Friday, December 14, 2012

How America got to its current state

By George Burns

For some time now I have been wondering about how America got to its current state: a miserable economy, rising costs, increased homelessness, rising poverty, moral decay, a seemingly endless list of businesses going out of business, job losses, housing crisis, decaying urban centers, growing government payments to more and more citizens, looming national financial collapse, etc.. More and more there is a sense of helplessness felt by many.  What caused this misery to come about?  The following nine items by no means capture the full extent of reasons but, I believe, are major contributors.  See if you agree.
 
1.  Real property ownership.  Government zoning ordinances have steadily grown since the Supreme Court declared zoning constitutional in 1921.  Property usage is subject to government restrictions/permissions.  Government taxes are levied for land/home sales/purchases.  Property owner taxes prevent outright ownership since the government can seize private property if taxes are not paid or if it is condemned and subsequently seized by the government under imminent domain provisions.  Because of all the mandatory fees and taxes levied on property owners by the government, true ownership is a myth.  Property owners are in reality renting their property from the government with the government using the taxes/fees collected for public purposes.  Examples of questionable government exercise of imminent domain are at the third link just below.
 
 
2.  Progressive income tax.  The onset of worldwide conflicts in the early 20th century caused a decline in funds derived from tariff payments.  Tariffs were, up until that time, the federal government's primary source of income and had the effect of containing government size and spending within Constitutionally established bounds.  Losing its source of income and dissatisfied with constitutional restraints on spending the government went in pursuit of additional revenue.  Ratification of the 16th Amendment enabled congress to pass the Revenue Act of 1913 which implemented the progressive federal income tax system in place ever since.  Before 1913 taxation policy was restrained, as the founders intended, and provided "uniform and equal protection of the law for all citizens".  With passage of the Revenue Act of 1913, that Constitutional intent was thwarted and the seeds of class warfare were sown.  The full flower of that reality is on display during election cycles and routine tax and budget fights in Washington.  This does not mean there is no need for tax resources to conduct legitimate government business.  But, taxation powers should be limited to conducting legitimate/Constitutional  government duties; not enabling the government to manipulate those powers for its own self-conceived and political purposes.  Having the ability to manipulate the tax code gives government unfettered access to funds rightfully the property of private citizens.  Failure to pay, on government demand, results in incarceration or fines, or both.  Of course income, property and inheritance taxes (next item) are not all the taxes Americans must pay.  See the second link below for some eye-opening details. 
 
 
 3.  Inheritance rights.  Various state and federal estate tax laws encumber the ability of property owners (for estates with combined gross assets and prior taxable gifts valued at $5.1 million or more) to transfer their property in whole or in part to whom they choose after death or as a gift prior to death.  Darien B. Jacobson, Brian G. Raub, and Barry W. Johnson tell us what is included in this taxation process: "Stamp taxes or duties, are taxes on the recordation of legal documents such as wills. Estate taxes are excise taxes on the privilege of transferring property at death and are usually graduated based on the size of the decedent’s entire estate. An inheritance or legacy tax is an excise tax levied on the privilege of receiving property from the decedent. These taxes are usually graduated based on the amount of property received by each beneficiary and on each beneficiary’s relationship to the decedent."  So, taxes were paid by the decedent on the property while alive and it gets taxed again as a consequence of death.  Note the usage of the words "privilege of receiving property" in the context of government taxing the inheritors of a decedent's property - the obvious assumption government makes is that "it", not the deceased, is extending property rights to beneficiaries.  Prior to senate passage of  S3412 estimates for 2012 were that only 0.0015 percent of small businesses with farms valued less than $5 million would be impacted.  However, "if President Obama and Senate Democrats do not act, the federal government will begin taking more than half the value of family farm estates exceeding $1 million beginning next year. This summer, Majority Leader Harry Reid and Senate Democrats passed legislation (S.3412) on a party-line vote that allows Washington to take up to 55 percent, a huge increase over today's top rate of 35 percent, and drop the tax's exemption from $5.1 million to $1 million. The lower exemption -- combined with soaring farm real estate values -- could put more than 420,000 additional farm estates at risk from the death tax."(see link four)  Government death/inheritance taxation of personal property whatever the case should never occur.  The government did nothing to make the farm productive; it has no right to take more than 50% of its value from those who did. This item relates to item numbers 1 and 2.
 
 
 4. Confiscation of property.  This regards the government's exercise of personal property seizures through dubious or erroneous charges of violation of law or regulations. 
These laws and regulations permit several government agencies such as the IRS, OSHA, EPA, Drug enforcement agencies and the BLM to confiscate property from citizens deemed to be "rebels', whatever that means. Examples of illegal government seizures are provided in the second link below.  It is different from but related to dubious government seizures under imminent domain provisions mentioned in item 1.  In addition, the government for many years has been using taxpayer monies to fund land purchases which have the effect of removing property from public tax rolls, exacerbating already stressed local, state and federal resources (see the third link below).  As of this writing the government owns about 30% of the nation's land and seeks more (see third link below). 


5. Government sanctioned centralized credit.  With the establishment of the Federal Reserve System (FED) in 1913 congress handed over its Constitutional responsibilities for managing the nation's monetary supply/policy to a private corporation owned by the nation's largest banks.   In collaboration with both congress and the administration, the FED creates money out of thin air, lends the money to the government and collects the principal and interest from American taxpayers.  When established its purposes were threefold:  maintain maximum employment, stabilize prices and maintain stable interest rates. Additional responsibilities have since been added, among them regulating banks and maintaining the stability of the nation's financial system.  With respect to its first mission, the last several years affirm it has failed.  Likewise its second mission.  Regarding the third, since the FED was created the dollar's purchasing power has declined as much as 96 percent.  Notwithstanding what the government or the FED says this is a consequence of printing far too much money which debases the dollar.  Translated that means inflation has robbed us of the dollar's value.  I am 69 years old and remember as a kid going to the movies for 25 cents. Another example: a $100 bill at the end of the 20th century would buy less than a $20 bill would buy in 1960.  As to how well the FED has regulated the banking industry and sustained a stable financial system, as recent years demonstrate more failures.  As of this writing our national debt is more than $16.2 trillion.  Debt ceiling management is a debacle.  It was originally established by law as a mechanism to control government spending.  However, congress cleared that barrier years ago, enabling the government in collaboration with the FED to borrow and spend with abandon. Unhappy with the fights in congress every time we near the debt ceiling, the president has requested congress turn over its management to him despite the fact that during his tenure the national debt has grown by $4 billion per day, $170 million per hour, $2.8 million per minute.  During his first term the debt will have increased more than $5 trillion.  In contrast during his predecessor's full 8 year term, as bad as it was, the debt rose by an unacceptable $4.899 trillion.  Providing any president sole control over the debt ceiling would vest far too much power in a single individual.  It should be patently obvious that the cozy relationship between the federal government and the privately owned FED has been and remains a very bad idea.  It, in fact, is a root cause of our current fiscal troubles.  History documents the disasters that follow when nations have instituted central banks (like the FED).  
Consider these words:  “If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”  Thomas Jefferson
Another quote:   The establishment of a central bank [FED] is 90% of communizing a nation.”  Lenin


6.  Ccommunications and transportation.   There is little doubt that central coordination of vital national infrastructure is an essential function best overseen by the federal government.  Hence the functions performed by the FCC, DOT, ICC, FAA among others.  However, how far should government functions reach?  The drawbacks to the current level of federal involvement are well documented but far too detailed for this limited look.  Here is a very brief snapshot.
Communications.  On 6 June 2012 the president signed an Executive Order entitled "Assignment of National Security and Emergency Preparedness Communications Functions".  It enables the executive branch to control communications "under all circumstances to ensure national security, effectively manage emergencies and improve national resilence."  This sounds good but it represents a presidential assignment of these functions to himself, the details and limits of which are best established by the legislative branch, the people's representatives.  The president is an executive, not a legislator.   In addition, various civil libertarian organizations express concerns that it (along with existing powers either self assumed or authorized by law) grants too much latitude for the government to breech privacy rights and civil liberties (see first link below).
Transportation.  Transportation functions are, likewise, an item warranting federal government attention.  However, the extent to which it should be involved is a matter of debate.  It stands to reason that establishment of nationwide highway, railway, waterway and bridge standards as well as construction and maintenance inspections are legitimate functions.   But, for example, control over federal fuel taxation, as with most taxes,  provides the federal government the opportunity to divert those assets to whatever cause it chooses, away from its very purpose of supporting transportation infrastructure.  Just one small consequence of inefficient government control is requiring taxpayers, in 2011 alone, to subsidize Amtrak $68,477 for food service losses multiplied by the total of all their food-service employees.  For a detailed discussion of ground transportation see the fourth link below.  Aviation transportation infrastructure is likewise an area in which there is considerable evidence of inefficient and ineffective control by federal, state and local governments.  Government involvement in setting and maintaining relevant construction, maintenance and safety standards of both airport facilities and aircraft are legitimate. As the fifth link below suggests turning over most aviation transportation functions to private industry (the same applies to ground and water transportation) would improve efficiency and cost effectiveness of aviation transportation. The consequence of absolute government control is a drag on the economy. The federal government has a vast, powerful and expensive communications and transportation bureaucratic infrastructure in place exercising control over these functions and is unlikely to relinquish any of it's authority no matter the benefits.  Further, there are a plethora of executive orders signed by presidents past and present demonstrating intent to maintain control.  In addition to the executive order cited above, here are a few more examples:
EO 10990 allows the Government to take over all modes of transportation and control of highways and seaports. EO 10997 allows the government to take over all electrical power, gas, petroleum, fuels, and minerals. EO 11000 allows the government to mobilize civilians into work brigades under government supervision EO 11002 designates the Postmaster General to operate a national registration of all persons. EO 11003 allows the government to take over all airports and aircraft, including commercial aircraft. EO 11004 allows the Housing and Finance Authority to relocate and establish new locations for populations. EO 11005 allows the government to take over railroads, inland waterways, and public storage facilities.


7.  Manufacturing and Agriculture
Manufacturing has long been one of the driving components of the American economy.  That position is increasingly in peril; while approximately 12 million jobs remain, 3.5 million manufacturing jobs were lost over the past decade.  There are a number of reasons for the decline.  Here is a list of a few:  improvements in productivity, technological advances, overseas competition, cheap oversees labor, ill-advised trade policies and a poorly trained/educated labor force.  At least one other warrants special consideration: government tax and regulatory policy. 
Government tax and regulatory policy.  While precisely measuring corporate tax rates is tricky it is generally accepted to be between 28% and 35%. The 35% rate would make American corporate taxes the highest in the world.  While opinions differ about the impacts of taxes, a recent poll offers insights into today's manufacturing/business climate from those in the trenches.  The next paragraph is lifted from the poll's executive summary (full reading is available at the third link below).  
"Manufacturers told us the reasons they would not start a business today:
Regulations at the federal, state, and local levels are too numerous and too costly;
The economy is not doing well, and small business owners face uncertainty as to whether or not it will improve soon;
Taxes are too high; and,
The costs of many factors, including health care, fuel, and workers’ compensation, have skyrocketed."
Associated with this discussion is the extent to which government is in control of private enterprise.  In his book, The Business End of Government,  Dan Smoot documents that the federal government owns 1165 different businesses such as the heavily subsidized US Postal Service, AMTRAC, Fannie Mae and Freddie Mac.  With implementation of Obamacare, the government will effectively control the health care industry, one sixth of the nation's economy.
Agriculture.  The agricultural industry is under extensive government control.  It started when President Franklin Roosevelt signed the Agricultural Adjustment Act into law creating the Agricultural Adjustment Administration (AAA) which regulated agricultural production by destroying crops and artificially controlling supplies (historians debate whether that was a good or bad thing).  The AAA also launched the continuing practice of taxpayer funded farm subsidies.  Another of many examples not covered here is the implementation of the National Animal Identification System over the past several years which gives government the ability to monitor growers, animals and feed crops.  While it is certainly a good thing for government to assure remotely grown and massively produced agricultural products are safe for consumers, extant practices are excessive and applied unfairly.  To illustrate the point big farms are not subject to expensive individual ID animal implants, tags, etc. required of small farmers.  This is a consequence of big government protecting big farmer interests based on heavy lobbying for regulations in their favor and large taxpayer subsidies, to the exclusion of small family owned farms.  Indeed, with support from the Farmers Home Administration, food processing companies are creating conglomerates by buying up farms facing foreclosure.  Also, The Guardian recently pointed out that "Two-thirds of food for the billion-dollar US food aid programme last year was bought from just three US-based multinationals.  The main beneficiaries of the programme, billed as aid to the world's poorest countries, were the highly profitable and politically powerful companies that dominate the global grain trade: ADM, Cargill and Bunge."  Lastly, it is appropriate to note that the vast majority of cases of contaminated food products harming consumers come from big farms and food processing plants, not small/local farms (related commentary is at the next to last link below).  Small farms are local, big farms are national/global. This does not mean to denigrate the innovations and efficiencies large farms generate.  But, customers of local farms/markets know from whom and what they are getting.  Not so for consumers of products from large farms or food processors.  Besides, if consumers don't like or trust one local source they find another. Bad business practices at the local level means the business either mends its ways or it goes out of business - an example of customers rule vs government rule at work.  One of many examples of how government chokes out small food businesses is at the last link below. This item also relates to item 3 above as applied to small farms.
 
http://www.dairygoatjournal.com/issues/84/84-2/Nathan_Griffith.html
http://www.guardian.co.uk/global-development/2012/jul/18/us-multinationals-control-food-aid
http://www.gracelinks.org/491/food-economics
http://www.nationalreview.com/articles/335174/raw-deal-jillian-kay-melchior

8. Union labor.  For a whole host of well documented reasons labor unions were a powerful force for good during their heyday in the first half of the last century.  They were vibrant up until the mid-1900s but since then have been in a slow decline.  Throughout their history their power and influence has waxed and waned largely based on the nature of prevailing federal labor laws.  As of 2009 The Bureau of Labor Statistics noted that for the first time the number of public sector employees (7.9 million) surpassed private sector employees (7.4 million).  So today's Union members are more likely to be public school teachers, librarians, policemen and firefighters funded by tax payers than carpenters, plumbers or electricians funded by union imposed on private industry workers.  Attitudes regarding labor unions have always differed with strong supporters for and against them.  A limited summary of a few reasons for these differences are found in links 1-3 below.  One informed writer on this subject recently wrote:  "While I do not care for unions at all, and never have, at least with private unions, someone other than corrupt politicians buying votes is bargaining at the other end of the table.  In the case of public unions, if politicians strike a bad deal, taxpayers foot the bill. In the case of private corporations, if management strikes a bad deal, the company goes bankrupt, shareholders take a hit, or the jobs move elsewhere, as soon as the contract is up.  Except in few cases every now and again, private unions just cannot seem to understand this simple economic fact."  See the full article at the fourth link below.  This segues us to public employee unions.  President Franklin Roosevelt, a strong advocate for private industry unions, declared that "the process of collective bargaining, as usually understood, cannot be transplanted into the public service."  His reasoning was that "Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable."  Even George Meany, first president of the AFL-CIO, believed it was "impossible to bargain collectively with the government."  Nonetheless, public unions now exist and are playing havoc with the budgets of local and state governments, as well as the federal government. This highlights a major difference between government and industry unions.  Private industry unions are constrained by company bottom lines while for government employee unions taxpayer pocketbooks are the bottom line. 
State and Local governments.  In 2008 wages and benefits of state and local government employees amounted to $1.1 trillion, half of state and local government spending.
Compensation costs are rising due to increases in pension and health care benefits.  Recent evidence affirms that public unions are resisting any substantive changes to their pay, pensions and benefits even though they usually exceed those enjoyed by their taxpaying counterparts in the private sector.  A 2012 finding notes that states nationwide are an estimated $4 trillion in debt primarily due to unsustainable labor agreements.  See the 2010 Cato Institute report at the tenth link below for full details.  States and municipalities are struggling with no clear indication as to how to fix the problem resulting from generous contracts negotiated between unions and governments.  Government negotiators, instead of protecting the interests of all their constituents, have instead repeatedly supported the interests of union labor.  Recent conflicts between both the unions and states/municipalities have yielded little, if any, progress towards resolution.  Budget deficits will ultimately require an equitable adjustment in union contracts, higher taxes or bankruptcy.  To expand the state and local government discussion just a bit, take a look at the last link below.  There you will find out just how extravagant some bureaucrats are and how well they compensate themselves, like the California executive of a low income city paying himself $822,000 per year.
Federal government.  According to information tabulated by the US Office of Personnel Management the federal government employs 4.443 million civilian and military personnel (see eleventh link below).  While that is a hefty number it does not account for the multitudes that work for the government under contract.  The Congressional Budget Office chart at the twelfth link below compares the compensation of federal and private sector employees, focusing on wages and benefits between 2005 and 2010.  A recent review of FY 2010 Department of Defense (DoD) expenditures found that the DoD alone spent $108 billion for its civilian workforce while paying $253.8 billion on service contracts (which paid its workers 2.94 times that of DoD civilians).  Consider the enormity of the costs that spread across the entire federal government's personnel resources.  All paid for by tax payers.  Links 12, 13 and 14 below provide insight into both federal and state workforce costs largely driven by overly generous union contracts.  While not members of a union, federal elected officials are doing quite well financially.  Just one of a number of examples is at the last link below.


9.  Public education.  To dispel the myth that the problem with our public schools is that they are underfunded one needs only to consult the charts contained in the 11 February 2011 report prepared for Congress entitled "The Impact of Federal Involvement in America's Classrooms", especially charts 2 and 3 (see first link below).  There is no denying the sharp contrast between funding increases starting in 1998 and spiking in 2008 and the sustained flat rate of student performance from 1970 to 2010. 
Believing that central planning and control of education was essential for American competitiveness in the world, congress established the Department of Education in 1980.  Instead of improving things we have been in educational decline ever since.  According to Charles Murray "we are today about where we were in math achievement in the 1960s. For reading, the story is even bleaker. The small gains among fourth graders diminish by eighth grade and vanish by the twelfth grade."  For more details see the second link below.  International rankings do not bode well as Joy Resmovits reports.  Referencing statistics recently released by the Department of  Education's National Center for Education Statistics, Resmovits writes: "The International Association for the Evaluation of Educational Achievement's PIRLS and TIMSS 2011 exams, released Tuesday {11 Dec 2012}, measure reading in fourth grade, and math and reading at fourth grade and eighth grade respectively. Across the board, East Asian countries occupied the upper ranks in the comparison of more than 60 world education systems, far outperforming the U.S.. Because the tests measure different groups of students from year to year, the results are best used as snapshots of performance relative to other countries at one point in time. Overall, the U.S. ranked sixth in fourth-grade reading, ninth in fourth-grade math, 12th in eighth-grade math, seventh in fourth-grade science and 13th in eighth-grade science." (link three) To validate that subsequent schooling beyond elementary and middle school is failing, consider results of almost 1.7 million 2012 high school graduates who took the ACT college entrance exam: in four core subjects (english, math, science and reading) most graduates were not prepared for either college or the work force (see link four).  The June 2011 Edition of The Atlantic magazine provides an excellent overview of the nature of the problems our nation's school systems face.  Review of the article will reveal that teachers unions and their influence over state governments are a major problem.  In addition, it affirms that government controls of funding and top down control mechanisms in the Department of Education are an abysmal failure. All with interest in our children's education should read The Atlantic article at link five below.  This item relates to item 8 above.


Readers who made it this far will surely surmise that this itemization is in no way complete as it relates to the causes for the slow demise of our culture, economic and political systems.  But it does serve a specific purpose.  Take a look at the following list:

1.  Abolition of property in land and the application of all rents of land to public purposes.
2.  A heavy progressive or graduated income tax.
3.  Abolition of all rights of inheritance.
4.  Confiscation of the property of all emigrants and rebels.
5.  Centralization of credit in the hands of the state.
6.  Centralization of the means of communications and transportation in the hands of the state.
7.  Extension of factories and instruments of production owned by the state.
8.  Equal liability of all to labor.  Establishment of industrial armies especially for agriculture.
9.  Combination of agriculture with manufacturing industries, gradual abolition of the distinction between town and country, by a more equitable distribution of population over the country.
10.  Free education for all children in public schools.  Abolition of children's factory labor in its present form.  Combination of education with industrial production.    

You may recognize this list as being the 10 planks of the communist party written in 1848 by Karl Marx and contained in his book, Communist Manifesto. The book reads a bit awkwardly to us because the language used comports with the language of his day.  Nonetheless it is easy to relate the 9 items I summarize above with what Marx wrote as necessary actions to bring about communism.  For convenience I combined Marx's planks 9 and 7 as they are more related today than they were in his day.  Should the reader scoff at the implications presented herein, consider that as recently as 1958 the Communist Party USA was seeking to destroy our society and form of government.  Please read in the link below a synopsis of the Communist Party's plans as documented in W. Cleon Skousen's book entitled The Naked Communist.  Add what Skousen highlights to the above narrative and either by happenstance or design it is clear that their plans are materializing.  Not covered here is the coming bankruptcy of Social Security and Medicare, the growing plight of the poor and increasingly the middle class, growing reliance of private citizens on a bankrupt government, incessant borrowing and taxation to keep the sinking ship afloat, and more - all the result of government actions which have inflicted untold harm upon the nation and average citizens.  This is a consequence, knowingly or not, of pursuing the promises of the impractical myth of socialism.  As Margaret Thatcher noted:  “The problem with socialism is that you eventually run out of other people's money.”  The encroachment of government, at tax payers expense, into the private sector economy, our national culture and even our private lives is undeniable.  The government's claim is that all they do is for our good. The consequential harm to our culture, economy, society and families belies that claim. Anyone dealing in reality will also recognize the encroachment of socialism, if not communism, into our society and our government.  Given the history of both the future does not bode well for us.

I am not a conspirary theorist.  I am a realist.  The facts speak for themselves.  In the first paragraph of this paper I asked you to consider whether you agree with me.  Having read this far, what do you think?
  
 
 

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