Adapted from the book, Why Government Doesn’t Work
America once was unique in all the history of the world.
It wasn’t its natural resources, the character of its people, or its beauty that made it special. Other countries could boast of similar things.
The essence of America was an abundance of something rarely found in other countries: freedom from government.
For centuries the peoples of the world had been ruled by kings, queens, tsars, shahs, ministers, satraps, chiefs, rajahs, emirs, warlords, parliaments, senates, legislatures, assemblies, gangs, and freebooters. They made extravagant demands upon their subjects.
An individual couldn’t refuse their demands. The rulers could take from him whatever they wanted; command him to work, fight, or kneel; and forbid him to do anything that displeased them. The government was all-powerful.
America’s Founding Fathers established something unprecedented – the first government strictly limited by a written Constitution to a short list of activities. The federal government was authorized to do only what was specified in the Constitution. Anything else was to be done by state or local governments, by the people themselves acting outside government, or not at all.
The Constitution didn’t limit what citizens could do. Its only purpose was to spell out – enumerate – what was permissible for the federal government to do. And anything not authorized was forbidden to the federal government.
This ideal of limited government was sometimes violated – but violations were the exception rather than the rule. And many of the violations that did occur were reversed later, because it was understood that the Constitution limited the role of the federal government.
For example, in January 1794 when Congress considered a bill appropriating $15,000 for French refugees, Congressman James Madison voted against it, saying he
could not undertake to lay [my] finger on that article in the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents. And if they once broke the line laid down before them, for the direction of their conduct, it was impossible to say to what lengths they might go, or to what extremities this practice might be carried.
To what extremities indeed.
The Bill of Rights
Some state governments had hesitated to ratify the Constitution – fearing that it didn’t make entirely clear how limited the federal government’s role was to be. Many people were afraid Congress might meddle in the areas that belonged exclusively to the states or private citizens.
And so the Bill of Rights was added to forestall any misunderstanding. It listed specific prohibitions against the federal government – such as forbidding it to pass laws suppressing the freedom to voice opinions in public or in print.
The Ninth and Tenth amendments defined the essence of limited government:
IX. The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
X. The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
In other words, the United States government could do only what was specified in the Constitution. All the rest of life’s activities – charity, education, regulation of business, crime control, and so on – were to be handled by state governments or by the people on their own.
Thus began a momentous experiment to tame the monster that had enslaved so many people all over the world over all the centuries. And it was very clear to the fathers of the Constitution that government is a monster. As George Washington is reputed to have said:
Government is not reason; it is not eloquence. It is force. Like fire it is a dangerous servant and a fearful master.
The founders felt that some government was necessary, since no one knew a better way to provide for the common defense and to insure domestic tranquility. But they knew how dangerous it was to give such an agency the power to tax, to forbid, and to compel obedience.
The Constitution was the most successful attempt ever made to keep the dangerous servant from becoming the fearful master. And it made possible the freest, most prosperous country in all history.
People everywhere envied Americans for the liberty they enjoyed. And they flocked to this country from the four corners of the earth.
America rightly became known as the land of the free.
The Constitution authorized the federal government to use coercion for certain purposes – chiefly to deal with foreign governments, to prosecute wars, to assure a “republican government” in each state, to settle disputes among states, and to collect the taxes needed for those functions. But because government is coercion, and because coercion tends to breed coercion, the government tends to grow – both in size and reach.
Most of the time, the growth has been gradual, almost imperceptible. Year by year, the federal government has taken a little more of our resources and a little more of our freedom – but too little at a time to provoke much resistance, or even much notice. Over the years, though, all the petty thefts have added up to grand larceny.
Even this, however, has been dwarfed by the wholesale trashing of freedom that occurred during four fateful periods in American history, when the politicians simply pushed aside the limitations the Founders had devised for the federal government.
1. THE CIVIL WAR, 1861-1865
The first was the Civil War.
Until then, the federal government had made brief, self-conscious excursions outside its Constitutional limits. But upon the secession of the Confederate states, the federal government began to disregard the limits without pause. The concept of individual rights was thrown out, and U.S. citizens became “resources” for the prosecution of the Civil War.
The government drafted soldiers for the first time, jailed people who spoke out against the war, imprisoned citizens without trial, flooded the country with paper money, and levied an income tax – all of which violated the Constitution.
By 1865 the federal government’s budget was 20 times that of 1860. After the war, the budget shrank year by year until 1878. But in 1878 the government was still spending 2½ times as much per person as it had in 1860.
Although many of the war’s impositions were repealed afterward, the precedent had been set: the federal government may do whatever it finds necessary. Its needs overrule the Constitution.
The federal government may have freed the slaves, but it had become everyone’s master.
2. THE PROGRESSIVE ERA, 1900-1918
During the first two decades of the 20th century, politicians established the principle that the federal government should actively intervene to solve apparent social problems and to direct the economy.
The federal government had begun regulating railroads in the late 1800s. In the first decade of the new century it expanded its reach to oil companies, steel companies, and any enterprise it considered critical to the economy. The government decided which companies were too big or too successful, and split up some firms whose share of the market it considered too large.
This “trust-busting” hit companies that provided the best service and lowest prices for their customers. It also let established companies use the government to keep more efficient competitors out of their markets.
And it brought us the Federal Trade Commission and the Interstate Commerce Commission – empowering the federal government to decide what products and services you’re allowed to buy.
The Income Tax
In 1913 the income tax was brought back and became a permanent imposition in our lives. It provided a seemingly unlimited source of funds to finance ever-growing government, and it gave the government an excuse to pry into every aspect of your life.
Perhaps no other instrument so starkly typifies the unrestrained power of today’s government.
The Federal Reserve System
Also in 1913, Congress set up the Federal Reserve System. This agency is supposed to keep the economy growing smoothly by regulating the quantity of money in circulation. Thus it became the government’s job to create prosperity – something coercion can never achieve.
The Federal Reserve was sold to the American people as a way to eliminate inflation, recession, and banking panics. Instead, it presided over America’s worst depression (1929-1941), its biggest banking crisis (1933), and its longest sustained inflation (starting in 1955 and still going).
The last year in which the Consumer Price Index didn’t rise was 1954. We have had inflation in 66 of the 80 years since the inception of the Federal Reserve, while there were only 20 years of inflation in the 80 years preceding the Federal Reserve.
As the graph above shows, when the Federal Reserve System was established in 1913, consumer prices were roughly a third lower than they had been in 1800. But 82 years of federal inflation-fighting have caused prices to be 15 times what they were in 1913.
Direct Election of Senators
Further in 1913, the Constitution was amended to require U.S. Senators to be elected by popular vote. The Founders had arranged for Senators to be chosen by, and beholden to, state governments – and hence inclined to vote against any federal intrusion upon the power of the states. This was part of the elaborate system of checks and balances designed to keep any element of the government from becoming too powerful.
The passage of the 17th amendment freed Senators to drain power from the States and concentrate it in Washington – so that individuals and companies must court the Senators to obtain favors or to seek exemptions from tyranny.
World War I
In 1917 the United States entered World War I. The government used the war to bring back the draft, impose food rationing, raise the maximum income tax rate to 77%, and interfere with private lives in many other ways.
While many of the impositions were lifted when the war ended, the maximum tax rate never again fell below 24% – a level not even the most fervent income-tax advocate of 1913 had hoped for.
The long-term consequences of World War I were even more tragic. By entering the European war, in which the U.S. had no particular stake, the politicians threw out America’s traditional neutrality. They replaced it with a policy that made every foreign conflict America’s concern – no matter what the cost in American wealth, freedom, and lives.
The cost in lives has run into the millions. The cost in dollars has run into the trillions. The cost in freedom has been immeasurable.
The Progressive Era has been hailed by historians as the time when America came of age. In truth, it was the time when America sacrificed liberty, privacy, stability, and neutrality to be more like the Old-World countries immigrants to America were fleeing.
3. THE NEW DEAL, 1929-1945
In the late 1920s the Federal Reserve System put new money into circulation in the U.S. as part of a misguided scheme to bail the British government out of its fiscal problems. When the monetary increase threatened to bring on price inflation, the Federal Reserve stomped on the brakes and pulled money out of circulation – bringing on the crash of 1929 and starting a recession.
The Federal Reserve persisted in its policy, allowing the nation’s money supply to shrink by 30% between 1929 and 1933 – an unprecedented implosion that devastated the American economy.
Meanwhile, President Herbert Hoover mobilized every avenue of government compulsion to fight the recession. In just four years government spending rose by 65% – to $4.8 billion from $2.9 billion. Income taxes were raised to a range of 4% to 63%, from a span of only 1% to 24%.
The government pressured large companies to keep prices and wages high, even though the general price level was in the process of falling by 27% from 1929 to 1933. The artificially high prices and wages produced a glut of unsold products and mass unemployment.
Previous recessions lasted only a year or so, because the government always stood aside and let the economy recover its balance. But this time, government actively intruded – and transformed the recession into a prolonged depression.
In running for president, Franklin Roosevelt denounced the Hoover administration’s misguided policies – saying the government had become too big and too intrusive. He pledged to cut both taxes and the size of government by 25%.
The Second New Deal
But once elected, President Roosevelt expanded the Hoover policies – tripling the size of government within eight years.
With the aid of a compliant Congress, his administration transformed government into the arbiter of nearly all major economic decisions – investigating and regulating every corner of American life and business. It forced farmers to destroy crops, tried to set minimum prices on everything, and set loose new commissions, agencies, and boards on every industry in the land.
The maximum income tax rate rose to 94%. The New Deal also imposed new taxes on cars, tires, phone calls, bank transactions, and a host of other goods and services – taxes you still pay today.
Although historians at government-supported institutions love to say that Franklin Roosevelt saved the country from economic ruin, few mention that in 1939 unemployment was worse than in 1931 and business still hadn’t recovered from 10-year-old shocks. And since Americans then had to struggle with the shortages and inflation of World War II, it was the late 1940s (almost two decades after the 1929 crash) before living standards returned to normal.
Still Paying for It Today
The New Deal policies of both the Hoover and Roosevelt administrations converted a simple recession into the worst economic disaster in American history.
Even more far-reaching, the disaster allowed government to expand its control over our lives. Since the 1930s, there is no area of American life that is considered off limits to the politicians.
Both Democratic and Republican politicians feel obliged to pay homage to Franklin Roosevelt and the New Deal. They ignore the fact that the New Deal was an economic failure. And they fail to recognize the straight line running from the New Deal to today’s meddling government, chronic federal deficits, historically high interest rates, and oppressive taxes.
But, then again, maybe they do understand the connection – and that is why they pay homage to Franklin Roosevelt.
4. THE GREAT SOCIETY, 1961-1975
Although the dismantling diminished our freedoms and prosperity, America survived because the character of the people hadn’t changed. Americans still believed they were individually responsible for their own lives and well-being.
However, it won’t be so easy to survive the devastation wrought by the Great Society programs of the 1960s and early 1970s. For millions of Americans these programs destroyed the belief that you must earn what you enjoy. Instead, the government is now considered responsible for everything any American might need or want. The loss of self-responsibility has led to a terrible increase in crime and illiteracy, and a trashing of most of the values that blessed our civilization.
Until 1960 the federal government had practically nothing to do with education, crime control, or welfare (except for Social Security). But by 1975, the federal government dominated all three areas.
In each case the pattern was the same: The federal government provided financial subsidies to state and local governments – and, once the governments became dependent on the money from Washington, the federal government imposed conditions for continuing to receive it.
Although the money the federal government gives to a community comes from citizens in that same community, routing it through Washington allows the Feds to set the rules. Thus the federal government began setting standards for school curricula, school lunches, welfare eligibility, and police procedures and budgets.
By taking control away from communities, the federal government made schools, police, and welfare systems even more remote from the people who pay for them and rely upon them – and made them even more susceptible to fraud and graft, and to meddling by social reformers.
Welfare is a good example.
Once upon a time, before the 1960s, a person who needed help got it by appealing to a local charity (such as the Salvation Army) or to the town government. The downtrodden individual had to explain how he got into trouble and how he intended to work his way out of it. He was monitored closely to assure that he was telling the truth and that he stuck to his plan to get back on his feet. And he knew that the money he received came from the pockets of his neighbors. Federal welfare, however, requires nothing more ambitious, energetic, or embarrassing than filling out a form.
In former days, you knew that you had to work for what you got. Today you can get a regular check from the federal government provided you’re willing to undertake the arduous task of walking to your mail box once a month.
The same is true for all sorts of government subsidies. You don’t have to be broke or hard up. With minimal qualifications, you can just sign up and receive:
Subsidized medical insurance
Disaster relief, and
Thousands of other giveaways.
Once provided, these benefits become “rights,” and anyone who suggests eliminating them is denounced as mean and heartless. It’s assumed that without farm subsidies all small farmers would go bankrupt and the country would starve; without federal loans no one could afford to go to college; and without Medicare no one would live past 65. No one asks how the country survived so well before these things became government’s responsibility.
The worst effect of these programs is to separate acts from consequences. They teach people to be careless. Since you don’t have to pay for your own mistakes, you have no reason to exercise caution, restraint, or forethought. Whatever goes wrong, the government will take care of you.
So it should be no surprise that Americans save less than they once did, exercise less caution in their business and personal dealings, seem less able to support themselves, and are more dependent on government to survive. This, of course, provides politicians with an excuse for more laws and subsidies.
America has been transformed from the land of enterprise, initiative, and self-reliance into the land of entitlements and dependency.
The transformation has devastated our civilization – bringing on terrifying crime rates, the abandonment of educational standards, an epidemic of teenage pregnancies, and the birth of a permanent class of citizens dependent upon the state for support.
Many of the social problems that worry us so much today were virtually unknown before the federal takeovers of the 1960s:
Crime rates were a fraction of what they are today. Gangs didn’t terrorize adults on the street or students in school. No one had seen drive-by shootings since Prohibition ended in 1933.
Children graduated from high school knowing how to read, write, and add – and knowing a great deal about history, geography, and science. Today many college entrants can’t even read the entrance exam. And many students have been told little more about Christopher Columbus than that he was an angry white male who took out his frustrations on the Indians.
Teenage pregnancies out of wedlock were virtually unknown. In 1950 only one in 79 unmarried teenage girls gave birth to a baby (even before birth-control pills were available). In 1991 the ratio had dropped to one in 22.
Welfare was rarely discussed, because it wasn’t a compelling social issue. “Welfare” as we think of it was a tiny program operated by your city or county government. The truly desperate were helped mostly by private charities who took an interest in seeing that anyone in trouble got out of it as quickly as possible. Today welfare is a national scandal, and few politicians have any idea how to end it.
The escalation of “entitlements” in the 1960s and 1970s has led to the devastation of American cities, the decline of American education, and the deterioration of self-reliance. It has turned America into a battleground on which groups fight for the power to dictate who gets to take what from whom, and who gets to impose the rules dictating how everyone must live.
NO LONGER ANYTHING SPECIAL
The four episodes of rapid government growth destroyed the qualities that had made America unique, and transformed it instead into something like an Old-World nation.
The Civil War changed the federal government into a national government superior to the states and the people.
The Progressive Era established the principle that the government was responsible for the economy, and it produced the foreign policy that has kept us in conflict with one country or another for almost all of the past 80 years.
The New Deal established that no area of American life is off limits to government.
The Great Society destroyed the self-responsibility that made possible the prosperity and freedoms we once took for granted.
A tragic casualty has been the loss of the system of federalism the Founding Fathers designed. That system empowered local governments to set their own rules. Local tyranny existed sometimes, but people could escape it by moving to another state. Today you can escape only by leaving the country.
The four eras transformed America from a free country into a nation of obedient serfs, paper-pushers, victims, whiners, and antagonists. Now we are just another country in which the citizens live at the sufferance of their rulers.
As Joseph Sobran has said, the land of the free has become the land of the government permit.
Since the 1950s government has grown relentlessly. Freedom hasn’t a single victory to its credit, and no champions in politics. Some politicians have fought against new government encroachments, but none has taken the offensive to try to win back any lost liberty.
Liberal politicians keep proposing new programs that further reduce the choices we can make with our money and our lives. Conservative politicians often fight these proposals – objecting that they’re too restricting or too expensive. But each year some of the programs pass despite the objections. And they pass permanently – because even when the conservatives have control of the government, they rarely repeal what they once denounced.
And the conservative politicians have programs of their own. They love anti-crime and national security programs even when they reduce the liberties supposedly guaranteed in the Constitution. Liberal politicians often fight such proposals – condemning them as intolerable invasions of our privacy or our freedom. But some of the programs pass. And they too pass permanently – because even when the liberals have control of the government, they rarely repeal the legislation they once denounced.
Thus each big-government program is tolerated, consolidated, respected, and perpetuated even by its most powerful critics.
Politicians who praise “limited government” really mean government limited to what it is today. If it is larger tomorrow, then “limited government” will mean government limited to what it is tomorrow. They never mean government limited to what the Constitution allows, or to any other fixed level beyond that.
GOVERNMENT IS EVERYWHERE
Today the Bill of Rights is just a quaint piece of parchment that few in Washington take seriously – lest it interfere with government’s power to do what’s right for you:
The 1st Amendment says: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”
But the Supreme Court has ruled that Congress can take any of these rights from you if the government claims to have a “compelling” reason.
The 2nd Amendment says: “the right of the people to keep and bear Arms, shall not be infringed.”
But Congress routinely passes laws that prevent you from defending yourself. Needless to say, the politicians don’t disarm themselves. Members of the Secret Service, the FBI, and other federal agencies charged with protecting politicians are always well armed.
The 4th Amendment says: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated .”
But the federal government can knock down your door, seize your property, and dare you to try to get it back – all in the name of fighting drugs? while the IRS routinely demands to see your private records without ever bothering to get a warrant.
The 5th Amendment says: “nor shall private property be taken for public use, without just compensation.”
But federal regulations render much private property worthless with no compensation to the owners.
The 9th Amendment says: “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
But in truth the only rights you still have are those the politicians haven’t yet bothered to take away. Congress considers every activity of life a fit subject of regulation, and it recognizes no limit on the taxes you must pay.
The 10th Amendment says: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
But, although this says the federal government’s power is limited to just what’s specified in the Constitution, is there a single area of your life that government considers off limits?
We have descended from a nation of limited government, individual liberty, and self-responsibility to a nation at the mercy of its politicians.
Don’t Tread on Government
The politicians don’t tolerate any limits on their ability to “do good.” They refuse to let the Constitution get in their way.
For example, on February 7, 1995, Rep. Melvin Watt (D-NC) proposed adding the following amendment to an anti-crime bill, H.R. 666:
provided that the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated; and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
The House of Representatives voted down the amendment by 303 to 121. The 303 nay-sayers knew they had just voted against the 4th Amendment to the Constitution, but they considered the Constitution to be an interference. Of course, the purpose of the Constitution is to interfere – to prevent politicians, in the heat of a national crusade, from going too far.
For another example, on April 24, 1995, the U.S. Supreme Court – in a rare showing of fidelity to the Constitution – ruled that a federal law prohibiting guns within 1,000 feet of a school was unconstitutional, because the Constitution gives the federal government no authority to legislate such a matter. The President of the United States, instead of accepting the Constitutional principle, immediately vowed to circumvent the ruling and find a way to impose the law anyhow.
Today government at all levels (federal, state, and local) takes 47% of the nation’s income. You probably haven’t noticed that government’s share is this large, because you don’t pay that much directly in income tax. But 47% of your earnings are confiscated nonetheless:
Part of it is taken from you in federal income tax.
More is taken in Social Security taxes.
Still more is taken in other federal taxes – excise taxes, gasoline taxes, tariffs, and so on.
And still more is taken in state and local taxes on income, sales, and property.
You pay more than you should for products and services because the companies who make, transport, and sell these things pay corporate income taxes and excise taxes.
You receive less than you earn because your employer must pay his share of Social Security for you, and pay other taxes that reduce the money available to pay you.
All these taxes together total roughly 47% of your income.
How free are you when government takes 47% of your earnings?
As recently as 1950, government’s take was only 28%. In 1926, it was only 14%. In 1916, just 7%. And at the beginning of the republic, undoubtedly less than 3% was confiscated by government.
But now you pay taxes on the water and electricity you use, the things you buy in stores, luxury items, necessities, imported goods, gasoline, telephone calls, baby-sitting, airline tickets, snack foods, investment transactions, alcohol, cigarettes, property, gifts, legacies, cable TV, amusements, employment, fuel oil, motor oil, cars, and thousands of other things.
Running Your Life
In addition to the money it takes from you, government regulates what you can buy and sell – and whether you can even go into business. Companies must file endless forms and adhere to thousands of regulations – all of which make it harder for them to provide what you want, in the form you want to receive it, at a price you’re willing to pay.
The government even dictates the terms of your job – and deprives you of income you could be receiving. Your employer can spend only so much money to pay for what you do. When the government imposes expensive work rules, the money to obey them comes out of what the employer is willing to pay you.
For example, if the government says your employer must provide “family leave,” the cost reduces what he can pay you. So instead of receiving what you’ve earned, you get only what’s left after your employer has paid all the costs government has imposed.
By most estimates, complying with regulations costs companies and individuals at least 10% of everything we earn. We pay that 10% in the form of higher prices and lower incomes.
Total Cost of Government
Adding the cost of taxes and regulation together, government is soaking up 57% of your economic life.
It means you work 4½ hours out of every 8-hour day for the government, and only 3½ hours for yourself and your family. Or, put another way, you work until around July 27 of each year (6 months, 27 days) for the government, and only the remaining 5 months and 4 days for yourself.
If this is freedom, at what level of confiscation are we no longer free?
What We Get in Return
Of course, you get something in return for all the taxes and regulation. But what is it? Safe cities? Good schooling for your children? Safe and uncongested roads? A harmonious society? A nation secure from attack by terrorists or foreign missiles?
Couldn’t you spend that 57% more wisely than government does? Couldn’t private companies provide better services at much lower cost than the government’s post office, its “insurance” schemes, and its so-called protective regulation?
WE MUST TURN THIS AROUND
America is no longer the land of the free. And if we don’t soon restore individual liberty in America, we may no longer have the chance. The larger government gets, the more power it has to forbid any change in the system – and the more its waste of our resources reduces the chance of getting out of this without national bankruptcy.
Only when we undo the changes made in the four eras of rapid government growth I’ve described will America once again be the “land of the free.”
Pundits like to say we can’t go back – that we must live in the present. But the question isn’t whether we will live in the present or the past; it is whether we will live free or as wards of the state.
Is it modern or progressive to let government confiscate 47% of the national income – a fatter share than the feudal lords of the Middle Ages demanded of their vassals?
Is it modern to let government enter our homes and businesses at will – in the same way King George’s Redcoats violated the privacy of the American colonists?
We have to reverse the tremendous growth in government. It isn’t enough to slow its growth or even freeze government at current levels. A moratorium on new federal regulations isn’t the answer, nor is a 7-year plan to balance the budget. Any of these timid measures could be repealed by the next Congress. More important, they leave intact the awesome, oppressive structure already there – the government that is suffocating America with regulation and taxes.
So we must slash government drastically – and we need to restore the limits set in the Constitution. That won’t guarantee freedom forever. But it will at least bind government down by the chains of the Constitution for a generation or two – while we figure out how to protect our freedoms for good.
We must revive the American Republic – and we must do it soon. We have already fallen into the gray world of half-freedoms and stagnant living standards the rest of the world takes for granted. If we continue along this path, it will inevitably become worse: at some point the government will no longer be able to keep its promises – leaving us only two choices:
The repudiation of promises made to Social Security recipients and others who have become dependent on the government; or
Tax rates of 50%, 60%, or more to pay for all the IOUs the government has signed on your behalf.
These are grim choices. But they will be the only choices if something isn’t done soon to stop the madness.