Tag Archives: United States

The State of the Union: The Path to Tyranny continues

An essay this weekend at Politico looks at the similarities between the fall of the Roman Republic and the United States today. I was asked by a friend to give my opinion.

The parallels between the fall of the Roman republic and our country are so numerous. Decline of virtue. Loosening morals. Redistribution of wealth. Multiplicity and mutability of laws. Ignorance and disdain for religion and the Constitution (way of the elders). Debt and monetary devaluation. Panem et circenses.

In The Path To Tyranny (2010), I wrote, “As of 2009, the federal debt held by the public was 55 percent of GDP,[1080] a large but manageable amount. The debt was just 41 percent at the end of 2008 and the 40-year average is 36 percent. The problem though lies in the future, not the present. By 2035, the debt is projected to be between 79 and 181 percent of GDP and, by 2080, it is predicted to be between 283 and 716 percent of GDP. The United States is clearly on the road to bankruptcy if the situation does not improve. Given that the deterioration intensifies just after 2020, we have just ten years to fix our government. Ten years may sound like a long time, but barring a real revolution, one with guns and violence, governments rarely change that quickly. It has taken the progressives and modern liberals a hundred years to produce our large government, but we have just one-tenth the time to reverse the trend. Not just stop new spending programs, but actually reduce the current commitments of the U.S. government.”

Unfortunately, we have kicked the can down the road for the last four years. If anything, the fiscal problems have gotten worse, not better, and the political situation has certainly gotten worse.

What scared me most, short term, is that this economic recovery officially started five years ago. As far as recoveries go, this one is a little long in the tooth. Some time, we will experience another recession. Deficits will go from the current $700-$800 million up to $2 trillion or so. Starting from such a weak economy to begin with, it this recession hits sooner rather than later, the lower and middle classes will be hit hard and will demand action from the government. It is in the throes of such economic despair and political incompetence that power accumulates in a single hand. I truly believe we are just one recession away from seeing a Caesar in our country. The apparatus is already in place (executive orders, non-enforcement of the law, NSA spying, etc.). One good crisis is all that is needed.

Fortunately, I don’t see anyone on the horizon with the charisma and skills to be this Caesar. Caesar was a great man, a great warrior, great politician, and great speaker. Obama is none of those, though some think he speaks well. If he had been competent, he could have done even more damage. God bless incompetence. Hillary Clinton is no Caesar either. Fortunately, I don’t see one, but then I am not predicting a potential rise of a new Caesar in the immediate future. It won’t happen until after the next recession has run a number of years. Think of the German economic misery of the 1920s that gave rise to Hitler. It takes many years before the people give up hope and give up their freedoms. As I wrote four years ago, I am looking for such an event to take place around 2020, if we don’t fix our problems, which so far we have only made worse.

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Guns don’t kill people, smoking does.

With all the talk about further gun control, a simple look at the frequency of firearm deaths compared to another killer is in order.

There are approximately 75 million gun owners in this country. At the same time, there are about 45 million smokers.

Self-inflicted gun deaths (i.e., suicides using guns) total approximately 19,000 suicides per year. Meanwhile, self-inflicted smoking deaths total 443,000. Let’s see how this looks as a proportion of gun owners/smokers.

Self-inflicted firearm/gun deaths vs. smoking deaths

Self-inflicted firearm/gun deaths vs. smoking deaths

But who really cares that smoking is 38 times more likely to kill the smoker than a gun is to kill its owner (through suicide)? If smokers want to kill themselves, so what? The real issue is how many other people are killed by these items. A madman with a gun killing 30 people is clearly more dangerous than a cigarette. Or so we are told…

In the United States, approximately 11,000 people are killed each year in firearm-related homicides. Meanwhile, less than 1,000 are accidentally killed by guns each year. In contrast, over 49,000 people are killed by second-hand smoke each year.

Again, a simple chart of deaths per million of gun owners and smokers is quite revealing.

Second-hand gun/firearm deaths vs. second-hand smoking deaths

Second-hand gun/firearm deaths vs. second-hand smoking deaths

As the above results show, the smoker not only is 38 times more likely to kill himself than a gun owner, he is also 7 times more likely to kill someone else.

I propose universal smoker registration. I further propose limits on how many cigarettes and cigars one can buy, limits on the nicotine content of cigarettes and cigars, hefty fines and lengthy prison sentences for anyone who smokes in or near smoke-free zones, and expansion of smoke free zones to include any area in which non-smokers may be. We have to protect our children from these dangerous, homicidal killers known as smokers.

Alexander Hamilton memorial events: July 13–The Museum of the City of New York.

On July 11, 1804, Hamilton had his famous duel with Aaron Burr. On July 12, Hamilton died. His funeral was on the 14th. Nothing occurred on July 13, so The Alexander Hamilton Awareness Society had no official events on July 13, 2012. Nevertheless, like Hamilton’s belief in a “steady and vigorous exertion,” we did not let the day go to waste.  Rand Scholet, President of The Alexander Hamilton Awareness Society,  and Mariana Oller, New England Chapter President, arranged a couple of private events for the Hamilton experts who traveled to New York for the week.

On the morning of July 13, we went to the Museum of the City of New York, where they had a temporary exhibit (it runs until October 21) about how New York City was and still is the Capital of Capital.

Credit: Capital of Capital: New York’s Banks and the Creation of a Global Economy at the Museum of the City of New York, 1220 Fifth Avenue at 104th Street, closing October 21st.

The exhibit was extremely well done. The exhibit was chronological and demonstrated the growth of the financial industry in New York and how it helped spark the economic development of the United States and the world.

Before heading to some photos of the exhibition, I would like to thank our fantastic tour guide, Daniel London, whose knowledge and enthusiasm for New York history added tremendously to the great exhibition.

Now, some photos of the exhibition.

One unique piece of history included in this exhibition is a “Savings Bank Machine” from 1922. This could be considered one of the earliest Automated Teller Machines (ATM) in history.

You can’t talk of the financial or economic history of New York City and the United States without also talking about Alexander Hamilton. As The Alexander Hamilton Awareness Society, that’s why we went in the first place. To our great surprise and delight, the Museum of the City of New York has perhaps the greatest portrait of Alexander Hamilton ever painted. This John Trumbull 1804 portrait is so bright and colorful that it looks like it was painted yesterday. I hope my photos do it justice.

Credit: 71.31.3 Alexander Hamilton, ca. 1804-1808, oil on canvas, by John Trumbull (1750-1831)

Additionally, there is a statue of Hamilton out in front of the museum.

Thanks again to The Alexander Hamilton Awareness Society and the Museum of the City of New York for providing us with a great experience.

Supreme Court approves of unlimited taxes

Logic holds that taxes cannot exceed the value of the thing being taxed. Income taxes cannot exceed 100%, though FDR wanted them to. Sales taxes can never exceed 100% because the value of the good must make up a certain percentage of the cost. Property taxes can never exceed the value of the property because the value of the property would immediately fall to zero and there would be nothing to tax.

But with today’s Supreme Court ruling on Obamacare, in which non-activity is being taxed, there is no limit to the taxes that could, in theory, be imposed. The government could, if it wanted to, implement a tax of whatever it wants, let’s say one million dollars per person, for not buying health insurance, or not buying a house, or not buying something else.

Alexander Hamilton argued that the Constitution should not limit the power to tax or the power to spend. He wrote in his Report on Manufactures:

The power to raise money is plenary and indefinite; and the objects to which it may be appropriated are no less comprehensive than the payment of the public debts, and the providing for the common defence and general welfare. The terms “general welfare” were doubtless intended to signify more than was expressed or imported in those which preceded; otherwise numerous exigencies incident to the affairs of a nation would have been left without a provision. The phrase is as comprehensive as any that could have been used.*

Nevertheless, he and all the other Founding Fathers understood that there are natural limits to taxation, as Alexander Hamilton explained in Federalist No. 21:

It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

Unlike Hamilton’s and the Founder’s system of relying primarily but not exclusively on consumption taxes, we now have a system wherein a tax can exceed a person’s income or net worth and be totally “constitutional.” The Obamacare penalty, I mean tax, can be set at whatever dollar level the politicians choose regardless of income or wealth. Or they can enact other similar taxes for not purchasing a given good or service. They have paved the way for unlimited taxes .

* For those who argue that this gives the government unlimited power, Hamilton added:

A power to appropriate money with this latitude which is granted too in express terms would not carry a power to do any other thing, not authorised in the constitution, either expressly or by fair implication.

– Michael E. Newton is the author of the highly acclaimed The Path to Tyranny: A History of Free Society’s Descent into Tyranny and Angry Mobs and Founding Fathers: The Fight for Control of the American Revolution. He is currently writing a book about Alexander Hamilton.

A proposal to satisfy Warren Buffett and raise his taxes

I’m tired of hearing Warren Buffett complain about not paying enough in taxes.

I propose a 10% property tax on all Americans with personal wealth in excess of $40 billion. This should bring the government about $10.5 billion in new revenue; $4.4 billion from Warren Buffett and $6.1 billion from Bill Gates.

What say you Mr. Buffett? Willing to put your money where your mouth is?

The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.

Did you know? The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.

UPDATE: Europe is paying for its past excesses: European interest payments as % of GDP.

With news out today of a weak German bond auction and troubles with the Dexia bailout, I thought it time to update my table of European interest payments as % of GDP. But first, the news:

  • Germany auctioned 6 billion euros of 10-year government bonds, but attracted just 3.889 billion euros of bids, a bid-to-cover ratio of just 0.65. Six of the last eight bond auctions have seen bids below supply. In these cases, the Bundesbank has bought the remaining debt. German yields are rising as a result. Germany’s 2-year yield is up 0.06% to 0.44% and 10-year yield is up 0.13% to 2.12%.
  • Belgian yields are soaring to new highs on reports that the bailout of Dexia was failing. Belgium’s two-year yield rose 0.69% to 4.98% and 10-year yield increased 0.40% to 5.47%. In France, also a partner to the Dexia bailout, the 2-year yield rose 0.14% to 1.86% and the 10-year yield jumped 0.15% to 3.68%.
  • No news other than the above is pushing up rates across most of Europe. Greece’s 1-year yield skyrocketed 38.6% to 306.7%. The 2-year rate jumped 4.6% to 117.9% and the 10-year year yield rose 0.18% to 29.04%. All are record highs. Over in Italy, 2-year yields rose 0.17% to 7.15% and 10-year yields increased 0.15% to 6.97%.

So now, let’s see an updated table of where Europe stands in its ability to pay the interest on its debts.

 

2-year interest rate

Debt-to-GDP

Interest payment %age of GDP

Change in Interest payment

Greece

117.88%

144.9%

170.8%

+14.4%

Portugal

14.62%

83.2%

12.2%

-3.1%

Italy

7.11%

118.1%

8.4%

-0.1%

Ireland

9.96%

64.8%

6.5%

+0.5%

Belgium

4.94%

96.6%

4.8%

+1.9%

Spain

5.82%

63.4%

3.7%

+0.8%

France

1.88%

83.5%

1.6%

+0.5%

Germany

0.45%

78.8%

0.4%

+0.1%

Great Britain

0.47%

62.6%

0.3%

———

United States

0.26%

99.7%

0.3%

———

As you can see on the above table, only Portugal had a significant decrease in interest payments going forward. In contrast, Greece, Ireland, Belgium, Spain, and France all say significant increases. Whereas previously, only four countries had interest going forward exceeding 3 percent of GDP, six nations now face that situation.

Clearly, as anybody watching the stock market decline here knows, the European debt crisis is getting worse and the European leaders have yet to find a solution. Unfortunately, with the budget mess in Washington and debt-to-GDP ratio of about 100%, higher than most of those “risky” European nations, the United States will soon be facing the same problem.