocracy, used force.  And having a larger force in Washington than they normally would have (thanks to the Three-Fifths Compromise that counted slaves as three-fifths of a person for representation in Congress) they were able to use the force of government to continue to force blacks into slavery.  The Southern Democrats (i.e., the ‘Old World’ planter aristocracy) were able to keep the black man enslaved until the mid 19th century.  Even using the power of the federal government to override states’ rights in the North.  Using the Fugitive Slave Act to force northern states to return fugitive slaves to their Southern Democrat owners.  The ‘Old World’ planter aristocracy.

This is coercion.  This is how you get people to do what they don’t want to do.  Using the power of the federal government the Southern Democrats kept their slaves in bondage.  Also, using the power of the federal government they forced those in the North who wanted to help ‘fugitive’ slaves to stay free return their slaves or else.  That ‘or else’ being the full weight of the federal government coming down on them with extreme prejudice.  But when the North became more populated control of the House of Representatives favored the larger populated North.  Despite the Three-Fifths Compromise.  Which left the Senate.  And as each state got two senators how the new states entered the union mattered.  For the planter elite to hold their power over the United States.

The Missouri Compromise of 1820 was an early attempt to put slavery onto the path of oblivion.  Those in the North did not want it.  The planter elite in the South did.  So they compromised.  Slavery could remain in the South to appease the planter elite but the compromise prohibited slavery in the new Louisiana Territory that Thomas Jefferson purchased above the 36°30′ parallel (about the southern border of Missouri).  Except in the state of Missouri.  Then came the Kansas–Nebraska Act of 1854 and the idea of popular sovereignty.  Throwing the Missouri Compromise of 1820 out the window.  These two states were both above the 36°30′ parallel.  The Kansas–Nebraska Act of 1854 said the first people into the fledging states could choose for themselves if they would be a slave-state or a free-state.  Which led to a mad rush to Kansas.  And a bloody civil war there.  That eventually led to the American Civil War.  To settle once and for all the issue of slavery in America.  Would the Southern Democrats prevail and keep the black man in bondage?  Or would the Republicans free the slaves?

Obamacare is less like Black Friday and more like Slavery

Even if you flunked your history class you should know the answer to this.  Abraham Lincoln and his Republicans defeated the Southern Democrats and won the American Civil War.  Freeing the slaves.  Of course, the Southern Democrats were not good losers.  They gave us the KKK.  Then the Jim Crowe Laws.  The separate but equal nonsense that didn’t exist in the Republican North.  The old southern aristocracy were not huge fans of the Declaration of Independence or the Constitution.  All they wanted was privilege.  They wanted the Old World in the New World.  And the planter elite fought bitterly to keep that.  Well, not them as much as their fellow southerners they lied to about states’ rights.  Getting them (most of who were too poor to own a single slave) to fight and sacrifice their lives to maintain the institution of slavery.  To maintain the privilege of the southern aristocracy.

So there you have examples of incentive and coercion.  Black Friday incentivized people to hire in for seasonal jobs during the holiday season.  And brought people into stores with deep discounting.  Everyone got something they wanted.  And so they did what the store owners wanted.  People worked for them on Thanksgiving.  And people came into the stores on Thanksgiving.  Both of their own free will.  Now contrast that to slavery.  Where there was no free will.  Only the coercion of the federal government.  Where fear and intimidation compelled slaves to remain slaves.  And their only incentive was to obey their masters to avoid physical harm.

With the Supreme Court ruling the penalty of Obamacare became a tax.  Allowing the federal government to compel people to buy health insurance or suffer the consequences.  A ‘tax’ that will grow in time.  Buy insurance or else.  With that ‘or else’ being the full force and fury of the IRS.  Something most people would find more unpleasant than a colonoscopy.  Without any anesthetic.  No, a letter from the IRS is something no one wants to see in their mail.  For few things will fill you with fear and dread more.  This is the enforcement mechanism of Obamacare.  Which they need because people otherwise wouldn’t spend more for less.  Higher insurance premiums to cover things they will never need (a gay man will never need prenatal care).  And sky-high deductibles that will be like having no insurance.  As everything will be out of pocket until you reach that sky-high deductible.  Which few people will reach unless they have a catastrophic illness or accident.  This is why people are NOT signing up for Obamacare.  Because Obamacare ain’t no Black Friday.  Obamacare is offering nothing the people want.  At prices higher than they ever had to pay for health insurance before.  Leaving them with less to spend on their family.  Forcing them to cut out things they once enjoyed.  Which is why Obamacare will fail.  Because you can’t incentivize people to make their lives worse.  No, to do that you need the fearful power of the state.  Just like the Southern Democrats used to maintain the institution of slavery.

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Counterfeiting in the Revolutionary War, the American Civil War and World War II

Posted by PITHOCRATES - September 24th, 2013

History 101

Governments often turn to Printing Money to Pay for War

It takes money to wage war.  A lot of it.  War spending is always a country’s greatest expenditure.  Because fighting wars is costly.  And the longer they last the more costly they become.  Pushing countries that are waging war to the brink of financial collapse.  Opening the door for another means of waging war.  Counterfeiting.

How do you wage war with counterfeiting?  By pushing a country’s economy into a financial collapse.  If you can’t defeat your enemy with bullets and bombs you destroy their ability to make bullets and bombs.  And everything else.  Including food.  And you do this by devaluing a country’s currency by flooding the money supply with counterfeit bills.  Increasing the money supply causes inflation by having more dollars available to buy the same amount of goods.  Requiring more and more dollars to buy those same goods.  Thus raising prices.

As people struggle with rising prices they buy less.  Because they lose purchasing power.  Businesses see their sales revenue fall.  As people have less disposable income to buy their goods.  With falling sales they lay off workers.  All of this causes a dramatic fall in tax revenue.  Just when they need more to pay the costs of waging war.  As well as providing relief for those no longer able to afford food and housing because they lost their jobs.  Which is why governments print money during wars.  As it is the only choice they have to pay for the high costs of a nation at war.

By the End of the American Civil War about Half of all Money in Circulation was Counterfeit

One of the problems the British had during the American Revolutionary War was that it turned into a world war.  The British were also fighting the French and the Spanish.  Their entering the conflict stretched the British resources thin.  So they turned to counterfeiting.  The Americans were already suffering a terrible inflation as the Continental Congress had little choice but to turn to printing money to pay for the war.  They printed so many continental dollars that people began to refuse to accept it in payment.  Making the continental dollar more and more worthless.  Hence the expression ‘not worth a continental’.  The British tried to push the American economy into collapse by adding to that currency devaluation.  It was so destructive to the American cause that General Washington hanged counterfeiters.

During the early years of the American Civil War the North was running through her gold reserves.  So Congress passed the Legal Tender Act (2/24/1862).  Authorizing the printing of paper money to pay for war.  Just like they did during the Revolutionary War.  A new national currency was a counterfeiter’s dream.  Instead of different banks issuing different banknotes across the country there was now only one.  Counterfeits were easy to pass as few could tell a real one from a fake one.  And with the Confederate dollar worthless even the Confederates wanted these new dollars.  To buy things the Confederate dollar no longer could.  The new counterfeits were even easier to pass in the South as there was no official currency trading hands there.  Counterfeiting was so bad (by the end of the Civil War about half of all the money in circulation was counterfeit) that the Lincoln administration created the Secret Service to combat it.

The Nazis tried to bomb Britain into submission during World War II.  Or at least to weaken it enough for a cross-channel invasion.  The only problem with their plan was that the British had the Supermarine Spitfire.  One of the greatest fighter planes of the war.  And some of the finest pilots ever to fly.  Who had an able assist from the new radar.  Allowing these few to defeat the Luftwaffe in the Battle of Britain.  And made the cross-channel invasion impossible.  It’s these few Winston Churchill’s “Never in the field of human conflict was so much owed by so many to so few” refer to.

Counterfeiting is a very Effective Way to Wage War while being Cheaper and Less Risky than Conventional War

The Nazis took a beating in the Battle of Britain.  So Hitler turned his war machine eastward.  And invaded the Soviet Union instead.  But he did not give up on Britain.  For Britain was a great thorn in Hitler’s side.  They were in the Mediterranean and North Africa.  And they were producing oil in Iran.  They had the shipping lanes.  As well as the United States as an ally.  Who was feeding food and war material to Britain.  And using that island nation to base their bombers out of.  As well as building up an invasion force there that would one day open up a second front in the West.  Enter Operation Bernhard.

Operation Bernhard was a Nazi plan to flood the British economy with counterfeit money.  To destabilize the British economy.  And push it into collapse.  They set up operations in concentration camps.  And were printing about 1 million counterfeit banknotes a month.  The Nazis then laundered the money.  And used it to buy the war material they needed.  The counterfeits were so good that they were still turning up in Britain a decade after the war.  Forcing the British to withdraw all notes (larger than £5) from circulation and replacing them with a more counterfeit-proof money.

The Nazis turned to the American dollar in 1945.  They set up printing presses in February.  But they cancelled their plans.  The war ended later that year.  Allowing the Americans to escape the economic damage the British suffered at the hands of the Nazi counterfeiting program.  But the idea lives on.  We see ‘superdollars’ (counterfeits so good that their quality is higher than the original) all over the world.  The U.S. suspects the source of these counterfeits are criminal gangs in Iran, Russia, China or Syria.  While suspecting the government of North Korea producing a share of these superdollars.  We don’t know for certain who is creating this counterfeit money but there is a lot of it out there.  Some may be doing it for financial gain.  While others may be doing it to damage the United States economically.  Whatever the reason the result is the same.  Resulting in the scourge of paper money.  Higher inflation.  Currency devaluation.  Higher prices.  And less economic activity.  Possibly even sending the economy into a deep recession.  Everything an enemy of the United States wants to do to the United States.  Making counterfeiting a very effective way to wage war while being cheaper and less risky than conventional war.

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Slavery, the Cotton Gin, the Jacquard Loom, Punch Cards and Computers

Posted by PITHOCRATES - June 12th, 2013

Technology 101

(Originally published December 7th, 2011)

African Slaves came to the New World because the Colonists needed Laborers

The Europeans didn’t invent slavery when they introduced it to the New World.  It’d been around since the dawn of civilization.  And it’s been a way of life in many civilizations for thousands of years.  Where no one was safe from the slave traders.  Some were born into slavery.  Some were simply soldiers captured in battle.  Even children were bought and sold.  Perhaps the saddest story is the Children’s Crusade of 1212.  When about 50,000 poor Christian kids walked from Central Europe to free Palestine from Muslim control and return it to the Christians.  They got as far as boarding ships in Italian ports.  But those ships did not deliver them to Palestine.  They delivered them instead into the Muslim slave markets of Northern Africa and the Middle East.  Where they were never heard from again.

African slaves came to the New World because the colonists needed laborers.  They tried enslaving the Native Americans.  But it was too easy for them to escape back into friendly territory.  And blend in with the indigenous population.  Not the case with black Africans.  Who didn’t know the surrounding country.  Or the languages.  What they knew was an ocean away.  Also, the locals had a tendency of dying from European diseases.  Especially smallpox.  Whereas the Africans were long exposed to smallpox.  And built up some resistance to this scourge of European colonialism.

So the New World colonies began with slaves harvesting their crops.  Slaves that the Europeans bought from African slave traders.  Who had long been selling captured Africans to the Arabs.  And had no problem selling them to the Europeans.  And so began the problem of slavery in America.

With the Cotton Gin Separating the Seed from the Cotton Fiber became not so Labor Intensive

When the British American colonists started talking about liberty the slavery problem was the elephant in the room that they were reluctant to talk about.  When Jefferson wrote that all men were created equal they knew that meant those enslaved against their will, too.  Yet here they were.  These liberty-seeking people were enslaving people themselves.  But there was a problem.  To form a united country the Founding Fathers needed the southern states.  Who used slaves as the basis for their economy.  And they weren’t going to join a union without their slaves.  So they wouldn’t talk about the elephant.  Instead they tabled that discussion for 20 years.  With the population growing they didn’t need slaves anymore.  There were few in the North.  And the South should follow suit.  It was inevitable.  Leaving just one problem to solve.  What to do with their slaves as they transitioned to paid laborers.  Which the Founding Fathers were sure the southern slave owners could solve within those 20 years.

Slave-labor was not efficient.  George Washington wanted to sell his slaves and replace them with paid laborers.  Because paid laborers cost less.  You only paid them for their labors.  And then they went away.  And if you changed your crops you could easily hire new laborers skilled in the new crop.  Not quite so easy with a large slave labor force.  So those in the North had good reason to believe that slavery would slowly give way to paid laborers.  Even in the South.  Or so they thought.  But one of the staple crops of the South started to shape events.  Cotton.

Cotton was a labor-intensive crop to harvest.  And separating the seed from the cotton was even more labor-intensive.  Until someone mechanized this process.  With a cotton engine.  The cotton gin.  Patented in America by Eli Whitney.  A hand-cranked device that used hooks to pull the cotton fiber through a screen.  The holes in the screen were small enough to let the cotton fiber through.  But not large enough for the seeds to pass.  With the cotton gin separating the seed from the cotton fiber became not so labor intensive.   In fact, these little machines could clean cotton faster than the slaves could harvest it.  Which meant, of course, there was a lot more cotton that could be grown and harvested.  Which created a new slavery boom.  And dashed all the hopes of the Founding Fathers.

Cheap Cloth Unleashed a lot of Economic Activity which Improved the Quality of Life

Many blame the cotton gin for extending the institution of slavery in America.  And the bloody American Civil War that ended it.  But apart from this the cotton gin was a fundamental step in modernizing economies everywhere.  And helped to spur the textile industry forward.   By creating an abundant source of material for weaving looms everywhere.

The textile industry was important because everyone wore clothes.  And we made clothes from cloth.  Once upon a time people made their own clothes.  Or spent a lot of money for store-bought clothes.  Leaving them with little time or money for other things.  So cheap cloth unleashed a lot of economic activity.  Which improved the quality of life.  The Chinese started this process.  By giving us an advanced loom that used foot-power to lift thread.  And the spinning wheel to make yarn.  All the weavers needed were abundant sources of fiber to feed these machines.  Such as American cotton.

The Chinese also made some beautiful silk tapestries with complex patterns.  Which were very difficult to reproduce by hand in the West.  Until the French automated this process.  When Joseph Marie Jacquard improved on the works of Basile Bouchon, Jean Baptiste Falcon and Jacques Vaucanson.  And created the Jacquard loom.  This automated the pattern process coming from those Chinese looms.  By using punch cards to automatically lift the proper threads to reproduce that complex pattern.  An impressive advance.  But one that did not impress the French.  Who were busier with revolution than fancy weaved patterns.  But the British were interested.  And they used the Jacquard loom in their booming textile industry.  Fed largely by that abundant American cotton.  Until the American Civil War, at least.

An Advanced Automated and Mechanized Economy has no Room for Slavery

The British also used this punch card idea to automate their shipbuilding industry.  To speed up the riveting process.  By automating riveting machines.  To make ships that carried immigrants to the new world.  Who swelled the American population.  Making the census taking more and more complex.  And another punch card system made counting these people simpler.  The tabulator.  Where an operator punched holes in a card to represent information for each person.  Age.  Marital status.  Country of origin.  Etc.  IBM would use this idea of punching information into a card later.  To program some of the first computers.  Machines that increased efficiencies further.  By replacing ever more people with machines.

So it is an interesting turn of events.  Eli Whitney created the cotton gin in America.  A machine that was part of a series of technological developments that increased efficiencies and reduced the number of workers needed to perform once labor intensive tasks.  All during this process fewer people were able to do more things.  Except one thing.  Planting and harvesting cotton.  That would take first a civil war.  And then steam-powered farming equipment.  To automate farming.  Which came later to the South than it did in the slavery-free North.  And other parts of the world.

Life got better for everyone the more advanced the economy became.  Sure, a lot of people lost jobs.  But that’s progress.  A few lost jobs is a small price to pay when the masses can enjoy a better life.  Thanks to automation and mechanization.  And that includes slaves.  Or, rather, former slaves.  For an advanced automated and mechanized economy has no room for slavery.

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Medieval Barbers, Supplemental Insurance, the Baylor Plan and Blue Cross Blue Shield

Posted by PITHOCRATES - May 28th, 2013

History 101

Barbers once Dressed our Wounds and Bled us when we were Sick

Awhile back one of our most beloved public figures suffered a serious accident.  The injuries required significant rehabilitation.  So he missed a lot of work.  People worried how he was going to pay his bills if he couldn’t work.  Groceries.  Rent.  Child care.  Etc.  Health insurance would pay his medical bills.  But what about that lost income?  What would replace that to allow his life to go on as before during his convalescence?  Thankfully he had Aflac supplemental insurance.  Which would pay his bills until his wings and beak healed.  Allowing the Aflac duck to continue on with his life.  Until he was able to return to work.

For a small insurance premium anyone can buy supplemental insurance.  This will allow them to pay their bills should there be an interruption in their earnings due to an illness or accident.  The Aflac duck probably did not pay for this coverage.  One of the perks of being the face of the company.  And the Aflac duck is fictional.  And fictional entities don’t have bills to worry about during any interruption in their fictional earnings.  But the duck is cute.  And it illustrates what the first health insurance policies actually did.  Replaced lost income.

Health insurance hasn’t been around for long.  For costly hospital stays haven’t been around for long.  Once upon a time you visited the local barber to have a wound dressed after an accident.  Or for a bloodletting when you were sick.  And if you had a toothache.  So he could yank your tooth out of your mouth.  As well as give you a shave and a haircut.  Things that weren’t really that costly.  But if you were a black smith with a lame hand you could go for awhile without being able to earn any income.  And this is what the first use of health insurance did for us.  Like that Aflac duck.  It paid our bills until we were ready and able to return to work.

Early Health Insurance didn’t pay for Hospital Stays or Medical Procedures but replaced Lost Income

Early hospitals bore little resemblance to what we have today.  In fact, most people preferred to stay out of them.  Choosing to recuperate at home.  The American Civil War killed over 600,000 Americans.  More than half of those were from disease.  Those wounded in battle feared the hospital.  Where you went to die.  Often by infection as surgeons went from one amputation to another without changing their bloody aprons or washing their hands.  This was in the 1860s.  Which isn’t that long ago.  There are people alive today whose grandfathers were born during the American Civil War.  Who were born into a world where surgeons still did not know that they should wash their hands before sticking them into someone’s body.

Medical care may not have been that good in the 1860s but we already had health insurance.  Introduced around 1850.  Thanks to the rise in rail and river transportation.  Which in their early days weren’t all that safe.  Hurting a great many people.  Brakemen fell off of moving cars.  And lost hands coupling cars together.  While steam boilers had a tendency to explode.  In fact, the greatest maritime disaster in U.S. history happened when a steam boiler exploded in the bowels of the S.S. Sultana in 1865 on the Mississippi River.  The American Civil War had just ended.  And the Sultana was carrying emaciated and frail Union POWs home after their release from Confederate prison camps.  Happy to be free.  And anxious to go home.  How sad that after all they had gone through that they would die not on the battlefield.  But on the voyage home.  The explosion killed 1600-2000.  A greater death toll than when the Titanic sank.

As the Industrial Revolution modernized the United States people got hurt in the machines of the Industrial Revolution.  Like brakemen losing hands.  And people getting hurt in boiler explosions.  Causing people to miss work as they healed.  Where they were unable to earn a living to support their families.  This is what our early health insurance did.  It didn’t pay for hospital stays or medical procedures.  You paid for that.  The health insurance replaced your lost income until you were able to return to work.

The Baylor Plan was a Prepaid Health Care Plan that gave School Teachers 21 Days of Hospital Services

But health care soon rose above the level of medieval barbers/surgeons yanking out our teeth.  And draining blood from sick people.  By the early 1900s medical skills and knowledge greatly improved.  We learned the importance of washing our hands before putting them into someone’s body by the late 1800s.  Making hospitals no longer the infectious deathtraps they once were.  We started taking x-rays.  Monitoring blood pressure.  Used newly developed medicines.  Medical training improved.  We developed standardized treatments for disease.  And procedures for emergency medical care.  People stopped fearing hospitals and stopped trying to avoid them.  They now sought them out when they were afraid of dying.  Not seeing them as houses of death.

All of this reduced supply as it took more training and equipment and licensing to become a doctor or to open a hospital.  And increased demand as people wanted to get better from what ailed them.  Low supply and high demand made health care, of course, expensive.  People were enjoying getting better.  But they sometimes had trouble paying their bills.  Something Dr. Justin Ford Kimball noticed.  School teachers having trouble paying their hospital bills.  So he developed the Baylor plan in 1929.  At the Baylor University Hospital in Dallas, Texas.  Participating teachers paid 50 cents a month.  In exchange they received up to 21 days of hospital services per year.  This brought in a steady stream of income to the hospital throughout the year.  And provided piece of mind for the teachers knowing that for a small manageable fee (i.e., a premium) they could go to a hospital when they needed to.

The Baylor plan was successful.  Other hospitals followed suit.  Health insurance spread.  Hospitals gained a steady source of income.  And people insured themselves from large financial losses by paying a little every month so they wouldn’t have to pay a large hospital bill at one time.  The system worked well.  For everyone using a given hospital didn’t get sick or injured and consume health care services at one time.  While the small premium everyone paid could pay for the few who did.  Hospitals then worked together to produce health insurance plans that could be used at more than one hospital.  In 1939 the American Hospital Association set the standard for these plans.  Plans that met the standard were called Blue Cross plans.  These separate plans merged in 1960 and became Blue Cross.  Physicians and surgeons also sold prepaid plans.  These plans merged into Blue Shield in 1946.  And in 1982 Blue Cross and Blue Shield merged into what it is today.  Blue Cross Blue Shield.  One of the largest providers of health insurance today.

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After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - February 12th, 2013

History 101

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s when the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As has our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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Abortion and Tax Revenue

Posted by PITHOCRATES - January 21st, 2013

Economics 101

The Population Growth Rate fell during the Sixties and Seventies from 19% to 11% due to Birth Control and Abortion

Taxpayers are born.  Yes, immigration helped populate America.  But it was really the children of immigrants that made the country grow.  For a large population having babies will increase the population far more than immigration can.  Why?  Where do immigrants come from?  Babies.  Having babies is like compounding interest.  For babies grow up and have babies of their own.  So babies are good.  Especially for a government that wants to spend money.  Because the more babies we have the more taxpayers we will have.  So high-spending governments need a growing population growth rate.  To provide ever more taxpayers.  Who provide ever more tax revenue.  But sometimes the population growth rate doesn’t always increase.  Sometimes it even falls.  (See Population, Housing Units, Area Measurements, and Density: 1790 to 1990.  The population numbers are from the decennial census numbers.  The population growth rate is the percentage of population growth from one decade to the next.)

Although the population has always grown the population growth rate has not always grown.  In fact, the rate of growth has been falling over time.  Taking steep declines during war.  During the American Civil War the growth rate fell from 36% down to 23% by the time of the next census.  The census before and after World War I saw a decline from 21% to 15%.  The rate plummeted from 16% to 7% before and after the Great Depression.  With so many people out of work and struggling to survive the last thing families needed was another baby to feed.  The rate actually increased during World War II.  But that had more to do with people not having babies during the Great Depression for economic reasons.  After World War II the rate rose to 14%.  Which was still a point less than after World War I.

The following table shows the decrease in population due to war.  (Raw numbers are pulled from United States military casualties of war.)

Note that the most devastating of American wars was the American Civil War.  Where approximately 2% of the population died.  In terms of percentage loss of population the next costliest war was the Revolutionary War.  Then World War II.  Then World War I.  These wars saw millions of men in uniform (except for the Revolutionary War).  Away from their wives for years.  Which put a crimp in baby making.  And the large number of wounded and dead compounded that problem.  Resulting in large dips in the population growth rate during these wars.  Despite the large loss of life in numbers of America’s other wars those losses were all less than 0.10% of the population.  Making the impact on the population growth rate negligible.  One thing these numbers don’t explain, though, is the decline in the population growth rate after 1960.  During the Sixties and the Seventies the growth rate fell from 19% down to 11%.    But it wasn’t the Vietnam War that caused that decline.  So what did?  Birth control.  And abortion.

Couples having only 2 Children can’t Support an Expanding Welfare State but Couples having 3 Children Can

The U.S. approved the sale of the birth control pill in 1960.  Which corresponded with the era of free love and the sexual revolution.  People were having more sex.  While having fewer babies.  Then Roe v. Wade made abortion legal in 1973.  Since then there have been on average about 1.4 million abortions a year.  Dwarfing the 156,250 killed a year in America’s most devastating war.  The American Civil War.  Which has brought the population growth rate to its smallest numbers that weren’t due to war or depression.  Because of that compounding nature of babies (growing up to have babies of their own).  And because babies become taxpayers this has a big impact on future tax revenue.  We can see this by looking at how 100 abortions ripple through the population.

Let’s assume those 100 abortions happen in Year 1 (Y1).  Had these abortions not happened these babies would have grown up and entered the workforce about 20 years later (Y1+20).  And split off into pairs to have babies of their own.  (If each couple has one baby they have a total of 50 babies.  If each couple has two babies they have a total of 100 babies.  Etc.)  Who would grow up and enter the workforce about 20 years later (Y1+40).  And so on.  The above graph adds up all the people for each 20-year period produced by the Y1 babies (children, grandchildren, great grand children, etc.) divided by 100 (those original babies not aborted).

If the Y1 people only have one baby they and their descendants disappear from the world in about 2 centuries.  If they have 2 children the population never grows larger than 4 times the original Y1 people.  Two children to replace two parents.  It’s not until you get to three children that you see an increase in population.  As well as an increase in tax revenue.

Assume each of the people, or taxpayers, at 20-year intervals earn a median income of $50,000.  They pay an effective federal income tax rate of 18%.  In addition to 12.4% for Social Security taxes (both employer and employee).  And 2.9% for Medicare.  Added together they total 33.3%.  This tax rate on total income at each 20-year interval produces the tax revenue in the above graph.  Note the revenue graphs are the same shape as the population graphs.  Showing a direct correlation between tax revenue and the population growth rate.  The tax revenue provided by couples having only one child disappears within two centuries.  Revenue provided by couples having only two children peaks out at $6,660,000.  As couples only have enough children to replace themselves.  Maintaining a constant of 4 taxpayers (2 parents and 2 children) after 80 years.  Showing that couples having 2, 1 or 0 children cannot support an expanding welfare state.  But a couple having 3 children can.  As long as it’s not too big of a welfare state.

You just can’t have an Expanding Welfare State with a Falling Population Growth Rate

The more children a couple has the greater the tax revenue.  For the more children they have the more people enter the workforce and become taxpayers.  If 50 couples have 3 kids each (as do their descendants) they will add $30.4 million in federal tax revenue in one century.  If they have 4 kids they will add $99.9 million in revenue.  If they have 5 kids they will add $264 million.  And if they have 6 kids they will add $599.4 million.

In two centuries these numbers are even more profound.  Couples having 4 kids will provide $3.2 billion in federal tax revenue.  While couples having 5 kids will provide $25.8 billion.  And couples having 6 kids will provide $145.6 billion.  If, that is, 100 pregnancies weren’t aborted 2 centuries earlier.

In the long-term revenue would soar if people simply started having babies again.  For birth control and abortion have greatly reduced the number of babies we’re having.  Causing tax revenue to fall.  We can bring revenue back up by having more babies.  But after some 30 years this baby dearth has pushed us into the flat part of these graphs.  Requiring up to a century or more to make large population gains.  And large gains in tax revenue.   And without these gains in revenue we simply cannot afford an expanding welfare state.

It is rather ironic that two tenets of liberalism clash here.  Liberals believe in both a welfare state.  And free birth control and abortion on demand.  They believe in one thing that requires women to have a lot of babies.  And another that helps women to have as few babies as possible.  Which is another reason liberalism will ultimately fail.  Paradoxes like this.  For you just can’t have an expanding welfare state with a falling population growth rate.  If you try you get trillion dollar deficits.  And $16.4 trillion in accumulated debt.

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