The Solution to Europe’s Debt Crisis may be as ‘simple’ as the Eurozone Nations surrendering their Sovereignty

Posted by PITHOCRATES - June 24th, 2012

Week in Review

The solution to the Eurozone debt crisis is easy.  All the European nations have to do is surrender their sovereignty (see The eurozone’s long reform wishlist by Laurence Knight posted 6/24/2012 on BBC News Business).

A US-style federal budget may be needed to cover the cost of recessions, so that individual governments don’t risk going bust when their national economies get into trouble. For example, the cost of a minimum level of social security – especially unemployment benefits – could be permanently shared across the eurozone, paid for by a common income tax.

Welcome to the new world order.  At least the new country of Europe.  Made up from the former European nations.  And, unsurprisingly, the answer to all their problems is a new tax.  Not just any tax.  But a European income tax paid to a distant central power.  The kind of thing that embroiled Europe in wars to prevent going as far back as the Roman Empire.  And beyond.

The European Central Bank may need to have its mandate changed so that it has an explicit dual target to support employment as well as price stability, just like the US Federal Reserve does, as proposed by the new French President Francois Hollande.

Because it has worked so well in the United States.  The Fed was in charge during the Great Depression.  The Fed was in charge during the stagflation of the Seventies.  The Fed was in charge during the irrational exuberance of the Nineties.  And the Fed was in charge during the great housing bubble that gave us the subprime mortgage crisis.  Few people in the US think the Fed should be supporting anything these days.  For they feel they’ve done enough damage.

All Europeans (and especially southerners) are having to implement structural reforms that will increase their long-term growth and strengthen government finances, including removing restrictions on market competition, raising the retirement age, laying off (over many years) a lot of state employees, and making it much easier to hire and fire employees.

Really?  Something the individual European nations couldn’t do (cut back generous state benefits) a European country can?  Students in France took to the streets when they added a year or so to the retirement age.  Students took to the streets in Britain when they tried to make students pay for a part of their college education.  And Greece’s answer to austerity?  Riots.  It is easy to say what they must do.  Getting them to do it is another thing.  And they’ve clearly shown they don’t like doing it.  And so far have chosen not to.

In the same way that Washington has helped out struggling US states, the southern European governments may need to be given money (given, not lent) by the rest of the eurozone via direct fiscal transfers, so that they can afford to prop up their economies until they have regained competitiveness. These transfers could end up taking the form of bailout loans that are never repaid.

The US government can’t afford to bailout any states.  The state of California is in trouble.  As are some of our big cities.  Such as Chicago.  And New York City.  They have the same problem Greece has.  They have far more spending obligations than they can afford to pay.  As did the state of Wisconsin.  Whose governor implemented the kind of structural reforms suggested for the new European country.  And the opposition party and the federal government attacked them for it.  Organized a recall drive to kick out the governor.  And undo those structural reforms.  But the recall failed.  The governor won the recall election by a large margin.  Showing the people are no longer going to pay for other people’s irresponsible spending.  As the European people probably won’t want to either.

To make a full banking, fiscal and monetary union work, the eurozone governments would need to hand power to a central authority (the European Commission) that can pay for and supervise all of the above, while national governments accept that in future they have to keep their own spending strictly within their limited means.

 As most of the above reforms involve Germany sharing its wealth with the rest of Europe (and all European nations handing power to Brussels), Berlin is insisting on the principle of no taxation without representation – in other words a move towards full federalism, with spending and regulation controlled by a directly elected presidency of the European Commission.

Few European governments like hearing Germany tell them to implement structural reforms.  They’re not going to like it any better coming from Brussels.  Federalism wasn’t easy in the US.  We had to fight a civil war.  Go through reconstruction.  To this day we’re still fighting regional conflicts.  The Midwest is strongly union while the southern states are not.  And the federal government recently intervened on the side of the unions when Boeing tried to build a new aircraft manufacturing plant in the South.  In fact, those in the federal government refer to those states as flyover country.  Which is all they want to see of that country.  Flying overhead as they go between the east and west coasts.  Where the big government people live.

The 13 original American states had only about 200 years of history before they joined the federal union.  The European people have over 2,000 years of history.  It is unlikely that they will willingly choose to become flyover country.  No, there isn’t any easy solution to their problem.  If there was they would have already done it.  A currency union without a political union may just prove to have been a bad idea.  A political union isn’t likely.  Unless the people of Europe are more willing to give up their 2,000 years or so of history than the Americans were willing to give up their 200 years or so of history.  And if they’re not they should really think long and hard about creating something even bigger than the Eurozone.  That may be even more difficult to fix.  Should it follow US history too closely.  Where that first hundred years proved to be a bitch.

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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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Internet Sales under Assault

Posted by PITHOCRATES - June 19th, 2011

The Public Sector against the Consumer

According to some, Amazon.com hates teachers.  And children.  Because their Internet sales are shorting tax coffers everywhere that pay for teachers and child welfare (see States look to Internet taxes to close budget gaps by Chris Tomlinson posted 6/19/2011 on the Associated Press).

State governments across the country are laying off teachers, closing public libraries and parks, and reducing health care services, but there is one place they could get $23 billion if they could only agree how to do it: Internet retailers such as Amazon.com.

That’s enough to pay for the salaries of more than 46,000 teachers, according to the U.S. Bureau of Labor Statistics. In California, the amount of uncollected taxes from Amazon sales alone is roughly the same amount cut from child welfare services in the current state budget.

So they want to tax the Internet.  So they can keep 46,000 teachers on the payroll.  And if my math is correct ($23 billion/46,000) that comes to $500,000 per teacher.  Wow.  We do pay teachers well.  Maybe that’s the problem.  The cost of the public sector.  I’m willing to guess that most teachers are not quite making $500,000 per year.  If you were listening to the news during that Scott Walker episode in Madison, Wisconsin, you’re more under the impression that a ‘typical’ teacher makes less than $100,000.  So if that is true, where is all of that money going?  And should we even be trying to sustain such a grossly inept and mismanaged system where one teacher costs on average $500,000 per year?

Internet retailers are required to collect sales tax only when they sell to customers living in a state where they have a physical presence, such as a store or office. When consumers order from out-of-state retailers, they are required under state law to pay the tax. But it’s difficult to enforce and rarely happens.

What?  Do you mean people are not reporting their out of state purchases so they can pay their use tax?  Why, that’s preposterous.  Why would anyone do that?  We’re not overtaxed.  Then again, maybe we are.  Perhaps the people are speaking.  And that’s what they’re telling us.

With sales tax revenue slumping more than 30 percent in most states between 2007 and 2010, lawmakers across the country are grasping for ways to collect those unpaid taxes. Retailers and lawmakers in several states have proposed ways to solve the problem, some with more support than others.

“The problem is that some out-of-state e-retailers openly flaunt the law, arguing that it doesn’t apply to them,” said Texas state Democratic Rep. Elliot Naishtat, who has offered a bill to require more Internet sellers to collect Texas sales tax. “It’s about potentially generating hundreds of millions of dollars for our state.”

But it’s not a simple matter of getting them to collect out of state sales taxes.  These Internet retailers will have to hire an army of people just to process all these extra taxes.  For example, New York state has a sales tax.  So does New York City.  Over in Illinois, Cook Country has their own county tax.  State taxes.  County taxes.  City taxes.  It can get pretty complex.  I mean, the brick and mortar store doesn’t have a problem.  Every sale has the same tax.  It’s a bit different selling nationally.

“There are over 8,000 taxing jurisdictions in the United States,” said Jonathan Johnson, president of Overstock.com, which has offices only in Utah. “We think it’s wrong that states are trying to cause out-of-state retailers to be their tax collectors.”

After all, Johnson said, these retailers do not use any state services where they don’t have offices.

The added cost would be huge.  And ultimately passed on to the consumer.  Sure, they’re trying to shake down the big Internet sellers, but all that money will be coming out of our wallets.  And purses.

Traditional retailers are complaining loudly to their elected officials, saying the current structure creates an unfair playing field…

“We get people all the time who come in, talk to a salesman for 15 minutes to half an hour … and then go, and we know they are going to buy it online because they can save money. In theory, they are stealing our time,” Burger said. “We’re losing at least 15 percent to online, out-of-state, so we’re losing anywhere between $3 million and $5 million a year in business.”

As it always is when a consumer finds a bargain.  It’s the competition that complains.  Not the consumer.  They attack anyone who can give the consumer the same value for less.  But they do have a point.  They are losing sales because of their physical location.  And the high taxes that they can’t escape.  Owed to an out of control public sector that can never collect enough taxes to satiate their desire to spend.  I mean, when was the last time any government jurisdiction ever lowed their tax rate?

“Local retailers complained that the big-box stores were coming in and taking their business, and the Wal-Marts of the world said they had a better business model and the world has changed,” Johnson said. “Today, the business model has changed and we can take cost out of the supply chain by doing business the way we do on the Internet. And for Wal-Mart, of all people, to be saying it’s not fair that Amazon and Overstock can’t be forced to be tax collectors is ironic.”

Talk about the pot calling the kettle black.  Stomping out their competition was one thing.  But having the shoe on the other foot is just unfair.

Traditional retailers have lobbied for the Main Street Fairness Act, which was reintroduced in Congress this spring by Sen. Dick Durbin, D-Illinois. The act would be “a helping hand to state and local governments at a time that they need it the most,” he said.

To help state and local governments?!?  This should be our concern?  Helping those people who can’t control their spending?  While Americans suffer through record long-term unemployment during the worst recession since the Great Depression?  We want to figure out how to take more money away from consumers so we can afford more $500,000 teachers?  All the while further stifling economic activity?  Just so we can help the more important people?  Those in the public sector?  Our servants?  Yeah, right.

A component of the proposed federal law is a requirement for states to adopt the Streamlined Sales and Use Tax Agreement, which would standardize sales tax laws and filing requirements for Internet retailers. To sweeten the pot, states would reimburse companies for any additional costs involved in collecting it…

Overstock’s Johnson and Paul Misener, vice president for global public policy at Amazon, said they would support a national standard using the Streamlined Sales and Use Tax Agreement.

“We’ve long supported a truly simple, national approach, evenhandedly applied,” Misener said. “This is federalism at work, and many states are making the right decision to seek a federal solution.”

Federalism at work?  Thomas Jefferson would beg to differ.  Consolidating more power into the federal government is not federalism.  It’s consolidation.  It’s a weakening of the states.  And a weakening of federalism.  A national sales tax?  Everyone knows the federal government has always wanted this.  And once they get it that will be another tax rate that they will never lower.  With a federal debt already over $14 trillion dollars, do we really want to give them a new tax that can justify even more spending?

Pulling more Money out of the Private Sector during a Recession is a Bad Idea

Government has a spending problem.  At the federal, state, county and local level.  The IMF has warned that we are playing with fire with our budget deficits.  And S&P may downgrade our credit rating.  Perhaps this is a good time to cut some of that spending.  To eliminate some of that spending that’s giving us those deficits.  Instead of pulling more money out of the private economy which will only make a bad situation worse.

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Governor Scott Walker Takes on the Public Sector Unions in Wisconsin

Posted by PITHOCRATES - February 18th, 2011

40 Percent of Teachers Call in Sick…in West Bloomfield, Michigan

We start not in Wisconsin.  But in Michigan.  Another of the other Great Lakes States where the Republicans won control of their state house.  And there’s teacher trouble in one of their fair cities (see The West Bloomfield Teacher ‘Sick Out’ by Tom Gantert posted 2/18/2011 on Michigan Capitol Confidential).

About 40 percent of the West Bloomfield High School teachers didn’t show up for work on Feb. 15 in the midst of bitter contract negotiations.

Goodness, that’s a lot of teachers.  Pay and benefit packages for teachers in the West Bloomfield school district must be awful.

West Bloomfield teachers do not do any premium sharing for health insurance and do not have a deductible in their plan, Andrees said…

The total compensation of a West Bloomfield teacher grew 173 percent over an 11-year period, going from $47,346 to $129,637, according to information that was presented at a school board meeting in December.

The teacher’s salary started at $31,881 in 1999-00 and grew to $85,836 in 2010-11. Meanwhile, insurance payments climbed from $9,309 to $19,304 per year, and retirement contributions jumped from $3,717 to $16,854 per year.

Wait a tic.  Isn’t Michigan one of those states suffering from record unemployment?  Even though the federal government just spent billions of dollars to bail out GM and Chrysler to save jobs?  I mean, it’s pretty horrible in Michigan.  But I guess we need to put this aside and focus on what’s important.  There are teachers there who have been working a 9-month year for the measly compensation of $129,637.  What vicious, heartless bastards they must have in Michigan.

Incidentally, teachers get the good months off during the year.  The summer months.  How many of you would like to get paid $85,836, get $19,304 worth of healthcare insurance per year free with no deductible, retirement contributions totaling $16,854 per year AND have the three summer months off?  Not to mention all the holidays and breaks during the school year.  I dare say many people would like this.  Especially the taxpayers who pay for this while they themselves get little in compensation compared to this.  So I don’t see a mass outpouring of sympathy for these teachers.

You know, it’s good to be a teacher.  In the public school system.

Public Sector Unions Impoverishing States, Cities and their Trade Union Brethren

Public school teachers are part of the public sector.  And belong to a public sector union.  In the public sector, there is no competition.  We pay the public sector workers with tax dollars.  Unlike their counterparts in trade unions.  These people who build useful things for us are not paid with tax dollars.  The private sector pays them.  As such, they have to respond to market forces.  Unlike their brethren in the public sector (see Labor’s Coming Class War by William McGurn posted 1/4/2011 on The Wall Street Journal).

Suddenly, it’s a different world. In this recession, for example, construction workers are suffering from unemployment levels roughly double the national rate, according to a recent analysis of federal jobs data by the Associated General Contractors of America. They are relearning, the hard way, that without a growing economy, all the labor-friendly laws and regulations in the world won’t keep them working.

What’s more, “blue-collar union workers are beginning to appreciate that the generous pensions and health benefits going to their counterparts in state and local government are coming out of their pockets,” says Steven Malanga, a senior fellow at the Manhattan Institute. “Not only that, they are beginning to understand the dysfunctional relationship between collective bargaining for government employees and their own job prospects.”

They get it.  All pay and benefits come from the private sector.  Whether paid from business profits.  Or taxes on business profits.  (Or taxes on our private paychecks.)  All taxes come from profitable business operations.  But excessive taxes dampen economic activity.  And kill jobs.  Everybody knows this.  Even some union people.  So something has to change.  And some state governors are stepping up.

The signs of this new awakening are gathering. In New Jersey, Gov. Chris Christie rightly becomes a YouTube sensation for taking on his state’s obstinate public-sector unions…

Over in New York, meanwhile, newly inaugurated Gov. Andrew Cuomo faces a similar battle. Mr. Cuomo campaigned on a cap on property taxes and a freeze on state salaries, both anathema to the powerful state-employee unions…

Elsewhere, in 2005 Republican Govs. Mitch Daniels and Matt Blunt used executive orders to end collective bargaining with state employees in Indiana and Missouri, respectively. Now the incoming Republican governors of Ohio and Wisconsin—John Kasich and Scott Walker—are targeting collective bargaining for government workers in their states.

Scott Walker and Wisconsin.  But more of that later. 

In some ways, this new appreciation for the private sector is simply back to the future. FDR, for example, warned in 1937 that collective bargaining “cannot be transplanted into the public service.” In the old days, unions understood economic growth. Mr. Malanga points to AFL-CIO President George Meany’s strong support for the JFK tax cuts as an example.

These days the two types of worker inhabit two very different worlds. In the private sector, union workers increasingly pay for more of their own health care, and they have defined contribution pension plans such as 401(k)s. In this they have something fundamental in common even with the fat cats on Wall Street: Both need their companies to succeed.

By contrast, government unions use their political clout to elect those who set their pay: the politicians. In exchange, these unions are rewarded with contracts whose pension and health-care provisions now threaten many municipalities and states with bankruptcy. In response to the crisis, government unions demand more and higher taxes. Which of course makes people who have money less inclined to look to those states to make the investments that create jobs for, say, iron workers, electricians and construction workers.

Now, with that background, let’s look at Wisconsin.

40 Percent of Teachers Call in Sick…in Madison, Wisconsin

Just like in Bloomfield, Michigan, teachers are calling in sick (see Schools in Wisconsin’s capital close after protesting teachers call in sick posted 2/16/2011 on myfoxorlando.com).

MADISON, Wis (NewsCore) – Public schools in Madison, Wis., were closed Wednesday after 40 percent of the 2,600 teachers protesting a controversial budget bill called in sick.

School officials were forced to cancel classes, as there were not enough substitute teachers available to cover the absentees, Madison Metropolitan School District superintendent Dan Nerad told local newspaper the Journal Sentinel.

Though in Wisconsin they’re saying little about what their current pay and benefits are.  One can only assume they are as generous as they are in West Bloomfield.  Because if they are awful they would have told us how awful they are. 

President Obama Declares War on Ohio, Indiana, Missouri, New Jersey, Pennsylvania and Wisconsin

So how awful are things really in Wisconsin?  From the media reports it sounds like the end of world.  That Wisconsin’s governor, Scott Walker, is bringing back slavery.  Even the president is joining the fight against the elected government of Wisconsin (see Obama joins Wisconsin’s budget battle, opposing Republican anti-union bill by Brady Dennis and Peter Wallsten posted 2/18/2011 on The Washington Post).

The president’s political machine worked in close coordination Thursday with state and national union officials to mobilize thousands of protesters to gather in Madison and to plan similar demonstrations in other state capitals.

Their efforts began to spread, as thousands of labor supporters turned out for a hearing in Columbus, Ohio, to protest a measure from Gov. John Kasich (R) that would cut collective-bargaining rights.

By the end of the day, Democratic Party officials were working to organize additional demonstrations in Ohio and Indiana, where an effort is underway to trim benefits for public workers. Some union activists predicted similar protests in Missouri, New Jersey and Pennsylvania.

So much for federalism.  Thank God Thomas Jefferson didn’t live to see this.  This meddling by the executive power into a state’s affair is worse than he even feared.  Even Alexander Hamilton would not approve.  And he was in favor of a strong executive.

The Worst of the Assault on Public Sector Unions – Asking them to Live like the Rest of Us

So what is so vile, so repugnant, so evil in the state of Wisconsin?

Under Walker’s plan, most public workers – excluding police, firefighters and state troopers – would have to pay half of their pension costs and at least 12 percent of their health-care costs. They would lose bargaining rights for anything other than pay.

Well that doesn’t sound so bad.  People in the private sector often pay 100% of their retirement.  A pretty hefty share of their health-care costs.  And something like 90% of the private sector doesn’t even have any bargaining rights.  Other than quitting a job if it is so vile, so repugnant and so evil.  And, you know what?  Those jobs in Wisconsin must be pretty damn good.  I mean, to protest like that can only mean one thing.  That these jobs are the best jobs around.  For there isn’t a chance in hell they’ll find anything as good in the private sector.  Which is why they simply don’t quit those ‘God-awful’ jobs.

Beyond their short-term fiscal problems, many states face pension and retiree health-care costs that some analysts say are unsustainable. Some states already are curtailing retirement benefits for new employees, although many analysts say it will take much more to bring their long-term obligations in line.

The huge debt burdens coupled with the impending cutoff of federal stimulus aid later this year have spurred talk of a federal bailout. The White House has dismissed such speculation, saying states have the wherewithal to raise taxes, cut programs and renegotiate employee contracts to balance their books.

What?!?  Our federal stimulus paid for those fat pension and healthcare benefits?  Wasn’t that money suppose to stimulate economic activity?  Create jobs?  Could it be that it was a slush fund all along to reward loyal Democratic supporters?  Good God, can it be that Rush Limbaugh was right?

In Wisconsin, state Democratic senators staged a protest of their own Thursday, refusing to show up at the Capitol for an 11 a.m. quorum call – delaying a vote that would have almost certainly seen the spending cuts pass.

I guess elections only have consequences when Democrats win.  When Barack Obama won, he told the Republicans, sure, you can give me your ideas about how to fix the economy.  I won’t use any of them.  Because elections have consequences.  And I won.  Perhaps the Republicans should have hid during the Obamacare vote.

“Many of the companies I went by, like so many others across the state, don’t have pensions, and the 401(k)s they have over the last year or two, they’ve had to suspend the employer contribution,” Walker told Milwaukee radio station WTMJ. “So, not a lot of sympathy from these guys in private-sector manufacturing companies who I think reflect a lot of the workers in the state who say what we’re asking for is pretty modest.”

What’s good for the private sector is good for the private sector.  The public sector apparently deserves better.  And with record unemployment, I’m sure they’ll get a lot of sympathy from the taxpayers paying their salary and benefits.  Not.

Public Sector Unions and the President are trying to Maintain a Privileged Elite

FDR got it.  The trade unions get it.  And most of the taxpayers lucky enough to still have a job in the worst recession since the Great Depression get it.  If you don’t have a healthy economy there is no money for anyone.  High taxes kill economic activity.  And there is only one way to pay generous public sector pay and benefits.  High taxes. 

We have come to a crossroads.  In one direction there is prosperity.  In the other there isn’t.  The governors in New Jersey, New York, Indiana, Missouri, Ohio and, of course, Wisconsin, are trying to go down the road to prosperity.  While public sector unions and the president are trying to maintain a privileged elite.  At the expense of the ordinary American.  Who will win?  We’ll find out in Wisconsin.

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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.

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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.

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The 2010 Census Confirms the Consensus that Liberalism has Failed

Posted by PITHOCRATES - December 19th, 2010

America is a Center-Right Country

The people voted against liberalism in the 2010 Midterm elections.  And they’ve been voting against it since 2000.  With their residency.  They’ve been moving out of the blue states.  And into the red (see New population count may complicate Obama 2012 bid by Charles Babington, Associated Press, posted 12/19/2010 on My Way).

The population continues to shift from Democratic-leaning Rust Belt states to Republican-leaning Sun Belt states, a trend the Census Bureau will detail in its once-a-decade report to the president. Political clout shifts, too, because the nation must reapportion the 435 House districts to make them roughly equal in population, based on the latest census figures.

People are moving out of the big welfare states.  They have rejected tax and spend.  They have rejected Big Government.  And they have rejected Big Union.  At least based on the states where they’re moving to. 

The biggest gainer will be Texas, a GOP-dominated state expected to gain up to four new House seats, for a total of 36. The chief losers – New York and Ohio, each projected by nongovernment analysts to lose two seats – were carried by Obama in 2008 and are typical of states in the Northeast and Midwest that are declining in political influence.

Out of the blue.  And into the red.  As one would expect in a center-right country.

Running away from Liberalism

So the people are literally running away from liberalism.  Why?  Because blue states are expensive to live in.  Especially on a pension (see The 10 Worst States for Retirees by Robert Powell, MarketWatch, posted 12/19/2010 on Yahoo! Finance).

Plenty of folks are aware of the best states for retirees. But what are the 10 worst states in which to spend your golden years?

Among them are states with the biggest financial problems.

Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin joined California as the 10 most troubled states, according to Pew’s analysis.

Of note, TopRetirements.com’s Brady suggested that retirees and would-be retirees might want to avoid states in fiscal peril because these locales might be expected to face decreasing services and increasing taxation.

And winning an honorable mention is New York.

New York wasn’t mentioned as being in fiscal trouble by the Pew Center, but it does have “very high taxes, including property taxes.” In fact, Brady said New York has the second-highest tax burden and fifth-highest per capita property taxes. Plus, he said, the Empire State has a “dysfunctional state legislature.” As if that wasn’t bad enough, it’s terrifically expensive to live in New York.

Surprisingly, people don’t want to pay high taxes.  No matter how generous the government is to other people with their money.  And big governmental payrolls and pensions are growing to be a bigger and bigger problem.

As for Rhode Island, Brady said it’s probably the worst-off state in the Northeast from a financial viewpoint. It also has high taxes, though he noted that the state does boast some great places to live.

New Jersey, according to Brady’s analysis, has the highest property taxes in the U.S., as well as the highest total tax burden of any state, as reported in a 2008 Tax Foundation report. Plus, New Jersey has serious pension-funding issues, Brady noted. States with the greatest tax burdens after New Jersey were New York, Connecticut, Maryland, Hawaii, California, Ohio, Vermont, Wisconsin and Rhode Island, joined by the District of Columbia.

America is a center-right country with smatterings of blue on the West Coast, the Midwest and New England.

New England had two other states on Brady’s list of worst places for retirees: Massachusetts, which has high taxes including high property taxes and a very high cost of living, and Connecticut, which has the third-highest tax burden of any state as well as high property taxes.

Nevada reelected Harry Reid.  Even though his state is in the toilet. 

Ironically, the 10th-worst place to retire is the one state where it’s easy to find a cheap place to live: Nevada. As many know, Nevada is presently the home-foreclosure capital of the world. In fact, the Silver State continues to lead the nation in terms of foreclosure filings per household, with one filing for every 79 homes, according to RealtyTrac. Yes, the state is having financial problems, but the good news for retirees living there or contemplating a move there is that it doesn’t have an income tax — at least not yet.

No income tax…yet.  When you have out of control spending to fund large government payrolls and pensions, you will run out of money.  And when they do, governments don’t cut spending.  They raise taxes.  So get ready for it Nevada.  Income taxes are coming.

Federalism Kept Big Government Small.  For Awhile.

I don’t know how many more ways we can say it.  We don’t like paying high taxes.  And we don’t like paying high taxes to help other people live better lives than we do.  We’ve said it at the mid-term elections.  And we’ve been saying it since the 2000 census.

This was the genius behind federalism.  It kept Big Government small.  If a state taxed and spent and regulated our lives too much, we could move to another state.  But with the growth of the federal government, we soon won’t have that option anymore.  For when the federal government oversteps its bounds and taxes and spends to support ever larger government payrolls and pensions, and they control our pensions (Social Security) and our health care (Obamacare), where are we going to move to in protest?  China?

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LESSONS LEARNED #17: “The raison d’être of federalism is to keep big government small.” -Old Pithy.

Posted by PITHOCRATES - June 10th, 2010

ALEXANDER HAMILTON WAS a real bastard.  John Adams hated him.  Thomas Jefferson, too.  George Washington looked at him like a son.  Aaron Burr killed him.  Politics.  It can get ugly.

Hamilton’s father was having an affair with a married woman in a loveless marriage.  Fathered two children with her.  First James.  Then Alexander.  Both born on the British island of Nevis in the Caribbean.  His father then moved the family to the Danish island of St. Croix.  Shortly thereafter, Hamilton’s father abandoned his family.  Alexander was 10ish (there is some disagreement about his year of birth). 

At age 11ish, Alexander became a clerk at Cruger and Beekmen, an import-export firm.  There he learned about business and commerce.  People noticed his talent and ability.  Soon, they collected some money and sent him off to the American colonies for a college education.  Hamilton’s fondest memory of his childhood home was seeing St. Croix disappear into the horizon from the ship that delivered him to America.

Hamilton’s father did have some nobility in his lineage but he squandered it before it could do Alexander any good.  He was an illegitimate child (a real bastard).  His father abandoned him.  His mother died while he was young.  He had little but ability.  But that was enough to take him from St. Croix to the founding of a new nation.

Hamilton served in the Continental Army.  He served as General Washington’s aide-de-camp.  Hamilton was in the know as much as Washington.  His understanding of business, commerce and money made him acutely aware of the financial disarray of the Army.  And of the Continental Congress.  What he saw was a mess.

The Continental Congress was a weak central government.  It could not draft soldiers.  It could not impose taxes to pay her soldiers.  It could only ask the states for money to support the cause.  Contributions were few.  The congress tried printing money but the ensuing inflation just made things worse.  The Army would take supplies for subsistence and issue IOUs to the people they took them from.  The Congress would beg and borrow.  Most of her arms and hard currency came from France.  But they ran up a debt in the process with little prospect of repaying it.  Which made that begging and borrowing more difficult with each time they had to beg and borrow.

The army held together.  But it suffered.  Big time.  Washington would not forget that experience.  Or Hamilton.  Or the others who served.  For there was a unity in the Army.  Unlike there was in the confederation that supported the Army.

WARS ARE COSTLY.  And France fought a lot of them.  Especially with Great Britain.  She was helping the Americans in part to inflict some pain on her old nemesis.  And in the process perhaps regain some of what she lost to Great Britain in the New World.  You see, the British had just recently defeated the French in the French and Indian War (aka, the 7 Years War).  And she wanted her former possessions back.  But France was bleeding.  Strapped for cash, after Yorktown, she told the Americans not to expect any more French loans.

Wars are costly.  The fighting may have been over, but the debt remained.  The interest on the debt alone was crushing.  With the loss of a major creditor, America had to look elsewhere for money.  The Continental Congress’ Superintendent of Finance, the guy who had to find a way to pay these costs, Robert Morris, said they had to tax the Americans until it hurt they were so far in debt.  He put together a package of poll taxes, land taxes, an excise tax and tariffs.  The congress didn’t receive it very well.  Representation or not, Americans do not like taxes.  Of the proposed taxes, the congress only put the tariffs on imports before the states.

Rhode Island had a seaport.  Connecticut didn’t.  Rhode Island was charging tariffs on imports that passed through her state to other states.  Like to Connecticut.  Because they generated sufficient revenue from these tariffs, their farmers didn’t have to pay any taxes.  In other words, they could live tax free.  Because of circumstance, people in Rhode Island didn’t have to pay taxes.  Connecticut could pay their taxes for them.  Because of the Rhodes Island impost.  And the Robert Morris’ impost would take away that golden goose.

As the congress had no taxing authority, it would take a unanimous vote to implement the impost.  Twelve voted ‘yes’.  Rhode Island said ‘no’.  There would be no national tax.  ‘Liberty’ won.  And the nation teetered on the brink of financial ruin. 

DEFALTION FOLLOWED INFLATION.  When the British left, they took their trade and specie with them.  What trade remained lost the protection of the Royal Navy.  When money was cheap people borrowed.  With the money supply contracted, it was very difficult to repay that debt.  The Americans fell into a depression.  Farmers were in risk of losing the farm.  And debtors saw the moneymen as evil for expecting to get their money back.  The people demanded that their state governments do something.  And they did.

When the debtors became the majority in the state legislatures, they passed laws to unburden themselves from their obligations.  They passed moratoriums on the collection of debt (stay laws).  They allowed debtors to pay their debts in commodities in lieu of money (tender acts).  And they printed money.  The depression hit Rhode Island hard.  The debtors declared war on the creditors.  And threw property laws out the window.  Mob rule was in.  True democracy.  Rhode Island forced the creditors to accept depreciated paper money at face value.  Creditors, given no choice, had to accept pennies on the dollars owed.  No drawbacks to that, right?  Of course, you better pray you never, ever, need to borrow money again.  Funny thing about lenders.  If you don’t pay them back, they do stop lending.  The evil bastards.

Aristotle said history was cyclical.  It went from democracy to anarchy to tyranny.  Hamilton and James Madison, future enemies, agreed on this point.  A democracy is the death knell of liberty.  It is a sure road to the tyranny of the majority.  If you don’t honor written contracts, there can be no property rights.  Without property rights, no one is safe from arbitrary force.   Civilization degenerates to nature’s law where only the fittest and most powerful survive.  (In the social utopias of the Soviet Union and Communist China, where there were no property rights, the people’s government murdered millions of their people).

WINNING A WAR did not make a nation.  Before and after the Revolution, people thought in provincial terms.  Not as Americans.  Thomas Jefferson hated to be away from his country, Virginia.  Unless you served in the Continental Army, this is how you probably thought.  Once the common enemy was defeated, the states pursued their own interests.  (Technically speaking, they never stopped pursuing their own interests, even during the War).

In addition to all the other problems a weak Continental Congress was trying to resolve, states were fighting each other for land.  A localized war broke out between Pennsylvania and Connecticut over the Wyoming region in north east Pennsylvania.  And a region of New York was demanding their independence from that state.  Hamilton helped negotiate a peaceful solution and the confederacy admitted the new state, Vermont.

There were problems with the confederation.  And people were getting so giddy on liberty that that they were forgetting the fundamental that made it all possible.  Property rights.  States were moving closer to mob rule with no check on majority power.  And the smallest minorities held the legislation of the Confederate Congress (the Continental Congress renamed) hostage.  Land claims were pitting state against state with the Congress unable to do anything.  Meanwhile, her finances remained in shambles.  She had no credit in Europe.  And creditors wanted their money back. 

They were choosing sides.  And you can probably guess the sides.  Hamilton had no state allegiances, understood finance and capital, saw how an impotent congress was unable to support the Army during war, saw provincial interests hinder national progress and threaten civil war.  George Washington, Virginia’s greatest son, had long looked to the west and saw America’s future there.  Not Virginia’s future.  His war experience only confirmed what he believed.  America had a great future.  If they could only set aside their provincialism and sectional interests.  James Madison saw the tyranny of the majority in the Virginian State House first hand.  He liked partisanship.  He liked competing ideals debated.  He did not want to see a majority stampede their vision into law.

These were the nationalists.  Madison wanted a strong federal government to check the tyranny of the states.  Hamilton wanted to do away with the states altogether.  Washington wanted what was best for these several united states as a whole after so many labored for so long during the Revolutionary War.  Ultimately, he wanted to capitalize the ‘u’ and the’s’ in united states and make it a singular entity.

On the other side were many of the old 1776 patriots.  Many of who did not have any army experience.  Such as Thomas Jefferson.  In them, the Spirit of ’76 was alive and well.  The Revolutionary War was to free the states from the yoke of British oppression.  They remained provincials.  They did not spend up to 8 years in an army made up of soldiers from different states.  They had no sense of this nationalism.  They saw everything through the eyes of their state.  And a strong central government was just another yoke of oppression in their eyes.

THE ANSWER TO all of their concerns was federalism.  Shared sovereignty.  The states would give up a little.  And the new central government would take up a little.  The drafters of the Constitution set up a 3-branch government.  It included a bicameral legislature.  Membership in the House of Representatives would be proportional to a state’s population.  They would have power of the purse.  Including the authority to levy taxes.  In the Senate, each state would get 2 senators.  They would be chosen by the states’ legislatures (a constitutional amendment changed this to a popular vote).  This was to keep the spending of the House in check.  To prevent mob-rule.  And to check national power.  Each chamber would have to approve legislation for it to become law.  But each chamber did not need to have unanimous approval. 

That was in the legislature.  In the executive branch, the president would be head of state and execute the laws written by the legislature.  He would also conduct a uniform foreign policy.  The president could veto legislation to check the power of the legislature.  And the legislature could override the president’s veto to check the power of the president.  Where the law was in dispute, the judiciary would interpret the law and resolve the dispute.

At first glance, the people didn’t love the U.S. Constitution.  Those at the convention didn’t either, but they thought it was the best they could do.  To help the ratification process, James Madison, Alexander Hamilton and John Jay wrote a series of essays, subsequently published as the Federalist Papers making the case for ratification.  Those opposed wanted a Bill of Rights added.  Madison did not think one was necessary.  He feared listing rights would protect those rights only.  If they forgot to list a right, then government could say that it wasn’t a right.  He acquiesced, though, when it was the price to get the Virginian Baptists on board which would bring Virginia on board. 

Madison promised to add a Bill of Rights after ratification.  So the states ratified it.  And he did.  The final document fell between what the nationalists wanted and what the ‘states’ government’ people wanted. 

OVER THE FOLLOWING years, each side would interpret the document differently.  When Hamilton interpreted broadly to create a national bank, to assume the states’ debts and to fund the debt, the other side went ballistic.  Madison, the father of the Constitution, would join Jefferson in opposition.  For they believed the point of the constitution was to keep big government small.  Hamilton was interpreting the ‘necessary and proper’ clause of the Constitution to make government big.  Nasty, partisan politics ensued.  And continue to this day.

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FUNDAMENTAL TRUITH #17: “The raison d’être of federalism is to keep big government small.” -Old Pithy.

Posted by PITHOCRATES - June 8th, 2010

BONJOUR.  A LITTLE French there.  To go with the use of the French expression ‘raison d’être’.  Which means reason for being.  Sounds better in French, n’est-ce pas?

I like Canada.  Both parts.  The French and the English parts.  I’ve met and become friends with people in Toronto, Montreal, Fredericton and Corner Brook.  And elsewhere.  I like to talk to my Francophone friends about that day on the Plains of Abraham.  And I like to speak French to my Anglophone friends.  And they both like to point out to me what they believe to be America’s lack of tolerance and compassion.

The Canadians may be a tolerant and friendly people.  Everyone says that about them.  That they’re nice.  And they are.  But they have to work at it at times.  For there ain’t a whole lot of love between the French and English.  Not now.  Or then.  When French Canada became British.

Like it or not, that animosity has been at the van of Western Civilization.  And it would compete in the New World.  Colonize it.  Fight in it.  And give birth to a new nation.  One that would break from the ways of the past.

“WHO’S THAT, THEN?” one filthy peasant asked another.

“I don’t know.  Must be a king. ”

“Why?”

“He hasn’t got shit all over him.”

(From Monty Python and the Holy Grail – 1975.)

What is a king?  Besides someone who “hasn’t got shit all over him.”  A king is where sovereignty lies.  And sovereignty?  In a word, supremacy.  Supreme authority. 

The Sun King, Louis XIV of France, was an absolute monarch and his word was the absolute law of the land.  And he could do pretty much whatever the hell he wanted.  He built his gorgeous palace at Versailles.  Because he could.  Over in England, the king was sovereign, too, but Parliament checked his power.  So the British king wasn’t an absolute monarchy.  In England, the king could do whatever he wanted as long as Parliament agreed to pay for it.  For Parliament controlled the purse strings.  There would be no Versailles in England.

Now France and England were always at war.  Their fighting even spilled over into the New World.  The 7 Years War (as the Europeans called this world war) went by a different name in North America.  The French and Indian War.  The British won.  France lost Canada and other colonial possessions.  Their loss, though, was America’s gain.  The French and Indian attacks on the American Colonists ended, leaving them with peace and prosperity.  But it was costly.  As wars are wont to be.

Over in England, Parliament had to pay that cost.  But taxes were already pretty high at the time in England.  If they raised them further, it could cause trouble.  So what to do?  Well, there were some who pointed out that the American colonists really came out the clear winner in this latest contest.  They got peace and prosperity without really paying anything to get it.  Shouldn’t they pick up part of the tab?  I mean, fair is fair, right?

And they probably would have gladly contributed as good English subjects.  However, and this is a big however, they felt they weren’t treated as good English subjects.  In fact, they felt more like Parliament’s bitch than English subjects.  And to add insult to injury, they had no vote in Parliament.

Parliament passed a series of acts that the Americans would call the Intolerable Acts.  Both sides missed opportunities for compromise and peace.  Instead, tempers festered.  Parliament would bitch-slap the colonists.  And the colonists would bitch-slap Parliament.  Eventually throwing some British East Indian tea into the water.

Now Britain’s king, King George, had a bit of a problem on his hands.  The Americans were challenging his sovereign rule.  There was a name for this.  Kings call it treason.  And they kill people for it.  King George was the supreme authority.  Anyone challenging his authority was challenging his right to rule.  That’s why acts of treason are typically punishable by death.  You don’t stand up to kings.  You grovel.  And these uppity Americans surely weren’t groveling.

And just how does a king get this authority?  Well, you don’t vote for them.  They either inherit power.  Or they kill for it.  It’s a story as old as time.  Patricide.  Matricide.  Fratricide.  And sometimes the killing was by someone outside the family.  But that’s how sovereign power changed.  A king or queen died.  Naturally.  Or with a little help.  And when a new sovereign ascended the throne, he or she usually killed all other possible contenders.

If King George didn’t put down the American rebellion, it could spread.  To Canada.  To other English colonies.  Or give someone ideas back at home that the king was weak.  And challenge him for his throne.

These are things kings think about.  Power can be precarious.  Even when it’s absolute.  As King Louis XVI would learn in France.  During the French Revolution, the people, challenging the king’s sovereignty, sent him to the guillotine.  Chopped his head off.  His wife’s, too.  Marie Antoinette.

ENGLAND GAVE BIRTH to modern, representative government.  It was a balance of power between the many (the common people in the House of Commons), the few (the aristocratic rich in the House of Lords) and the one (the sovereign king).  Each provided a check on the others.  The king was the supreme power but he needed money to wage war and build things.  Parliament collected taxes and paid for things they approved of.  And the House of Lords was to keep that spending from getting out of control as they understood money and costs (that’s what rich people are good at).  They were to protect the nation from the evils of pure democracy where the people, once they realize they can, will vote themselves the treasury.

Most of the American colonists were transplanted Englishmen.  Or came from English stock.  They were English subjects (at least in name if not in practice).  They understood representative government.  Their colonial governments were in fact very British.  The Rule of Law was the rule of the land.  The governed consented to taxation.  And the government collected the taxes they consented to. 

You can probably see where this is going.

Taxation without representation was very un-English.  The fact that it was okay in the American colonies chafed the American English subjects.  I mean, it really frosted their shorts.  It wasn’t right.  By English law.  Or by precedent.  Anger at Parliament turned into anger at the king.  Questions of sovereignty arose.  Should the king be sovereign?  Or should the people?  In 1776, the American colonists stated their opinion in a very treasonous document.  The Declaration of Independence.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed….

The U.S. Constitution emphasized the sovereignty of the people in the preamble.

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

Kings were out.  The Rule of Law was in.  No aristocracy.  No hereditary offices.  In America, it would be different.  After the Battle of Gettysburg some 75 years later, Abraham Lincoln would reiterate this at the dedication of the Soldiers’ National Cemetery.

Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal…

…that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.

THE AMERICAN COLONISTS rebelled and broke away from Great Britain because they were through with being her bitch.  In fact, they weren’t going to be anyone’s bitch.  That’s why there was a lot of opposition to the establishment of a strong, central government.  They didn’t want a national government taking up where Great Britain left off.  And they didn’t want an American president to be just another King George.  The people won their liberty.  And they intended to keep it.  So they could pursue that happiness Thomas Jefferson wrote about in the Declaration of Independence.

Federalism was the solution.  The states’ governments would retain most of their powers.  Only those things they could not do well (regulate ‘free-trade’ interstate commerce, negotiate trade agreements with other nations, wage war, etc.) would be done by the new national government.  The people would remain sovereign.  Strong state governments and a ‘weak’ central government would share power.  In effect, the new central government was to be the people’s bitch.  But you’d never know that by looking at things today.

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FUNDAMENTAL TRUTH #14: “Christianity does not beget antidisestablishmentarianism.” -Old Pithy

Posted by PITHOCRATES - May 18th, 2010

DID THE FOUNDING Fathers found America as a Christian nation?  No.  Did they found a secular nation?  Not exactly.  Did they found a federal nation?  Yes.

Federalism.  What does it mean?  It means the new federal government would have LIMITED powers.  The new national government would do national things.  Trade.  National defense.  Treat with other nations.  In other words, those things that required a single national voice.  The French didn’t want to treat with the individual states.  They didn’t want one set of trade agreements for Virginia and another for North Carolina.  Neither did Great Britain.  Or the other European powers.  No.  If the United States of America wanted to be an independent nation, then they had to act as a single, unified nation.  So they did.

The other things, the non-national things, they left to the states.  And one of these things was religion.  For when it came to religion, the new federal government did not interfere in the states’ religious business.  Ergo the First Amendment.  The ‘wall’ between church and state was to separate the new federal government from the states’ religious establishments.  If a state discriminated against all but their established religion, that was fine and dandy for it was a moot point as far as the federal government was concerned.  It just wasn’t their business.

Now, a truly secular government would intervene in such a case.  The federal government would later, but at the founding, one of the preconditions for ratification of the Constitution was that it wouldn’t.  And it didn’t.  Interfere with a state’s religion.

WE ALL KNOW the story of the Pilgrims, the Puritans, coming to the New World from England to escape religious persecution.  Probably not as familiar with the backstory.  The English Civil War.  Duke of Buckingham.  King and Parliament.  Queen and Parliament.  The French.  The Spanish.  The Pope.  The Kirk.  The Ulster Uprising.  Oliver Cromwell.  And, of course, William Laud.

Here’s the short version of what happened.  And some back-story to the back-story.  The Protestant Reformation split the Catholic Church.  Much fighting ensued.  This split nations into essentially Catholic and Protestant camps (which broke down into further divisions).  England was Protestant.  Scotland was Presbyterian (a branch of Protestantism).  Ireland was Catholic with a Protestant enclave in Ulster.

Mix them together, add a not great English king, who married a French Catholic, throw in a revised Church of England prayer book, bring back some Catholicism to the Protestant Church of England, dissolve Parliament, recall Parliament, try to dissolve it again and, well, you get civil war.  Parliament wins the war.  They behead the king. 

The English Civil War is a little more complicated than this.  But for our purposes, it’s the religious component that’s important. Everyone persecuted someone at one time.  One group, the Puritans, were Protestants.  Hardcore Protestants.  Calvinists.  They were about as anti-Catholic as you could get.  Didn’t like any of the Catholics’ fancy vestments, icons, statues, pictures, altar rails, candlesticks, stained glass windows, etc.  That church was corrupt.  They had lost their way. 

They didn’t believe in original sin or that you can buy your way into heaven.  God chose your fate before you were born.  If you were one of the elect, you passed your days in long church services and you read the Bible.  If you didn’t do these things it was proof you weren’t one of the elect.  And were damned.  No matter what you did during your life.  Cure cancer, it didn’t matter.  You were damned.

They didn’t like Catholics and Catholics didn’t like them.  And, as it turned out, the Protestant powers that be didn’t much care for them either.  In England or on the Continent.  They just couldn’t be un-Catholic enough to please the Puritans.  Much bitterness ensued.  Many left the Old World and settled in the New World.  Like the Israelites fleeing Egypt, these Puritans came to the New World to establish that city on a hill of Mathew 5:14 fame (from the Sermon on the Mount.  Given by Jesus Christ.  Just in case you’re unfamiliar with it).

THEY CAME FROM England, Scotland, the Netherlands, France and settled in New England, New York and the far side of the Appalachians.  A hard working people.  They provided for themselves.  Went to church.  Read the Bible.  All work and no play.  At least, some would say. 

They established the state-supported Congregational Church in the Massachusetts Bay Colony.  John Adams was born and raised a Calvinist and attended this state-supported church.  When writing the new state’s constitution, the state support of the church was a contentious issue.  Most felt that religion was an indispensible part of life.  Others agreed but feared a religious majority would oppress a religious minority.  The process would take 3 years to resolve.

Being in the heart of the rebellion, Abigail Adams, Founding Mother, and perhaps America’s first feminist, experienced much of the darker side of the struggle for independence.  Soulmate of John Adams in every sense of the word, she was as religious as he.  As the war dragged on with no end in sight, she feared it was God’s punishment for the sins of American slavery.

IN VIRGINIA, THE established church was the Anglican Church (i.e., the Church of England).  As in Massachusetts, there was debate about an established majority religion oppressing a minority religion.  For good reason.  It did.  Right in James Madison’s backyard.  Baptists were harassed.  And imprisoned.  You needed a license to preach.  Virginia and the established church made getting that license very difficult.  If you were a Baptist.

America’s least religious Founding Father, Thomas Jefferson, wrote the Virginian Statute for Religious Freedom.  The Virginian General Assembly passed it in 1786, two years before the states ratified the U.S. Constitution.  To help get the Virginian Baptists on board for ratification, James Madison, the father of the Constitution, promised to add a Bill of Rights after ratification that would add similar rights and protection at the federal level that were enacted at the state level.

BENJAMIN FRANKLIN MAY have been a Deist.  He was, after all, the embodiment of the Enlightenment.  Like Thomas Jefferson.  They embraced reason over dogma.  But Franklin believed religious faith was fundamental to civilized society.  His personal beliefs boiled down to simply doing good deeds.  Help others.  And sometimes you need to remind some people to help others.  And that’s why he liked religion.  He spent much of his life helping his community (serving in the state militia, participating in the volunteer fire department, etc.).  At an impasse at the Constitutional Convention, it was he who suggested they should pray.

GEORGE WASHINGTON MAY not have taken communion, but he added chaplains to his army units during the American Revolution.  He believed the American cause was a divine one.  He feared a lack of faith may determine battlefield outcomes.  He led an integrated army of Protestants and Catholics.  And Jews.  And blacks.  And others.  He forbade anti-Catholic demonstrations which were very common in the former British colonies.  When an Army went to Canada to attack the British, they were to respect the Catholic French Canadians and invite them to join their cause.  He would even attend Catholic service on occasion.  Like the army, the nation he would lead would be a melting pot.  Tolerance and respect was the mantra.  For all Americans.

SO, DID THE Founding Fathers found a Christian nation?  No.  Religious establishment was simply beyond the responsibility of the new federal government.  Did Christians settle the original colonies?  Yes.  And they established Christian churches.  And the states were worried that a new federal government would interfere with their religious business.  Some wanted additional safeguards written in.  So James Madison added the Bill of Rights after ratification.  The First Amendment placed a wall between the federal government and the States’ religious establishments.

In time, the states extended the tolerance and respect of religious diversity prevalent in Washington’s army to their states.  They disestablished their established churches.  And, to their relief, religion flourished.  Especially the different branches of Christianity.  Yes, America became even more Christian, but it tolerated and respected other religions.  New York even had a Jewish Temple 3 years after the British surrender at Yorktown.  And even the Catholics were welcomed in the new nation.

DISESTABLISHMENTARIANISM INCREASED THE spread of Christianity.  Like the economy, the freer it was the more it flourished.  And with the great number of Christian religions that have since spread across the nation, it is unlikely that overt acts of Christianity would result in the establishment of one of these.  Or the reestablishment of the Church of England. 

So go ahead and display your Christmas Crèche or the Ten Commandments.  Chances are good that it won’t beget antidisestablishmentarianism.

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