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Quick Fix: Senate

March 23, 2010 2 comments

When the founders set up the federal government, they created two legislative bodies.  The idea was that one body would represent the people and the other would represent the state governments.  Since state governments were considered sovereign, they had to have a voice in the making of federal law, otherwise the federal government could erode that sovereignty over time. 

In 1913, after a long campaign by progressives such as Robert La Follette and William Randolph Hearst, congress passed the 17th amendment to the constitution which made senators elected by the public instead of by the state governments.  Once this happened, the senate was just another house of representatives with longer terms.  This means that the state governments have no say in what the federal government does. 

Now look at what the federal government does.  They pass massive unfunded entitlements for “the people” and then impose them on state governments who have to find a way to pay for them.  Naturally this leads to states going bankrupt which we are now seeing.  And the Feds. are heaping more and more on them while they’re already struggling.  It’s almost as if they want states to be in trouble…  The healthcare bill which passed the house yesterday apparently forces millions into Medicaid which is funded by states.  This is largely responsible for the “deficit reduction” that is claimed to result from the bill.  But how are states going to pay for it?  Well if you read my previous post in this category you know the answer.  The federal government will give them back some of the money that they take from their citizens.  But notice that we are crossing an important line here.  This federal money is about to go from being something that states would really like to have, to being something that they need in order to survive.  Once this happens, can we really convince ourselves that states are sovereign?

State governments need to be able to keep the federal government from doing this to them and the way to make that happen is to have them elect their senators again.  If we could get this done along with getting rid of direct taxation and the top down flow of money, then we would have a system that could work long-term.  That’s about all we need actually.  If I know me though, I will probably keep thinking of things and posting them.  Actually I’m thinking of a minor amendment to the constitution right now that would help a lot….

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Categories: Quick Fix

Quick Fix: Dual Federalism

March 17, 2010 2 comments

The government of the United States was designed around the principle of  dual federalism.  According to wikipedia, this system places the following limits on federal authority.

1. National government rules by rules only.

2. National government has a limited set of constitutional purposes.

3. Each governmental unit—state and federal—is sovereign within its sphere of operations.

4. Relationship between nation and states is best summed up as tension rather than cooperation.

Now consider the story of the National Minimum Drinking Age Act.  In 1984 the government wanted to make it illegal for anyone under the age of 21 to drink.  The only problem with this was that keeping people from drinking didn’t fall within the “limited set of constitutional purposes” assigned to the federal government.  That’s why they had to change the constitution when they tried to keep people from drinking the first time.  This time, however, they decided to take a different approach.  They simply passed a law saying that if a state chose not to raise its drinking age to 21, the feds would cut that state’s annual federal highway appointment by ten percent.  In other words the feds said to the states “you don’t have to do what we want, but if you don’t, we will keep taxing your citizens and giving their money to other states but we will stop giving it back to you.”  Of course, every state fell in line, the constitution wasn’t changed and the government got a new power. 

More recently, if you watch MSNBC (especially Rachel Maddow) you have probably witnessed a long steady lambasting of republican lawmakers who voted against the stimulus bill and then later took credit for bringing stimulus money back to their districts.  Frequently a question like this will be proposed (although I’ve never seen it addressed to someone who could actually answer).  “If the stimulus was so bad, shouldn’t you have refused the money?”  Now these republicans are politicians so their principles are probably highly impeachable in many cases.  It is not my intention to defend republicans in general but rather to point out how ridiculous this question is.  Imagine Nancy Pelosi calls up your congressman and says the following:  “We want to spend a lot of money.  We’re going to give it out to states and then later we will have to tax them to pay for it.”  Now your congressman may think it’s a bad idea and vote against it but once it has been passed, the question is no longer whether he thinks it is a good idea or not.  At that point Nancy Pelosi comes to your congressman with a sack full of money, he doesn’t have the option to say “no I don’t want the money because it’s not worth the money that it will cost my state in the future. ”  His state is going to have to pay for it anyway!  The question is simply “do I want to get my state’s fair share of the wasteful spending or do I just want to subsidize wasteful spending in other states?”    Certainly most of them will choose the former and we can hardly blame them.

This brings me to the next key for fixing our system.  It is essentially a corollary to the previous entry in this category.  The flow of money between state governments and the federal government should be one way only.  That is, the federal government should be disallowed from giving money to state governments for any purpose.  Why is the federal government giving money to states to build roads?  Forget about setting a drinking age, where in the constitution is the federal government given the authority to build roads?  Shouldn’t that fall within the state’s sphere of operations?  Does it really work better when the federal government takes your money and then decides how much of it to give back to your state to build roads or do you think your state could handle that itself?  Could it be that the federal government only does this so that they will have leverage over the states to make them do little things that the feds want and if so is this “ruling by rules only?”  The only other reason I can think of is that they just like transferring wealth from one state to another, which I’m not a big fan of either.

For a hundred years the federal government has been finding ways to get the things they want done in spite of their limited set of constitutional purposes.  The most effective way they have found to do this is by creating a humongous grab bag of cash in Washington D.C. funded by individual taxes and then hand this money out in exchange for whatever they want.  Mary Landrieu doesn’t want healthcare?  I bet there’s some money for Louisiana in here.  Who’s next, Ben Nelson?  Let’s see what we have for Nebraska… There’s no reason for the federal government to be doing this.

If we were to abolish the IRS and make the federal government take their taxes directly from state governments, we would still have the problem that the Feds. would take way too much and then dangle it in front of states to “convince” them to cooperate (see limit on federal authority number 4).  This is much like the relationship they have with you and me right now.  When they “cut taxes” they don’t actually cut taxes they just give you a credit for doing something they like.  This gives you more money but it doesn’t give you more liberty.  In order to restore any degree of liberty to state governments the federal government must be prohibited from giving them money.

Categories: Quick Fix

Quick Fix: Income Tax

March 15, 2010 1 comment

Since a few people are beginning to read this crazy blog I’m starting to feel motivated to write more frequently than every three weeks.  In order to add some structure, I intend to introduce a series of topics which I will call “quick fixes.”  These will be thing which could easily be done that would have a major positive impact on our system.  By “easy” I mean that they are conceptually simple, not necessarily politically easy and by “positive” I mean conducive to a stable system of individual liberty.

Perhaps the simplest and most beneficial change that could be made to our system is to abolish direct federal taxes.  Instead of taking taxes from every individual in the country, the federal government should collect them only from the states.  You could determine each state’s liability in some simple way such as proportional to their number of federal representatives.  Then have each state cut a check to the federal government once per year.

The most obvious benefit from this would be that we wouldn’t need the IRS any more which costs us about $10 billion per year.  This drastically underestimates the savings from such a policy though because it ignores the countless hours spent by private accountants and lawyers trying to manipulate the 16,845 page tax code.  These benefits, while substantial, are purely economic.  The more important implications relate to individual liberty.

The government uses taxes for essentially two purposes (other than the necessary and appropriate purpose of taxation).  The first is to redistribute wealth and the second is to micromanage individual behavior.  If they don’t want you to smoke, they put a tax on cigarettes.  If they want you to buy a house they give you a tax credit.  In fact, pretty much every time the feds propose a “tax cut” it is really a tax credit which is really a handout from the government to people they like or for behavior they like.  This is fundamentally different from a tax cut.

Now one of the reasons I like this issue so  much is that the argument against it is essentially the same as the argument for it.  Because of this, the debate forces people to identify the real issue and decide where they stand on a fundamental tenet of individual freedom.  That tenet is competition.  Now I can hear you saying “but wouldn’t the state governments just use their tax codes to do the same things that the federal government is doing now?”  The answer is that some of the states will and that’s fine with me because I can go to one that doesn’t.  If one state tries to tax the rich too much, the rich will leave.  If they put excessive taxes on business, then business will leave.  If they tax smokers too much then smokers will leave.  If they want to live in a world without smokers, they will embrace this outcome.  If, in fact, what they really want is to leech off of them, then they will be less thrilled.  This situation will cause states to compete over tax payers.  This competition will mean every state will have to find a system of taxation that is acceptable to their population.

Competition between governments would allow people to select the type of government that they want.  If you want to have government provided healthcare and you are willing to pay for it, you could go to Massachusetts.  If you don’t, you could go to Texas.  Everyone should be happy right?  The problem is that this would not allow government to use the tax code to redistribute wealth and micromanage people’s behavior.  These actions are compulsory by nature and they therefore require a captive victim.  You can’t rob from the rich if the rich are able to escape.  You can’t force the healthy to subsidize the health insurance of the unhealthy unless the healthy can’t get away. 

The argument in opposition to this policy, although it may be cloaked in creative language, will always amount to the fact that it will prevent government from doing these things.  They will say that competition in government is destructive.  What they will mean is destructive to the ability of government to redistribute wealth and micromanage individual behavior.  They will be right about this and that is exactly the point.  We don’t want that!  They do want it.  Let’s have that debate.

Categories: Quick Fix, Uncategorized