The authors of the Constitution envisioned the American state as one with extremely limited powers. However, the history of operation of the United States of America acting under its constitutional powers shows that a state endowed with ostensibly limited powers has expanded those powers so much that it intrudes upon almost every human activity, from birth to death, from education to economic life, from individual power to enter into contracts to committing the lives of its young men and the republic’s fortune to wars around the world where no vital interests of the American people are at stake.
This chapter traces the evolution of political democracy in the United States of America to the early 21st century from its source in the revelation of Thomas Paine’s inspirational ideas on human freedom in his essay entitled Common Sense (1776), ideas that are restated in the Declaration of Independence issued by the American Continental Congress on July 4, 1776.
We do not need a king
Beginning around 1750 resentment began to build in America against Britain’s rule over the colonies. The British state exploited its American colonies by imposing taxes, trade restrictions and military occupation without consultation with or consent from Americans. Although Americans generally considered themselves British citizens, they had no voice in the English parliament. Americans’ grievances were expressed in the phrase “no taxation without representation,” rather than any ambition for independence.
Conflict between Britain and the American colonies developed and grew intense after 1763, as Americans took actions such as boycotting British imports and protesting a tax on tea by dumping a load of tea into Boston harbor in the famous Boston Tea Party of 1773. American resentment turned into armed rebellion and warfare in and around Boston in April 1775.
The impetus for the Declaration of Independence came from Thomas Paine (1737-1809). On January 9, 1776 Paine published anonymously his 46-page essay, Common Sense. It was an immediate sensation. Between 150,000 and 250,000 copies of Common Sense were sold in 1776. Since there were then only about three million inhabitants of the colonies, this was the equivalent of a sale of twenty million copies to the 300 million inhabitants of early 21st century America.
Paine argued that America should reject rule by monarchy and develop a new form of government based on the principle of individual self rule. In denunciation of the absurdity and injustice of hereditary monarchy, Paine stated:
“One of the strongest natural proofs of the folly of hereditary right in kings is, that nature disapproves it, otherwise she would not so frequently turn it into ridicule by giving mankind an Ass for a Lion. . .”
In Galambos’ view the American Revolution is not the War for Independence, but rather the idea that America does not need a king.
Thus, Galambos points out that the success of America and its revolution led to the termination of monarchy in all the nations of the world. While a few monarchs remain, as in England, Belgium, Japan and Sweden, they are figureheads, not rulers, because they have no political power. Queen Elizabeth II, to the left, is the 7th monarch after King George III to serve has a figurehead, not a ruler.
According to Galambos, “The real significance of the Declaration of Independence is not the independence of the Colonies from Great Britain, but the independence of the individual from the state. . .”
Distinction between “state” and “government”
The state is any political organization that is coercive, that raises its revenue by coercion, and that operates on a compulsory rather than on a voluntary basis. This definition is true of the federal state (the United States of America), the fifty individual states of the U.S. and the subdivisions of the states such as counties and cities.
French King Louis XIV (1638-1715) epitomized the nature of the state when he said, “L’etat, c’est moi” (or “I am the state”). He ruled as an absolute monarch, believing that his power as king was derived from God and that he was responsible to God alone. Through his unchecked power Louis XIV caused frequent wars, bankrupted the French state and caused starvation and persecution of ordinary people.
In contrast to the state, a “government” in Galambos’ lexicon is any organization, individual, or mechanism that operates to protect property and to which its customers may subscribe voluntarily. A government is not a monopoly. It sells its products or service. It does not force the sale. Examples of government already in existence include, but are not limited to, a manufacturer of door locks (which may have prevented more crime than all the police that ever lived), a private security company, a private detective service, and an insurance company.
A property protection service company operates to make a profit from providing property protection service to customers who may subscribe voluntarily to the service and terminate the service when they please.
Anarchy is not the alternative to the state
It is generally believed that without a political state there would be anarchy, lawlessness, and extreme social disorder. It is true that the sudden disappearance of the state probably would lead to a temporary increase in crimes against persons and property. However, the state does a very poor job of protecting persons and property as it is.
The 1992 Los Angeles riots were anticipated by the police. They were a responses to a jury verdict acquitting several white police officers of charges of excessive force in assaulting and beating a black motorist they had pulled over for speeding. While the jury was deliberating the Los Angeles Police Department was preparing for the possibility of an outbreak of rioting in heavily black south central Los Angeles. Still, they were unable to stop prevent the rioting in which 58 people died, many more were injured, and property damage exceeded $1 billion.
Urban rioting is nothing new in the U.S. There have been urban riots in America at least since the New York City anti-draft riots during the Civil War. The police have never been able to prevent these riots from starting.
According to federal state statistics, which are most likely understated, in the year 2011 in the U.S. there were 15,000 murders and non-negligent manslaughters, 83,000 forcible rapes, 354,000 robberies, 751,000 aggravated assaults, and over nine million property crimes, such as burglaries, larcenies and thefts.
Galambos taught that the absence of the state did not relegate mankind to anarchy; that the word anarchy comes from a Greek word meaning without leadership; that when people subscribe to property protection services on a free and voluntary basis they are choosing the ideological leadership of others in their own pursuit of happiness.
A Russian philosopher, Prince Peter Kropotkin (1842-1921), voiced a similar thought in the following comment:
“Either the State for ever, crushing individual and local life, taking over in all fields of human activity, bringing with it its wars and its domestic struggles for power, its palace revolutions which only replace one tyrant by another, and inevitably at the end of this development there is … death! Or the destruction of States, and new life starting again in thousands of centers on the principle of the lively initiative of the individual and groups and that of free agreement. The choice lies with you!” Although the ideas of Kropotkin have been classified as “anarcho-communist,” he was repelled by the behavior of the Russian communists who seized power in 1918, of whom Kropotkin said they were demonstrating “how the revolution was not to be made — that is, by authoritarian rather than libertarian methods.”
Galambos knew there could not be a sudden transition from a world of coercion to one of freedom. Galambos did not want the state to self-destruct with consequent disorder and random criminality replacing the organized coercion of the state. Rather, his view was that the transition to freedom would evolve; that freedom is a product to be built and offered by innovators and entrepreneurs.
Slavery in America
While the Declaration of Independence is about freedom, the U.S. Constitution recognized and preserved slavery—the opposite of freedom—as an entrenched institution throughout the United States, not only in the South but in much of the North as well. That was a fundamental flaw in the political structure of the U.S., a flaw that deepened into a fissure that eventually ruptured and tore the country apart.
Henry David Thoreau (1817-1862) voiced the passion of American abolitionists when he said: “I cannot for an instant recognize that political organization as my government which is theslave’s government.” As abolitionist fervor grew stronger and people in free states sought to aid escaped slaves, an even more severe Fugitive Slave Act of 1850 was enacted.
The constitutional authorization of slavery was ended by The Thirteenth Amendment to the U.S. Constitution adopted in 1865. However, it was another hundred years before federal laws were enacted to prohibit state laws (mostly but not exclusively) in the south that greatly restricted the civil rights of black Americans. As late as 1896 the U.S. Supreme Court upheld the constitutionality of state laws requiring racial segregation in public facilities under the doctrine of “separate but equal.”
Expansion of the United States
From its inception as thirteen relatively sovereign, but thinly populated, states along the east coast of what had become the United States of America, the country expanded rapidly over the rest of the North American continent between Canada on the north and Mexico on the south.
The United States grew from peaceful exchange as well as from destructive wars.
The total area of land acquired by the U.S. through peaceful payment (as in the Louisiana Purchase) rather than war is around 45% of the total area of the present fifty states. The total cost of these purchases was $37 million, or about four cents ($.04) per acre, equivalent to no more than $1.00 per acre (around $1.25 billion) in the purchasing power of the dollar in the early 21st century. In comparison, the total cost of all U.S. wars that added territory to the nation by military conquest, was about $22 billion in purchasing power as of the early 21st century, an amount nearly eighteen times greater in constant dollars than the amount the U.S. paid to acquire territory by peaceful purchase.
The U.S. wars of military conquest include the War of 1812 with its unsuccessful attempt to take Canada, the Mexican-American war, the Spanish-American war and the Philippine-American war.
Additionally, in the course of the nineteenth century the U.S. subjugated some 600,000 Native Americans whose ancestors had preceded Europeans to North America by at least 12,000 years. The U.S., by force of arms in most cases, dispossessed Native Americans of their ancestral lands, made and broke treaties with the various Native American tribes or nations and confined them to reservations. On the so-called “Indian Reservations,” the people became passive and dependent on the U.S. for subsistence.
What began as a small union with limited government soon became a nation with aggressive imperial ambitions.
The Great Depression of the 1930s and its aftermath—a fundamental change in America
In the 1930s America commenced a fundamental change–from a country of largely free, independent, and self-responsible individuals to one where nearly half the people are dependent on the state for sustenance either wholly or to a significant extent.
The Great Depression of the 1930s was manifested in a deep and sharp economic downturn, losses of savings due to bank failures, a deeply depressed stock market and, worst of all, wide-spread and long-lasting high levels of unemployment and under-employment.
When President Franklin D. Roosevelt was inaugurated on March 4, 1933, the unemployment rate was over 20%; farm prices had dropped by 60%; industrial production had fallen by more than half since 1929; the stock market was down 85% from its 1929 peak; two million people were homeless; and 32 of the 48 states plus the District of Columbia had closed their banks.
It was then, and still is, widely believed that the Great Depression was due to a failure of capitalism; and that it was necessary to look to the state for relief from depression and for laws designed to prevent another depression. However, contrary to general belief, the depth and length of the Great Depression of the 1930s was caused not by capitalism but primarily by presumably well-intentioned but misguided state interventions in the economy.
As just one example (numerous others are illustrated in the full text version of this chapter), the large number of bank failures, mainly in rural areas, was due to local state prohibition of branch banking so that banks in rural areas could not diversify away from lending predominantly to farmers, who were among those hit the hardest by the depression.
President Franklin D. Roosevelt’s “New Deal” included taking actions that worsened conditions they intended to improve. For example, at a time when many people in America were hungry and could not even afford to buy food a federal law was passed with the objective of raising farm income by reducing production. According to Hans Sennholz, an economist who has studied the Great Depression, “The objective was to cut the acreage planted, to destroy the crops in the field, and pay the farmers to refrain from farming. The expenses of the program under which farmers [were required] to plow under their [crops] and kill their livestock were to be covered by a new ‘processing tax’ levied on agriculture.”
In 1939, after nine years of the Great Depression, the Secretary of the Treasury, Henry Morgenthau, Jr., is reputed to have said the following in comments to members of the Ways and Means Committee of the House of Representatives.
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . and enormous debt to boot!”
The question of taxes is central to liberty because in taxation the state may take by force the property of individuals. The U.S. federal income law imposes financial penalties, or imprisonment, or both, for failure to report income and pay the tax required.
The view of socialists and communists is that of French socialist Pierre-Joseph Proudhon (1809-1865) that “property is theft,” which in the mind of the statist justifies taking property away from its owner.
Frédéric Bastiat, a liberal French contemporary of Proudhon summarized the view of the French socialists as follows:
“When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”
In 1867 the American political philosopher Lysander Spooner wrote the following about taxation:
“Either ‘taxation without consent is robbery,’ or it is not. If it is not, then any number of men, who choose, may at any time associate; call themselves a government; assume absolute authority over all weaker than themselves; plunder them at will; and kill them if they resist.”
The view of Galambos is that of Bastiat and Spooner, that taxation is theft. Galambos describes taxation as “. . . acquisition of revenue [by the state] to finance . . . [its operation by levying] . . . fees against the population, according to various methods they unilaterally prescribe, and can alter at will . . . [States] raise their revenue by coercion; they offer their services on a compulsory rather than on a voluntary basis [which is] not compatible with the principle of freedom [defined in the V-50 lectures].”
The foregoing view is not only that of Galambos and two liberal philosophers of the nineteenth century. It is also a view espoused as recently as the year 2010 by the editor-in-chief of U.S. News & World Report, Mortimer Zuckerman, who has been prominent in political life as a supporter of the Democratic Party in the United States. Zuckerman says:
“State and local governments are not subject to the kind of profit-and-loss restraints that dominate the private sector. They obtain their revenues by the coercion of the public through taxes; essentially they cannot go out of business. The public will always foot the bill.] [Emphasis added] The principle inherent in Mr. Zuckerman’s statement applies as well to the U.S. federal state.
In 1910, before the income tax, the U.S. federal state operated on tax revenues of $7.35 per capita per year, equivalent to about $183 per capita per year in terms of the inflation-adjusted value of the U.S. dollar as of the early 21st century. A century later, in 2010, U.S. federal tax receipts were about $7,000 per capita, or nearly 50x as high as in 1910, on an inflation-adjusted basis. Yet these high tax receipts fell $1.3 trillion short of covering federal spending for 2010 which amounted to $11,200 per capita and around $30,000 per household. That $1.3 trillion (1,300 billions of dollars) was the federal deficit for just the year 2010, which was added to the debts of the U.S.
By the early 21st century the federal income tax law (the Internal Revenue Code) had grown from a few pages in 1913 to tens of thousands of pages and some 9 million words. A vastly larger number of words and pages are taken up by regulations and rulings of the Treasury Department and court decisions implementing and interpreting the tax law.
In American society, as it has evolved, the typical reaction about objections to taxation is “how else could government finance its operations but with taxation?” A partial response to that question appears in an early essay in this text entitled “Replacements for the Political State.” A more detailed response appears in a later portion of this book addressing solutions to the problem of establishing non-coercive government.
Explicit federal debt in 2011 was nearly $15 trillion, but that is just the cone of a simmering volcanic mountain of debt. According to what appears to be a conservative estimate, the federal state also has unfunded liabilities of more than $53 trillion for old-age pensions, health care for the elderly and others as well as other welfare programs which brought its total debt, as of 2011, to $68 trillion, over 200x the federal debt of 1930 calculated on a “real”, inflation-adjusted basis. That $68 trillion of federal debt and liabilities amounts to nearly $600,000 per U.S. household, more than the American people can ever afford to pay.
According to John C. Goodman, President of the National Center for Policy Analysis, “the latest report of the Social Security and Medicare Trustees shows unfunded liability for both programs of $63 trillion.” Goodman says that the $63 trillion estimate understates the potential liability by half, because that estimate assumes cuts in payments to physicians which Congress has repeatedly refused to do; and, accordingly, the chief actuary for Medicare submitted an “alternative” report projecting much higher levels of Medicare spending.
A book published in 2012 puts the total debt of the United States of America, including the unfunded social welfare liabilities, at $211 trillion which is more than three times the estimated amount of $68 trillion mentioned in the preceding paragraph. The source of the $211 trillion figure is The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy (2012) by Laurence J. Kotlikoff and Scott Burns.
Many Americans, and their politically elected representatives, appear to have lost touch with a principle stated by two Presidents concerning debts contracted by the federal state.
Thomas Jefferson said “. . . [W]ould it not be wise and just for [a] nation to declare in [its] constitution . . . that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age . . .”
In his farewell address of January 17, 1961, President Dwight Eisenhower said: “[W]e—you and I, and our government—must avoid the impulse to live only for today, plundering for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without asking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.”