Some of us have watched this day approach and have warned of its coming, only to be greeted with boos and hisses from “patriots” who have come to regard the U.S. Constitution as a device that coddles criminals and terrorists and gets in the way of the president, who needs to act to keep us safe.

Many expected President Obama to re-establish the accountability of government to law. Instead, he went further than Bush/Cheney and asserted the unconstitutional power not only to hold American citizens indefinitely in prison without bringing charges, but also to take their lives without convicting them in a court of law. Obama asserts that the U.S. Constitution notwithstanding, he has the authority to assassinate U.S. citizens, whom he deems to be “threats,” without due process of law.

In other words, any American citizen who is moved into the threat category has no rights and can be executed without trial or evidence.

Awlaki was a moderate American Muslim cleric who served as an advisor to the U.S. government after Sept. 11 on ways to counter Muslim extremism. Awlaki was gradually radicalized by Washington’s use of lies to justify military attacks on Muslim countries. He became a critic of the U.S. government and told Muslims that they did not have to passively accept American aggression and had the right to resist and to fight back. As a result, Awlaki was demonized and became a threat.

All we know that Awlaki did was to give sermons critical of Washington’s indiscriminate assaults on Muslim peoples. Washington’s argument is that his sermons might have had an influence on some who are accused of attempting terrorist acts, thus, making Awlaki responsible for the attempts.

Obama’s assertion that Awlaki was some kind of high-level al-Qaida operative is merely an assertion. Jason Ditz concluded that the reason Awlaki was murdered, rather than brought to trial, was that the U.S. government had no real evidence that Awlaki was an al-Qaida operative.

Having murdered its critic, the Obama regime is working hard to posthumously promote Awlaki to a leadership position in al-Qaida. The presstitutes and the worshippers of America’s first black president have fallen in line and regurgitated the assertions that Awlaki was a high-level, dangerous al-Qaida terrorist.

Attorneys Glenn Greenwald and Jonathan Turley point out that Awlaki’s assassination terminated the Constitution’s restraint on the power of government. Now the U.S. government not only can seize a U.S. citizen and confine him in prison for the rest of his life without ever presenting evidence and obtaining a conviction, but also can have him shot down in the street or blown up by a drone.

Over the last 20 years, the United States has had its own Mein Kampf transformation.

Indeed, as the neoconservative Project for the New American Century makes clear, the war on terror is only an opening for the neoconservative, imperial ambition to establish U.S. hegemony over the world.

As wars of aggression or imperial ambition are war crimes under international law, such wars require doctrines that elevate the leader above the law and the Geneva Conventions, as Bush was elevated by his Justice (sic) Department with minimal judicial and legislative interference.

Illegal and unconstitutional actions also require a silencing of critics and punishment of those who reveal government crimes. Thus, Bradley Manning has been held for a year, mainly in solitary confinement under abusive conditions, without any charges being presented against him. A federal grand jury is at work concocting spy charges against WikiLeaks’ founder Julian Assange. Another federal grand jury is at work concocting terrorist charges against anti-war activists.

“Terrorist” and “giving aid to terrorists” are increasingly elastic concepts. Homeland Security has declared that the vast federal police bureaucracy has shifted its focus from terrorists to “domestic extremists.”

It is possible that Awlaki was assassinated because he was an effective critic of the U.S. government. Police states do not originate fully fledged. Initially, they justify their illegal acts by demonizing their targets and, in this way, create the precedents for unaccountable power. Once the government equates critics with giving “aid and comfort” to terrorists, as they are doing with anti-war activists and Assange, or with terrorism itself, as Obama did with Awlaki, it will only be a short step to bringing accusations against Glenn Greenwald and the ACLU.

The Obama regime, like the Bush/Cheney regime, is a regime that does not want to be constrained by law. And neither will its successor. Those fighting to uphold the rule of law, humanity’s greatest achievement, will find themselves lumped together with the regime’s opponents and be treated as such.

This great danger that hovers over America is unrecognized by the majority of the people. When Obama announced, before a military gathering, his success in assassinating an American citizen, cheers erupted. The Obama regime and the media played the event as a repeat of the (claimed) killing of Osama bin Laden. Two “enemies of the people” have been triumphantly dispatched. That the president of the United States was proudly proclaiming to a cheering audience sworn to defend the Constitution that he was a murderer and that he had also assassinated the U.S. Constitution is extraordinary evidence that Americans are incapable of recognizing the threat to their liberty.

Emotionally, the people have accepted the new powers of the president. If the president can have American citizens assassinated, there is no big deal about torturing them. Amnesty International has sent out an alert that the U.S. Senate is poised to pass legislation that would keep Guantanamo prison open indefinitely, and that Sen. Kelly Ayotte (R-N.H.) might introduce a provision that would legalize “enhanced interrogation techniques,” an euphemism for torture.

Instead of seeing the danger, most Americans will merely conclude that the government is getting tough on terrorists, and it will meet with their approval. Smiling with satisfaction over the demise of their enemies, Americans are being led down the garden path to rule by government unrestrained by law and armed with the weapons of the medieval dungeon.

Regards,

Paul Craig Roberts

The Day America Died was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

I have this contrarian view not because I am cynical or pessimistic, but because I have thoroughly studied this set of rules or “law of the land,” and found them to be antagonistic to individual liberty and state’s rights, and sympathetic to big government. When one compares the constitution that was replaced, The Articles of Confederation, there is little doubt of this truth. Lysander Spooner said this:

“But whether the Constitution really be one thing, or another, this much is certain – that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.”

In my opinion, there is no doubt that the constitution fully authorized the government that we had and still have today. It is also true that any set of rules is powerless to stop tyranny unless the people enforce and demand compliance on a constant basis. This has never been the case. Even if it had been followed to the letter, it is obvious that liberty would still have been compromised.

Before the current constitution was drafted, there was never any mention or acceptance of the notion that there was a (U)nited States, or that any single nation existed with power over the states. Quite the contrary was the case. It is very troubling that so many Americans have been fooled into believing that the constitution is the basis of our freedom. Nothing could be further from the truth, and nothing could be more misunderstood!

Recently, those like Tom Mullen and Bill Buppert have explained thoroughly why the constitution is not what it is made out to be, and many others have properly denounced this misleading document as well, but the general thinking is still very misguided. Most continue to laud and worship this very flawed piece of parchment, and continue to believe that it is the creator and savior of liberty. Liberty lies in the essence of man, not in documents secretly drafted in the dark of night by the few. The free spirit of the people must awaken before any real freedom becomes evident, and in that awakening they must realize the great importance of the individual and of individual responsibility.

My intent here is not to claim that our original constitution, The Articles of Confederation, were a perfect set of rules, or that any set of rules established by simple men could be perfect. My intent is to expose the lie that is our current constitution. If we as a people could see the truth of why our original constitution was completely scrapped in favor of our current one, maybe a more widespread anger would arise. Once it is accepted that the Hamiltonians in 1787 staged a coup to destroy states rights in favor of federal power, and to destroy individual liberty in favor of nationalism, then maybe more will begin to question their false idolization of the constitution. One could only hope for such an awakening.

Before this constitution, there was no power whatsoever for the federal government to tax. That was left entirely to the individual states. Now the Feds have an unlimited power to tax. In Article 1, Section 8, the taxing clause states, “Congress has the power to lay and collect taxes, duties, imposts, and excises for the common defense and general welfare of the United States.” I see no limits mentioned here whatsoever, and given the term “General Welfare” of the (U)nited States, there is no reason to believe that any restriction was intended. Many so-called constitutional scholars will argue this, saying that all spending must be “constitutional”, or within the confines of the taxing and spending clauses, but these arguments can easily be refuted given the broad and sweeping language in this section. This was in my opinion done explicitly by design. Article 1, Section 8 is nothing if it is not an all-encompassing, unrestricted, and explicit enabler of unlimited governmental power.

Anyone can check the definitions during that period by simply going to the dictionary of that time, Samuel Johnson’s A Dictionary of the English Language. It is immediately obvious that there was little difference in the meaning of general welfare at the time of the founding as there is today. But this is just one example of the obvious misunderstanding by so many in modern times.

Under the Articles of Confederation, there was no president. There was no supreme court. There was no federal taxation, and certainly no immoral income tax. This meant that there was no IRS. There was no federal control of interstate commerce. Congress could not raise an army or draft troops. What this meant, was that the states were sovereign, and no national government existed in any real sense. Because of this, freedom flourished, and tyranny was not evident. So how is it then that this very pro-central government, federal controlling, and powerful national governing system could be created by the same constitution that supposedly set us free? Why were the Articles scrapped entirely if freedom of the people and state’s rights were the objectives sought? I can tell you; at no time did those who supported the drafting and ratification of the U.S constitution in 1787 consider individual freedoms!

There are those who would offer that the Bill of Rights adopted several years later corrected the obvious problems that plagued the constitution, but that thinking is based on the false logic of gullible minds. While those amendments certainly were restrictions on government power, they did nothing to change the original intent, that being one of granting massive and in many cases unlimited power to a federal government.

The constitution allowed for the usurpation of power by the executive branch, it allowed federal courts to approve and sanction authoritarianism by the government over the people, it allowed for legalized forcible theft by the federal government in the form of taxation, and it allowed the federal government both the ability to collect taxes for war, and to also prosecute those wars. These egregious powers given by the constitution to the central government are completely antithetical to liberty, and should never have been considered by any men of character.

The people did not establish our constitution, nor was it inspired by divine intervention as so many suggest. It would be difficult for me to imagine that God would have a hand in the destruction of our inherent and natural rights. No, this flagrantly flawed document was designed and implemented by a few corrupt men led by Alexander Hamilton. Their agenda was guided not by any desire to achieve liberty for all, but by a grand lust for power and control. Had that not been the case, the Declaration of Independence would have been the guide for any new set of rules, and our original constitution would have been even more scrutinized instead of being replaced.

Instead, after 224 years, we now have exactly what the original ruling class desired, an all-powerful central government ruling over the lower classes. This is a rule by the few over the many. As Aristotle said: “rule by the few is aristocracy in its ideal form and oligarchy in its perverted form.” The elite class holds all the cards, while the rest of us now struggle under the thumb of tyranny!

Regards,

Gary D. Barnett

Gary D. Barnett is president of Barnett Financial Services, Inc., in Lewistown, Montana.

Still Fed Up With Constitution Worship was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The drafting was done in 1787, and the needed nine States had ratified it by June 21st, 1788, so the Constitution became supreme law on that day. Then on March 3rd 1789 Congress opened its doors and the following month George Washington presided. It’s very interesting to notice what the new Congress did, in its first session, from March through September of that year.

It committed six acts, before going home for the winter in September. See if any of them give you warm, fuzzy feelings; and in a moment I’ll focus on the sixth, because of its huge importance.

First came some administration; deciding on how oaths of office were to be taken. Not too much there to bother us.

Second was the “Hamilton Tariff,” under which revenue was to be raised. So the second-ever Act of the US Congress was to arrange for the confiscation of property. Sure, it was Constitutional — it was a set of tariffs, imposed on certain imports; some must have recalled that it was a tariff on tea that had sparked the Revolution in the first place, so may have wondered whether anything had changed except the geographic location of the thieves. The import duties favored Northern manufacturers by making foreign goods seem more expensive — it was protectionist — and hurt Southerners by making them pay more. From Day One, a division was being fashioned that led after seventy years to open warfare. So the first substantive thing Congress did was to start to set the scene for internal conflict.

Third came an establishment of “Foreign Affairs” — now the Department of State — by which the new government was to execute “policies” towards other nations. If the intention was to have a perfectly uniform policy towards all, that would not have been needed. By establishing one, it was clear there were to be some nations more favored, others less favored. That’s what a “foreign policy” means, and it is ultimately the cause of war and, in our own era, of the unconventional war called “terrorism”; for had there been no foreign policy favoring Israel (recall Biden’s call in March for “no space” between the policies of the US and Israel?) there would have been no 9/11, or if there had been one favoring Palestinians there would have been a “9/11” much sooner and much more devastating, executed by Mossad. So the third Act in the history of the new government was to set the scene for all future external conflict.

Fourth was an Act to set up a Department of War — now euphemized as “Defense” — and that was very logical. You play favorites with other nations, eventually you’ll need to fight some of them. Better get ready.

Fifth came the Department of the Treasury, to take in and account for the collection and spending of the money confiscated by Act Two. It is to this Department that today’s IRS belongs, so I need say no more.

So far, it’s not too hard to detect the beginnings of all the most loathsome attributes of any government: tax, distortion, discord and warfare. This is to what our well-meaning “Constitutionalist” friends want to get us back.

The sixth action of that first session bore fruit on September 24th, 1789 and was the “Judiciary Act” — and it’s notorious and breathtaking. Here’s why.

On its face, its purpose was just to flesh out Article Three, which said there was to be a Judicial Branch in the new government. It had to do with establishing Courts — Supreme, District, Circuit — and government Attorneys, General and less general. But as well as that administrative stuff, the 1789 Judiciary Act declared that the Supreme Court had the power to hear actions for “writs of mandamus” as one of original jurisdiction, and so not to be just a court of appeal. Congress was therefore purporting to grant to its sister Branch a power which Article Three never gave it.

Oops! Right off the bat, in its very first session, Congress therefore tried to do something it was not empowered to do (if you’ll allow for the moment that, contrary to Spooner, the Constitution actually empowered anyone to do anything). In so doing, Congress demonstrated its disdain for the fences placed around it by Articles Two and Five. Very clearly, government today acknowledges no limits on its power; the 1789 Judiciary Act made it plain that Congress never did acknowledge such limits, even in its very first session.

Was this arrogation of power deliberate, or inadvertent?

Either is possible if the Act is considered in isolation, but it wasn’t isolated. While the Constitution was being drafted, Alexander Hamilton and other Federalists had wanted to specify powers for the Judicial Branch, just as the charter did for the other two Branches, and in particular to grant it the power of “Judicial Review,” i.e., to say what is, and is not, valid law. He argued that that is what high courts normally do. However in Article Three no powers were granted to it at all, so as it’s fair to presume that it was not to have zero powers (otherwise, why set it up?) consequently Article Three left them wide open — for unlike the wording of Articles I and II there are no limits or prohibitions named, either. It was a blank check, whose detail could be filled in later.

If Hamilton had had his way and the Constitution as drafted had said something like “The Supreme Court shall have power to decide what is law and what is not law” the new government would have been plainly seen as a dictatorship, and in my humble opinion it would have not had a snowball’s chance of getting ratified; even as it was, that process was no sure thing. So that’s why they left it blank — while the Federalist majority intended all along that such a power should, indeed, be owned by the Judicial Branch so that the new government could (with a little delay, and with its cooperation) do anything it wanted to do, while operating under the pretense of being strictly limited.

So Congress’ 1789 attempt to endow the Supreme Court with a new power (to hear certain cases with original jurisdiction) was not accidental, but deliberate; that particular power wasn’t very important, but it was to test the waters, establish a precedent. If they could grant it one small power then, they could later grant it bigger ones, and so eventually equip it with absolute, law-determining power. Take an inch at once, so as to take a mile later on.

Regards,
Jim Davies
LewRockwell.com
Whiskey & Gunpowder

May 12, 2010

The Eden Myth and the Ratification Con of 1789 was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Freedom for Federalism. Some of us have actually read the U.S. Constitution. Readers may know the document I mean, the written one, the one containing the set of behavioral limitations placed upon the created government. Not the imagined version penned with invisible ink whose words and meaning are discernible only by elites with special glasses. (Pointedly many of these elites so-called have either been elected or appointed and thus have been required by the written Constitution’s Article VI to take an oath “to support this Constitution,” meaning, because of the Framers’ deliberate use of the definite article “this,” the one visibly available to the rest of us.(*)) When reading that Constitution, we know that the created federal government has no authority to legislate on any matter dealing with education. On this point we have Mr. Madison in our corner. “The powers delegated by the proposed Constitution to the federal government, are few and defined [(**)]. Those which are to remain in the State governments are numerous and indefinite.” ~ Federalist #45.

(*) In addition to Clause 3 of Article VI (the Oath/Affirmation Clause), the phrase “this Constitution” appears in 11 other provisions of the Framers’ 1787 document, demonstrating unequivocally that the Framers’ use of the definite article “this” in pointing at the words of their written document was intentional, not inadvertent.

(**) We know precisely what those few and defined powers are because they are listed – in writing – in the document itself. Education is not on the list.

This understanding undergirds the 9th and 10th Amendments. “You may go this far, but no farther.” Despite these clear restrictions, we have today a huge federal superstructure called the U.S. Department of Education(!) which intrudes not only into K-12 education but also into the collegiate system. Since no provision in the Constitution authorizes federal involvement in education (among countless other federal intrusions), this can only be the result of government officials being unfaithful to their voluntarily-taken oaths to “this Constitution,” acting without the consent of the people, compounded by the people’s own failure to appreciate the genius of the American constitutional system: by restricting governmental power, individual freedoms are maximized.

There is nothing inherently American about a top-down, one-size-fits-all public school system, a system drawn from the authoritarian Prussian model (promoted circa 1840s by Horace Mann, a Massachusetts liberal, among others). Hearthside teaching aka home schools, private tutoring, and small community-based private schools (with the emphasis on small) are representative of the American tradition.

The elimination of the public schools would deprive Congress of the excuse that it “must” take money from taxpayers in order to support education by connivingly offering “help” to the several states, provided of course that those states agree to a few controlling strings. In short, eliminating the public schools assists Congress by forcing it to obey the written Constitution. When government is limited, then ipso facto the people have more freedom. “The course of history shows that as a government grows, liberty decreases.” Thomas Jefferson.

That Congress has strayed from the essence of the Constitution – limiting the reach and power of the created government – can ultimately be laid at the feet of the electorate. Not enough of us have demanded that Congress obey the Constitution because not enough of us know the Constitution, not a co-incidence since the public schools have gone out of their way to avoid teaching the country’s foundational underpinnings. It’s no surprise then that a sizeable percentage of the population does not honor our Constitution since appreciating its ingenuity has been replaced by academically-approved Statism and its worship, a tactic accelerated under Obama but which began in earnest in the 1930s. Certain constitutional symbolisms may still prevail – congressional and presidential terms still begin and end on January 3rd and January 20th respectively; those nominated for federal office still receive the advice and consent of the Senate; state of the union addresses are given “from time to time”; and so forth – but the substantive core thesis of the Constitution – its raison d’être, namely, strictly limiting the reach of the created government – has been so grossly ignored that the “system as practiced” would be unrecognizable to the Framers.

Consider the all-too-typical routine: (i) Congress (whether D or R controlled) passes a putative “law” that has no textual authority, thereby neglecting its institutional duty to check-and-balance itself and only enact measures for which there is express constitutional language, with affirmatively-voting Members disregarding their individually-taken constitutional oaths to support “this Constitution.” (ii) The president, failing in his independent check-and-balance duties to ascertain a law’s compliance with the Constitution and unfaithful to his special constitutional oath, signs that “law.” (nb: Both D and R presidents have been equally guilty.) (iii) That “law” when tested in the federal courts is, surprise, surprise, found to be “constitutional” because the judiciary, ducking out on its own independent check-and-balance duty, relies on a long-practiced, judicially-created legalistic convenience, wink-wink, nudge-nudge, known as presumption-of-constitutionality, an artifice which holds that anything and everything done by Congress is to be presumed by all courts (both federal and state) as constitutional. [Having the benefit of this presumption is an enormous strategic advantage: it shifts the burden of proving constitutionality from the government (the proponent) onto the shoulders of citizen-challengers who are then burdened to disprove the “law’s” constitutionality, a very high legal standard to overcome.] In all other venues of life, a proposition’s proponent bears the burden of proof and persuasion, but perversely not in the one venue where it really should be mandated because in the federal law-making venue can be exercised the greatest measure of control over the greatest number of people. The ObamaCare “law” easily comes to mind, and supporters of this pretense at law-making have been quick to assert the presumption-of-constitutionality trump card against the people.

In short, we have the textual and apparent form of a limited, appropriately checked-and-balanced government, but not the actual substance which will only occur, indeed, can only occur, when men and women of honest character, whose “yes” is their “yes” and whose “no” is their “no,” serve, individuals to whom the letter and spirit of the Article VI oath to maintaining a government of limited reach is a meaningful undertaking. To this point Founder John Adams was prescient in assessing the efficacy of paper handcuffs, “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.”

Today we have Members who openly acknowledge that they do not read bills before voting, even apart from performing a thoughtful analysis of a bill’s provisions for compliance with the Constitution, a document to which they have taken a personal oath to support. Some even openly acknowledge that most of what Congress does is unconstitutional (see the recent remarks of Democrat Rep. James Clyburn, SC-6, found here). Despite these admissions, they’re re-elected! Again and again! have we gone mad? A private employer would never tolerate such behavior from an agent or an employee, but we the American people do. That we are in this state of affairs can be blamed in large measure on the American public school curriculum where an appreciation of the ingenious American system is neither taught nor admired. We’ve now arrived at the point where a sitting Congressman (Democrat Rep. Phil Hare, IL-17) can openly state (see this recent video here, at 00:45) that he doesn’t care what the Constitution says, a sentiment obviously held by a majority of Members since Congress continues to putatively enact “laws” in the utter absence of express constitutional text. The recent health care reform act may be the largest and ugliest example, but it hardly stands alone. Contrast the Clyburns and Hares of the world with Davy Crockett (yes, that Davy Crockett), a former Member of Congress (Tennessee, 1827–1831, 1833–1835), in an attributed speech, “Not Yours To Give,” found here.

Where is the express authority to enact so-called health care reform legislation; or the authority to give billions in “foreign aid”; or the authority to enact national educational funding and academic standards; or the authority which enables the executive branch to conduct war/s without express declarations; and on and on? Obviously no such authority exists except in the minds of those privy to the Constitution’s invisible ink. To maintain that Congress’s authority to do as it wishes may be found in the Interstate Commerce Clause, or in the even more nebulous General Welfare Clause, is to say that the Framers went through their painstaking work of setting forth limitations on power, with memories of the harsh treatment which British unlimited government meted out still fresh in their minds, only to learn that they had written two clauses (ICC; GWC) that swallow and emasculate the core concept of limitation. With this sort of open-ended reasoning, nothing is beyond the reach of Congress, Article I, section 8’s enumerated listing be damned.

On this score there is no middle ground: Either we have limited government, or we live under its only known alternative, unlimited government. What should we see as worse: Having Members of Congress who are ignorant of the Constitution’s purposes, or having Members who understand those limiting purposes but who intentionally undermine them through blatant disregard? One is dim-witted, the other dishonest. The answer to this question may be of little moment since the result is the same: a corrupted government that does not play by the people’s agreed-upon rules for conducting self-government. Want proof? Listen to the recent words of Democrat Rep. Alcee Hastings, FL-23, member, House Committee on Rules, “When the deal [i.e., the process of legislating, -editor] goes down, all of this talk about rules, we make [th]em up as we go along.” Video found here.

Contrary to the portrayal by the MSM and the left generally, the current 10th Amendment and Tea Party movements are not anti-government; rather, they are anti-corrupt government. Their existence and the various state proposals to fight the perversion of the Interstate Commerce Clause through intrastate statutes (for example on gun matters or health care reform “mandates”) are healthy signs of an engaged citizenry acting as self-governors. That more and more Americans are carrying pocket-sized versions of the founding documents is evidence that a strong sense of independence from government animates many, and is further evidence that the pathetic efforts of the public schools to erase the personal responsibility heritage of our history have not been altogether successful. Could all these efforts at reviving federalism flourish? Yes, without question, but only if the people follow through and do what they must: Insist that their federal and state representatives strictly confine Congress, binding it, borrowing again from Jefferson, “with the chains of the Constitution.” Such should be a bedrock principle found in the 2010 campaign literature of every worthwhile candidate.

Regards,
Paul Galvin
LewRockwell.com
Whiskey & Gunpowder

May 4, 2010

Eliminate Public Schools, Part II was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

There is, however, a “Bankruptcy Clause” in the U.S. Constitution (Article I, Section 8, Clause 4). I’ve written before about bankruptcy in Whiskey & Gunpowder. See “National Bankruptcy,” and “A Suggestion of Bankruptcy,” Part I and Part II.

The key point is that the framers of the U.S. Constitution specifically anticipated that the nation would encounter economic troubles from time to time. So they gave Congress the power to enact bankruptcy laws, as opposed to “bailout” laws. And throughout U.S. history, the various economic “Panics” — which occurred every couple of decades — always led to one direction or another in the evolution of state and federal bankruptcy laws. Hey, bankruptcy works. (Full disclosure — I used to practice bankruptcy law.)

At some times in U.S. history, the bankruptcy laws favored the creditor class. During other times, the bankruptcy laws favored debtors. The point is that the economic hardships were eventually manifested in bankruptcy proceedings.

Just as all rivers flow to the sea, bad debt must find its way to discharge. So bankruptcy court was where judges and attorneys and other financial experts (like accountants and actuaries) could deal with each case on the merits. The problems could come to some sort of resolution. Some people came out OK. Other people lost everything. But capital flowed from weak hands to strong hands, and the economy moved along.

Why Not Bankruptcy Process?

But not today. Indeed, according to the New York Times many law firms — including firms that focus on bankruptcy work — are actually scaling back and laying off staff. Why is that? Why are the politicians so eager to avoid seeing companies go into bankruptcy? The government is trying to solve the problems of gargantuan levels of debt — along with chronic insolvency and illiquidity within the economy — without resorting to the constitutional-based legal mechanisms and tools that have served the nation well for over 200 years.

Consider the problems of derivatives. Few understand them. Many so-called derivative “contracts” are little more than mathematical formulae based on a series of futuristic occurrences that are entirely speculative. Their initial value in the best of times was entirely somebody’s guess. So is it any surprise that it is all but impossible to place a value on such things during the throes of a recession? Yet derivatives are some of the “troubled assets” that the Treasury is attempting to bail out. This is ridiculous!

Why is the Treasury allowing even one dollar of taxpayer money to get near a derivative? Why not use the bankruptcy process in this kind of situation? The companies that hold unsalable derivatives should have to go into a Chapter 11 proceeding and let a bankruptcy court sort it out. If the derivatives have value, let someone say so — under oath — in front of a federal judge. If the derivatives are worthless, let the judges do what we pay them to do — void the instruments and allocate the losses.

Sure, bankruptcy cases take time to roll through the courts. But could Chapter 11 bankruptcy be any worse than the current drip-drip-drip, hemorrhage of funds into the black hole of the likes of AIG? And at least some bankruptcy judge might just put a stop to the AIG exploits of taking nice vacations to exotic resort locales.

Or what about the U.S. automobile industry? Now the domestic carmakers want some of that TARP money too. Or else what? They’ll have to file for Chapter 11? Yeah? And then?

Well on the day that the automakers file for bankruptcy, the automobile factories will still be there. The patents and designs aren’t going anywhere. The workers and design teams will stick around for a while — it’s not like there are a whole lot of other jobs out there, except maybe raking leaves in leafy suburbs.

It seems to me that General Motors, Ford or Chrysler — without the legacy costs of pensions and health care and featherbed contracts for non-working union members — would actually be a decent investment for a Debtor-in-Possession (DIP) form of financing. Any DIP-lender worth its salt would certainly go into the management suites to take names, kick ass and get rid of the deadwood. And over the long term, if U.S. automakers actually paid more for steel than they have to pay for retiree health care, then we might actually see a revival of that industry.

Meanwhile, We’re Losing Time

Meanwhile, we are losing time. “Ask me for anything,” said Napoleon to his lieutenant. “Anything but time.”

What Napoleon was saying to his subordinate was that in the context of war, there are always setbacks. Terrain, for example, is sometimes captured and lost to the enemy. But lost terrain can be regained. And troops are lost in combat, but the armed forces can be rebuilt and reconstituted from the strategic reserve. Lost time, however? Once it has passed, time is gone forever. You will never get it back, and no general — however great — can win it back on any field of battle.

It is the same thing with the declining U.S. and world economy. The world’s central bankers and treasury ministers dither, and squander capital into bottomless pits of a deflationary recession.

But the great villain in all of this is debt, pure and simple. And much debt is just a collection of bizarre debt instruments, exotic forms of speculative contracts, and obligations so massive that they will never be repaid. So why prolong the agony? Liquidate it now. Let the bankruptcy courts do what the framers intended.

That’s all for now.

Until we meet again…
Byron W. King
November 19, 2008

Bankruptcy, Not Bailouts was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.