[Originally published by The Devin-Adair Company, New York, 1954]
To the Memory of Albert Jay Nock
Competition in Government
THE AMERICAN political terrain, so to speak, is most favorable for a fight for freedom. The tradition of home rule, supported by the constitutional doctrine of States’ Bights, presents a formidable obstacle, if properly exploited, to the forces of collectivism. We have their own admission to that fact.
Early in the socialistic New Deal, its leaders recognized in the division of authority between state and federal governments a difficult impediment to their plans. They set their minds on overcoming it. They went so far as to draw up a blueprint for an arrangement that would circumvent, if not obliterate, the troublesome state lines. In 1940, Mr. Roosevelt’s National Resources Committee, in a report called Regional Factors in National Planning, proposed that the nation be divided into a dozen regional areas, as a basis for the coordination of federal administrative services. Recognizing that what they proposed was actually violative of the Constitution, they hastened to give assurance: the regional system, they said, “should not be considered a new form of sovereignty, not even in embryo.” It would have been foolish to say anything else, since the consolidation of the states into a national unit requires, under the Constitution, the joint action of Congress and the state legislatures. Nevertheless, the report was a bid for a nationalized system, pure and simple. The committee insisted that so long as the “division of constitutional powers remained,” the government is handicapped in handling “national problems.” In those days the inspired propaganda insisted that the states were “finished.”
Thus, the collectivists are on record as to their tactical campaign: the separate states must be wiped out or reduced to parish status. Later, they veered from a direct frontal attack on our traditional system, and went in for liquidation of state autonomy by bribery of state officials.
When you dig down to the psychology of our States’ Rights tradition you see the soundness of the collectivists’ tactics. The legal difficulties that the division of authority presents is not their main trouble; these can be circumvented by new laws, political deals, and judicial interpretations.1 The real obstacle is the psychological resistance to centralization that the States’ Rights tradition fosters. The citizen of divided allegiance cannot be reduced to subservience; if he is in the habit of serving two political gods he cannot be dominated by either one.
History supports the argument. No political authority ever achieved absolutism until the people were deprived of a choice of loyalties. It was because the early Christians put God above Caesar that they were persecuted, even though they paid homage and taxes to the established political establishment. Stalin’s liquidation of the religious and fraternal orders followed from his basic premise that the Soviet was the only deity. Mussolini was always bothered by the hold the Catholic Church had on the people, and Stalin would never have been Stalin if he had not brought the orthodox church to foot. And so, if the Californian thinks of himself as a Californian as well as an American and has two flags to support his contention, the central authority rests on shifting ground.2
In no country where centralism got going did the regime have to contend with divided authority such as our Constitution provides. Long before Hitler came on the scene, Bismarck had liquidated the autonomous German states. Mussolini’s march on Rome would not have gotten started in the nineteenth century when Italy was an aggregation of independent units. And, of course, the Czars handed Lenin a thoroughly centralized government.
In this country, the advocates of centralism have had hard going because of our entrenched tradition of States Rights. It is a tradition that is older than the Constitution, older than the Revolution. It is a national birthmark.
The people of the recently liberated British colonies had had their fill of unlimited government. If they were going to have any national government at all it would have to be quite different from the one they had kicked out. They would put their trust in a government of neighbors, for that kind of establishment could be watched and handled. They were for Union, of course, for by Union they had done away with the foreign tyrant, and they wanted something that would correct the imperfections in the Union they had. They sent delegates to the Philadelphia Convention to correct these imperfections. But they did not want Union at the cost of government resembling in the least that which they had discarded.
When the Convention came out with a brand-new Constitution, not improved Articles of Confederation, as expected, the people were suspicious of it. Ratification of the Constitution came hard, and was not effected without some sharp political practices. In the antiratification literature of the day, long buried by federalist historians, the main theme was that the proposed government might intervene in local affairs and in their private affairs. Their touchiness on that point is reflected in the very composition of the Constitution. The Founding Fathers were very careful to make clear that the new federal government would have certain specified powers, and nothing more.3 Whatever powers were not enumerated in the Constitution would remain with the states. No other kind of Constitution could have got by.
One must go to pre-Revolutionary history for the legal origins of States’ Rights, but it is sufficient for the present argument to show that it is an essential Americanism, a bit of folklore learned at the nation’s cradles. Both the Founding Fathers and the opponents of the Constitution were agreed on the principle of divided authority as a safeguard of the rights of the individual. No one (except a few monarchists) questioned that. The only question was whether the separation was definite enough. It is unfortunate that the doctrine of States’ Rights has become sullied with sectionalism and racism, and its original meaning lost in the bitterness of other issues. Perhaps the name should be dropped in favor of “home rule”; but the essential point, that divided authority is the bulwark of freedom, is still sound Americanism, and ought to be exploited to the full. It can be invoked in a fight to repeal the Sixteenth Amendment.
But why is the case of freedom stronger when the autonomy of the states is inviolate? There is no vice in the national government that cannot be duplicated in the government of a subdivision; even county sheriffs have been known to take liberties with the rights of citizens. If we were living in forty-eight separate nations our lot, as individuals, might be worse; it probably would. Some people, using Switzerland as example, maintain that the smaller the nation the more freedom. But the Central American dictatorships refute that argument. The characteristic of the Swiss government that is often overlooked is the division of authority between the federal establishments and the cantons. That is the essential ingredient: only when the central authority is kept off balance by competition from autonomous sub divisions are the rights of citizens more secure.
Freedom is the absence of restraint. Government cannot give freedom, it can only take it away. The more power the government exercises the less freedom will the people enjoy. And when government has a monopoly of power the people have no freedom. That is the definition of absolutism—monopoly of power.
The object of monopoly, in any field, is to compel the customer to accept the services offered by the monopolist at his own terms. It is a take-it-or-leave-it arrangement. Competition, on the other hand, compels the servicer to meet the standards set by his competitors, with the customer the final judge as to proficiency. The beneficiary of competition is the buyer. In the matter of government services—which is the protection of life and property—the customer is the citizen.4 The government will serve him best only if it cannot set its own standards, when it does not enjoy a complete monopoly of power.
This brings up a contradiction. The theory is that government must have a monopoly of coercion to prevent us from using coercion indiscriminately on one another; we institute government, and endow it with sole police power, for the purpose of maintaining order. Nevertheless, experience has shown that the monopoly we give government can work for disorder; the power can be used to create disharmony and promote injustice. That, in fact is the record. Throughout history, those to whom the job of rulership has fallen, whether by heredity or popular selection, have shown a tendency to use their position to dominate, not serve, the ruled. Hence, unless the monopoly of power can be checkmated, freedom is always in danger.
Recognition of that fact gave rise to the idea of constitutional government, with limited powers. And as further restraint on government, popular suffrage was instituted. The vote is presumed to keep the government from getting out of hand; the threat of being turned out at the next election is supposed to hold down the arrogance and ambition of those in whom the power is vested. However, during its incumbency the elected government does enjoy a monopoly position, and it can use that position to solidify, enlarge upon, and perpetuate its power; it can even use the citizens’ tax money to “buy up” the next election, either by bribery or by propaganda.
Popular suffrage is in itself no guarantee of freedom. People can vote themselves into slavery.
The only way, then, to prevent the monopoly of power from becoming absolute is to create a competitive market for government; to give the citizens, the customers, a choice of jurisdiction. That is exactly what our peculiar American system of divided authority, between states and federal government, accomplished. The Constitution, as originally conceived, set up independent nations within an independent nation—imperium in imperio—each with delimited powers. In that way, it was hoped, the polarization of power that undermines freedom would be prevented. The central government was given certain specified chores to do; it could not intervene in local affairs, unless the state governments were not able to maintain order. If the state government got rough with its customers, they could easily transfer their allegiance to another state.
This division of powers established the nearest thing to competition in government the world has ever known. As long as it held up, or until the federal government invaded the state lines (though the powers it acquired under the Sixteenth Amendment), the American citizen was as free as it is possible to be in organized society. Except with excise taxes, or during war, the central government never annoyed him. Sometimes the state governments went in for political innovations, including socialism, that violated his freedom. But they did not get far with these schemes, simply because the citizen could march off to a state more to his liking, or immigration from other states was discouraged; no government likes to lose taxpayers.
Thus, before the Prohibition Amendment, several states and localities went in for this kind of sumptuary legislation. This was indeed an invasion of individual rights, but it never amounted to much more than a nuisance. There was no monopoly of power behind it. The citizen could and did import liquor from contiguous territory, or manufactured his own. Until the prohibitory power was monopolized by the federal government, so that escape was fraught with danger, the individual’s right to make a drunken fool of himself was not effectively infringed by state laws.
From the very beginning the states had the power to impose income taxes and a number of them exercised it. None of these states ever went as far as the federal government has gone, and for obvious reasons. In the first place, the neighborly relations between local tax collectors and taxpayers made for evasion of this infringement of property rights; the state governments could not import “foreigners” from Washington to do the unpleasant work. Then, the local politician is more sensitive to the likelihood of retribution at the polls than is the national politician, and he knows that nothing will stir up the people more violently than excessive taxation. Most important is the fact that, other things being equal, capital, without which production is impossible, is attracted to areas where low tax rates obtain; it was regular practice, before the Sixteenth Amendment, for chambers of commerce to advertise the freedom from income taxes in their states as an enticement to industry, and it was not unusual for men of means to migrate to those states that did not tax inheritances. Running away from taxes is an ancient custom, and no state government wants to see its area depopulated. For these reasons some of the states dropped their income taxes, and none of them went in for oppressive rates.
Sometimes it is urged that we federalize our divorce laws, which would indeed be an invasion of our personal lives. So long as there are different legal jurisdictions covering divorce, the morality of it is left where it should be, in the conscience of the parties involved. A federal law would not prevent the breaking of conjugal ties, but if it were stringent enough it would certainly encourage the practice of living together out of wedlock, with a consequent increase of illegitimacy. Thus, immorality would be multiplied, as every law to eradicate it does. The more affluent would migrate to other countries to effect their purpose. More important, from the viewpoint of freedom, a federal law would put upon us another flock of enforcement agents, snoopers, and bribe takers.
Right now there is an urgency to have the federal government eradicate by forcible means the stupidity of racial and religious bigotry, particularly in employment practices. This is another example of the fatuous undertaking to make men “good” by law—the socialistic program. It cannot be done. A “fair employment practices” law can only result in intensifying bigotry, by concentrating attention on it. A New York State law of that kind has done nothing more than stimulate the ingenuity of employers and employment agencies to invent methods of evasion; discrimination is as prevalent as ever. But if the federal government is given the power of a “fair employment practices” act, we can expect an army or corruptible police swarming all over our national industry. That is not freedom.
As long as anything is left of our tradition of States’ Rights, the danger of absolutism in this country can be avoided. In fact, it is that tradition that must be depended upon in any effort to repeal the Sixteenth Amendment.
1 One device for invading the authority of the states, under cover of the “general welfare,” is the establishment of “authorities,” of which the Tennessee Valley Authority is the prototype. Putting aside the economic desirability of these agencies, or their ability to do a job that might be better done by private industry, they are a distinct threat to the autonomy of the states. They are, in fact, “authorities,” in that the land they occupy, which is extensive, is federal land and under the jurisdiction of Washington. They are politically alienated from the states. The states, of course collect no taxes from the federal government, and they also lose the revenue that the private users of this land once paid to them. (The TVA generously makes a “donation” to the states, in lieu of the lost taxes.)
2 To the early American his state government was at least on a par with the federal government in his esteem. Illustrative is the following incident:
President Washington was about to arrive at Boston on a visit, and Governor Hancock was perturbed over a matter of protocol; would he be compromising the dignity of the Commonwealth of Massachusetts if he went to meet the “father of his country” on arrival, or would it be more proper that the President call at the state Capitol? The Governor finally settled the problem by pleading illness…. The sequel to that incident is worth noting. President Washington was asked to review the Massachusetts militia; he refused on the ground that the militia was the military arm of the state, not the federal government; after all, the tacit understanding in those days was that the militia might be called upon to face the federal army.
3 In number 45 of The Federalist, Madison writes: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which remain in the state governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation and foreign commerce…. The powers reserved to the several states will extend to all objects which, in the ordinary course of affairs, concern the lives, liberties and properties of the people, and the internal order, improvement and prosperity of the state.” And so The Federalist goes on; promise after promise that the state governments will be free in all respects except to deal with foreign governments. At one time, Madison described the federal government as the foreign department for the state governments.
4 “The first object of government,” says Madison in the tenth number of The Federalist, is the protection of “the diversity in the faculties of men, from which the rights of private property originate.” The conception of government held by the Founding Fathers was quite the opposite of what has been gaining currency in this country in recent years.
THE CIVIL WAR did not abolish the autonomy of the states. All that was settled by that conflict was the questions of secession and nullification; no state could pull out of the Union or disregard a regularly enacted national law. After 1865, as before, the states were still the depositories of all powers not specifically delegated to the federal government, as stipulated in the Constitution.
After 1913, however, and without either a war or a change in the law of the land, the states were gradually and almost imperceptibly rid of their sovereign position and reduced in importance to dependent subdivisions of the nation. It was done by the subtle arts of bribery and blackmail, made possible by the Sixteenth Amendment.
From the very beginning of the Union it has been customary for Congressmen to try to wangle out of the federal government some special privilege for their more influential supporters, or some appropriation of federal funds for spending in their states. “Pork barrel” legislation did not begin with the Sixteenth Amendment. However, before 1913 the best the party in power could do for a Congressman (or a state governor), by way of a bribe, was to let him hand out a judgeship or a postmastership, an occasional franchise or perhaps a land grant.1 Such favors helped the state machines to see eye to eye with the federal government and win their support for its programs; but the total of such patronage was not enough to reduce the states to subserviency. The manna that fell from Washington was hardly enough to buy up the independence of the states or the votes of their citizens. No candidate for Congress could offer his constituents gifts paid for by the citizens of other states.
The ink was hardly dry on the Sixteenth Amendment before the heretofore picayune federal patronage began to blossom into the program of grants-in-aid. The first of these came in 1914, when the Agricultural Extension Service was inaugurated with an appropriation of $480,000—not so inconsiderable an amount in those days. Each year thereafter Congress found reason to pass “general welfare” legislation, with appropriations increasing in importance. Whether the “general welfare” prospered by these expenditures is questionable, but it is certain that the political fortunes of the politicians who could boast of “bringing home the bacon” did not suffer.
The laws multiplied and the appropriations grew bigger. It is a curious fact that as the government’s revenues increase so do its needs.
Before 1913, the country was in difficulty several times, but it never suffered from an “emergency”; that national disease is a product of the income tax, and as the levies increased, the affliction recurred with greater frequency and greater intensity.
War, or the threat of it, is a most important “emergency,” and since 1913 we have had two major wars, a “punitive expedition” and at least one “police action.” We finally got around to permanent peacetime conscription, thanks to an “emergency,” with its costs. In between all this a depression came upon us, even as did “hard times” several times before the Sixteenth Amendment. The country managed to get out of these former economic disasters without federal intervention; but the depression of 1929 was not allowed to cure itself; it had to be ministered to with taxes.
Every post-Sixteenth Amendment “emergency” became an occasion for raising the rates of taxes on incomes and of lowering the exemptions; that is, for taking more of the incomes of more persons. The odd thing about these “emergency” taxes is that they hang on after the original occasion for them disappears. Just by way of illustration, first-class postage before World War II was two cents an ounce; the rate was raised to three cents “for the duration.” Later legislation made the increase permanent. Perhaps other factors, like inflation, made continuation of the increased rate necessary, although that is a debatable question; the point is that the promise of the original legislation was never kept. In like manner, a great “need” ushered in every increase in income taxes, with the tacit or explicit understanding that the levies would be dropped when the “need” no longer existed; but every “need” hardened into a permanent necessity.
Popular suffrage fosters government by and for pressure groups. The first concern of a politician is to be elected, the second is to be reelected. No matter how noble he is at heart, no matter how sincere his desire to serve his country, practical considerations force him to cater to individuals or groups who can “deliver the vote”; he cannot do anything for the good of his country unless he is in office. Hence, he is inclined to make promises to do this or that for the benefit of those who can help him at the polls. Since an office holder has nothing to offer but laws, his preelection promises amount to the pledging of the political power with which he is invested. But the patriotic citizens who enter into the bargain are not interested in political power in itself; what they are after is an economic advantage that political power can confer upon them. They are interested in sinecures on the public payroll, franchises, public works and contracts that bring jobs to the community and profits for the contractors, handouts, and so on.
This practice of buying votes with political favors is inherent in popular government. It is the weakness of democracy. It is not due so much to the depravity of the politician as to the human hunger for something-for-nothing.
However, this weakness of democracy is only as dangerous as the amount of the citizens’ wealth the government has at its disposal. Before 1913 the American government was comparatively poor and political jobbery was correspondingly limited in scope. When the government acquired this power of confiscating the national wealth, the corruption was limited only by the amount that expediency would permit it to confiscate. At this writing the confiscation amounts to one third of the production of the citizenry. That is a lot of “pork” with which to buy votes. And so, as the Sixteenth Amendment gradually achieved its fulfillment, the politician’s attention was more and more directed toward the “barrel”; so was the attention of those who are compelled to keep it filled.
The dependence of the state political machinery on the coffers of the federal government carries an obligation: to support and acquiesce in the policies and purposes of the ruling regime. If a governor asks for or accepts a school subvention, he cannot very well object to the curriculum or textbooks “recommended” by the Bureau of Education. And a Congressman who tries to become a liaison officer between his voters and the United States Treasury will probably vote for any program the regime wants. Even a city mayor might find it politically inexpedient to reject a housing subsidy offered by the federal government. The funds at the disposal of Washington make it possible for the bureaucracy to go over the heads of noncooperative local politicians to the people, to propagandize them in favor of what it wants and against the independent local politician; it is a known fact that the Washington bureaucracy maintains a most extensive propaganda machine.
Thus, every federal dollar spent in a state becomes an obligation on the state. The obligation is paid off with sovereignty; the state sells out its independence. It is all done without change of the law, without any modification of the Constitution, and is as imperceptible as the gradual wearing down of a proud horse by a resolute trainer.
Once in a while, however, the fact of what is going on is dramatically disclosed when a state government asserts its independence. Thus, when the Indiana legislature, during the Truman administration, decided to make public its relief rolls, in order to put a stop to corruption in the distribution of public money, the federal government showed its fangs; it threatened to withdraw its fifty percent contribution to these relief funds if Indiana persisted in its purpose. This blatant attack on the sovereignty of a member of the Union received wide publicity. It will probably never be known how much quiet pressure is put on state governments (through favors extended to local politicians) to submit to federal domination.
This centralization of power, which the Founding Fathers feared and sought to prevent by constitutional safeguards, is made possible only by income taxation. This is the atomic bomb that has virtually destroyed the Union. But, it may be pointed out, the state legislatures ratified the Sixteenth Amendment in the first place; did they not know that they were voting themselves out of business? Probably not. Most of the states were poor and envious of those in better circumstances, and all they saw in the Sixteenth Amendment was a way to “soak the rich.”
For some years after the Amendment went into effect, seven states of the Union paid in more to the federal government in income taxes than they got back in the form of grants-in-aid; the other forty-one made a “profit.” Covetousness was thus encouraged. Somehow, a Mississippian sees no immorality in forcing a Pennsylvanian to support his local economy. His pride might stop him from accepting a gratuity from his neighbor, but he suffers no such inhibition when he knows it comes from a “foreigner.” So, it came to pass that a Congressional coalition, representing the poorer states, and held together only by their common greed, pressed for legislation that would bring them dollars mulcted mainly from the citizens of the seven rich states. That is the bald fact, though the legislation was glamorized with the “public interest” label. According to the label, New York profits by its forced contribution to Arizona irrigation projects or Montana roads. However that might be, the immediate beneficiary of federal grants to local projects is the politician who solicits it, and the ultimate beneficiary is the federal bureaucracy. Everybody else pays.
Today, every state in the Union pays into the income-tax fund more than it gets back. (See table at the end of this chapter.) This outcome was inevitable. The Sixteenth Amendment gives the federal government power to levy on incomes “from any source derived.” This includes the incomes of citizens in the poorer states, and the federal government had to get around to them in time.
But the fact that every state is now a loser gives them all a common interest in the repeal of the Amendment. They all have an economic motive for raising the banner of States’ Rights, for reestablishing their sovereignty; they would all profit by repeal of income taxation. How could they lose?
Twice in the history of the country the doctrine of home rule was called from retirement to lead a secessionist movement, and each time the motivation was economic. In 1814, when the British fleet had all but ruined New England industry and commerce, delegates from these states met to consider ways and means, not excluding secession from the Union. What might have come from the Hartford Convention must remain conjecture, for “Mr. Madison’s War” was called off before the proposed second gathering was convened. The renewal of business activity put the doctrine back into the textbooks.
States’ Rights became the battle cry of the South only because the planters felt the pinch of protective tariffs. No one would ever have heard of nullification and secession, and certainly not of war, if Calhoun’s plea for lower tariffs had been heeded—or if the government had been able to buy off the planters with “parity” prices, which it could not do for lack of an income tax. After the war had destroyed the economic interest which had inspired it, States’ Rights was again interred.
The fires of freedom are stoked by the will to be free. It is not the promise of bread alone that will spur a people to shed their shackles, but rather the hope that they may attain the dignity of self-respecting individuals. Without idealism a revolution is nothing but a gang fight. Nevertheless, it will be found that every struggle for freedom was led by a group who, though prompted by lofty purposes, had some immediate economic objective in mind; it may not have been personal gain that drove them to act, it may have been the improvement of general conditions, but in any case an economic motivation was present. Nor will the rank-and-file go through the struggle of liberation unless they can see a pot of gold in the rainbow.
At the present time there is no economic group sufficiently disturbed about income taxation to start doing something about it. On the other hand, a sizable number of Americans, and particularly those who have the resourcefulness to take care of themselves under any conditions, have managed to attach themselves to the income-tax wagon and see no reason for breaking it up.2 They are doing pretty well for themselves, so well, in fact, that they are blinded to the ultimate effects of income taxation on the welfare of their offspring, on the future of their country. To them the income tax has been good.
For instance, the banking fraternity is not overly disturbed by high income taxation; because of these revenues, the government can guarantee the mortgages the banks hold on overvalued veterans’ homes and other housing projects; these guarantees might not be worth much if the Sixteenth Amendment were repealed.3 The industrialists who revel in a backlog of government orders likewise see no reason for repeal. Nor can the farmers work up any interest in the matter since it is out of income-tax revenues that they get “parity” support as well as checks for not producing. College professors whose salaries depend on government subsidies, veterans whose incomes are augmented by gratuities from the federal treasury, dentists who pull teeth at government expense, tenants whose rent is more or less paid by the government, two and a half million who are on the public payroll—probably half the population of America are wholly or in part dependent on income taxes for their livelihood, have made a comfortable adjustment with it, and though they grumble about the part they have to pay, would not like to have their adjustment disturbed.
Among these beneficiaries of the income tax are the type of people who could be the backbone of a revolt. In time, they will be, for it cannot be long before their benefits will be more than offset by the taxes they have to pay; the “take” of the government, increasing as a percentage, must ultimately wipe out the winnings of all the players. When that time comes, or when they become aware of it, those who are now for income taxation will discover that they have been robbed not only of their property but also of their freedom, and will kick up a fuss. Meanwhile, they are content to keep their snouts in the public trough.
That part of the population who get no return on their income-tax payments—obviously, the government cannot subsidize everybody—are too preoccupied with the problem of making ends meet to do anything but grumble. Were a leadership to appear, explaining that repeal of the Sixteenth Amendment would do away with withholding taxes, that the waitress would not have to share her tips with the tax collector, that the grocer would no longer have to hire an accountant to keep him out of jail, that the housewife would not have to conspire with her housemaid to evade the law, a goodly crowd would join up.
The only group that could logically furnish that leadership are the governors and legislators of the states. Repeal of federal income taxes would not only reestablish their importance and dignity, but would also put them in the way of increasing the revenues of the states for the carrying on of such social services as the citizens call for. The states would set themselves up in business again. And some degree of statesmanship could attach to the job of the representative in Washington if he were relieved of the necessity of panhandling.
Besides, any change in the Constitution is still the prerogative of the states. If three quarters of the members of the Union demand an amendment (and repeal would be an amendment), Congress must put it into the works; the signature of the President is not needed. Hence, the initiation must come from the states.
Repeal of the Sixteenth Amendment would amount to secession of the forty-eight states from Washington—and restoration of the Union.
FEDERAL INTERNAL REVENUE COLLECTIONS OF THE UNITED STATES REPORTED FOR THE FISCAL YEAR 1951, COMPARED WITH REPORTED GRANTS-IN-AID TO STATE AND LOCAL GOVERNMENTS, AND FEDERAL AID PAYMENTS TO INDIVIDUALS WITHIN THE RESPECTIVE STATES, OTHER THAN GRANTS AND LOANS, WITH PERCENT OF COLLECTIONS RETURNED TO EACH STATE IN FISCAL 1951.
1 In 1932 the programs in effect totaled $269,425,252. During the wartime fiscal year 1946, the grants-in-aid and checks to individuals totaled $1,290,107,183. As these figures were compiled, there were 80 programs and activities under which federal revenues were shared with or funneled back to the states and local governments, or as direct payments to individuals. (Payments to individuals were exclusive of payments to civilian employees of the federal government who at this time numbered more than 2,530,000, with payrolls at an annual rate of over $10 billion a year.)
2 Maryland receipts include revenues from the District of Columbia and Puerto Rico. For fiscal 1951 the District received a total of $34,384,443 in federal aid and Puerto Rico received $54,412,416. The actual Maryland figure is $51,378,383.
3 Figures on collections for Washington include Alaska. Amounts have not been shown separately by the Treasurers annual report. Federal aid reported for Alaska for fiscal 1951 totaled $5,789,295.
Author’s note: The preliminary summary of this table states that the average percentage of total collections returned to the states and individuals is 9.42. This is an incorrect and misleading figure, and is a perfect example of how easily statistics may be used to state an untruth. It is indeed true that, of the lump sum collected by the federal government from all the states, a lump-sum percentage of 9.42 was returned to the states. But it is not true that the average percentage returned to each state and individual was 9.42. Actually, the average percentage returned to each state was 22.64. This correct percentage is arrived at by averaging the 49 percentages listed in the table.
You can’t take 566,957,101 (Delaware), lump it together with 113,976,845 (Mississippi), divide the lump sum into the lump sum of the amounts returned to these two states, then draw an average of the percentages returned to the states. You can’t do this because the separate sums are of different amounts, and percentages drawn from two different amounts cannot be averaged. For your average percentages returned to these states, you have to take the two percentages given—1.47 and 93.58—and average them.
1 During recent years, the federal government has regained by purchase or state grant a good portion of the land it so lavishly distributed for political purposes during the nineteenth century. It now owns about one fourth of the land of the country. Since this is federal land, the states cannot collect any taxes from its users. This is practically “foreign soil” as far as the states are concerned, outside their jurisdiction and yielding them no land tax.
2 A striking instance of how the federal government has built up a vested interest in income taxes is the case of the Reconstruction Finance Corporation. This agency, set up in the Hoover Administration on a “temporary” basis, makes loans to companies who can prove that private financial institutions have rejected their applications; that is, to companies that are not entitled, on the basis of their financial statements or their performance, to loans. Some 14,000 of such presumably unsafe companies, in 1950, had obtained funds from the RFC; the citizens of the United States were compelled to loan money to people whom the banks had turned down. Obviously, the borrowers were grateful. The Sixteenth Amendment was very good to them. Since this was written, Congress has terminated the life of the RFC, and has replaced it with the Small Business Loan Corporation.
3 The condition of the banks is worth commenting upon, because of the importance of these institutions to the general economy. The banks, as a whole, now hold government bonds in an amount equal to upwards of sixty percent of their total assets. A sizable drop in the value of these bonds could wipe out their net worth and bring on an insolvent position. Repeal of income taxation would certainly affect the value of these bonds adversely. The banks must be against it. Furthermore, they are in the peculiar position of not being able to refuse to take more bonds, because such refusal would be tantamount to repudiating the soundness of their main borrower and thus casting reflection on their own soundness. Thus, the banks have slipped into the position of dependence on and subservience to the United States Treasury; to all intents and purposes they constitute the bank of the government.
For Freedom’s Sake
REPEAL OF the Sixteenth Amendment would not be a reform; it would be a revolution.
A reform is a procedural change, an alteration in the legal ritual that does not affect the center of political power. A revolution, on the other hand, whether it is effected by violence or in an orderly fashion, is a transference of power from one group to another. An election is in effect a revolution, and so is a coup d’etat or one of those gang fights that characterize Latin-American politics. The essence of revolution is a shift in the incidence of power.
The significant revolutions of history were those that either strengthened the political establishment or whittled off some of its power. The Bolshevik Revolution of 1917 was a major operation, because it replaced a decadent and weakening Czarism with the most powerful machine the world has ever known; not a shred of social power was left in Russia after the Bolsheviks took over. Then there was the revolution at Runnymede that resulted in the Magna Carta, an instrument that deprived the Crown of some of its prerogatives.
The American Revolution was unique in history, not because it kicked out a foreign rulership, which had been done before, but because it made possible the establishment of a government based on a new and untried principle, namely, that the government has no power except what the governed have granted it. That was a shift in power that had never occurred before.
A new American revolution was initiated in 1913, when the government was invested with the power to confiscate private property. The Amendment was not heralded as a revolution, and very few recognized it as such, but the fact is, as events have shown, that this power over the economy of the country put into the hands of the American government a means of liquidating the sovereignty of the citizenry.
As a result of income taxation, we now have a government with far more power than George III ever exercised. It is self-sufficient, independent of the will of the people. The elections do not alter that fact; these are merely periodic changes of the guard. Whoever is elected retains the power vested in the office and, as usual, tries to augment it. The end in clear sight is the liquidation of all social power and the advent of a regime of absolutism.
This, it cannot too often be repeated, was an inevitable consequence of income taxation. The citizen is sovereign only when he can retain and enjoy the fruits of his labor. If the government has first claim on his property he must learn to genuflect before it. When the right of property is abrogated, all the other rights of the individual are undermined, and to speak of the sovereign citizen who has no absolute right of property is to talk nonsense. It is like saying that the slave is free because he is allowed to do anything he wants to do (even vote, if you wish) except to own what he produces.
The proposal to repeal the Sixteenth Amendment is really a proposal to restore the sovereignty of the American citizen. To use a modern term, it is a counterrevolutionary proposal, in that it aims to restore to society the power that the Amendment gave to the government. Judging by the grumbling over income taxes—to say nothing of the wholesale evasion that even the Treasury Department admits—it would seem that the revolutionary tinder box is full and needs only leadership to ignite it. Particularly is this truculence strong among workers and housewives, professional and small businessmen; the big industrialists, bankers, and commercial interests, for the reasons aforementioned, have no reason to favor repeal. But whether this mass dissatisfaction can be channeled into a dynamic movement depends on the underlying cause of it; is it economic or spiritual?
It needs no proving that the country, the people, would be better off if income taxation were abolished. But no movement based on economic grounds alone will stir a people into action; a movement so based can be bought off.
Unless Americans want to be free, unless they put their tradition of freedom above all else, the Sixteenth Amendment will stay in the Constitution until it wrecks both the tradition and the civilization from which it emerged.
It is customary to identify the American tradition with the Declaration of Independence. Yet the Declaration merely articulated what had grown into an American thought pattern long before it was written. It had become the American ethos. John Adams, writing in 1818, put it this way: “the Revolution was in the hearts of men”… it was effected “before the war commenced.” That is to say, when Jefferson wrote about “unalienable rights” he simply put into words what Americans instinctively felt. They opposed the British Crown because they could not do otherwise.
When we try to define “Americanism”—of which there is much loose talk these days—we find it necessary to look to our beginnings for the essential ingredient. Whatever special character this country can lay claim to, it was the habit of freedom that was acquired before the country was formally organized. And it was an acquired, not an inherited characteristic, for the American was ethnologically as heterogene ous as his forebears. His ancestry gave him nothing that the peoples of Europe did not have. He had come by freedom through trouble and toil; he meant to hold on to it.
When he got around to establishing a political establishment of his own, the American had sense enough not to put too much trust in it. He had learned—without the help of a textbook on political science—that inherent in government, any government, is the tendency to rob the individual of his freedom. Hence, while recognizing the need of government for orderly gregarious living, he was against giving any setup a free hand; it must be hamstrung. The Constitution was, for that reason, that distrust of government, heavily underlined with prohibitions and with “checks and balances.”
The Constitution was tailor made for and by Americans; it was fitted to their particular habit of thought. That point was emphasized by one of its makers, Gouverneur Morris, when he was Minister to France, during the Reign of Terror. “The French,” he wrote, “want an American Constitution without reflecting that they have not American citizens to support it.”
Missing from our original Constitution was a “check” that was all the more potent because of its omission. The straight-thinking pioneer knew full well that the power of the government is in direct ratio to its income, and he was therefore all for cutting its income to the bone; that way it could not get out of hand. About all he would allow it was what it could pick up from tariffs on imports. Grudgingly, because, as Hamilton pointed out, tariffs could not produce enough to pay the running expenses of the proposed government, he allowed it some excise taxes. More than that he would not give, and more than excise and tariff taxes did not get into the Constitution.
Certainly, no tax on incomes got into the Constitution. That was unthinkable. A people that had but recently kicked over the traces because of taxes far less onerous would hardly have countenanced an income tax. They knew their freedom.
The case for repeal rests on this tradition. If there are still enough Americans who are of the opinion that that government governs best which governs least, if there is among us a group willing to risk their fortunes, their lives, and their sacred honor for freedom, then repeal has a chance. If on the other hand, the habits of mind acquired under income taxation have completely obliterated the American tradition, then any effort to restore citizen sovereignty is futile.
It is never too late to put up a fight for freedom.
Right now, even in America, the prospect for starting such a fight is unpromising. Not that the goal is unattainable, but that interest in freedom is at so low an ebb. The great enthusiasm of the times is “security”; everybody seems bent on catching this evasive will o’ the wisp, oblivious of the fact that it is beyond reach because it does not exist. There is no such thing as “security”; it is a mirage sprouting out of deep-rooted human yearning for something-for-nothing. Government, which lives and thrives on power, fosters belief in the “golden calf,” so that it can surreptitiously rob the self-mesmerized worshipers of their wealth and their dignity. It requires no great acumen to realize that what trickles out of the government’s cornucopia must be replaced by labor. But reflection is foreclosed by the madness that has come over us. The national passion is for handouts, no matter what the cost. Freedom, which puts a premium on self-reliance, is in short demand. Why put up a fight for it?
The rank and file, those whose principal preoccupation is with the problem of existence, are in no mood to argue with the beneficent State; they are for letting well enough alone. Those Americans who have pretensions to over-average capacities are also quite willing to put their self-esteem on the barrelhead. The entrepreneur whose venture would not exist but for government loans or government contracts readily makes peace with government regulation. So long as government bonds pay interest, the banker will not quarrel with government intervention. The farmer does not object to a meddlesome federal agent who brings him a gratuity, and the professor who lives by subsidie s will write books in praise of the subsidizing State.
Who wants freedom?
In the circumstances, those who put a value on freedom, who know that the loss of interest in freedom is the sure mark of national and individual decadence, are in deep despair. Many, too many, have resigned themselves to what they call the inevitable. Let the country have its bellyful of socialism, they say, and be done with the struggle to stop it. The human animal can adjust itself to any condition that permits him a meal and a mate; Americans are no different from any other people that in times past have swapped their souls for a mess of pottage. They, too, will find that the only “security” is that provided by a penal institution, but by the time they find it out they will have made their adjustment to prison bars and barbed wire. After a century or two of that kind of living, some Moses will come along to remind them that they are in fact men, and a new exodus to freedom will be started. By that time, these prophets of gloom maintain, and not without good reason, the State itself will be in a starved condition and unable to stop the exodus. A handful of resolute men will easily topple it over.
There is historic support for such resignation. Every civilization on record has followed the same pattern. In the beginning, the civilization rose and flourished in the sunshine of freedom. And, in the beginning, the civilization was poor. Always some kind of government attached itself to society, but because of the general lack of goods, the government remained quiescent and even rendered service in the maintenance of order.
But the human urge is always away from poverty, and that urge, while it improves his circumstances and widens his horizon, also is man’s downfall. As soon as a general abundance appears, the passion for power is enflamed, and the political establishment changes its character; it gradually shifts its position from a protective to a predatory institution. It levies taxes. And the more the general economy improves the larger its levies, always, of course, in the “general interest.” So it was in the time of the Caesars, so it is now.
The general welfare is not improved by the increasing load of taxation. On the contrary, the upward climb of civilization is retarded in exact proportion to the levies, and when they reach the point of discouraging production, the parabola of civilization turns downward.
Returning to first principles, the object of productive effort is consumption; men work to satisfy their desires, and for no other reason. They don’t want work, they want satisfactions. Their aversion to labor is such that they are constantly inventing labor-saving devices. And the more labor they save the more labor they invest in the gratification of new desires, of which the human mind seems to have an inexhaustible fund. Contrariwise, when the results of their efforts are taken from them, when the prospect of possession and enjoyment is diminished, they lose interest in producing. Why work when there is nothing in it? And this disinterest in production arises whether the insecurity of ownership is caused by regular visits from marauders or tax collectors. The name or the uniform of the absconder makes no difference to the one deprived of his property; he sees no point in trying to improve his circumstances, in widening his horizon; his point of interest is mere existence. That is civilization in decline.
When faced with this circumstance, does the State abdicate? It does not. The general lack of interest in production threatens its own existence, but it still cannot divest itself of its inner urge for power. It turns to the use of force to stimulate the production from which it derives taxes. It confiscates and tries to run the entire economy by rules, regulations, controls, and compulsion; the nation becomes a slave-labor camp. But the output of an economy that rests on force rather than on self-interest is meager. More important than lack of production is the slave psychology that such an environment induces. Men lose their capacity for self-improvement along with their sense of individual dignity. Thus civilization disintegrates and becomes an historical or archaeological curio. The State, of course, collapses with the civilization.
Must our civilization follow in the same groove? There are prophets who so maintain. For about three centuries, they point out, that bit of modern civilization called America thrived under the life-giving rays of freedom; now it is entering into the usual regime of absolutism. The end is in sight, and the end, they say, will come much more quickly than did, for instance, the end of the Roman civilization, simply because our great advances in technology will hasten it. We move much faster these days, even toward our decline. The event that will bring about a complete collapse of freedom in America, and the civilization that grew up under it, will be the next world war; the State will, under fear of annihilation from the enemy, confiscate all that remains of social power. After the war, as usual, it will not give up the power it has thus confiscated—in fact, the bewildered and war-impoverished people will insist on the State retaining that power and using it for the “general welfare”—and in short order even the memory of freedom will have been lost.
Maybe so. Maybe our civilization must obey the “ineluctable” forces of history; maybe it is on the toboggan now. Nevertheless, men do what they are impelled by their natures to do, not by what history dictates. The stars in the heavens attend to their eternal business, while we mortals must travel within our own specific orbits.
It was no historical imperative that directed the pens of those who signed the Declaration of Independence; it was an inner force. There were many at the time—the Tories— who deemed the Revolution a foolhardy venture, from which no good could come greater than that which might ensue from a compromise with King George; if they were alive today these Tories could point to Canada in support of their argument. Nevertheless, the rebels, none of whom were driven to it by economic necessity, put their signatures to what at the time seemed to be their own death warrant. Why? For lack of a better answer, let us say they were made of a peculiar kind of stuff and could not do otherwise.
Whether there are any mystic forces pushing men along a path from which there is no escape, is a moot question. But there is no questioning the fact that throughout history men have regularly made excursions in quest of freedom, and that every one of these excursions was identified by its leadership. It is a logical inference therefore that when men of that stripe appear on the scene the cause of freedom is not neglected. Perhaps, after all, the present plight of freedom in America is due to lack of leadership.
If, for instance, those who prate about “free enterprise” were willing to risk bankruptcy for it, even as the men of the Declaration risked their necks for independence, the present drive for the collectivization of capital would not have such easy going. Assuming that they are fully aware of the implications of the phrase they mouth, and are sincere in their protestations, the fact that they are unwilling to suffer mortification of the flesh disqualifies them for leadership, and the case for “free enterprise” is hopeless.
The present low estate of freedom in this country must be laid to lack of the proper leadership—to men who know what freedom is and who do not equate it with their own “standard of living.” Whether or not leadership could have averted, or can still stop, the trend toward socialism, may be open to question; that a glorious fight for freedom might yet enliven the American scene is not. Whether a fight for freedom will be crowned with success, is less important than the fight itself, for if nothing comes of it, the improvement in the spirit of the fighters will be a gain, and they cannot help but keep alive the values that will make America a better climate for their offspring to live in.
There is no accounting for the emergence of these superior men, these “sports of nature,” who sporadically shape the course of mankind. They come, as it were, from nowhere, and nobody has yet conclusively explained their advent. But, they come. When in her own time and her own pleasure Nature deems America ready for and worthy of them, she will give us the men who will make the good fight. It seems reasonable to assume that their first objective will be— Repeal of the Sixteenth Amendment.