Tax Day 2010 - Getting Ready for the Next Depression

Tax Day is here and while protests are taking place all over the country, we would do well to realize that April 15, 2010 may be something to celebrate only because these will be the lowest tax rates you will see for the foreseeable future. The spending spree brought on by the election of Barack Obama has accelerated the American free-fall into debt and the lending machine we have been using to finance our deficits has finally warned us that they are about to pull the emergency brake handle; bringing it all to a screeching halt. Think of it…our nation has spent so much money that we have not only exhausted our own ability to finance it, but the ability for an entire pool of foreign nation’s to lend us the difference. That is quite a feat and certainly qualifies as the primary definition of Obama’s proclamation that he would “fundamentally transform” America.

What has happened here? In the timeline of human events it wasn’t all that long ago when we were a nation that innovated self-reliance; which was the catalyst that sparked the solutions to every one of our difficulties. There is a long history of financial cycles where business and employment waxed and waned but the free market responded with dynamic solutions; not under the watchful eye of government, but because government was not involved at all. Today, that dynamic structure is shackled by the heavy hand of government regulatory control.

As the Twentieth Century approached, America found itself allured by the false promises of European thinkers. Progressives had entered the scene armed with the teachings of Marx, Engels and Nietzsche hoping to create an America that could coalesce power under a strong central government with the authority to pool the nation’s resources together to provide a base standard of living for all. Our first truly Progressive President was Theodore Roosevelt and while he didn’t have the power to bring about the change that he wanted to see, he certainly planted the seeds of Marxism thinly veiled behind the uniquely American label of Progressivism. What Roosevelt did do was to create the precedent of creating administrative agencies under a loose interpretation of the Commerce Clause. After all, if you could tweak America’s understanding of the constitutional authority for Congress to “regulate” commerce, then nearly anything could be brought under Federal control.

Woodrow Wilson would be the next Progressive President to assault the Constitution and is in fact, the most damaging. As a man who considered himself a “Progressive intellectual”, Wilson began the process of radicalizing America and using the precedent established by Theodore Roosevelt, created the Federal Reserve, the Federal Trade Commission, the Federal Farm Loan Act and of course, the Progressive Income Tax to pay for it all. Curiously, there was no constitutional authority to create any of those programs but since Roosevelt had already started the vilification of the Corporation; it was an easy sale to convince America that it just needed to be done. Of course, since these programs added to the Federal budget that gave Wilson the ability to institute the Progressive Income Tax because the Constitution allows Congress to collect taxes to pay for the debts of government. Incidentally, when the Progressive Income Tax became law, it was promised that the top marginal rate would never exceed 10% and most Americans would accept a minor tax to provide for such important programs.

Wilson narrowly won his second term in 1916 by promising America that he would keep us out of the unpopular war that was raging in Europe; a promise that he would break less than a year later. The war expenditures created the economic conditions that would have Wilson break another promise in short order, when he raised the top marginal income tax rate to 77% to pay for America’s war debt. Wilson’s actions crippled business and investment and led directly to the unknown depression of 1920. The reason it is called the unknown depression is that while there is plenty of data available about this calamity; none of the facts are particularly flattering to Wilson or the Progressive movement so it is simply not discussed in schools, the press or academia. Worse news for our Progressive friends is that the facts surrounding our recovery from that depression soundly refute Progressive policy. President Warren Harding recognized the damage done by Wilson’s wild tax increases and responded by halving Federal spending and eventually reducing the top marginal tax rate to 25%. Within two years, the nation’s economy rebounded and the “Roaring Twenties” had been born.

Progressive Herbert Hoover became President in 1929 and as though he had no recollection of the damages wrought by Woodrow Wilson, immediately sought to use his Presidency to bring about more transformative change. Hoover began by closing what he called “tax loopholes” for the rich and could probably be credited for creating the open war against wealth that modern Progressives use to sway the general population’s support for any program or policy that will punish evil wealth and better the lives of average Americans with the proceeds. Hoover also raised tariffs and farm subsidies while increasing Federal expenditures for public projects such as veteran’s hospitals that for the first time thrust our medical system into a direct an unfair competition with the Federal government. Hoover also cancelled oil leases on government lands (does that sound familiar?); chaired White House conferences on child health, protection, homebuilding and homeownership; created an anti-trust division within the department of justice and generally saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism.

It wasn’t a year before the nation slipped back into fiscal chaos as the bottom fell out of the stock market in 1929. Failing to learn the lessons set by Warren Harding in the early 1920’s, Hoover implemented huge public spending projects and raised the top marginal tax rate to 63% in 1932 throwing the nation into a full fledged depression. The Depression allowed the next great Progressive President his shot at transformative change; Franklin Delano Roosevelt. Although Roosevelt had accused Hoover of spending and taxing the nation into depression, FDR immediately began his bid to tax and spend the nation out of depression. Yeah, that didn’t make sense to me either but that is what happens when Progressives control what you read, hear and learn. The lessons of history become lost in the fog of “intellectual rhetoric”.

In the midst of a crippling depression, FDR created a huge new Federal entitlement program (Social Security) and saddled us with a labor relations act that would legitimize collective bargaining. He is also the first President that advocated the establishment of a second “bill of rights” that would enumerate certain economic rights that were unnervingly similar to the rights listed in the Constitution adopted by the Communist regime of the Soviet Union. Fortunate, we dodged that bullet or we may be a very different nation today. In a slight of hand, FDR balanced the regular budget but the “emergency budget” created to combat the depression had increased Federal spending from 8% of GDP under Hoover to 10.2% under Roosevelt. As a result, the National Debt increased more than 100% and was 40% of GDP by 1936. To pay for all this spending FDR raised the top tax rate to an insane 79% in 1936 and Truman would continue this ultimately topping out at 94% after World War II.

While FDR’s programs caused a brief drop in unemployment from 25% when he assumed office to 14% in 1937, the tax hikes and new government programs would take their toll and create a new depression within a depression, throwing more people out of work. FDR’s programs are widely credited for ending the depression, which is the white-washed and revised history offered by Progressive historians that again, want to conceal that Progressivism, like its Socialist sister; does not work. The Depression would not end until World War II when the American industrial base was the only untouched manufacturing center left standing and if you wanted to buy anything, you had to buy it here. Of course modern Progressive’s use the artificial manufacturing boom of the ‘50’s to justify higher income tax rates. After all, if the nation had economic expansion with a top marginal tax rate of 94%; doesn’t that negate the validity of the cuts imposed by Harding? Well, since the economic expansion was based on an artificial and temporary demand, those Progressive assumptions must be equally artificial.

So now it’s 2010 and we have another Progressive in the White House and this Progressive is as corrupt, evil and devious as Woodrow Wilson was. While Barack Obama is seemingly ignorant of the historic solutions that are proven to relieve financial problems on a national scale, this Progressive has a willing band of co-conspirators holding absolute control over the Congress making his regime particularly dangerous. Ronald Reagan understood what needed to be done but by then, the Federal agencies created by the Progressives of the early and mid- twentieth century had become so powerful, and the misinformation fed to the general population was so complete that not even the charismatic “great communicator” could restore the Federal government to its basic and most successful roots.

While 2010 may be the lowest taxes we will see in a long time history has taught us that we must now brace for a new “Great Depression” as Obama continues to make the same mistakes that all of his Progressive predecessors made. In his case, I sincerely question whether his actions are actually mistakes. We may be witnessing the only Progressive President that truly understands the history of his actions and is intent on using them to complete the work started by Theodore Roosevelt to create an America based on the principals of Marx, Engels and Nietzsche. God help us all.

Paul

A Constitution Beyond Interpretation

In a flight of fancy we are discussing an America that has taken a slightly different path. What if the Founders included a basic list of definitions as an appendix to the Constitution; definitions that eliminated any possibility that the true meaning of the Constitution would ever be subject to interpretation? That would give us a Constitution that would remain intact unless altered by the rigorous and prescribed method of amendment that the founders intended. This would have insured that the Constitution would forever remain the rigid armature of the Republic while retaining the ability to remain dynamic in response to an ever changing world.

Those definitions would have made a world of difference. If we research through the Federalist Papers, the founders had enunciated their ideas quite clearly and their intentions are well known even today. Unfortunately, legalists have chosen to ignore that treasure trove of information simply because those intentions were never actually written into the Constitution. The Constitutional scholars have spent nearly as much time navigating between each word of the Constitution to justify alternative law as they have learning the law itself. Just as a worm would weave in and out of the garden soil, these lawyers have laced the Constitution with holes of nothing but semantics; skirting the truth to inflict their own mark upon society.

Roscoe Pound devised his theory of sociological jurisprudence and legal realism at the turn of the 20th Century. Sociological jurisprudence is the school of thought that allows the interpretation of legal language and therefore laws, in contemporary terms. Through sociological jurisprudence, one could alter the law without actually having to go through the legal wrangling of convincing lawmakers to rewrite it. A perfect example of the modern use of sociological jurisprudence is the Constitutional authority to “Regulate” commerce. To regulate, at the time the Constitution was drafted, simply meant to make regular or to make uniform. It was meant to enhance commerce between the states through a uniform standard of currency and through trade laws that would make commerce between any of the states fair and equitable. As time passed, the word “regulate” slowly had additional meanings applied to it including “to license, oversee or control through regulation”. Since the word “regulate” had assumed multiple meanings and there was no clear definition in the actual Constitution, the entire commerce clause was left open to interpretation using any one of those definitions.

Of course we know that today the United States Congress has made a mockery of free trade through their liberal interpretation of the “Commerce clause”. The regulation that Congress prefers is of course, the use of governmental regulations to control, tax and license interstate commerce. FDR used this clause liberally to affect government control of nearly everything during the Depression, including the growth of farm products for personal consumption. Not because that produce was marketed across state lines but because produce grown for personal consumption “may” have an affect on the interstate value of produce if too many people began growing their own food. It was a clear stretch of the imagination and something that would not have been possible without the legal tinkering of one Roscoe Pound.

Pound’s other assault of “Legal Realism” postulated that since man was flawed, that any law written by man was potentially flawed as well. For the first time, the Constitution was under scrutiny; not because of the word of the law and not by using the volumes of information contained in the Federalist papers that spoke not only about the Founders intent but of their character as well. Now the Constitution could be examined based on the sheer speculation that the law possibility contained motives of greed and avarice; that the founders had laced their own interests into the original law and that made modern interpretation a guild-edged priority. For his legal genius, Roscoe Pound was decorated; not by the United States, but by Nazi Germany for giving them the tools they needed to get around some very sticky laws of their own. The real danger in these theories is that the interpretation is left to those in power. Since power is corrupting, these little gems could be used by those in power to justify nearly any action; especially if a crisis warranted the declaration of a state of emergency.

FDR had ascended to the Presidency during the Great Depression in 1933. There is no doubt that this was a time of crisis, even national emergency. Jonathan Alter is a columnist and Senior Editor for Newsweek Magazine. In “The Defining Moment”, his recent song of tribute to his hero, Franklin Roosevelt, Jonathan Alter claims to have made an historical find. He states that in 1932, members of FDR's inner circle had urged the new president to deputize the American Legion. The only purpose Alter could arrive at was for the creation of some form of private army. In prepared remarks to be delivered to a meeting of the American Legion which was also broadcast as his first radio address after his inauguration, FDR was to tell the assembled veterans, "As new commander-in-chief under the oath to which you are still bound, I reserve to myself the right to command you in any phase of the situation which now confronts us." In fact, during his inaugural speech, FDR said quite clearly that he was ready to “assume extraordinary powers if Congress failed to act against the emergency”. This shocking revelation was met with thunderous applaud by the assembled crowd.

Alter's interpretation is entirely plausible for any number of reasons, including FDR's determination to use the World War I-era Trading with the Enemy Act as the legal justification for assuming emergency powers. A memo written at the Democratic Convention by Hugh Johnson, the future head of the NRA (National Recovery Administration) suggested that the entire Congress and Supreme Court be sent into temporary exile while a dictator set the country straight. Liberal Journalist and FDR advisor Walter Lippmann cautioned FDR about the state of the nation and urged him to assume "dictatorial powers." Fortunately for us, Roosevelt recognized that once those steps were taken, the American Constitutional government could never again, emerge intact.

Alter would have praised FDR regardless of what he had found but this time he was on the right side of the issue. Alter’s praise was for the man that resisted the call to assume such awesome powers. Not that it wasn’t tempting for Roosevelt, it was. Having seen the amount of power Roosevelt harvested using the legalist tactic of sociological jurisprudence, he came close enough as it was. Incidentally, I find it ironic that FDR was the descendent of another noted person in history. I don’t mean Theodore Roosevelt; that would be too easy. I mean another relative of great ambition, Benedict Arnold.

Seeing the fragility of the Constitution when it is allowed to be subject to such broad and yes, subjective interpretation, perhaps it is time that the definitions that are so obviously absent in this document are finally added so that we can read it in the context that the founders intended. The Federal government would be responsible for the defense of the United States against foreign aggression. We would not be engaged in “nation building” nor would we enter into wars that were not in direct defense of American territory, resources or vital interests. It would insure that trade between the States was free of corruption and that business between the States is conducted with a uniform currency and a uniform code of laws to insure ethical business practices. It would arbitrate disputes between the States and enforce the Constitutional laws that all States agreed to when they entered the Union. The Federal government, as now, would enter into treaties with foreign powers provided the treaties are ratified as prescribed in the Constitution.

Since the States retained all rights of self governance excluding the enumerated powers granted to the Federal government; there would be no Federal agencies for education, health and human services, labor, environmental protection, social security, agriculture, international development, on and on and on. The complete list can be found here and I strongly suggest you take a look at it since you probably have no idea half of these even existed: http://www.usa.gov/Agencies/Federal/All_Agencies/index.shtml

Fear not, the elderly would not perish in the streets, the lakes and streams would not become acidic and disease would not race through the streets. With Progressives, Socialists and extreme Liberals handcuffed by a strong Constitution, the States, being free of oppressive Federal mandates would begin to flourish. The agencies that wastefully consume so much of this nation’s wealth would be gone, freeing that money for economic expansion. Local economies would finally possess the means to provide the services that their residents feel strongly enough to approve through their electoral might. Good ideas never remain hidden or stagnant and as the States test those ideas, the best ones would rise and be sought by the residents of other States. Instead of a one size fits all Federal mandate, States would adopt programs at their own discretion that are tailored to their special needs. Best of all, the people of each State would retain direct control over their destinies instead of being saddled with national burdens imposed by the overwhelming number of number of Congressional representatives from California, Illinois, New York and Florida.

Paul