whosez

Governments Consume

Governments don’t produce wealth. If this were not true, why do governments collect taxes? Why don’t they just pay their bills out of the wealth that they have produced? The fact is that all governments, from the very first, consume wealth. Everything that the government does, even if necessary or important, is consumption.

Prior to the 18^th century, all Governments acquired wealth by invasion, conquest, enslaving the conquered, various forms of subjection (serf, vassal, coolie, etc.) and by taxing.

Then some genius philosophers came along and said that men should not be subjects but should be free. That they, not the government, should benefit from their labor. That government power should be limited to that which only the government can do such as protect them from enemies abroad and miscreants at home. That the government should be supported by tariffs and if taxing became necessary, all should be taxed equally. They eschewed democracy and created a Constitutional Republic.

Then in 1913 the Republic was turned into a Democracy, a form of government that our Founding Fathers considered suicidal.

·         Equal taxation died with the 16^th Amendment allowing an income tax. When first proposed, we were told that only the incomes of the wealthiest 1% would be taxed and that the rate would be from 1% to 7%. It has been as high as 90%.

·         The 17^th Amendment attacked State sovereignty by changing senators from appointment by State Legislatures to election by popular vote. This led to more power being concentrated in Washington.

·         And, finally, the Federal Reserve Act was passed which, with other changes, allowed the printing of fiat money. As we print more money, the dollar loses its credibility. In time, like the Soviet ruble, it will have no exchange rate and no value on international money markets.

Today we are 12 trillion dollars in debt* and counting. National wealth production is on a descending trajectory. With increased government activity, wealth consumption is on an ascending trajectory.

Since we no longer teach the basics of economics (we teach a lot of advanced gobbledygook that few understand and is forgotten as soon as finals are over) few people understand how wealth is created. They demand that the government create jobs not understanding that any jobs created by the government just consume more wealth. They believe that we can create wealth with a service economy. They don’t understand that wealth consists of transferable assets. Where do you find services listed on a balance sheet?

Wealth can only be created in the private sector. People growing, building and making things that others will give up time and energy to acquire. Private sector jobs are what we need not jobs created by Washington.

Washington is so busy trying to tell us how to live that they are failing at one of the things that they are supposed to do, as stated above, protect us from miscreants at home. Despite repeated warnings, since 2000 by Harry Markopolos, Washington failed to act to stop Bernie Madoff.

But they are quick to tell us what to grow by consuming wealth in order to provide subsidies to farmers to grow corn for ethanol which resulted in increased costs for food. Then cotton farmers planted corn instead of cotton so as to profit from the subsidies. This resulted in cotton production moving to South America. For those of you that are slow learners, growing cotton produces wealth, subsidizing corn consumes wealth. And ethanol from corn consumes more energy than it produces.

The con artists in Washington tell us that they will pay for their hand outs (including those to farmers and businesses) by taxing big business and the wealthy. They get away with this lie because, due to economic ignorance, we don’t understand that businesses don’t pay taxes the purchasers of their goods and services pay the taxes for them, even when the buyer earns less than $250,000 or is poor. And taxing the wealthy doesn’t work, because they don’t become wealthy by being stupid. When income tax rates on the wealthy reached 90% it became cheaper to pay lawyers and accountants fees than to pay the taxes. If you lower taxes it becomes cheaper to pay the tax than to avoid it. This results in more revenue.

So, they say, we’ll just pass more and more laws to prevent them from avoiding the tax. Well, Washington expanding or creating agencies to enforce these laws just consumes more wealth increasing our debt. And, the more laws you have the more of a police state you become.

That’s why our founder’s made a distinction between “Natural” law and “Man Made” law. Natural law can be thought of as law for which nature extracts a consequence if broken. Freedom is possible when the culture informs the law. When the law informs the culture, you have tyranny. The road to power and tyranny is paved with Man Made Law. That’s the road that we’re on. The question is: How do we get off this road?

American History education has been corrupted. If you want to learn the 28 principles our Founding Fathers used for creating the Constitution and the United States, you will read The 5000Year Leap, by W. Cleon Skousen and go to: www.nccs.net

 

*As of August 10, 2009. Go to: http://www.usdebtclock.org/ for updates.