Our founding fathers shared a profound aversion to what we would today call big government. In the 18th century and before, big government meant something very close to autocratic rule, the consolidation of power in the hands of the few and privileged. Most colonialists emigrated to the New World precisely to escape the smothering political, social, religious and economic structures entrenched in European societies. When the time came to establish a new country in America, those responsible for crafting the Constitution determined to create a political framework ensuring the survival of individual liberty, a condition that can only flourish when government is truly limited.
While restricting the power of government was a primary goal of the founders, representative government was nonetheless universally acknowledged as a necessity. Even the relatively tiny United States population — about 3,000,000 souls in 1789, far less having the right to vote – could not be called on to decide every issue. Direct democracy could not work. However, the founders, being Calvinists almost to a man, did not trust human nature, rightly anticipating future politicians’s desire for power and wealth. Thus was conceived our Constitution’s acclaimed system of checks and balances. Two branches of our government could always be counted on to block the third from usurping too much power. Federal influence was also restricted by the 10th Amendment, reserving all but delegated powers “to the states respectively, or to the people.”
Further limiting the capability of the Federal government was its inability to raise large sums of tax revenue. Federal income tax did not exist until 1913. Until then, federal coffers were filled primarily by taxing the movement of goods through the imposition of tariffs, tolls, and, when war broke out in 1812, sales tax. Instructively, productive activity — wages, profits – was not taxed. So effective was the noose around the neck of the federal purse that “even into the twentieth century…the total amount spent by city governments was greater than all the state and federal budgets combined.” Money is power, and until World War II the lion’s share of government money was collected and spent close to home, exactly as the founders wished. Oh for the good old days.
It took nearly 150 years, but politicians finally figured out how to circumvent the American ideals of diffused power and local control. The imposition of the income tax in 1913 opened to the federal government previously unimaginable financial resources. The crisis of the Great Depression, and America’s unwitting acceptance of erstwhile abhorrent socialist policies, marked the beginning of the modern welfare state, a small acorn growing into the huge oak of Lyndon Johnson’s Great Society. An amazing pattern of regulatory control, unfunded mandates burdening the states, and astronomical spending has created a federal government none of the founders would recognize, let alone approve.
This violation of founding ideals has had dire consequences. “The increase in the size and scope of government has been accompanied by a corresponding reduction in the self-reliance of Americans. A classic zero-sum situation exists today in America. As government grows, individual responsibility shrinks. Considering the fact that the federal government was more than sixty-two times larger in 2005 than it was in 1928, adjusted for inflation, no wonder that fewer and fewer Americans can fend for themselves in the great tradition of individualism.” Large, paternalistic government has turned too many Americans into passive recipients, unable or unwilling to care for themselves.
As many Americans can now sense, the chickens are coming home to roost. Record deficits, a ballooning national debt, the weakest dollar in history, energy prices rising and threatening to cripple the economy, and falling consumer confidence are merely harbingers of an approaching economic meltdown. In fact, the economic future is so bad the federal government uses devious accounting methods to mask our indebtedness. According to an article written by Dennis Cauchon for USA Today, “Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later. The federal government does not follow the rule, so promises for Social Security and Medicare don’t show up when the government reports its financial condition.” Writing in 2005, Mr. Cauchon admonished “taxpayers are now on the hook for a record $59.1 trillion in liabilities…[an] amount equal to $516,348 for every U.S. household.” Today, some estimates put the indebtedness at $75 trillion. Someone should be locked up.
As far off the founder’s path as we have strayed, there is still time for a course correction. Organizations like the National Tax-limitation Committee, and individuals like Lewis Uhler, Daniel Mitchell, Richard Vedder, and Lawrence Hunter — among hundreds — have been looking long and hard at America’s financial situation, and there is good news. Thanks to their work, we now know there is an optimal size of government, about one-third smaller than our current behemoth, and there exists a relatively painless way to pare the government down to size. Throughout this week, we’ll outline these ideas, plus take a look at nations around the world that are demonstrating the almost forgotten merits of limited government and private sector genius. Chile has successfully privatized its Social Security system, and Chilean workers are reaping the benefits. Ireland’s economy is booming, far outstripping European competitors, in no small measure due to its 12% corporate tax rate. It’s time for America, so often a world-leader, to follow these good examples.
As always, your comments and references to other sources of information are invaluable.
“It is incumbent on every generation to pay its own debts as it goes.” Thomas Jefferson
“If you would know the value of money, go and try to borrow some.” Benjamin Franklin
“All men having power ought to be mistrusted.” James Madison
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Posted by Jerry Pomeroy in Budgets, Economics, Limiting Government, Politics, Video