Government Is Still Just Like an Overtaxing King
These days it takes very little to set me off on yet another rant against the American political class – a proxy for governments the world over.
On occasion, I’m tempted to apologize for these rants. Not so much for the message, but for the frequency.
Unfortunately, when surveying the landscape on which our hovels rest, the king’s castle looms large in the foreground.
I am not an envious person by nature and so wouldn’t begrudge the king his fine trappings, provided they were honestly earned.
But therein lies Ye Olde Rub.
Ever more frequently these days, the drawbridge comes down and a troop of the king’s finest sallies forth to extort from me more than half of my crops, and to read new royal proclamations whose net result is to add to the daily burden of trying to provide sustenance for family and jobs for workers.
Should I protest, say, by grabbing a pitchfork and telling the soldiers to clear off my land, or refuse to fill their wagons with the best of my crops – each leaf of which represents time and investment on my part – they would grab me by the shoulders, drag me to the king’s dungeon, and confiscate my property.
In fact, all that has changed since the days of yore is that the king’s knights tend to no longer rape, as well as pillage.
To be fair, the annals of history contain rare instances of kind and intelligent monarchs, the sort who understand that overburdening the peasants ultimately reduces crop production, leading to unnecessary and unproductive hardship and, in time, even revolt. Though, by temperament, I resist authority of any description, I suppose I could live comfortably under the rule of a fair and benign monarch.
The problem with that notion, of course, is that the corruptive nature of power leads to the near certainty that Baldash the Not So Bad will be followed by Norbit the Nasty.
And all of a sudden, instead of politely requesting I kick in some reasonable percentage of my crops to help maintain a constabulary, courts, and maybe the highways, Norbit’s men are kicking in my doors and we’re back to ox carts full of my produce being confiscated to provide a new set of gold plates and to pay the cost of invading neighboring lands.
While some among you will protest, there is, I would contend, little difference between a degraded monarch and a degraded democracy. In the monarchy, a single leader directs his minions in their ruinous acts; in a democracy, the directions come from professional politicians, as well versed in gaining and keeping power as any royalty of a bygone era. (Sir Robert Byrd held high office in this nation for 57 years.)
Far from being benign, the nation’s leadership, masters at appealing to the self-interest of an unprincipled voter class, have led us to a perilous situation where the fields are being left unplanted.
And an increasing percentage of the citizenry is now muttering angry curses as the king’s men ride by in their shiny black limo-horses.
For a clear understanding of just how poorly ruled this country has been, look no further than the latest budget projections. In his recent article, “America’s Impending Master Class Dictatorship,” Stewart Dougherty does just that, analyzing the government’s wanton spending and penning some notable, and quotable, words on the topic.
One stark and sobering way to frame the crisis is this: if the United States government were to nationalize (in other words, steal) every penny of private wealth accumulated by America’s citizens since the nation’s founding 235 years ago, the government would remain totally bankrupt.
Recently our stalwart CEO Olivier Garret sent over an insider doc from the Republicans’ Study Committee that provides talking points for candidates to use in the unending struggle for control of the castle. While I think the color of flag flapping over the battlements is at this point almost irrelevant, the document contains some interesting data points.
For instance…
- $13.5 Trillion of New Debt: The president’s budget proposes to increase the national debt from today’s level of $12.3 trillion to $25.8 trillion in FY 2020 – an increase of $13.5 trillion or 109.8%. The amount of new debt proposed by this budget is larger than the total amount of debt accumulated by the federal government from 1789 to today (even including the $3.6 trillion of new debt over the last three years).
- $2.8 Trillion Tax Increase: The president’s budget submission increases taxes by $2.8 trillion over ten years. This includes allowing many of the 2001 and 2003 tax cuts to expire at the end of this year, such as allowing the top rate (which is often paid by small businesses) to increase from 35% to 39.6%, and allowing the top capital gains tax rate to return to 20%. These tax increases would take effect in an economy that, according to many economists, will still have an unemployment rate around 10%.
- Mandatory Spending: Increases from last year’s level of $2.1 trillion to $3.4 trillion in 2020, an increase of $1.3 trillion or 59.4%. Within that amount: Medicare spending increases from $425 billion in 2009 to $953 billion in 2020 – an increase of $528 billion or 124.2%; Social Security spending increases from $678 billion in 2009 to $1.20 trillion in 2020 – an increase of $523 billion or 77.1%; and Medicaid spending increases from $251 billion in 2009 to $487 billion in 2020 – an increase of $236 billion or 94.0%.
- Interest Payments on the Debt: Increases from $187 billion in FY 2009 to $840 billion in FY 2020 – an increase of $653 billion or 349.2%.
As mentioned yesterday, the projection on interest costs is far too conservative. While the government’s always flawed projections don’t anticipate it, both Bud Conrad and Doug Casey see strongly rising interest rates as a certainty in the foreseeable future. At that point, the debt death spiral begins in earnest, and the whole charade begins to come apart.
But it won’t take soaring interest rates to bring the economy down. That’s just going to accelerate things. And, of course, the worse things get, the worse the monarchy will act – demanding ever higher taxes and further debasing the currency, as they now certainly must.
How can you protect yourself? It really depends on where you are from.
One obvious solution would be to move to a different kingdom, one that treats you and your money better. Or that pretty much ignores you altogether. If you are from the U.S., the king’s tax collectors will follow you wherever you go – but even so, there are modest tax advantages you can gain by expatriation. Ask your tax counsel for details.
If, on the other hand, you live in a kingdom that doesn’t tax foreign-derived income (yet), becoming a citizen of the world can offer serious advantages and is well worth considering. The situation in most of the developed kingdoms, where easy money and quick mortgages greatly exacerbated the levels of debt, is only going to get more dire as the rulers cast a wider and stronger net in the quest for more revenue.
Even if you aren’t in a position to move, however, you’ll benefit from clearly understanding one key point about the king. While he may dress well and speak in dulcet and pleasing tones, he doesn’t actually produce anything. What money he has to spend must first be taken off the productive elements of the peasantry.
But there are limits to how much he and his men can squeeze out of the citizenry. We are nearing those limits.
That means that all that is left to the monarchy is for it to issue IOUs. And given the levels of their debts and ongoing spending, lots and lots of IOUs. Those IOUs are called dollars, or pounds, or pesos, or yen, or….
While there will be no straight line up or down for any asset class in the unsettled times we will live through, using periods of weakness to build your exposure to tangible assets – most notably gold, whose primary and best use is as sound money – is the only way to protect yourself from the Great Debasement that’s coming.
Regards,
David Galland
Casey Research
for Whiskey & Gunpowder
April 21, 2010
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Well said Sir Knight. You speak of the “self-interest of an unprincipled voter class”. Blaming leadership is acknowledging the symptom, not the root cause. Ultimately, if the quality of the citizenry in the US was higher, we would not need, ask for ,nor tolerate the system of government that has evolved today. As a nation, we are devolving into the world’s biggest threat to international security in our quest to maintain our former status. For the greater good of humanity, we the people of the US need to either shape up or get out of the way and let the rest of the world get on with the business of living.
Witty and very apt, Mr. Galland.
Well said Sir Knight. You mention “the self-interest of an unprincipled voter class”. It’s time we quit laying all the blame on the government and seek the root cause of what ails our country; the citizenry. Upstanding citizens would not require, ask for, nor tolerate the intrusions and corruption of our government. Instead, we get the government we deserve. The US has evolved into one of the largest risks to international security in our effort to maintain our standard of living in the face of exploding debt. We need to either get our house in order quickly or get out of the way and let the rest of the world get on with their business of living.
Dear Roger: Very nice, and you’re right, but how to do it without the world crashing around all our ears–or before then, as the case may be? Half the population pays no income taxes, 40% of those employed work for government at some level, and the penalty for reneging on the foolish promises of former power-hungry politicians, alone, would lead to blood in the streets. Yes, the answer is individual character, taking responsibility, and restraint, but I learned long ago that the only behavior I can control is mine. Sometimes I can influence others through my words or my example. I do not have the power to tell those on welfare their checks stop 1 June, or to provide jobs for all those who actually want them. I cannot tell Obama that nobody minded when he wanted a puppy, but the 100,000 Hamas he adopted have to go. We’re already in the position of Israel: the more we cede to placate enemies, the more they demand. The true bill for a hundred years of Statist expansion is due and we will all pay–some more than others.
Linda, I have become too cynical to believe that people will find a way for a correction to occur without the world crashing around all our ears. I believe the crash will come. Greece has enetered the world stage for act 2 of their collapse and should serve an an empirical example of what to expect. Greece is small enough to be bailed out by a consortium of other countries but why bother? Unless Greece significantly improves its behavior, which it has shown no inclination to do, the inevitable is merely forestalled. The results will be ugly. Seems to me that in the US, the changes we are making lately only serve to accelerate our demise and as we get more desparate, we will get more hawkish. To those Americans that don’t travel abroad or mix with other cultures ( a high percentage I would bet), I can tell you from personal experience, the anti-American sentiment has pervaded into the remote corners of the world. They are afraid of the hungry desparate wolf that we as a nation are likely to become. I for one prefer not to visit this carnage on them for purely selfish interests. Time to suck it up and take the licks we have coming to us and be more diligent in how we govern ourselves going forward.
Roger, I share your cynicism. But what do you mean by “afraid of the hungry desparate wolf that we as a nation are likely to become”? The way I see it, we aren’t that far behind Greece, and that makes us a toothless, clawless wolf. You saw what happened in Greece when they said they’d have to cut public sector salaries and freeze hiring and pensions. We’re already talking about tens of thousands of teacher layoffs in the U.S. and that’s not even the tip of the iceberg. If what happened in Greece is any indication at all of what we’ll be in for, I have no doubt our military will be recalled to quell the masses here. So, what do the remote corners of the world have to fear from us? Seems like it’s more of an opportunity for them than a threat.
Witty and very apt, Mr. Galland.
[...] This post was mentioned on Twitter by Ron Simon and Agora Financial, Whiskey Gunpowder. Whiskey Gunpowder said: Government Is Still Just Like an Overtaxing King: These days it takes very little to set me off on yet another ran… http://bit.ly/9RBt55 [...]
Roger, I share your cynicism. But what do you mean by “afraid of the hungry desparate wolf that we as a nation are likely to become”? The way I see it, we aren’t that far behind Greece, and that makes us a toothless, clawless wolf. You saw what happened in Greece when they said they’d have to cut public sector salaries and freeze hiring and pensions. We’re already talking about tens of thousands of teacher layoffs in the U.S. and that’s not even the tip of the iceberg. If what happened in Greece is any indication at all of what we’ll be in for, I have no doubt our military will be recalled to quell the masses here. So, what do the remote corners of the world have to fear from us? Seems like it’s more of an opportunity for them than a threat.
[...] This post was mentioned on Twitter by Ron Simon and Agora Financial, Whiskey Gunpowder. Whiskey Gunpowder said: Government Is Still Just Like an Overtaxing King: These days it takes very little to set me off on yet another ran… http://bit.ly/9RBt55 [...]
He [Edward III] issued writs to the judges, enjoying them to administer justice, without paying any regard to arbitrary orders from the ministers; and as the robbers, thieves, murders, and criminals of all kinds, had, during the course of public convulsions, multiplied to an enormous degree, and were openly protected by the great barons, who made use of them against their enemies, the king, after exacting from the peers a solemn promise in parliament, that they would break off all connections with such malefactors, set himself in earnest to remedy the evil. ~ A.D. 1331, History of England, David Hume
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“enjoining them to administer justice”
Mr. Galland,
A great op-ed piece, and the point is well-taken; however, I’m not sure if you are conversant with all the rape & pillaging practiced by police, both local and federal, across the U.S. There are scores of instances where our land is stolen in the name of the King (“Eminent Domain”); the King’s men commit atrocities while applying the King’s Law (see: http://www.cato.org/raidmap/ ); and the King’s men do, indeed, rape the peasantry at will and are put on administrative leave while investigated, if they are investigated at all (use favorite search engine to search for police officers raping individuals and you will see that it has never really stopped).
It seems as if those adages & axioms about power and corruption are just as true in antiquity just as they are today.
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Government is still an overtaxing king? Well, I not impressed with what Mr. Galland says. His article is
just an exercise in a lot rhetorical babbling followed by a few statistics. It’s just something to get people
worked up. It’s an exercise in getting people to focus on the “trees” and not see the forest.
1) The US Federal tax compared to other industrial contries is about average – and that’s pretty good considering how much we spend on defense.
2) There is a subtle implication that taxes have gone up since Obama’s been president – that’s a lie.
3) Most people have been hoodwicked into believing that their tax dollar is going to the government and is therefore being redistributed. It is! It’s being redistributed upward via various elaborated schemes and ending up in the hands of the already wealthy. That is why the number of billionaires have skyrocketed since the 80′s.
4) Too many ignorant people are running around complaining this country moving toward socialism when
in fact it is not. It is moving in the opposite direction. Neofeudalism, predatory capitalism, fascism, or call it
what you like, but it certainly isn’t socialism – unless you want to call it “socialism for the rich”. And…..
5) If the American people don’t like paying the taxes, they need to consider that half or more of their tax dollar goes toward defense [offense] spending to support the American Empire and they should ask
themselves, “is it worth it?”
So, Mr. Galland, what I find wrong with your article is the way you “frame” the issue. The way I see it, the
government, which suppose to be of the people, by the people, and for the people, is NOT the case at all.
The government has increasingly become the agent of the super wealthy and the big corporations and until
that issue is addresed, the frustrations of the people are goings to continue no matter what party or president or party is in office. As long people like you keep “misdirecting” the people, most will never figure this out.
J. Morrow
You like most people in this country do not understand that the Federal Income Tax goes to the Federal Reserve Banks. They are privately owned and are no more federal than Federal Express. The Federal Reserve prints money and loans it to the US Government and we (Tax Payers) pay income tax to pay for the interest on the loan. None of the Federal income tax goes to pay for anything in this country. There is NOT any law that says we have to pay income tax! The IRS was set up to make sure the illegal income tax is paid. Do some research and you will find that we did not have any income tax until the private banking cartel was unconstitutionally granted this power by a devious, scheming group of senators back in 1913.
J Marrow
I thought there would be more response to your post by those more articulate than I by now. Perhaps they thought it a waste of time.
Anyway, most the people reading and writing articles for W & G are awake. It is you still stuck in the chicken or egg quandary.
1) Federal Income tax is only part of the “Overtaxed” equation.
2) How have taxes gone down since Obama took office? Sort of like pretending you don’t have the expense of a mortgage till the first payment comes due…..
3) Distributed upward through elaborate schemes… Big eye roll. Please, do a season of tax prep for H&R block and how much EIC $$ people receive. Sure wealthy people have the time and $$ to help figure out to use various laws and regs to their advantage. One GOOD reason not to heavily fund the government.
4) See # 3. When you create a system of tax laws and regulations so restrictive preventing the LITTLE guy from being able to take care of himself, even he will begin to think he needs help. The politician pretending to have his back while fighting for his own pet ruling is the guy doing the redirecting, he is creating the diversion while others rob the citizenry blind. You ever look at what it costs to just exist in this society? Bottom line what you have to pay out just for existing? (Not food etc., which you would have to produce or buy anywhere.)
5) Yes-What do you suppose the US would look like without it? Does that please you?
Mr. Galland writes:
“Far from being benign, the nation’s leadership, masters at appealing to the self-interest of an unprincipled voter class, have led us to a perilous situation where the fields are being left unplanted.
And an increasing percentage of the citizenry is now muttering angry curses as the king’s men ride by in their shiny black limo-horses.”
I would look to the “self-interest of an unprincipled voter class” for your answer. While FRUSTRATED with the current situation, all is not lost, yet. If the government has become the agent of the super wealthy how did that occur? Think back to the day when INDIVIDUAL men were brought before Congress, Flynn, Hughes and Hearst come to mind.
A government of the people, by the people and FOR the people does not mean majority rule or that like a spoiled bunch of children they get what they want. A nanny state to take care of them (Socialism). It means a government of ORDINARY people, set-up by the people to SUPPORT and PROTECT the people in their productive endeavors. The fact that this idea has and is being misused and abused does not mean it is a bad of unworthy idea!
You want big bad government to do your bidding (debase the super wealthy or big corps.) before it is properly managed. How many Americans work for BIG corporations? You don’t protect people by “taking care” of them. You do it by pushing back the freeloaders, looters, and crooks (of ALL sizes) so they can go about their business.