Of Liberty and Breaking the Rules

October 21, 2013 Leave a comment

Sometime in the 1990s, before the days of YouTube, I received a homemade video from a man who owned and operated a small business near Dallas, Texas. He ran a landscaping company, had a handful of employees, and, according to the video, was in violation of some rule or regulation of the federal government every day. He did not intend to be in violation. He did not want to be in violation. As he explained, it was just impossible to comply with all of the requirements.

The video began with the owner sitting behind his desk, explaining the problem. He stood up and took the camera with him as he walked through different parts of his operations, pointing out what was required of him, his business, and his colleagues.

In the main office he described the employment rules, the tax laws, the related mandates and regulations that applied because he had hired other people. He walked over to the equipment and described the numberless “safety hazard” regulations, from warning notices that had to be glued beneath the seats of garden tractors, to how he and his workers used, carried, and stored their tools, gear, and machines, and what they were supposed to wear while using them. He discussed the multitude of formal requirements for managing and applying the fertilizers, pesticides, and other chemicals that are commonly used in his business, including their handling, storage, clean up, and their transportation. Speaking of transportation, because his company used trucks and other vehicles, there was another long list of rules and regulations that applied to that part of the firm.

Added to all of this, there were numerous reports, applications, notices, and other papers to be filed with a variety of agencies on a regular basis. When he was through, he sat down again behind his desk and said, “I break the law every day. I don’t intend to, but I cannot avoid it. I can’t keep up with it all as long as I stay in business.”

How did we get here? Is this America? Is this the land of the free and the home of the brave? Is this a land of freedom sustained by law? It is an unknown America, too unknown to most but too familiar to people who run a business, especially the people who own a small company. The rest of us see little of it, though perhaps we suspect it is there. Some of us catch glimpses.

In a large business it takes longer for the regulatory burden to become overwhelming. For a while the boss can hire more people to help carry the load. In the large firms of America there is a host of employees who produce no goods or offer any services to any customers. They spend their careers complying with their slices of these federal rules, laws, and mandates so that some of the other employees can be involved in what the business is all about, providing something to a customer for which the customer is willing to pay.

The customer may not realize that a large share of what he pays for he never receives; it goes to pay those people who work to keep the business in compliance with the government rules. More than businessmen would be wealthier without this heavy, dead hand clamped on firms, factories, and farms. The necessities and luxuries of life would all be a lot cheaper. Or, another way to say it, we would get more of the goods and services we pay for, less of our money sunk into these hidden costs for unproductive activity.

America’s Founders sought to create a land of freedom, not dominated by government and the officiousness of government functionaries. To them “unregulated” was a goal, not a criticism. They also knew the danger of what could happen, even in America. James Madison wrote, “It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood. . .” (James Madison, Federalist no. 62)

And yet here we are. What the Texas businessman faced in the 1990s has not become any lighter since. When was the last time that you read the full text of a law? Who has read the Obamacare statute, the Dodd-Frank Act, or any of the other voluminous, incoherent laws recently enacted, each written on more than a thousand pages? For each page of law enacted by Congress today government bureaucrats write ten pages of rules and regulations, all of which are enforced as law though never voted on by anyone who himself has been voted into office by the people.

In the land of the free, whose founding document begins with “We the People”, why do we tolerate it? One of the complaints against the king of England in the Declaration of Independence reads, “He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.” And yet we have done the same to ourselves. The Dodd-Frank Act alone created several New Offices and has already stimulated the hiring of more than a thousand new officers.

“I wear the chain I forged in life,” replied the Ghost. “I made it link by link, and yard by yard; I girded it on of my own free will, and of my own free will I wore it. Is its pattern strange to you?”

Scrooge trembled more and more.

“Or would you know,” pursued the Ghost, “the weight and length of the strong coil you bear yourself? It was full as heavy and as long as this, seven Christmas Eves ago. You have laboured on it, since. It is a ponderous chain!”
(Charles Dickens, A Christmas Carol)

There was a time when the chains had to be broken to restore the rule of law.

(First published August 8, 2013)

Filed under America, bureaucracy, Congress, Constitution, Declaration of Independence, Dodd-Frank Act, exceptionalism, freedom, government, healthcare, law, productivity, rule of law, statism, wealth

Of Claiming Good and Doing Bad

October 13, 2013 1 Comment

A very good book was published this month. Ostensibly, it is about our economy and the recession. It is actually about much more. It is the first book about the current American economy written by a philosopher, and it is perhaps the best book I have read yet about all the recent unpleasantness. Some might say that the economic trouble still continues, more like a long, slow convalescence from a serious illness than a healthy recovery. For many whose financial condition stagnates, for those who have replaced a full-time job with one or two part-time jobs, for graduates who have a degree in hand but no work in the field for which they have trained, and especially for the millions who remain out of work, talk of an economic turnaround can seem like a mockery.

For those and others, Infiltrated, by Jay W. Richards, can help make some sense of what hit us. The book does not suggest that there was a massive conspiracy to drive our nation into economic turmoil. It explains how turmoil came nevertheless as national policymakers followed the prescriptions of people who claimed to be doing good but tried to cheat the laws of economics and markets to impose what they might call “benevolence” on the rest of us.

It was their idea that in order to help more people own homes lenders should ignore such things as ability to repay a mortgage, strong history of employment and steady income, and having some equity in the value of the house so there would not be an incentive to walk away if prices dropped. They also agitated for the government to expand its guaranties for mortgages to people with poor credit histories and loans where lenders cut corners. And they badgered builders to keep building more houses.

Their plans horribly miscarried, and yet those people have even more control over us and our economy today and are more able and determined to try again. The recession, rather than educating and deterring them, has made them bolder.

I am reminded of what the late Louis Rukeyser, the very popular host of the PBS program Wall Street Week, wrote in the 1990s:

Washington has been taken over by an impregnable mob of short-sighted, power-hungry megaclowns.

They try their worst to micromanage every detail of the economy, but succeed only in whipping the markets back and forth, up and down in spastic patterns. They despise the gentler forces of a free market, which would moderate swings far more predictably.
(Louis Rukeyser, 1993 advertisement for his financial newsletter)

The people to whom I refer and whom Richards exposes in his book do not like the markets. They trust themselves more and think that you should trust them, too. They seriously do believe themselves smarter than the markets, and that is the problem. No one, other than God, is smarter than the markets. A large part of economic history, the tragic part, is a chronicle of the disasters caused when a small coterie of people are able to enforce their wishes and preferences on the rest of us in contravention of economic reality. It never works.

That was the story of the Great Depression, and it was entirely the story of communism, where whole societies were based upon the now well-proven fallacy that any group of people, no matter how smart or well intentioned, can gather sufficient data and know and understand enough to run a national economy. It is just far too complicated, with billions of economic decisions being made by millions of people all day and all night long. The markets make it all work, because the markets are the sum combined total of all of those economic actions and decisions interacting with each other. No human five-year plan for economic control has escaped failure.

What is worse, as well intentioned as such people may start out, all too often, as Richards’ book exposes, their efforts not only fail to do what they set out to do, they fail to stay virtuous and instead become enlisted in the service of private gain at the expense of the rest of us. The Soviet system might have worked pretty well for the party owners of the dachas along the Black Sea but only by impoverishing the workers their leaders claimed to be serving.

Do not let yourself be put off that Richards is a philosopher. His book is remarkably readable, one that you can take with you to the beach and actually enjoy, and feel that you have learned something—a lot—in the reading. Richards mixes real life narrative with hard facts and good research, unified by sound reasoning to expose a nasty and growing problem in American government today. The problem is a big part of why government is expanding and becoming more intrusive in all aspects of our lives, including our financial affairs, education, healthcare, energy use, the products we buy, the food we eat, and the entertainment we enjoy, and even the breath we exhale.

That is to say that the story told by Jay Richards, in Infiltrated, is actually a longer story, a story that began long before the recession, and continues afterward, a story that is bigger than his book. The recent economic events and their painful aftermath illuminate Richards’ core message, the human wreckage caused when some people are able to harness the coercive force of government to impose their personal notions of “benevolence” on the rest of us.

Roger Kimball, writing in 2011 in The New Criterion, warned that such efforts are “intoxicating, addictive, expensive, and ultimately ruinous.” (Roger Kimball, “Liberty versus benevolence,” The New Criterion, February 2011, p.6) Richards offers several well-described examples, well illustrating the truth of Kimball’s observations.

A valuable lesson for policymakers and for the people they would govern: the more discretion you give to government, the more you create the opportunity for abuse of that discretion for private gain. Europe in the 18th century was lousy with the practice. Our forebears sought to escape it and fought a revolution to get out of its grip. The men who threw the tea into Boston Harbor were acting in protest of the partnership between the British Crown and the British East India Company.

Beware the public-private partnerships. Jay Richards explains how some public-private mortgage partnerships went bad, very bad, for the partners and for all of us caught in the dust and debris of their collapse. I am reminded of the warning by former Congressman Dick Armey, that when you enter into a partnership with the devil, you are always the junior partner.

I conclude with the words of New York City Democrat Congressman Bourke Cockran, delivered 110 years ago:

That Government only is good, that Government only is great, that Government only is just, which has neither favorites nor victims.

(W. Bourke Cockran, speech given before the National Liberal Club of England, London, July 15, 1903, in W. Bourke Cockran, In the Name of Liberty, p.190)

Our government should be that government.

(First published August 18, 2013)

Filed under banking, benevolence, economic depression, economic growth, economics, healthcare, jobs, markets, personal finance, progressives, recession, rule of law, socialism, statism, tyranny

Of the Constitution and the States

October 8, 2013 Leave a comment

It must be the least employed part of the Constitution. In fact, “never used” may be a better description. I am not sure but that it may be the one part of the Constitution not only never used but never really tried.

I draw your attention to Article V, which offers procedures for amending the Constitution. Article V has been successfully invoked 27 times–25 or 26 times if you reconcile the count for the fact that the Twenty-first Amendment repealed the Eighteenth Amendment, the prohibition of intoxicating liquors.

So why do I refer to Article V if it has been used on more than two dozen occasions? I have in mind an important but neglected part of Article V. Article V provides two methods for amending the Constitution. Only one method has been used. We might call that the Washington Method, since it relies upon the Federal Government to propose amendments and send them to the States. The other, unused method I would call the State Method, as it relies upon the State legislatures to initiate the amendment process.

Article V is short. Here is the text in full:

The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate. (Emphasis added)

Constitutions are foundational documents and so should not be changed any more often than you would consider changing the foundation of your house. Change the foundation and a lot of other things change, too, and if you are not careful you can weaken the whole structure. But the Founders of the nation knew that they were not omniscient and that the need for adjustments or even corrections to the basic plan of the government would surely become obvious over time.

For example, the original process for counting electoral votes for President and Vice President almost put Aaron Burr in the White House instead of Thomas Jefferson in 1800. Jefferson was the candidate for President, Burr the running mate, and both received the same number of electoral votes, but the electoral college ballot under the Constitution did not distinguish between President and Vice President. The two were tied, and Aaron Burr got the notion that maybe he should be President instead of Jefferson. The House of Representatives had to sort it out. Afterwards, this flaw in the Constitution was corrected by the Twelfth Amendment.

The first ten amendments, the Bill of Rights, were made almost immediately and were demanded by several states as essential conditions for their ratification of the Constitution itself. We could very appropriately consider those ten amendments as part of the original Constitution since it would not likely have been ratified without their promised addition. In that view, the Constitution has subsequently been amended little more than a dozen times in over two centuries.

It is also worth noting that Congress has proposed amendments that the States have subsequently and appropriately turned down. One such proposed amendment that never got past the States was approved by Congress in 1861, denying Congress the power to interfere with slavery. The Constitution does not, however, limit the power of the States to only considering amendments that come out of Washington. It provides to the States the power to initiate amendments of their own.

Mark Levin, in his recent book, The Liberty Amendments, argues that it is important for the States to exercise that authority. He offers some suggestions for amendments that the States might consider, designed to restore the balance between Washington and the States that the Founders envisioned when creating our federal system.

It is a sign of how distorted things have become that using the word “federal” today almost always leads one to think of the government in Washington. Yet our federal system was designed specifically to preserve State authority and limit the power of the national government. Levin argues that those limits have been dangerously eroded, especially over the last century.

Consider the many aspects of our daily lives that are determined one way or another by Washington laws and regulations rather than by the States whose representatives are closer to the people whom they govern. The list would include the fixtures in our bathrooms, the design of our cars, the food offered to children in school lunch rooms, the subjects that they are taught, the products and services offered by banks, and now the healthcare that we can receive.

A major consequence of the problem is that the power appetite of Washington has taken on more than it can handle and is seriously threatening the health of the nation. Regardless of which parties are in power or whether power is divided, Washington is becoming increasingly dysfunctional. But the professional politicians in Washington will not let go of the power that they have taken from the States, even as they sink under the weight.

What has tied Washington up in knots this fall? It is conflict over Obamacare. Would that even be a problem if healthcare were left to the States to regulate? Congress is having trouble passing a farm bill because of apparently unbridgeable differences over food stamps. Would Washington be stuck in the mud—and at the same time affecting all the rest of the nation—if farm and nutrition policies remained in State hands? At the same time, many States are facing major budget problems coming to grips with paying for programs forced on them by the national government.

The State Method for amending the Constitution was put into the Constitution specifically for the time when the national government was the problem and would be incapable of solving its own problems. Surely that time has come. Washington has gotten tied up in a Gordian knot of its own devising. The wise Founders of the nation apparently knew that things could come to this. It is time for the States to exercise their constitutional power to cut the knot.

(First published September 22, 2013)

Filed under America, banking, Congress, Constitution, federalism, government, healthcare, politics, statism, tyranny, Washington

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