FT217: “If you want to know what it was like living under an absolute monarchy just think of the IRS.” —Old Pithy

Posted by PITHOCRATES - April 11th, 2014

Fundamental Truth

Thomas Jefferson wanted to keep the New Federal Government and Money Apart

Thomas Jefferson did not trust government.  And he didn’t trust moneyed men.  Because when the two come together they cause nothing but trouble.  That’s why he hated and distrusted Alexander Hamilton.  Hamilton wanted a strong central government.  A central bank.  And an economic system favoring merchants and bankers.  With big city moneyed men financing the government in return for special favors.

This is why the nation’s capital isn’t in New York City.  It once was.  But one of the first deals the Hamilton and Jefferson camps made was the relocation of the nation’s capital to a mosquito-infested swamp on the Potomac River.  A long, long way from the moneyed men in New York City.  To try to keep the new federal government and money apart.  To restrict the influence of the moneyed men on the government.  And to prevent the government from having easy access to big money.

Why did Jefferson want to do this?  Well, they fought for their independence from Great Britain.  Which was a constitutional monarchy.  Where some in Parliament were no friends of British America.  And got the king to agree with them rather than the pro-British America faction in Parliament.  Ironically, the Americans got help in their War of Independence from France.  Which had an absolute monarchy.  Whose king ruled with no check on his power.  Both governments were in the big cities.  London.  And Paris.  Where the moneyed men were.  In the big cities.  Allowing these monarchies to do a whole lot of mischief all around the world.  And a fair amount of mischief inside their own countries.  Because the money and the government were in the same city.

Government + Money = Corruption

Great Britain and France were forever at war with each other.  And with other countries.  Requiring a lot of money.  Which they got from the moneyed men.  In return for special privileges that allowed them to get ever richer.  Of course the mischief grew greater as they fought a world war or two.  Requiring ever more money.  Which they got from, of course, taxing the rest of the people.  Even those who could little afford it.  And once this starts, once the government starts accumulating debt, that taxation will only get greater.

This is what Jefferson was worried about.  And why he so distrusted Hamilton.  The Founding Fathers were all gentlemen of the Enlightenment.  Disinterested public servants.  Honorable men who would never take advantage of their position in government for personal gain.  Because for these men honor was everything.  Some even fought duels to protect their honor.  As Hamilton did.  And died.  Washington, Adams, Hamilton, Jefferson, Madison, Jay and Franklin were men of exceptional integrity.  Men who could be trusted.  But here is where Hamilton and Jefferson differed.  Hamilton believed only men like them would ever enter government.  While Jefferson believed that government service would one day attract mostly scoundrels and knaves.

Of course, Jefferson was right.  For as the nation grew so did the size of government.  And the need for great big piles of money.  Which the moneyed men provided.  In exchange for special privileges.  Patronage.  Lucrative government contracts.  Etc.  Big piles of money flowed into Washington.  And favors flowed out from Washington.  With many a politician getting rich in the process of getting rich moneyed men richer.  Politicians who used their position in government for personal gain.  Corrupted politicians.  As government + money = corruption.  Which is why politicians always leave office richer than when they entered office.

Power + Corruption = Tyranny

This is how it started.  As the size of government grew corruption grew.  Just as Jefferson feared.  All that money flowing into Washington corrupted ever more politicians.  Who were not gentlemen of the Enlightenment.  But the scoundrels and knaves Jefferson knew would come.  Who used their position in government for personal gain.  Whose corruption grew so great it exploded federal spending.  So great that taxes from the moneyed men AND the middle class were unable to fund it.  So the taxation grew more aggressive.

The government created by the Founding Fathers had no income taxes.  They funded the few things the new national government did with tariffs for the most part.  People lived from day to day without any fear of the taxman.  The United States even did away with debtors’ prison.  Prison where people were sent who could not pay their debts.  A relic of the 19th century.  Sort of.  For there is one debt people can still go to prison for not paying.  Past-due taxes.  For the IRS can take everything you have and imprison you if you don’t pay your taxes.  And those taxes have grown great as of late.  As the tax code has grown convoluted.  Requiring businesses to hire armies of accountants and lawyers to comply with.  So the government can help the moneyed men who help the government.  In return for special privileges, of course.  Leaving the masses dreading April 15.  As they dread opening any letter from the IRS.

If you want to know what it was like living under an absolute monarchy just think of the IRS.  People fear the IRS.  Just as people feared the arbitrary power of an absolute monarchy.  A king could take your property and lock you away.  Just like the IRS.  And if you spoke out against the monarchy the king could make your life really unpleasant.  Just like the IRS.  During the 2012 election the IRS targeted conservative political groups to stifle their free speech.  Delayed their tax-exempt status approval.  And harassed them with costly tax audits.  And now their tyranny has extended to people in the middle class.  Who unbeknownst to them had a family member owe the federal government.  Years earlier.  Even a generation earlier.  And the IRS is arbitrarily seizing the tax refunds from these debtors’ distant relatives to pay these debts.  Even though they are in no way responsible for these debts.  And the government has no documentation for this debt.  Doesn’t matter.  Because they have the power to do this.  And these people are powerless to stop them.  Just like people living under an absolute monarchy were powerless to stop their king from doing anything to them.  And this is what Jefferson feared.  For after corruption comes tyranny.  For power + corruption = tyranny.  (Just look at every tin-pot dictator that has oppressed his people).  Which is why people fear the IRS.  And the federal government the IRS is beholden to.  Because they have become everything Jefferson feared they would.

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The First Bank of the United States, the Second Bank of the United States and the Federal Reserve System

Posted by PITHOCRATES - April 2nd, 2013

History 101

Merchants raise their Prices when the Monetary Authority depreciates the Currency

What is inflation?  A depreciation of the currency.  By adding more money into the money supply each piece of currency becomes less valuable.  Let’s assume our currency is whiskey.  In bottles.  Whiskey has value because people are willing to pay for it.  And because we are willing to pay for it we are willing to accept it as legal tender.  Because we can always trade it to others.  Who can drink it.  Or they can trade it with others.

Now let’s say the monetary authority wants to stimulate economic activity.  Which they try to do by expanding the money supply.  So there is more money available to borrow.  And because there is more money available to borrow interest rates are lower.  Hence making it easy for people to borrow money.  But the monetary authority doesn’t want to make more whiskey.  Because that is costly to do.  Instead, they choose an easier way of expanding the money supply.  By watering down the bottles of whiskey.

Now pretend you are a merchant.  And people are coming in with the new watered-down whiskey.  What do you do?  You know the whiskey is watered down.  And that if you go and try to resell it you’re not going to get what you once did.  For people typically drink whiskey for that happy feeling of being drunk.  But with this water-downed whiskey it will take more drinks than it used to take to get drunk.  So what do you as a merchant do when the money is worth less?  You raise your prices.  For it will take more bottles of lesser-valued whiskey to equal the purchasing power of full-valued whiskey.   And if they water down that whiskey too much?  You just won’t accept it as legal tender.  Because it will be little different from water.  And you can get that for free from any well or creek.  Yes, water is necessary to sustain life.  But no one will pay ‘whiskey’ prices for it when they can drink it from a well or a creek for free.

It was while in the Continental Army that Alexander Hamilton began thinking about a Central Bank

During the American Revolutionary War we had a very weak central government.  The Continental Congress.  Which had no taxing authority.  Which posed a problem in fighting the Revolutionary War.  Because wars are expensive.  You need to buy arms and supplies for your army.  You have to feed your army.  And you have to pay your army.  The Continental Congress paid for the Revolution by asking states to contribute to the cause.  Those that did never gave as much as the Congress asked for.  They got a lot of money from France.  As we were fighting their long-time enemy.  And we borrowed some money from other European nations.  But it wasn’t enough.  So they turned to printing paper money.

This unleashed a brutal inflation.  Because everyone was printing money.  The central government.  And the states.  Prices soared.  Merchants didn’t want to accept it as legal tender.  Preferring specie instead.  Because you can’t print gold and silver.  So you can’t depreciate specie like you can paper money.  All of this just made life in the Continental Army worse.  For they were hungry, half-naked and unpaid.  And frustrating for men like Alexander Hamilton.  Who served on General Washington’s staff.  Hamilton, and many other officers in the Continental Army, saw how the weakness of the central government almost lost the war for them.

It was while in the army that Hamilton began thinking about a central bank.  But that’s all he did.  For there was not much support for a central government let alone a central bank.  That would change, though, after the Constitutional Convention of 1787 created the United States of America.  And America’s first president, George Washington, chose his old aide de camp as his treasury secretary.  Alexander Hamilton.  A capitalist who understood finance.

Despite the Carnage from the Subprime Mortgage Crisis the Fed is still Printing Money

At the time the new nation’s finances were in a mess.  Few could make any sense of them.  But Hamilton could.  He began by assuming the states’ war debts.  Added them to the national war debt.  Which he planned on paying off by issuing new debt.  That he planned on servicing with new excise taxes.  And he would use his bank to facilitate all of this.  The First Bank of the United States.  Which faced fierce opposition from Thomas Jefferson and James Madison.  Who opposed it for a couple of reasons.  For one they argued it wasn’t constitutional.  There was no central bank enumerated in the Constitution.  And the Tenth Amendment of the Constitution stated that any power not enumerated to the new federal government belonged to the states.  And that included banking.  A central bank would only further consolidate power in the new federal government.  By consolidating the money.  Transferring it from the local banks.  Which they feared would benefit the merchants, manufacturers and speculators in the north.  By making cheap money available for them to make money with money.  Which is the last thing people who believed America’s future was an agrarian one of yeoman farmers wanted to do.

They fought against the establishment of the bank.  But failed.  The bank got a 20 year charter.  Jefferson and Madison would later have a change of heart on a central bank.  For it helped Jefferson with the Louisiana Purchase.  And like it or not the country was changing.  It wasn’t going to be an agrarian one.  America’s future was an industrial one.  And that required credit.  Just as Alexander Hamilton thought.  So after the War of 1812, after the charter of the First Bank of the United States had expired, James Madison signed into law a 20-year charter for the Second Bank of the United States.  Which actually did some of the things Jefferson and Madison feared.  It concentrated a lot of money and power into a few hands. Allowing speculators easy access to cheap money.  Which they borrowed and invested.  Creating great asset bubbles.  And when they burst, great depressions.  Because of that paper money.  Which they printed so much of that it depreciated the dollar.  And caused asset prices to soar to artificial heights.

Andrew Jackson did not like the bank.  For he saw it creating a new noble class.  A select few were getting rich and powerful.  Something the Americans fought to get away from.  When the charter for the Second Bank of the United States was set to expire Congress renewed the charter.  Because of their friends at the bank.  And their friends who profited from the bank.  But when they sent it to Andrew Jackson for his signature he vetoed the bill.  And Congress could not override it.  Sensing some blowback from the bank Jackson directed that they transfer the government’s money out of the Second Bank of the United States.  And deposited it into some state banks.  The president of the bank, Nicholas Biddle, did not give up, though.  For he could hurt those state banks.  Such as calling in loans.  Which he did. Among other things.  To try and throw the country into a depression.  So he could blame it on the president’s anti-bank policies.  And get his charter renewed.  But it didn’t work.  And the Second Bank of the United States was no more.

National banks versus local banks.  Hard money (specie) versus paper money.  Nobility versus the common people.  They’ve argued the same arguments throughout the history of the United States.  But we never learn anything.  We never learn the ultimate price of too much easy money.  Even now.  For here we are.  Suffering through the worst recession since the Great Depression.  Because our current central bank, the Federal Reserve System, likes to print paper money.  And create asset bubbles.  Their last being the one that burst into the subprime mortgage crisis.  And despite the carnage from that they’re still printing money.  Money that the rich few are borrowing to invest in the stock market.  Speculators.  Who are making a lot of money.  Buying and selling assets.  Thanks to the central bank’s inflationary policies that keep increasing prices.

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FT157: “Now that the anti-establishment types are running government we are no longer to question authority but embrace it.” —Old Pithy

Posted by PITHOCRATES - February 15th, 2013

Fundamental Truth

The History of Oliver Cromwell’s New Model Army and the English Civil War were not that Distant

Benjamin Franklin said the first responsibility of every citizen is to question authority.  That was kind of America’s thing.  Giving the finger to the governing authority.  Figuratively.  And sometimes literally.  Starting with King George III.  One of our earliest flags said, “Don’t tread on me.”  This flag had a coiled rattle snake on it.  Franklin thought the rattle snake was a good symbol of the American people.  If the British left us alone this snake would cause no harm.  If you get too close this snake will warn you to back off by shaking its rattle.  If you don’t heed this warning and threaten this snake it will strike you with lethal force.

This problem with authority almost lost the Revolutionary War for us.  At first American soldiers didn’t like following orders.  For if they could rebel against their king they could just as easily rebel against a commanding officer.  George Washington stopped that.  But this mistrust of authority was systemic.  The state governments did not trust the Continental Congress.  That distant central power.  Anymore than they trusted that other distant central power.  The British monarchy.

So the Continental Congress was woefully underfunded throughout the Revolutionary War.  Finding it very difficult to supply the Continental Army.  Or pay her soldiers.  Something else the states didn’t trust.  A standing army.  For the history of Oliver Cromwell’s New Model Army and the English Civil War were not that distant.  Or the peace that followed.  Where that army helped keep the new government in power.  And unleashed great woe and suffering to the Catholics in Ireland and Scotland.

Kings don’t suffer Personal Attacks in the Newspapers like an Elected President Does

So the Americans stood up to that distant power.  And to her ministers in the American colonies.  Not afraid to speak truth to power.  To speak out about the abuses of King George in the colonies.  Which Thomas Jefferson summarized in the Declaration of Independence.  They spoke contemptuously of the ruling British authorities.  When they won their independence they transferred this contempt to the new federal government.  The states trusted the new central authority in the United States little more than they trusted the one on the far side of the Atlantic.  And many fought as passionately against it as they fought against King George.

Even those in the new central government didn’t trust each other.  Political parties formed.  Alexander Hamilton led the Federalists.  Who wanted a strong central government.  And Thomas Jefferson led the Republicans.  Who wanted a weak central government.  Keeping the power in the states.  Hamilton and Jefferson hated each other.  Despised each other.  Believed that the other was everything that was wrong in the new nation.  And they attacked each other viciously in the newspapers through their surrogates.  Which were extensions of these political parties.  So if you wanted fair and balanced news all you had to do was read at least two newspapers.  Weigh the vitriol and lies in each to arrive at the truth.  Which was somewhere in between.

And these papers were pretty nasty.  Even attacking the most beloved man in the country.  George Washington.  Calling him old and senile.  Secretly British.  A mere puppet controlled by that evil puppet master Alexander Hamilton.  George Washington could have been king with the blessings of the American people.  Instead he chose to keep the United States a republic.  And suffered horribly for it.  For kings don’t suffer the personal attacks in the newspapers like an elected president does.  This was representative government.  Where the people are sovereign.  And the president is a servant of the people.  Not the other way around.  Like in a monarchy.

You can call LBJ and George W. Bush Murderers but you can’t ask President Obama Questions he doesn’t want to Answer

People marveled at how George Washington stepped down from power after his second term as president.  Even King George said that if he did that he would be the greatest man in the world.  And he did.  Proving the American system.  But while others marveled about how he could give up power after so short a time in office Washington more likely marveled about how long he was able to stay in office.  For he hated the politics.  And the newspaper attacks.  He was anxious to step down.  He was giddy during the transfer of power.  Happy to be going home.  While poor John Adams had to deal with all the politics.  The newspaper attacks.  And the lies.

Contrast this to President Obama.  Who gets treated by the media with kid gloves.  Who don’t question him at all.  Or his administration.  It being more like a monarchy than a republic.  After 4 Americans died in Benghazi the president offered no explanation.  And the media did not pressure him for one.  When Congress finally got to question the Secretary of State, Hillary Clinton, they asked her who was responsible for the failure to provide for the security for our diplomats in Benghazi?  Who was responsible for not coming to their aid while they were under attack?  And who was responsible for the lie about it being a spontaneous uprising in response to a YouTube video?  She only yelled “what difference does it make?”  And that was that.  The media reported that the Republicans were mean to her.  And never pressed her for answers.  Or President Obama.

Even the people aren’t demanding answers.  Which is sad.  For once upon a time the people chanted, “Hey, hey, LBJ, how many kids did you kill today?”  Making the political pressure of the Vietnam War so unbearable that he refused to run for a second term.  But where is this outrage over President Obama’s use of drones to kill terrorists as well as the innocent civilians and children around them?  Or the targeting of American citizens without any due process?  We hear nothing from the people.  Or the media.  The same people and media who wanted to try the 9/11 mastermind, Khalid Sheikh Mohammed, in a U.S. court not far from Ground Zero during the Bush Administration.

Why the double standard?  Why was it okay to question authority in the Sixties and Seventies?  No matter who was in power.  But after that it was only permissible to question authority when Republicans were in power?  Why is it you can call LBJ and George W. Bush murderers but you can’t ask President Obama questions he doesn’t want to answer?  When Dr. Benjamin Carson spoke truth to power at the National Prayer Breakfast criticizing Obamacare and the president’s economic policies the Left attacked him for not showing deference to the president.  How dare he exercise free speech in a public setting they asked?  A far cry from “Hey, hey, LBJ, how many kids did you kill today?”  No.  This president we’re supposed to show deference to.  As if he was a king.  Why?  Apparently now that the anti-establishment types are running government we are no longer to question authority but embrace it.  So they can do whatever they want to do.  And change the country however they want to change it.  While that whole questioning authority thing was okay when they were on the outside looking in.  But now that they are on the inside looking out we need to question less and obey more.

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John Locke, Charles de Montesquieu, Republican Government, Separation of Powers, Enumerated Powers, Federalists and anti-Federalists

Posted by PITHOCRATES - July 26th, 2012

Politics 101

Funny thing about the Americans is that they just didn’t Like Paying Taxes

United we stood.  For awhile.  Until we defeated the British at Yorktown.  And negotiated the Treaty of Paris where Great Britain recognized our independence from the British Crown.  But people grew weary of the war.  On both sides of the Atlantic.  And those in the once united states (small ‘u’ and small ‘s’) were eager to retreat to their states.  And forget about the Continental Congress.  The Continental Army.  And everything to do with the confederation.  Threatening to undo everything they fought for.  Because of their sectional interests.

Shays Rebellion nearly pushed the country into anarchy.  It was the tipping point.  They had to do something.  Because if they weren’t united they would surely fall.  They owed Europe a fortune that they had no hope of repaying.  Funny thing about the Americans.  They just didn’t like paying taxes.  Making it difficult to repay their debts.  The Europeans gave them little respect.  France tried to sell them out during the peace talks to rebalance the balance of power in their favor.  Spain wanted to keep them east of the Mississippi River.  And off of the Mississippi.  Even refused them passage through the Port of New Orleans.  Britain didn’t evacuate their western forts.  The Barbary pirates were capturing American shipping in the Mediterranean and selling their crews into slavery.  And Catherine the Great of Russia wouldn’t even meet the American ambassador.  So the Americans were the Rodney Dangerfield of nations.  They got no respect.

In 1787 delegates gathered in Philadelphia.  To revise the Articles of Confederation to address these problems.  Some enthusiastically.  Some begrudgingly.  While one state refused to attend.  Rhode Island.  For they were quite happy with the way things were.  As the smallest sate in the union they had the power to kill almost any legislation that didn’t benefit Rhode Island.  For some legislation the vote had to be unanimous.  And they enjoyed charging other states tariffs for their goods unloaded in Rhode Island ports.  Things were so nice in Rhode Island that they didn’t need much taxation.  Because they had other states funding their needs.  Thanks to those tariffs.  Of course, this did little to benefit the union.  While imposing taxes on their neighbors in the union.  Sort of like taxation without representation.  Funny thing about Americans, though.  They didn’t like paying taxes.

Montesquieu said a Republican Government must Separate Power into Three Branches

Thomas Jefferson was in Europe in 1787.  John Adams, too.  But just about every other “demi-god” (as Jefferson called those at that gathering) was in Philadelphia in 1787.  America’s patriarch Benjamin Franklin.  The indispensable George Washington.  The financially savvy Alexander Hamilton.  The studious James Madison.  The Framers of the Constitution.  Highly principled men.  Well read men.  Prosperous men.  Who were familiar with world history.  And read the great enlightenment philosophers.  Like John Locke.  Who especially influenced the writing of the Declaration of Independence.  With his inalienable rights.  Consent of the governed.  And property rights.

As they gathered in Philadelphia to revise the Articles it became clear that they needed something more.  A new constitution.  A stronger federal government.  With the power to tax so they could raise money.  For without money the union could not solve any of its problems.  So they set upon writing a new constitution for a new government.  A republican government of republican states.  As they began to frame this constitution they drew on the work of a French philosopher.  Charles de Montesquieu.  Who championed republican government.  The ideal government.  A government of the people who ruled at the consent of the governed.  With built-in safeguards to protect the people’s inalienable rights.  The key requirement being the separation of powers.

Montesquieu said a republican government must separate power into three branches.  The legislature, the executive and the judiciary.  A nation of laws requires a legislature to write the laws.  Because the laws must respect the inalienable rights of the people the people must elect the legislature from the general population.  So the legislature’s interests are the people’s interest.  However, if the legislature was also the executive they could easily write laws that represented their interests instead of the people.  Elevating the legislature into a dictatorship.  If the legislature was also the judiciary they could interpret law to favor their interests instead of the people.  Elevating the legislature into a dictatorship.  Likewise if the executive could write and interpret law the executive could elevate into a dictatorship.  Ditto for the judiciary if they could write the law they were interpreting.  So the separation of powers is the greatest protection the people have against a government’s oppression.

If a Power wasn’t Delegated to the New Federal Government it Remained with the States

During the Constitutional Convention they debated long and they debated hard.  The Federalists were in favor of a stronger central government.  The anti-Federalists were not.  The Federalists included those who served in the Army and the Congress.  The anti-Federalists were those who didn’t serve ‘nationally’ and favored states’ rights.  In general.  So one side wanted to increase the power of the central government while the other side wanted no central government.  For their fear was that a new federal government would consolidate power and subordinate the states to its rule.  As if the last war never happened.  And the states would still bow to a distant central power.  Only this time to one on this side of the Atlantic.

So the balance they struck was a two-house (i.e., bicameral) legislature.  A House of Representatives.  And a Senate.  The people in each state elected a number of representatives proportional to their state’s population.  So a large state had a large representation in the House.  So that house represented the will of the people.  To prevent the tyranny of the minority.  So a small privileged class couldn’t rule as they pleased.  Whereas the Senate prevented the tyranny of the majority.  By giving each state two senators.  So small states had the same say as big states.  Together they represented both the majority and the minority.  Further, states’ legislatures chose their senators (changed later by Constitutional amendment).  Providing the states a check on federal legislation.

To round things out there was an executive they called the president.  And a judiciary.  Providing the separation of powers per Montesquieu.  They further limited the central government’s powers by enumerating their powers.  The new federal government could only do what the Constitution said it could do.  Treat with foreign powers.  Coin a national currency.  Declare war.  Etc.  If a power wasn’t delegated to the new federal government it remained with the states.  To give the new federal government some power.  Including the power to tax.  While leaving most powers with the states.  Striking a compromise between the Federalists and the anti-Federalists.

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War Debt, Seven Years War, Revolutionary War, Articles of Confederation, U.S. Constitution, Central Government, Federal Spending and Fiscal Policy

Posted by PITHOCRATES - February 7th, 2012

History 101

Americans don’t like Paying Taxes

Americans don’t like paying taxes.  A dispute over taxation without representation led to American independence from British rule.  For Britain had been fighting for many years in many wars.  And ran up an enormous war debt.  Which they had to repay.  Because some of that debt was incurred protecting the American colonists from the French and Indians during the Seven Years War, some had a bright idea.  “Here’s a thought,” they said, “Let’s have the Americans pay their fair share.  I mean, fair is fair, right?  Besides, it’ll be a lot easier getting money from the Americans than it will be getting it from Parliament, eh wot?” 

The Seven Years War, though, was a world war.  Fought in many countries and on many seas.  Costing lots of money.  Which Parliament was financing with lots of taxes.  But the British taxpayer had tax fatigue.  And felt they had no more taxes to give.  Or wanted to give.  As they had a say in Parliament raising taxes further was a nonstarter.  But the Americans had no representation in Parliament.  So what could they do?  Turns out they could do a lot.  Now the Americans weren’t unreasonable.  They just didn’t appreciate the, “Oh, by the way, here’s your share of the war debt.  We’ll tax you accordingly.”  Which the British did.  Without so much a by-your-leave.  Rubbed the Americans the wrong way.  If the British had shown them the numbers and gave them a chance to agree on what their ‘fair share’ was they probably would have paid.  And stayed loyal to the Crown.  But the British didn’t.  So the Americans didn’t.

Now fighting wars is expensive.  Especially long ones.  And the Revolutionary War was a long one.  Eight years until they penned their names to the Treaty of Paris (1783) officially ending it.  In these eight years the Americans ran up a great war debt.  And needed to repay it.  Just like the British.  The very thing that started the Revolutionary War.  Now it was the Americans’ turn to raise taxes.  They tried taxing whiskey.  Which led to another tax rebellion.  The Whiskey Rebellion.  For Americans still didn’t like paying taxes.  This time, though, it was a tad different.  Because those they were taxing had representation.  And the new ‘nation’ (a confederation of ‘equal’ states) had the legal authority to impose this tax.  And to put down the rebellion.  Which General Washington did.  To the howls of liberty-loving patriots everywhere.  The tax quietly went away.  But it didn’t solve the nation’s problems.  They were broke.  Needed money.  And they had to get a handle on the massive sums they owed for the world of nations to take them seriously.

Hamilton thought both Jefferson and Burr were Scoundrels but at least Jefferson was a Principled Scoundrel

The new ‘nation’ (that confederation of ‘equal’ states) was the problem.  Just as the world of nations didn’t take the Americans seriously these ‘equal’ states didn’t take the new national government seriously.  There was no taxing authority.  So the federal government could only ask for contributions from the states.  Which often came in late.  And when they did they were often less than they requested.  Some states even refused to pay anything.  Worse, the states were making their own treaties with other nations as well as the Indian Tribes.  Or reneging on the treaties the federal government made with other nations and the Indian Tribes.  The confederation wasn’t working.  They needed something new.  And once George Washington was onboard they called a meeting in Philadelphia (1787) to rework the Articles of Confederation.

Of course they didn’t rework the Articles of Confederation.  They replaced them with a new U.S. Constitution.  And a new nation.  The Preamble to the U.S. Constitution began with “We the people.”  The sovereignty of the new nation wasn’t with the states.  It wasn’t with the new federal government.  It was with the people.  It was a nation of the people, by the people and for the people.  To borrow some words from Abraham Lincoln.  Which meant that although the thing they created had more power than the confederation of states it replaced, its power was limited.  Very limited.  The Framers designed it to do only those things the states could not do well individually.  National defense.  Coin uniform money.  Establish post offices and post roads.  Make national treaties with other nations and Indian Tribes.  Declare war.  Create a standard of weights and measures.  But little more.  In fact, the Constitution listed more things the new government couldn’t do than listed what it could do.  To quell everyone’s fear that they just replaced one far away central power (the British Crown) with another far away central power (the central government of the United States).  Especially when it came to taxes.  Raising taxes required approval by two houses of Congress and by the President.  Making it difficult to raise taxes.  The way Americans liked it.  For Americans didn’t like paying taxes.  And still don’t.

Getting the new Constitution ratified wasn’t a walk in the park.  The size and power of the new central government appalled those Patriots who worked so hard during the Revolution.  James Madison, the Father of the Constitution, joined forces with Alexander Hamilton and wrote a series of articles arguing for ratification.  The Federalist Papers.  And were successful.  Then when Alexander Hamilton was putting the Constitution into action as Secretary of the Treasury in the Washington administration, Madison didn’t like what he saw.  For Hamilton wanted to use the power of government to make the United States an economic superpower like Britain.  His opponents, though, saw a man who wanted to be king.  So Madison joined the opposition.  Led by Thomas Jefferson.  And the politics got ugly.  Before it was done the Jefferson camp would write about an affair Hamilton had.  And the same muckraker who exposed this affair would later write about a Jefferson affair with a slave.  Sally Hemming.  The people in the different camps hated each other.  Especially Hamilton and Jefferson.  They hated each other with a passion.  But they were principled men.  For when the election of 1800 came down to either Thomas Jefferson or Aaron Burr, Hamilton backed his archenemy.  Thomas Jefferson.  Both Jefferson and Burr were scoundrels as far as Hamilton was concerned.  But at least Jefferson was a principled scoundrel.  Burr took great offense to some things Hamilton said about him around this time.  And challenged him to a duel.  In which Hamilton suffered a mortal wound.  Pity.  For Hamilton was a true Patriot.  And perhaps the greatest treasury secretary the United States ever had.

It’s not the Spirit of Alexander Hamilton, Thomas Jefferson or James Madison that lives on in Politics but Aaron Burr

Funny how things change.  The new nation almost didn’t survive because of the opposition towards a strong central government.  And towards federal taxes.  Now federal spending includes just about everything under the sun.  Most of which the Framers excluded from the Constitution.  And the taxes!  They have reached a level none of the Founding Fathers thought would ever be possible.  Even Hamilton.  He was ‘big government’ for his day but he would be disgusted to see what became of his beloved Treasury Department.  And the money they pull out of the private sector economy.  Not to make America an economic superpower.  But to buy votes.  And for personnel gain.  The true underbelly of democracy.  Where people come to public service not to serve.  But to enrich themselves at the expense of the taxpayer.  Like that scoundrel that killed him.  Aaron Burr.

Even worse they use fiscal policy to further their spending ways.  The federal debt grows.  And now whenever a recession rolls around they use Keynesian fiscal policy to ‘lessen’ the affects of the recession.  Which is just a clever way to keep on spending after they’ve run out of money.  Because this spending is now stimulus.  And if the government stops spending it will make the recession worse.  Clever.  And it’s just coincidental that friends of the administration benefit most by this Keynesian stimulus spending.

It would appear it’s not the spirit of Alexander Hamilton that lives on in Washington.  Or Thomas Jefferson.  Or James Madison.  It’s the spirit of Aaron Burr.  Scoundrel extraordinaire.  And role model for the political elite.

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Brazil is Rich in Resources but Beset with Poverty Despite its Social Spending

Posted by PITHOCRATES - December 18th, 2011

Week in Review

The Portuguese colonized Brazil.  Which is why Portuguese is one of the top ten most spoken languages in the world.  Because there are a great many Brazilians speaking Portuguese.  So there is a strong bond between Brazil and Europe.  Home of tiny little Portugal (and a wonderful dessert wine.  Port).  Perhaps a little too strong (see Brazil state struggles with poverty despite rich natural resources posted 12/12/2011 on the Los Angeles Times).

Brazil’s huge northern state of Pará is about three times the size of California, home to much of the Amazon rain forest and is the second-largest producer of the nation’s most important export, iron ore.

But poverty levels are well above the national average…

Even opponents of the bill, however, recognized the predicament, and it’s one that is repeated in parts of Peru, Colombia and elsewhere in South America: the lack of central government representation for states that are resource-rich (be it mining, gas or other commodities) but poverty-stricken.

“We can’t accept that in this country, natural resources benefit companies, but not its people,” said Simão Jatene, governor of Pará. “The Brazilian fiscal system is extremely perverse with respect to Pará…”

In Brazil, the last decade of economic growth has brought tens of millions of Brazilians out of poverty, powered by commodities exports, consumer credit growth and social spending. But the country still remains extremely unequal, across class and geographical lines. Some parts of the southeastern cities of São Paulo and Rio de Janeiro have a higher gross domestic product per capita than rich European countries, while in remote parts of Pará, residents who are struck ill must brave a five-day boat ride to the nearest hospital for treatment, O Globo reported.

The Amazon rain forest, eh?  Perhaps part of the problem is the environmentalists trying to save the rain forest.  Preventing any development there.  Condemning these people to a life of poverty.  Because it is usually a trade off.  Save the planet.  Or save man.  Rarely can you do both.  At least the way the environmentalists see it.  Who won’t be happy until they take civilization back to the days of Neanderthal.  And you know there are those out there who would bitch about Neanderthal’s use of tools changing his environment, too.  Which is the greatest crime man can make.  Changing his environment.

The lack of central government is the problem?  Funny.  The lack of central government didn’t stop the British and the Industrial Revolution they kicked off.  And the lack of central government didn’t appear to be a problem for Andrew Carnegie as he created a steel revolution in the United States.  Which is far bigger than California.  Yet the economy of the country grew so great it topped the mighty British Empire from the top spot.  One country with a limited central government.  Besting another country with a limited central government.

The problem the Brazilians have is spelled out in this article.  Their economy has been driven by the export of commodity materials.  Exporting raw materials?!?  This isn’t capitalism.  This is mercantilism.  And why only some Brazilians are living the good life.  They need to ignite an engine of economic exchange within Brazil.  Use those raw materials in domestic industries.  Build factories to transform them into consumer goods that Brazilians will buy with their factory wages.  Like the Americans did in the 19th century.  And we did that with less central government than we have today.  And I’m guessing that’s the only problem Brazil has.  Too much government.

Any country has the human capital to do what the Americans and the British did.  They just need the key to unlock that capital.  And the key to that lock is called free market capitalism.  Brazil is already far down this road.  They just need to let the rest of their country play catch-up.  And they’ve got to back off on the social spending.  Or else they’ll end up like Europe and their Eurozone.  Fighting for their life.  From excessive social spending.  If European capitalists had any advice for the Brazilians it would be this; don’t do it.  Don’t follow them down the Road to Serfdom.  Be free.  Stay free.  And let capitalism be free.

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FUNDAMENTAL TRUTH #77: “Liberals only call for bipartisan compromise when they’ve lost majority power and can no longer dictate policy.” -Old Pithy

Posted by PITHOCRATES - August 2nd, 2011

English Law and Capitalism gave People Freedom few knew in the 18th Century

Politics is a class struggle.  The ruling class against everyone else.  The ruling elite fights to keep the power in the hands of the privileged few.  While everyone else tries to wrest it away.  So they can live a better life.  Free from tyranny.  And oppression.

Life was pretty good in British North America.  The colonies were growing.  Their English law and free market capitalism gave people freedom that few knew in the 18th century.  Over in Europe the masses were poor and worked for subsistence.  Over in British America, though, a thriving middle class was emerging.  Like I said, life was pretty good.  Until the French had to go and spoil everything.

Great Britain and France were at war.  Again.  And this one was a world war.  The Seven Years’ War (the French and Indian War in North America).  Great Britain ultimately prevailed.  And made all French North America British.  We call it Canada today.  But conquering a world power and managing an empire that stretched around the globe was expensive.  And to make matters worse, the treasury was running low.  They needed more tax revenue.  But Britain’s land owning aristocracy was already heavily taxed.  And they were none too keen on paying any more.  So what to do?

Well, there was this.  There was a vast continent on the other side of the Atlantic with a lot of wealth that just got a whole lot safer thanks to some brilliant, and very expensive, military engagements.  Surely, they would not refuse to pay for some of the safety they gained in the recent war.

The London Ruling Class wouldn’t let a bunch of Backwoods Upstarts challenge their Authority

Well, as it turned out, yes, they could.  And did.  And don’t call me Shirley.

At the time, the American colonialists were proud Britons.  They loved their way of life.  And the representative government enshrined in Parliament.  Based on the Rule of Law.  Only thing was that they had no say in Parliament.  No representation.  Which was fine.  For awhile.  Being that far from the seat of government had its advantages.  But it was a different story when that distant power started flexing its muscle.  And a great power desperate for money could be rather presumptuous.

Now the colonists were reasonable people.  They were willing to make some kind of bipartisan deal of fair-share sacrifice.  But they wanted to talk about it.  They want to sit in Parliament.  And they wanted more say about their future on the new continent.  They were already very unhappy with some of the treaty details the British made with the French.  And the Indians.  Forbidding western expansion?  And allowing the French Canadians to practice their Catholicism in their very backyard?  No.  These would not do.  Americans had to have more say in America’s future.  And the British response?  “Shut your bloody mouths you insolent swine.  You do as we say.  And like it.”

I’m paraphrasing, of course, but you get the gist.  The ruling class in London wasn’t about to listen to a bunch of backwoods upstarts challenging their authority.  No, they were going to dictate policy from London.  And the Americans were going to accept their second class status and do as they were told.  Well, long story short there was a rebellion, the colonies declared their independence from Great Britain and a new confederation of states was born.

After Winning Independence the States got Drunk on Democracy

The Revolutionary War lasted from 1775 until the Treaty of Paris formally ended the war in 1783.  It was a long and bitter war.  Especially in the South where it evolved into a civil war between Patriot and Loyalist.  Independence did not come easy.  Nor was it cheap.  Like Great Britain, the young confederation of states racked up a large war debt.

With the common enemy defeated the several states went their own ways.  And threatened to destroy what they just won.  Some states were fighting over land.  Over tariffs.  Trade.  The united confederation of states wasn’t very united.  And they were more on the road to becoming another war-plagued Europe than the great nation envisioned by George Washington and the others who had served in the Continental Army.  Who saw the greater America.  Beyond the borders of their own state.

And the worst danger was democracy.  Mob-rule.  Religious persecution.  And the general feeling you didn’t have to do anything you didn’t want to.  The people were drunk on democracy.  They were voting themselves whatever they wanted.  In debt?  No problem.  We’ll pass debtor laws to protect you and rip up those contracts you signed.  Or we’ll give you worthless money we’ve printed to pay your debts.  And we’ll pass a law forcing creditors to accept this worthless money as legal tender.  Even though it’s worthless.  The Rule of Law was collapsing.  As was the new ‘nation’.

Madison and Jefferson feared the Power a Permanent Government Debt Gave 

This was quite the pickle.  An oppressive ruling class was bad.  But so was mob-rule.  They needed something else.  Something between these two extremes.  That would somehow strike a delicate balance between responsible governing.  And liberty.  The solution was federalism.  As created in a new Constitution.  Drafted during the summer of 1787 in Philadelphia.  Which created a new central government.  That shared power with the states.

Getting the new constitution ratified wasn’t easy.  Most of the old Patriots from the Revolutionary days hated the thought of a new central government.  They didn’t trust it.  This was just King George all over again.  Only on this side of the Atlantic.  The wrong side.

Alexander Hamilton and James Madison worked tirelessly for ratification.  They wrote a series of essays explaining why it was the best compromise possible.  These essays became the Federalist Papers.  An extensive set of checks and balances would greatly limit the powers of the new federal government.  And the only thing the new central government would do would be the things the several states couldn’t do well.  Coin money, treat with other nations, raise an army and navy, etc.

Hamilton and Madison succeeded.  The constitution was ratified.  And the United States of America was born.  And soon thereafter Hamilton and Madison (and Jefferson who was out of the country during the Constitutional Convention) parted ways philosophically.  Hamilton wanted to assume all the states’ debts and fund it.  It was the right thing to do because they had to pay it to be taken seriously on the world stage.  But this scared both Madison and Jefferson.  They feared the power a permanent government debt gave.  Money and government was (and still is) a dangerous combination.  All the world powers consolidated money and power in their capitals.  And all the great mischief of the Old World was a direct result of this combination.  It’s what lets the ruling class oppress the people.  Money and power concentrated into the hands of a privileged few.

Had Liberals lived during the Revolution they would have been Loyalists

Fast forward a few hundred years and we see exactly what Madison and Jefferson feared.  The federal government is bloated beyond the Founding Fathers worst nightmares.  And handling such vast sums of money that would even make Alexander Hamilton spin in his grave. 

We’ve come full circle.  We began by rejecting a distant ruling class.  And we now have a distant ruling class again.  In Washington.  Made up of liberal Democrats.  And obedient RINO Republicans who toe the liberal line.  And the nation has a permanent debt so large that we’ll never pay it off.  Thanks to out of control government spending.  It’s as Madison and Jefferson feared.  All of that spending and debt require ever more taxation.  And ever more borrowing.  And whenever taxation and borrowing is not enough, they manufacture a crisis to scare us into raising both taxes and the borrowing limit.  For we have no choice.  Because if we don’t the consequences will be unbearable.

This is the liberal way.  Big Government.  The bigger the better.  With all power concentrated into as few hands as possible.  Their hands.  The privileged few.  The ruling elite.  Who like to dictate policy when they have majority power.  And cry foul when they don’t.  For the only interest they have in bipartisan compromise is when they can’t have their way.   

Liberals like to invoke the Founding Fathers (and Ronald Reagan) whenever they can in some twisted explanation of why they would support their policies (i.e., the new central government was created to raise taxes and therefore would approve high taxes).  But their actions are clearly more consistent with King George and his ruling class than the Founding Fathers.  And had they lived during the Revolution, no doubt they would have been Loyalists.  To support and maintain the ruling class.  And their privilege.

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FUNDAMENTAL TRUTH #60: “Fool me once shame on you. Fool me twice shame on me. Fool me again shame on public education.” -Old Pithy

Posted by PITHOCRATES - April 5th, 2011

The Founding Fathers’ Experiment in Self-Government

Benjamin Franklin said when the people find they can vote themselves money, that will herald the end of the republic.  Because people tend to be greedy.  And lazy.  And they don’t understand public finance.  Especially the uneducated ones.  And there were a lot of uneducated people during our founding.  The Founding Fathers worried about this.  Because governments past have always exploited the uneducated for personal gain.  Kings and lords would give the poor some alms to make them feel good about their lives of unending toil and suffering on the feudal estates.  Should you not be lucky enough to have been born with the ‘right’ last name.  The new United States of America was going to change that.  Here it wouldn’t matter who your father was.  Here, no one would be better than you.

But only if this experiment in self-government succeeded.  So they were very careful when they wrote the Constitution.  And the type of government for the new nation would not be a democracy.  Instead, they chose a representative republic.  For the Founding Fathers all feared democracies.  Which when you come down to it is nothing more than mob rule.  If the mob is racists they’ll pass racist laws.  If the mob is sexist, they’ll pass sexist laws.  And if the mob is greedy and lazy, they’ll vote themselves money from the federal treasury.  This is the risk of democracy.  All you need is a majority.  And whatever you want is yours.  No matter how destructive it is to the country.

That’s why the Founding Fathers did NOT give us a democracy.  We have intermediaries between the mob and the actual law-making.  We call these people our representatives.  At the founding, these were the best of the best.  Well educated and/or experienced.  Men of great honor and integrity.  Imbued with a selfless sense of duty.  These men went out of their way NOT to prosper from their government service.  Really.  It’s nothing at all like today where government service is nothing more than a ticket to a fat pension and early retirement.  Back then such a thought was anathema to the Founding Fathers.  Which is very evident by the type of government they created.

Indirect Elections temper the Populist Tendencies

The Constitutional Convention was a hot, miserable, long summer in Philadelphia.  There was little agreement.  No one liked the final product much.  But most agreed it was the best that they could do.  Even then the U.S. was big.  Lots of different people trying to make the final product favor their state more than the others.  And few were in favor of giving the new central government much power.  They all feared that this new central power would consolidate its power.  And regulate the states to fiefdoms in a new kingdom.  Just like in the Old World.  So they took as many opportunities to restrict federal power.  And minimize the influence of the populist mob.

The new federal government was a limited government.  It was only to do the things the states couldn’t do well.  Maintain an army and navy.  Treat with other nations.  Those things that needed a singular national identity.  Everything else was to remain with the states.  And to make sure the states would not lose their sovereignty, the states’ legislators would choose their federal senators.  The House of Representatives would have direct elections.  Being the closest to true democracy, the House risked being influenced by the mob.  The Senate, then, would be wise and prudent to temper the populist tendencies of the House.  To keep the House from doing something stupid.  Like voting the people the treasury.  (Of course, the states lost a lot their sovereignty when we changed this by amendment to a popular vote like the House.)

The president was to be elected indirectly, too.  Like the senators.  The Founders were worried that the office of the president could be easily corrupted.  So they put great restrictions on its powers.  And made it as difficult as possible for any one group or interest to ‘cheat’ and get their man into office.  Hence the indirect election.  Again, to protect their sovereignty, this fell to the states.  State legislatures would choose electors who would then vote for president.  (With quite a few close elections, there have been calls to eliminate the Electoral College and replace it with a pure popular vote.  Of course, it is usually the loser in a close election who wants this change.  If the same thing happens in a subsequent close election where they win they are quite happy with the Electoral College.)

Talented People create things to trade

The reason the Founders wanted so many people between the voters and the actual law-making is to keep people from voting irresponsibly.  The federal budget is pretty big.  And people see that it is big.  They figure that because they pay taxes, there’s no reason why they can’t have stuff from the federal government.  In a true democracy, the people could vote to cut taxes and increase spending.  They could vote themselves a monthly stipend to live on and quit their jobs.  An uneducated mob can easily do this.  Who wouldn’t want to get a paycheck for doing nothing AND pay less in taxes?  It’s very attractive.  If I ran for office on such a platform a lot of people would probably vote for me.  But there’s a problem with such generosity.  You see, government can’t give money to people unless they take money from other people first.

There appears to be a popular misconception about public finance.  Many believe that government has a stash of cash that they can give out whenever they please.  And that this stash of cash has mystical power.  That it’s endless.  And when they give it away more just magically appears.  But the government has no money.  The public treasury isn’t filled with the government’s money.  It’s filled with our money.  That’s our tax dollars in there.  Or it’s borrowed money.  Borrowed money that costs interest.  Paid with our tax dollars.  Or it’s printed money.  Money created out of nothing.  Which makes our money worth less.  Which makes everything we buy more expensive.  We call this inflation.  You just can’t print money.  Because it just dilutes the purchasing power of the money already in circulation.  It’s like a bartender selling you whisky from a bottle that’s one part water and 4 parts whisky.  It not only tastes bad.  But you’ll have to pay more to get the same buzz from an honest bartender.

The reason why printing money doesn’t work?  Because it isn’t the money we want.  It’s the things that money can buy that we want.  Who sits in an empty room and enjoys looking at big piles of cash?  No one.  Take the cash out of your wallet or purse and see how long you can stare at it.  Probably not long.  Why?  Because it’s boring.  We don’t enjoy the cash.  We enjoy the things in the room we trade that cash for.  And this is key.  We trade.  We are traders.  Always have been.  And always will be.  We started out bartering for things.  You traded something you built (this is important) for something someone else built (equally important).  Talented people who created things met to trade.  And we still do this today.  The money just makes it easier to trade.  But this would not be possible if we all lived on a government stipend and nobody worked.  Because if no one worked, there would be no things to buy.  We would be sitting in an empty room staring at piles of useless money.

A Public Educational System that doesn’t Educate but Indoctrinates

The Founding Fathers understood all of this.  And they framed the Constitution accordingly.  They limited the powers of the federal government.  Minimized the amount of actual democracy/mob rule.  And minimized the amount of money in the federal treasury.  For they were capitalists.  They knew money left in the private sector stimulated local economies.  People created useful things.  Brought them to market.  And traded these useful things for other useful things.  That’s the way things were.  It’s not how they are now.  Politicians today are in politics for personal gain.  They pander to the voters.  Buy and sell favors.  Enrich themselves in the process.  And leave a swath of destruction in their wake.  And how are they able to do this?  Because the government has become more of a democracy than a representative republic.

Along the way the educational system failed.  Probably starting in the Sixties.  With the hippies in college.  Who went on to teach in the Seventies.  We spent less time on reading, ‘riting and ‘rithmetic.  And more on American white guilt for what happened to the Native Americans and a slave economy.  We learned less about the Founding Fathers.  And more about the people they wronged.  We learned less about American culture and more about diversity and multiculturalism.  We learned less about American Exceptionalism and more about American Imperialism.  We learned less about Western Civilization and more about ‘enlightened’ oppressive socialism.  We learned less about capitalism and more about the ‘fair’ redistribution of wealth.  Let’s face it.  Kids in school didn’t have a chance.  Their teachers were no longer teaching how America got to be exceptional.  They were teaching that America was anything but exceptional.  That we were guilty of every crime and injustice you could think of.  That America needed to change.  And that they, the young, our future, could make that change happen.

So the dumbing down of America began.  For those unable to escape the indoctrination of the new public education.  And the growth of government took off.  In fact, you can say that as society became ‘less American’ they became more dependent on government.  Where once rugged individualists dominated the land their numbers are thinning.  As slick politicians lure more people by the siren song of an easy life provided by government benefits.  And these politicians find the lie easier to sell with a public educational system that doesn’t educate but indoctrinates.  In fact, it’s quite an incestuous relationship.  The politicians spend more and more money on education.  The money goes to the teachers.  The teachers belong to unions.  The teachers’ unions support and donate to Democrat candidates.  So some of that tax money spent on education goes right back to the politicians that just increased educational spending.  And the teachers, eager to keep a good thing going, teach their students to become good Democrat voters.  Instead of teaching them about the three Rs, the Founding Fathers, American culture, American Exceptionalism, Western Civilization and capitalism.  As the standardized test scores show.  And does their irresponsible voting.

A Rising Sun or a Setting Sun 

America is fast approaching a crossroads.  People have learned that they can vote themselves money.  And have.  Politicians are pandering to these people for personal gain.  Offering to spend more and more money that we just don’t have.  Bringing us closer and closer to the end of the republic. 

Ben Franklin sat through that insufferable summer in Philadelphia.  Swatted at the giant horseflies in the hall.  He was old and his time was short.  He sat quietly during much of the debates.  Often staring at the sun carved into George Washington‘s chair.  He wondered if it was a rising sun.  Or a setting sun.  He saw it as symbolic of their little experiment in self-government and the work they were doing in that hall.  Was this already the end of their noble experiment?  Or was it just the beginning?  After the delegates voted to send the new Constitution to the states for ratification he breathed a sigh of relief.  For it was a rising sun.

I guess that question is once again open to debate.

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The Egyptian Military Suspends their Constitution while some here can only Dream

Posted by PITHOCRATES - February 13th, 2011

A Military Coup by any other Name

The Army’s in charge in Egypt (see Military rulers suspend Egyptian constitution by Marwa Awad and Dina Zayed posted 2/13/2011 on Reuters).

Egypt’s new military rulers said on Sunday they had dissolved parliament, suspended the constitution and would govern only for six months or until elections took place, following the overthrow of Hosni Mubarak.

As bad as this sounds, the military is the stable force in Egypt.  They’ve pledged to honor Egypt’s treaties during their rule.  Israel welcomed this news.  As did many governments in the region.  Perhaps the military will be able to win the peace.  Much like our Founding Fathers did after their revolution.  Time will tell.  We hope for the best for the Egyptian people.  The region.  And the world.

The Intent of the Constitution was to Oppress the People?

Suspend the constitution?  You know there are some here in the United States that would like to suspend the Constitution.  To hear some talk about the Constitution, the Founding Fathers were nothing but a bunch of racist, sexist, slave-owning bigots.  And these people mock the Tea Party people for all of their constitutional talk (see What “original intent” would look like by David Schultz posted 2/13/2011 on Salon).

Tea Partiers would be surprised how little freedom they’d have if we read the Constitution literally.

I dare say more people in the Tea Party have read the Constitution than those who argue against them.  Those on the left always say we need to take things in context.  When discussing barbaric customs of some indigenous people.  Or even the right to choose.  We can’t remove the context of environment and/or custom from these things.  But we can when it comes to our founding.

It wasn’t a perfect world in 1787.  We had just defeated the British Empire in a war that lasted 8 years.  And the people were in no mood to replace one central power with another.  Getting a national constitution wasn’t easy.  There were many conflicting interests.  And the states just wanted to go back to the way things were before the Revolution.

But when the Confederation Congress couldn’t pass a ‘national’ tariff over the objection of a single state that benefited well under the status quo, they had to do something.  If the new nation was to survive.  Few nations thought we would.  Some were just waiting in the wings for the collapse.  It was primarily those who served in the military that pushed the idea of nationhood along.  They fought alongside men from different states in a unified army.  These were the first ones to think as Americans.  And it was one man in particular, a retired George Washington, who brought the men together in Philadelphia in that hot and muggy summer in 1787.

It wasn’t easy.  States didn’t want to give up power.  They feared consolidation.  The states didn’t want some faraway seat of power telling them how to conduct their business.  In the context of the times, there was no nation. There were states.  Sovereign states.  Working together in a confederation.  Yes, they understood there were things a national government could do better (coin money, treat with foreign nations, build and maintain a military force, etc.).  But they were leery giving this new central government any power for fear that once they did, there would be no end to this transfer of power.  So the Founding Fathers developed federalism.  Shared sovereignty.  Most of the power would remain with the states.  And only those things strictly enumerated would go to the federal government. 

To begin with, the original document was silent on the right to vote. Voting rights were largely a matter of state law, and in 1787 most states limited the franchise to white, male, Protestant property owners, age 21 or older. The original Constitution did not allow for direct popular voting for president or the United States Senate, and there was no clear language even allowing for voting for members of the House of Representatives.

In the context of the times, white protestant males were the only people voting in the British world.  And Americans came from British stock.  No surprise here.  And a popular vote was not included for a very good reason.  The Founding Fathers feared a pure democracy.  Because once people learn they can vote themselves the treasury, they do.  Also, the states wanted to make sure their interests were represented in the central government.  That’s why state legislators were to elect their senators.  To keep a short leash on the new central government. 

The original Constitution didn’t include a Bill of Rights. Alexander Hamilton, one of the framers and authors of the Federalist Papers, argued against it. The Bill of Rights protects many rights the Tea Party considers hallowed, such as the freedom of speech and assembly and a right to bear arms. Lacking a Bill of Rights, these freedoms wouldn’t be protected against limitation by the national government.

The reason why they argued against a Bill of Rights was that they said they didn’t need it.  The Constitution enumerated the powers of the new central government.  Anything not enumerated was a power retained by the states.  The fear was that if they included a Bill of Rights and forgot to include a right then that right wouldn’t be protected.  But a Bill of Rights became conditional for ratification by some states.  James Madison opposed it (for the reasons just mentioned) but worked tirelessly to include it.  Because he and Hamilton knew it was the price of ratification.

Most importantly, as written, the Bill of Rights limited only national power — not state power

Again, the Constitution was all about limiting the power of the federal government.  It had nothing to do with limiting states’ powers.  No state would have ratified if it did.  This is the concept of federalism.  To keep Big Government small.  The states had their own constitutions.  And if a state became too oppressive, people could move to a state that wasn’t. 

And then there’s the matter of slavery. Article I, Section 1 of the original Constitution permitted slavery and the slave trade… Slavery did not end until the Emancipation Proclamation by Abraham Lincoln in 1863 and the adoption of the 13th Amendment in 1865.

I believe that was Section 2 of Article 1.  And the Emancipation Proclamation didn’t free a single slave.  But I’m nitpicking.  Again, historical context.  Slavery and Social Security have a little in common.  One is a failed institution.  The other is about to fail.  And the cost to fix or undo them is/was absolutely prohibitive.  And socially undoable. 

Article I, Section 9 did address the slave trade by agreeing to table it for 20 years.  It was the only way to get the southern states to join the union.  Because emancipation would wipe out close to have of the equity on many southern balance sheets.   Though immoral, the institution of slavery was legal.  Ending it would simply destroy the southern economy.  Much like what happened after the American Civil War when northern carpetbaggers came down and bought properties at fire-sale prices.  So there is a reason why the Founding Fathers didn’t address slavery more in the Constitution.  Because it wasn’t as easy to fix as Social Security.

And let’s not forget Alexander Hamilton, who argued against the need for a bill of rights and in favor of judicial review. The famous “Report on Manufactures” and “Report on Public Credit” he prepared as George Washington’s treasury secretary argued for an expansive federal government role in assisting the economy — hardly something the Tea Party constitutionalist would endorse.

Hamilton worked in business at a very young age.  And he was in awe of the British Empire.  Of their wealth and power.  He wanted an American Empire.  He wanted to jumpstart American industry.  And wanted to use a tool familiar to him.  Mercantilism.  It was the way the great empires became great.  In the British Empire, America was a supplier of raw goods.  We had no manufacturing base to speak of.  Hamilton wanted to use government to build one fast.  Today government wants to control the economy.  Hamilton wanted to create an economy where there was none.  There’s a bit of a difference.

It should be clear that many of the liberties and rights today’s Tea Partiers demand and benefit from just didn’t exist in the original form of the Constitution. It took many amendments and clarification from the courts to secure them. On top of that, if the ideal the Tea Party espouses ever was realized, it would just mean the states would have more authority to suppress rights.

The amendment process was part of the original Constitution.  The authors provided the means to change the Constitution.  They just didn’t make it very easy.  Unlike a court ruling, many people would have to agree to a change.  Not just a partisan few.  Or a partisan judge.

The Tea Party gets it.  It’s those who rail against them that don’t.

www.PITHOCRATES.com

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LESSONS LEARNED #48: “Government benefits aren’t from the government. They’re from the taxpayers.” -Old Pithy

Posted by PITHOCRATES - January 13th, 2011

Defense Spending is in the Constitution, Entitlements Aren’t – And it’s Entitlement Spending that’s Growing

People like to bitch about defense spending.  And I can understand why.  It’s a lot of money.  Just to kill people and break things.  People would rather see that money spent on education.  Health care.  Food assistance for the poor.  Entitlements.  Those nice, generous, government benefits.  The kinder, gentler side of government spending. 

People like the free stuff.  They want to get something for all those taxes other people are paying.  And it just kills them to see it spent on the military.  Because they’d rather see that money spent on them.  Of course if you read the Constitution, you’ll find defense spending in there.  It’s in the preamble (provide for the common defense).  You’ll find it in Article I.  In Article II, too.  Defense spending is pretty conspicuous in the Constitution.  Conspicuous by their absence, though, are entitlements.  Did the Founding Fathers overlook this?  No.  It was the whole point of federalism.  They designed the central government to do only those things that the states couldn’t.  To establish credit for the new nation, to treat with foreign nations, to coin money, etc.  And, of course, to provide and maintain a military force.  Alexander Hamilton wanted it to do more.  And he stretched the “necessary and proper” clause in Article I for some of the things he wanted the central government to do (to try and make the nation rich and powerful like Great Britain).  Pity, too.  For the Left has been stretching that clause ever since.

All right, defense spending is a constitutional requirement of the federal government.  Entitlements aren’t.  So how much are we spending on these?   In 1962, defense spending was 49% of all federal spending (see Federal Spending by the Numbers 2010).  Social Security and Medicare (the two biggest entitlements) were 13%.  Current baseline projections show that, in 2020, defense spending will drop to 14%.  And Social Security and Medicare will rise to 36%.  Medicare is the real cost driver here.  In the decade from 2000 to 2010, Medicare spending has jumped 81%.  It is outgrowing Social Security and Medicaid.  The runaway costs of Social Security, Medicare and Medicaid (the Big Three) are projected to equal total current tax revenues in the year 2020.  That means the total federal budget today will only pay for the Big Three in 2020.  Concerned?  You should be.  Especially if you’re a taxpayer.

You can pay Uncle Sam with the Overtime.  And will.

Taxpayer, beware.  The government is feeling especially generous.  With your money.  By 2020, Washington will be spending $35,604 per household.  That’ll take almost $5,000 in additional taxes per household for the Big Three alone.  That is projected to jump to $12,636 in 2050.  And that doesn’t include Obamacare.  When that is factored in, it’ll cost you as much as paying cash for a new car each and every year.  And a nice one, not a subcompact with a sewing machine for an engine.  Can you afford that?  I hope so.  Because you won’t have a choice.  You’ll be buying it.  But not for yourself.  No.  That nice beautiful car you’ll be buying each and every year?  You don’t get to drive it.  It will be for someone else.

The entitlement spending is getting so out of hand that we have record deficits.  Compounding this problem is the 2008 recession corresponding with a huge jump in entitlement spending.  It’s opened a rather large gap between revenue and spending.  And that gap isn’t going anywhere soon.  Unless they cut entitlements.  Or raise taxes.  And you know they won’t be cutting entitlements.  So, guess what?  You can pay Uncle Sam with the overtime.  Because that’s all you’ll get for your money (borrowed from Billy Joel’s Movin’ Out (Anthony’s Song)).  So get used to it.  Paying Uncle Sam.  Because Sam is going to raise your taxes.  He has no choice.  Because he won’t cut entitlements.

And they’ll have to raise taxes.  Because we’re running out of creditors to borrow from.  I mean, the Chinese only have so much money to lend.  And we can’t keep printing money.  They’ve been doing that.  Quantitative easing, they call it.  But they can’t keep doing it.  Anyone alive during the Seventies will know why.  Or anyone who has done some reading outside the public school curriculum.  In a word, stagflation.  That’s a phenomenon where you have both high inflation and high unemployment.  It’s usually one or the other.  The normal rules of economics don’t allow both to happen at the same time.  Unless you’re printing money like there’s no tomorrow.  Which they were in the late Sixties and Early Seventies.  To pay for the Vietnam War.  NASA’s Apollo program (to the moon and back).  And, of course, entitlement spending.  The biggest to date was a group of programs we called the Great Society.  Inflation was so bad that they joked about it on Saturday Night Live.  Dan Aykroyd played President Jimmy Carter, joking about the pleasure of owning a $400 suit.  And how easy it was to just call the treasury to have them print off another sheet of hundred dollar bills.  (Or something like that.)

The Reagan Deficits were Bad, but they Make the Obama Deficits look Good

The Seventies were a bad time.  Economically speaking.  Printing money was bad.  Quantitative easing was bad.  Easy money was bad.  So Paul Volcker started tightening monetary policy.  And Ronald Reagan cut taxes. And the Eighties were like a glorious spring following the bleakest of winters.  But you can’t teach an old dog new tricks.  The liberal Democrats weren’t going to roll over and cry ‘uncle’.  For they knew there was more spending left that they could do. 

So the spending continued.  Reagan had a Democrat Congress.  They fought him tooth and nail.  But he spoke directly to the American people and got his tax cuts.  And Reagan’s tax cuts resulted in a windfall of revenue.  And the Dems in Congress couldn’t spend the money fast enough.  Actually, they could.  They spent it so fast that surpluses soon turned into deficits.  They blamed Reagan’s defense spending.  So he made a deal.  He agreed to increase taxes.  If they would cut some of their entitlement spending.  To get the deficits under control.  So they did.  Increased taxes.  But they never cut spending.  Which just goes to show you that you can’t trust liberal Democrats.

You youngsters probably have no memory of these times.  But Ronald Reagan was attacked more than George W. Bush.  Hell, he was attacked almost as much as Abraham Lincoln.  The Seventies were the high-water mark of liberalism.  Then it went head to head with Reagan’s limited government supply-side economics in the Eighties.  And lost.  The hatred for Reagan knew no bounds.  For he was the man that repudiated liberalism.  So they attacked him ruthlessly. Screamed about his defense spending.  And yet his deficits were only around $200 billion.  Obama’s, on the other hand, are around $1,500 billion.  But they’re okay with that.  It’s no big deal, they say.  Just raise the debt ceiling.

It’s Spending, not Tax Cuts, that’s Causing those Record Deficits

But they can’t just raise the debt ceiling to keep spending.  Because spending is the problem.  Our debt is approaching 100% of our GDP.  When you’re borrowing money at record levels, you’re doing this because you just can’t raise taxes anymore.  You put the two together and it’s destroying the economy.  Taxes kill economic activity.  And the interest on the debt is soaring.  It’s projected to be approximately $760 billion in 2020.   That’s more than 70% of the projected budget deficit.  That means that most of the money we’ll be borrowing will go to pay the interest on the money we’ll be borrowing.  At that rate we’ll never pay down our debt.

Revenue averaged 18.0% of GDP from 1960-2009.  During the same period, spending averaged 20.3% of GDP from 1960-2009.  Not good.  But not too bad.  That’s a small, somewhat manageable deficit.  But spending takes off in 2010.  It’s projected to rise to 26.5% of GDP.  Meanwhile, revenue is projected to rise only to 18.2% of GDP.  That’s a projected deficit of 8.3% of GDP.  That’s fricking huge.  And that’s all runaway spending causing this mammoth deficit.  It ain’t tax cuts causing this.  It’s those entitlements.  Those fat, generous government benefits.

By this time there won’t be anything left to cut from the defense budget.  So they will have to turn to the generosity of the taxpayers.  And hope they enjoy personal sacrifice.  Because they’re going to be doing a lot of that.  To pay for these generous benefits.  These benefits for other people.

www.PITHOCRATES.com

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