How Excess Spending, Taxation, and Controls are Destroying the USA Economy

David Redick
Activist Post

Politicians, ‘Progressive’ activists, NeoCon Imperialists, and bankers worldwide love to spend money and love the unending supply of it from; 1. taxing ‘other people,’ and 2. fiat paper money (‘face value’ decreed by government) from the central banks that create and control it. With this supply, the politicians never run out of money for their vote-for-me pork; Progressive activists get it for their welfare and subsidy projects; Imperialists for their wars and ‘foreign aid’ bribery; and bankers get cash and credit for the reserves they need to continue lending and for creating bizarre investment schemes. All four view the government and its central bank (ours is the Federal Reserve System, or ‘Fed’) as the unlimited source of funding to finance their projects, and bail them out if they get into trouble.

Of course, most of these handouts come with strings attached, so the federal government gains creeping power over state and personal matters. The controls that should be removed are those that limit choices by consumers, or do favors for political friends. Many controls start as a means to protect citizens from violation of their rights by others, which is a proper function of government. The problems start when controls are enacted to limit people, even when what they do is no harm or threat to others. This is the ‘nanny’ approach, where government manages our lives.

One part of the solution is to make licenses optional for the professions such as medical, law, etc., and trades such as plumbers, hairdressers, etc. Users would be able to choose ‘licensed’ or ‘independent’ based on price and track-record (references) of the product or service provider. This would introduce competition to the license-cartels that now control pricing and limit addition of new members. Prices would drop and service quality and availability would improve.

The ‘Building codes’ and ‘zoning laws’ now written and enforced by counties often impose excessive costs (minimum size of house, special plumbing, wiring, and insulation requirements, etc.)  that decrease availability of ‘affordable housing.’ Adherence to these codes should also be optional for private buildings (houses, garages, barns) where the user-occupants make the choices, but would apply to ‘public’ buildings like apartments, stores, offices, factories where occupants are not part of the construction choices or ownership.

Zoning laws are usually created to separate residential and commercial areas, but cover broad areas which ignore or conflict with local preferences. The laws are often abused by including excess restrictions such as approved ‘colors’ or ‘architectural style’ for houses, etc. These laws should be replaced by voluntary neighborhood associations, which are a means of self-defense. There are many other types of excess controls, but these will be addressed in a future essay. 

Further, this loose, cheap money creates the moral hazard of false confidence that causes businessmen, politicians, and bankers to engage in expensive and risky deals (new factories, wars for oil and bases, welfare, derivatives, no-doc home mortgages, etc.) that they would otherwise avoid, or could not finance. More and bigger wars, spending, and business cycles (bubbles) are the result.

Big spending got a boost in 1913 when the Fed was created (fake money funded two World Wars, VietNam, Medicare, etc.), and another major jump occurred when Nixon cut the dollar’s last ties to gold in 1971; we were running out and we had no limits on the amount of fake money we could create. Being the world’s reserve currency allowed us to do this, since our dollar — even those newly created —  were treated as ‘good as gold.’ Due to this added increase in excess spending and borrowing since 1971, the US has declined from the world’s biggest lender to the biggest borrower, and our growing national debt of $14 trillion is now about equal to our Gross National Product, which all economists agree is dangerous. Our problems are very similar to those that caused the recent crashes in Greece and Ireland, and which have Spain, Portugal and England on the brink. How did we get into this mess? Why do people seek more government when history is so full of economic and human loss due to central control of the economy?

The Start of Our Decline
The USA started a trend toward more government in 1933 when FDR announced the New Deal. The Great Depression was caused by excess ‘stimulus’ money created by the Fed in the 1920s that led to mal-investments and bubbles that burst in 1929 (they always do). In a similar manner, today’s TARP and Quantitative Easing schemes are flooding our economy with money, with little benefit and much harm.

FDR tried to end the depression with government spending by his New Deal. This postured the government for the first time in US history in a paternalistic (nanny) way as funder and manager of the economy, and much of our personal lives. This Paternalism violates the Constitution, which mainly empowers the government to protect our rights, and is the opposite of the personal responsibility and initiative that built our country, thus marking the beginning of our decline.

The New Deal funded the ‘Progressive-Liberal-Socialistic’ (pick a term; they all seek free benefits from big government) projects that continue in various forms today, and are the main cause of our excess, and unsustainable, spending and borrowing at both the State and Federal level. I include in this group the former Liberals who became ‘neo-conservatives’ to push their imperial agenda (they and Pres. Obama ended the Liberal anti-war movement) with the false Conservatives such as Presidents R. Nixon and G. W. Bush. This imperial thinking has led to our chosen role as the World’s Policeman (or bully?) since 1945, and the huge costs of our ‘defense’ equipment, military people, contractors, and bases (about 1,000 in 130 countries), which exceeds the total spending of all other nations combined!

This can be called Empire-USA, and must end. The nations we ‘protect’ with our SOFAs (Status of Forces Agreements), save billions of dollars of ‘defense’ expense by trading some control of their skies, land and economy for our presence. Maybe we should declare the USA as a neutral country like Sweden or Switzerland? As a ‘neutral’ we would only need homeland defense (low cost, similar to Sweden and Switzerland), and would have additional reasons to eliminate the Patriot Act, FISA, TSA, MCA, etc., when the blowback from our overseas invasions, killings, tortures, and meddling ends.

As opposed to false conservatives such as Nixon and both Bushes, a true Conservative or Libertarian  is for low spending and taxes, sound money, adherence to the Constitution (limited government), social freedom, and a non-interventionist foreign policy. Thus, under true Conservative-Libertarian leadership:  a) our Federal spending would be reduced by more than half, and b) The unlimited supply of fake money would end by abolishing the Fed. Money would be limited in quantity, and made of, or backed-by, precious metal (silver and/or gold), the unit of account (price of things) would be by weight of the metal — grams, not dollars, dimes, etc. — with private mints and no central bank or legal-tender laws.

Of course most economists are now in the Liberal (more-government; Keynesian style) camp, especially the grant-seeking academics. As a result of this Progressive dominance during most of the years since 1933, our nation, the US Dollar, and many states are now facing economic collapse.

History is full of the failure of nations and empires. Most fail due to excess government control, high costs, and corruption, plus a decline of personal responsibility in the people due to the moral hazards of laziness and excess consumption caused by subsidized or free goods and services. The USA is on the brink.

Success Stories for Limited Government
Conversely, in the last fifty years we have seen the recovery of countries that suffered economic failure (low Liberty, GDP, and standard of living) due to excess government control, when they  introduced some free-market capitalism as a means to end their decline. Examples are:

1. USSR: In 1985 General Secretary Mikhail Gorbachev introduced Glasnost (openness of government activity) and Peristroika (restructuring, privatization) at the same time. It didn’t work because:  a) the Russian people had lost their desire and skills to take initiative, and b) the corrupt Apparatchiks (former Communists bureaucrats) and Oligarchs (business magnates) grabbed ownership of the industries that were divested, often at fraudulently low prices. The USSR is gone, and surviving Russia still has serious problems with corruption and low productivity, but at least its homeland still exists and is trying to reform.

2. Vietnam: Since we stopped bombing and murdering them in 1975, Vietnam has made a shift from a highly-centralized planned economy to a socialist-oriented market economy which uses limited central control, and much free-enterprise by the people. It is working well, but Liberty remains low.

3. Most of the former Soviet-controlled countries in eastern Europe (Eastern Bloc) have reduced central planning, and increased free-enterprise in various amounts, and the results are good to the extent government control has been reduced. Poland and the Czech Republic have done best because of their leaders and a spirit of initiative in the people. Even Cuba has tried some free-enterprise in a desperate move to avoid collapse.

4. India is a good example of choosing to reform due to the failure of central planning, and prohibition of foreign investment. Following the socialist inspired economy after its 1947 independence from Britain, in 1990 India allowed international competition and foreign investment.  Results have been excellent, but a high percent of the population are still poor. Economists predict that by 2020, India will be among the leading economies of the world.

5. China:  We have seen the People’s Republic of China rise as an economic success after they allowed free-enterprise to create new products, services, and exports. Since the revolution in 1949, the political campaigns led by Mao Zedong, such as the Great Leap Forward and the Cultural Revolution, are blamed for 40 to 70 millions of deaths, causing severe famine and damage to the culture, society and economy of China. After Mao’s death in 1976, his main leftist supporters, led by the Gang of Four, were ousted in a coup, and reformists led by Deng Xiaoping took power in 1978, and started economic reforms based on more free-enterprise, but with considerable central government ownership and control. Civil liberties have remained low, but ‘Free Trade Zones’ have grown to larger areas.  The economic reforms occurred in two stages. The first stage, staring in 1978, involved the decollectivization of agriculture, the opening up of the country to foreign investment, and permission for entrepreneurs to start-up businesses. However, most industry remained state-owned, inefficient and acted as a drag on economic growth. The second stage of reform, in the late 1980s and 1990s, involved the privatization and contracting out of much state-owned industry and the lifting of price controls, protectionist policies, and regulations, although state monopolies in sectors such as banking and petroleum remained. The private sector grew remarkably, accounting for as much as 70 percent of China’s GDP by 2005, a figure larger in comparison to many Western nations. From 1978 to 2010, unprecedented growth occurred, with the economy increasing by 9.5% a year, and China’s economy became the second largest after the United States, and also the world’s largest holder of US debt at about $900 billion (or over $1 trillion when Hong Kong’s holdings are included). The conservative Hu-Wen Administration more heavily regulated and controlled the economy after 2005, reversing some reformist gains. For 2010, China was ranked 140th among 179th countries in Heritage Foundation’s Index of Economic Freedom World Rankings, which is an improvement from the preceding year.

Again, why do some Americans seek more government when history is so full of economic and human loss due to central control of the economy? They will cite the success of some of the above hybrid socialist-oriented market economies (but not all attempts are a big success, depending on leaders and rules, but free markets always bring some improvement), as to why they want it for the USA, but that would include giving-up most of our Liberty, and the present hybrid system is failing all around us!  I say these people want more government because: a) they are delusional ‘do-gooders’ who are ignorant of, or ignore, the past (or think ‘we’ll do it right this time’), and are determined to impose their views of ‘common good’ and ‘shared responsibility’ on others by force of law. They all focus on the good parts, and ignore the bad side-effects. (I suggest private charity), b) they see a benefit in it for themselves (free health care, tuition, tenure, etc.), and/or c) they seek the prestige, power, security, and wealth that comes with being in charge of government programs (even when they know there is much harm being done; employees of the Fed are classic). Shame on all three types!

The problems with the Progressive system are: 1. It is immoral due to using ‘tyranny of the majority’ gang-theft to impose a higher tax rate on certain groups (‘the rich’, inheritors, property owners, corporations, etc.), and they want more even though the top 20% of earners already pay about 80% of our tax revenue. They justify these tax attacks by claiming ‘the rich’ are lucky, more fortunate, etc., while ignoring the fact that most high net-worth people earned their wealth by work, risk, investment, and brains; 2. It damages personal responsibility, social values, and private charity while creating a fragile entitlement-based dependency for both people and business (nurturing ties with friends and family means less when you perceive ‘the government’ as your best friend); and 3. It creates an unfriendly national and state regime of taxes and fees that scare away successful people and firms, and thus causes a net loss in tax revenues. Individuals and firms are moving to other countries. WI, IL, CA and other high-tax-and-spend states are losing people and businesses to low-tax-and-spend states like TX and FL. Texas gained four new Congressional seats in the last census! 

The economic and social problems we face today are clear notice that the day of reckoning has arrived. Taxes, regulations, spending, paternalism, and our empire of bases and meddling worldwide must be reduced, or our economy and social order will collapse, as it has for all previous empires (UK, Spain, USSR, France, etc.) that failed to heed the warnings!

David Redick is a businessman  and author in Madison, WI, and President of Forward-USA

Other Articles by David Redick:
Why Use Gold As Money?
The Impact of Fiat Money as the World’s Reserve Currency
The Cost of Building and Operating Empire (USA)

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