Back to Basics

The economy is scheduled to plunge off a cliff in January.

Back in the first two years after the Progressive’s November Revolution of 2008, the big government party enacted tax increases not scheduled to take place until after the 2012 elections. They also passed Obamacare which carries within it multiple tax increases, which are also scheduled to take affect after the 2012 election. Combine these with previous tax rollbacks scheduled to expire in January 2013 and we are looking at the major economic crisis the progressives have worked so hard to create so they can then work so hard to solve.

In 2010 the voters got a chance to let the central planners know what they thought of what had been done with the power entrusted to them in 2008. However, with only one house of Congress in Republican hands they were unable to reverse any of the changes made in the first two years of the Obama administration, so come January we hit the wall.

This manufactured economic crisis will be used by the triumphant Progressives as proof that capitalism doesn’t work. Then following their play book, since too much government wrecked the economy we need more government to fix the economy. They will tighten the already strangulating regulatory straight jacket. If Obamacare is upheld and implemented, within a few years it will kill the private insurance industry as company after company figures out it is cheaper to pay the fines imposed than purchase the insurance required. The flight of paying customers from the private insurance companies will force them into bankruptcy. Remember even if they used deceptive language at the moment of passing the bill President Obama, Nancy Pelosi, and Harry Reid were on the record many times saying what they were aiming at was a single payer European type healthcare system. And we can all see how well that is working out for the Europeans.

They will also use the failure of the insurance industry as more proof that capitalism doesn’t work.

As President Obama travels around the country inciting class warfare with his constant attacks on the millionaires and billionaires which he tells us aren’t paying their fair share he continues to accept vast amounts of money from those same millionaires and billionaires. While his administration imposes regulation after regulation that every day makes it harder to start new businesses, maintain or expand small businesses he turns a blind eye to the continued casino like atmosphere at the largest banks: the ones that are too big to fail and which should be too big to bail.

The largest bank in the country, J. P. Morgan Chase just lost another couple of billions in risky credit derivatives that their own chairman says were ill-conceived, poorly executed, and not managed very well. This is the same bank that President Obama says is one the best run banks in America and the same chairman who has visited the Whitehouse at least 18 times since 2009.. The Chairman of the Board Jamie Diamom, the one in charge when all the poor execution was going on was just voted 23 million dollars in compensation while the stockholders take it in the wallet.

All bubbles burst. This is a law of nature. No matter from what material the bubble arises. No matter what forces propel its expansion. All bubbles burst.

Actually the science of bursting bubbles has recently popped into the forefront of scientific discovery. Conventional wisdom has taught since the beginning of time that when a bubble bursts it simply vanishes. However, recent observations using high speed cameras has revealed that when a bubble bursts it leaves a circle of miniature daughter bubbles that pop so fast the eye cannot catch it. There is even the thought that each daughter bubble leaves a ring and each daughter bubble leaves a ring ad infinitum. All happening so fast it cannot be seen. And yet, each succeeding bubble bursts.

The physics of bubbles tells us that the pressure on the inside works against the tension on the surface and a ratio between the two determines when the bubble will burst. No matter how it bursts, no matter why or when it bursts one thing is certain: all bubbles burst.

In economics a bubble is the term commonly used for a cycle characterized by rapid expansion followed by rapid often dramatic contraction. What causes economic bubbles is often a matter of dispute among economists. Some believe they are a natural part of the economic cycle: everything goes up, and everything eventually comes back down.
Others believe they are caused by inflation. In this scenario everything has a natural price which is the intersection of cost and demand. The Bubble is the artificial rise of price over the natural price. Eventually the economy must correct itself and the inflated product will return to its natural price.

No matter which theory you subscribe to, one thing is certain: all bubbles burst.

Remember the Clinton years? Today the official History as dispensed constantly by the Corporations Once Known as the Mainstream Media is that the wise and benevolent rule of the man from Hope was a time of plenty. There was solid growth and balanced budgets. As the Progressive narrative goes, President Clinton alone was responsible for the growth of the nineties which Bush the Younger proceeded to destroy leaving a mess for President Obama who has fought valiantly to restart the economy and save the day. At least that’s the story as dispensed by the headlines and the talking heads.
The reality is approximately 180 degrees opposite of the spin.

President Clinton won a three way election with less than 50% of the vote (twice) and called it a mandate both times. The policies he opposed for his entire career had recently won the Cold War, and President Clinton reaped the rewards. He gutted the military and called it a Peace Dividend which he proceeded to spend on social engineering projects pumping up the economy with government spending. Then the Dot-com Boom turned into the Dot-com Bubble and the economy was roaring. Another plus for Clinton was the defeat of Hillarycare which would have torpedoed the economy just as Obamacare is now.

When taxes become destructive they’ve surpassed the consent of the governed bending to the will of tyranny. When regulations strangle competition instead of securing it from evil combinations they’ve become counterproductive and defeat the very purpose for which they were proposed. When foreign entanglements bleed the nation but do not secure the peace or defeat the enemy they’ve become interventionist vehicles for vested interests. When spending becomes a hemorrhaging of assists leading to national bankruptcy those who continue to pile debt upon debt seek not the good of the nation but instead its destruction. When leaders selected to unite instead do all they can to divide they no longer advance the interest of the whole and are instead partisan leaders in a factional fight.

A social contract is one made between a people and their government. It is an agreement whereby the people surrender certain aspects of their independence for the guarantee of corporate security and the enjoyment of a general welfare. In the case of most countries this is an unwritten and unconscious arrangement built upon tradition and precedent as in the case of England. However in the United States we have an actual contract, the Constitution. This was ratified by the original states and the subsequent states were formed under it and admitted as full partners to it.

All contracts may be legitimately changed over time as long as there are mechanisms either within the document or established by the document to do so. Within our Constitution there is an amendment process and it has been amended 27 times so far. Whether we agree with those amendments or not they have been legally ratified and accepted becoming part of the document. However, over the years our government structure has been changed and our manner of life transformed more by the informal changes than by the formal. Nowhere in the Constitution is the central government given the power to wage unending undeclared war. Nowhere is the central government given the right to ignore the requirement to protect the states from invasion. Nowhere is there found any basis for executive orders, signing statements or bureaucratic regulations to have the force of law without legislative action by Congress.

Well-connected rabble rousers now say equality will not be achieved until everything is equal in everybody’s house. Leveling the playing field has finally thrown off its cloak of deceit and exposed itself as, “From each according to their ability to each according to their need.” The professional civil rights entrepreneurs who’ve extorted vast amounts of personal wealth with threats of boycotts and demonstrations have been unmasked as the true purveyors of prejudice seeking to keep race and gender differences alive for their own benefit. Union bosses build political empires using the legally forced dues of members with more money spent on political activity than on member service. The union bosses ride in limousine comfort from board meetings to political rallies while their members lose jobs. The pensions of the bosses are golden parachutes while the pensions of the members are underfunded.

First, I would ask myself how did our ancestors build America from an agricultural colony on the edge of civilization into the number one manufacturing and commercial nation the world had ever known.
Why reinvent the wheel if round ones still roll?

The early American colonies of the British were founded based upon the economic ideas of Mercantilism. Governmental regulation of industries, trade, and commerce characterized Mercantilism as every aspect of the economy was utilized for national policy. This was especially true with foreign trade, which was determined more by national aims rather than individual or local interests.

The definition of wealth began to change in the sixteenth century. During the Middle Ages, wealth was defined by the amount of productive land a nation possessed. As transportation, especially by sea, improved so did the ability to conduct foreign trade bringing with it an increase in the amount of cash generated by that trade. The definition of wealth came to be the amount of cash a nation possessed. Therefore every nation sought to have a favorable balance of trade. They also sought to develop monopolistic type environments wherein they provided their own raw materials thus avoiding imports which meant money flowing out and fostering the export of finished goods raising the level of money flowing in. Defining wealth as the accumulation of cash, the nations of Europe desired to conduct foreign trade on a larger scale, and they began looking for foreign sources of gold, silver, and raw materials.
This brings us to the British effort to develop North America as a source of wealth.

The Chesapeake colonies of Virginia and Maryland were the first successful British colonies in what was to become the United States of America. Though the initial colonists came looking for gold they soon learned that prosperity came not from a shovel but instead from a plow. It was tobacco that primed the pump and lifted the colonies from a burden to a benefit for the mother country. After years of mounting expenses for the British and years of starvation for the colonists the cultivation of tobacco brought prosperity. Virginia’s production of tobacco grew from 200,000 pounds in 1624 to 3,000,000 pounds in 1638 overtaking the West Indies as the number one supplier of tobacco for all of Europe thus boosting Britain’s balance of trade.

The cultivation of tobacco fostered a plantation system based upon indentured and slave labor. A gentrified class of great planters sought to replicate the social structure of Britain with a small number of very rich ruling a large number of small land holders who prospered to a certain extent but never enough to challenge the status quo. The wretched poor of Britain who had come to the Chesapeake colonies to find a better life did find more opportunity and the ability to advance from the landless poor to the ranks of yeoman farmer. However, there was little opportunity to enter the ranks for the gentry which became a type of American nobility.

New England, because of the soil, the climate, and the fact that there was no major cash crop that grew well in the area, did not lend itself to large plantations. Most farmers were operating at a subsistence level.

America was founded as a Federal Republic. This means our nation was designed to have two levels of sovereignty. The States which pre-date the central government and which created the central government is to be one level and the central government they created was to be the second. The separate States first combined to found a central government when they drafted and ratified the Articles of Confederation in 1781. This combination was strengthened and expanded in the writing and ratification of the Constitution in 1789. However, in both of these new beginnings it was always stated and assumed that the States were the building blocks out of which the whole was built.

The Anti-Federalists sought to safe guard the inherent rights of the Sovereign States in the face of a proposed national government which concentrated power and superseded the primacy of the States. The Anti-Federalists are often dismissed by those of succeeding generations who have been educated by the victorious philosophical descendants of the Federalists, as mere obstructionists and people of no-account. However, their ranks were filled by some of the greatest names of the Revolutionary times such as Samuel Adams, George Mason, Thomas Paine, and Thomas Jefferson.

Another well-known leader of the Antifederalists, Patrick Henry, questioned the very legitimacy of what are possibly the most famous words in the document: “We the People” when he said, “I have the highest veneration for those gentlemen; but, sir, give me leave to demand, What right had they to say, We, the people? My political curiosity, exclusive of my anxious solicitude for the public welfare, leads me to ask, Who authorized them to speak the language of, We, the people, instead of, We, the states? States are the characteristics and the soul of a confederation. If the states be not the agents of this compact, it must be one great, consolidated, national government, of the people of all the states.”

Once the Constitution was maneuvered through the ratification process most of the Anti-Federalists faded into the background. Forgotten were their war time services and forgotten were their warnings that a central government once established would inevitably grow in power to eclipse the States.

In the early days of the Republic the former Anti-Federalists attempted to keep alive the idea that it was the States which had created the central government and that the States therefore had the authority to determine if the central government had overstepped the authority which had been delegated to them by the States. They proposed to do this through a process known as Nullification.

Nullification is the process through which they believed a State could suspend a federal law within its borders. In opposition to the Alien and Sedition Acts of the Adams Administration Thomas Jefferson and James Madison first enunciated this concept in1798. The tactic was accepted as a legitimate tool of the States by the Hartford Convention in 1814. It was seen as a logical and legal protection against the encroachment of the central government upon the sovereign rights of the States.

The idea that a state or a combination of States could nullify what they perceived as unconstitutional laws passed by the central government which exceeded the delegated powers granted to it remained a point of contention until it reached a crisis in 1832.

Benjamin Franklin told us, “Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters.”

Socialism is a debilitating confidence game dressed up as an ideology used by demagogues and want-to-be dictators to fool its victims into believing it is possible to have your cake and eat it too. Those who fall under the spell of the charlatans singing this siren song actually come to believe it is fair and just to force some people to labor for the good of others. This is the same type of sophistry and rationalization that was used by the clergy and philosophers of the Antebellum South to justify unending human bondage for an entire race of people because it was for their own good.

This twisted tool of central planners and bureaucratic tyrants teaches those who have not that it is fair and just to take from those who have and re-distribute the plunder as the government decrees. This is not fair! This is not just! To teach that it is raises up generations of people who believe they have a birth-right to that which is not their own forfeiting their true birth-right: the opportunity to succeed through their own efforts. The products of such an educational system are citizens without virtue voting pawns without honor. Not because they have made a personal decision to live without these two attributes but because they have been programmed to believe taking the fruit of someone else’s labor is permissible as long as it will be given to someone else. Theodore Roosevelt said, “To educate a man in mind and not in morals is to educate a menace to society.”

Those who drank the Kool-Aid dispensed by the government schools learned that this type of theft is not only permissible it is laudable. They were told and they believe that this is what Robin Hood did: steal from the rich to give to the poor. However, in reality the legend of Robin Hood tells of a fighter for liberty and the sanctity of personal property who robbed the stolen wealth of corrupt government officials so that he could return it to its rightful owners: those who produced the wealth in the first place. However, the leaders of America today have turned the world upside down demanding that people objectified by the name “Millionaires and Billionaires” need to pay their fair share. Yet they never say what that fair share is or when enough will ever be enough. According to Noah Webster, “…if the citizens neglect their Duty and place unprincipled men in office, the government will soon be corrupted; laws will be made, not for the public good so much as for selfish or local purposes; corrupt or incompetent men will be appointed to execute the Laws; the public revenues will be squandered on unworthy men; and the rights of the citizen will be violated or disregarded.”

We look around us and we watch as our beloved United States of America crumbles. Our elected leaders act as if it is their goal to spend us into oblivion. The only way to understand the pronouncements and actions of this administration is if we consider ourselves a conquered people and the Washington-centered oligarchy as an occupying power.

Recently President Obama made this remarkable statement, “Ultimately, I’m confident that the Supreme Court will not take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress.” For someone reputed to be a former professor of Constitutional Law at the University of Chicago this statement is hard to explain. Any high school student in a sophomore American History class knows there are many precedents for the Supreme Court making laws passed by Congress null and void. As a matter of fact, in the system of government tradition has delivered to us overturning laws as unconstitutional has been an important power of the Supreme Court for more than two hundred years.

And if the primary content of the President’s statement isn’t strange enough the supporting information is wrong. Obamacare wasn’t passed by a strong majority in Congress. In reality the final vote in the House vote was 220 to 215. Every Republican and thirty four Democrats voted against the law. In the Senate the vote was sixty Democrats and Independents voting for and thirty nine Republicans voting against. The Democrats, even though they controlled both houses of Congress knew they would lose enough of their own members that it was going to be a close vote so they moved the bill outside the regular order of business and used a legislative maneuver known as reconciliation to avoid giving the Republicans the opportunity to filibuster the law.

What is the context of these current pressure tactics being used by the executive branch on the judicial branch?

Soon after taking office in 1829, President Andrew Jackson a long time Indian fighter spearheaded one of his signature pieces of legislation through Congress: the Indian Removal Act. This act gave the president the power to negotiate treaties with the various tribes which still existed in America East of the Mississippi. These treaties, often accepted either under duress or under questionable circumstances seized the lands of the tribes and forced them to move West to the Indian Territory in what is today Oklahoma. The time for fighting had passed and most of the tribes quietly left their ancestral lands.

One tribe decided to try another route. The Cherokee Nation had adopted the ways of the Europeans. They devised their own written language and wrote their own Constitution. They had their own plantations, printing presses, and businesses. They also had their own lawyers and instead of going on the warpath as their ancestors had done they went to court to fight the orders from the State of Georgia which dispossessed them of their land.

In two cases; Cherokee Nation v. Georgia (1831) and Worcester v. Georgia (1832), the United States Supreme Court considered whether or not it had the power to enforce the rights of Native American nations in disputes between them and the states. In Cherokee Nation v. Georgia, the Court ruled that it lacked jurisdiction to review the claims of any Indian nation within the United States. In Worcester v. Georgia, the Court ruled that only the Federal Government not the states, had the power to regulate the Indian nations.

This week the eyes of everyone concerned with the continuance of limited government were riveted on the Supreme Court. For three days the nine Justices heard arguments by the Solicitor General in favor of ruling the individual mandate which is the keystone of Obamacare constitutional. They also heard the representatives of twenty-six States argue that it is unconstitutional. This is the first time that a majority of the States have combined to protest an act of Congress. Now We the People must wait while the fate of our Republic is decided in secret by our Black Robed rulers from whom there is no appeal.

How did we get here?

We elect our representatives and they enact laws which are supposed to be within the framework of the Constitution. It should be the expectation of Americans that those we entrust with our delegated sovereignty would craft laws in accordance with our wishes as expressed in the founding document of our government. These laws should reflect our desire for limited government, personal liberty, and economic freedom.
And the unicorns danced with the elves until the cow jumped over the moon.

The perpetually re-elected who control the two houses of our legislature make law with no regard for the limits, the spirit, or the letter of our Constitution. In this case they have decreed not participating in Commerce is commerce, and that a penalty is not a tax, that is a tax, and then isn’t again. After years of stepping so far over the line they have forgotten there was a line. The Party of Power has finally legislated us to the point of no return. If the court of last resort gives this power grab the green light what limits are left?

Since the law was passed over the overwhelming rejection of the voters its validation would cement the dictatorship of the Party in the transformation of America from what we have known into what we would never choose. The Court appears to be our last line of defense. But where does the Supreme Court get its power?

The Supreme Court is principally occupied in a task that has no basis in the Constitution. The nine justices spend their time judging what is constitutional and what isn’t through a process known as judicial review. However, when the delegates of the thirteen original States drafted the Constitution they decided after much debate not to delegate such a power to the judicial branch or any other branch of the new Federal Government.

If the Constitution doesn’t give this power to the Court how did they get it? The surprising answer is that they assumed it unto themselves, and since no one stopped them they just kept doing it. The process began in 1794 when for the First time they declared an act of Congress unconstitutional. Then in 1803 they used a minor case Marbury v Madison to outline their justification for the process. Since that time the belief that the Supreme Court is the ultimate judge of the constitutionality of anything and everything has become such a cornerstone of the American System that the average person erroneously believes the power was granted in the Constitution. Thus the first power grab has become our last defense against what could be the final power grab.

This weekly column, which I have been privileged to submit for your consideration for the past three years, elicits many comments and questions. The most common of which can be summed up as, “I agree with your analysis, appreciate the Historical context, but how about some practical suggestions.”

If you are one of the many who have sent me those emails, posted those replies, made those phone calls, or asked me in person this column is for you.

To fully address these questions we have to look at two levels: the macro and the micro. We need practical suggestions for the very large and the very small. We need practical suggestions for the societal and cultural level and the personal level.

First of all we need some historical context for our current situation. In some ways we are unique, we are America after all. And in some ways what is happening to us has happened many times before. As I have often said in these columns if History doesn’t actually repeat itself it does rhyme.

The French Revolution occurred between 1787 and 1799. It was the first to try to replicate the phenomenon of the American Revolution which overthrew the age old tyranny of divine right kings and landed aristocracy replacing it with a federal republic operating on democratic principles based upon limited government, personal liberty, and economic freedom.

The American Revolution inspired the French to believe they too could break free of the chains and breathe the fresh air of freedom. However, it lost something in the translation. Perhaps because the French didn’t have the centuries long tradition of limited self-government and human rights which had grown up in England since the Magna Carta had been forced on a reluctant King John in 1215. Perhaps it was because the French had endured centuries of the cruelest servitude under the most absolute of absolute monarchs.

Whatever the reason once the French broke free of the cultural, societal, and personal restraint of the Old Regime which had persecuted and exploited them for so long the French people sought to exact revenge. They sought to cut the former ruling class out of society and while they were at it establish a completely new regime in its place. The French, always famous for philosophers, had produced one who had a tremendous influence on the thinking of the Founders of our country and the Framers of the Constitution: Jean-Jacques Rousseau.

However, Rousseau had two sides. On one he eloquently expressed the idea that government was established upon a social contract between the rulers and the ruled and that to have any legitimacy government must base itself upon the consent of the governed. Thus empowering the governed to decide when that contract has been violated and giving them a philosophical basis for change. Our forefathers based their work upon this side.

On the other side, Rousseau argued against private property. And that it is the role of the state to impose freedom, equality, and justice for all within the state regardless of the view of the majority.

Under President Obama we doubled-down in Afghanistan? We sent more of our fellow citizens to a long hard slog in a country whose synonym is Quagmire while announcing the eventual date of their withdrawal at the same time. In an unprecedented action Mr. Obama announced our attack as he heralded our retreat in a calculated political decision that has cost lives, squandered treasure and told the Taliban to wait in the wings for the second act.

As our economy was being outsourced, our debt monetized, and our infrastructure crumbled we meekly followed the leader deeper into a thankless nation-building campaign in the Little Bighorn of nations. A nation that is more of a Western construct than an actual nation-state, and the tribes which inhabit this mountainous waste have resisted and foiled every empire from Alexander to Moscow.

There is a fundamental difference between a republic and an empire. Republics are based upon the consent of the governed. Empires are imposed from above. Republics foster a community of equals each with the opportunity to achieve. Empires exalt the ruling class at the expensive of everyone else. Though settled by European kingdoms seeking empires the United States wasn’t founded to become an empire. Individuals fought against the empire building tyrants until their determination and resolve won independence against all odds.

It is time to re-think America’s international military commitments. It is our world wide web of foreign commitments and entanglements that has been used by the self-righteous Progressives and their cronies in the military industrial complex in their efforts to transform the United States from republic to empire. They have used the never ending wars for peace to regiment our society and create a centrally-planned bureaucratic mega government.

George Washington warned us to avoid foreign entanglements telling us, “It is our true policy to steer clear of permanent alliances with any portion of the foreign world…” He warned us about allowing the military to grow to big, “Over grown military establishments are under any form of government inauspicious to liberty, and are to be regarded as particularly hostile to republican liberty.”

Thomas Jefferson outlined the essential principles of our government which included this advice concerning foreign affairs, “peace, commerce, and honest friendship with all nations entangling alliances with none.”

For the first 100 years of our existence we followed Washington’s great rule, “The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible.”

The temptation to empire captured the American imagination in the 1890s: the beginning of the Progressive Era. This was a time when Europe was rushing to gobble up the last places open for colonization or carving up those areas unsuited for colonies into spheres of influence.

Under President McKinley the United States entered the scramble for colonies in the Spanish-American War winning Puerto Pico and the Philippines as well as a long war against those in the Philippines who wanted the independence they had expected when liberated from the Spanish Empire by the American Republic.