Tariffs: America’s Oldest Tax Plan Revisited

In history class, I distinctly remember talking about tariffs. It’s usually something you learn about first especially in American history. The American revolutionaries were unhappy with the tariffs being put on their exports by the British. This is what the revolution started over to a degree. You might not remember what a tariff or tariffs are. The definition of tariff is: tax or duty to be paid on particular class of imports and exports. In other words, a tariff is a tax on imported or exported goods. Every country typically imports and exports goods and services. The goods that are typically exported are those in surplus in that country. The goods that are imported are those which are either cheaper or not in supply in that country. Tariffs have been long a part of the American economy. Tariffs have even long been a part of the government.

In the post, I’m going to first review why tariffs were such an integral part of our nation’s history. Then I want to discuss how we went from a tariff based revenue system to the current system of income tax. After that I want to put forward an idea that seems to have been lost in time. The tariff in the United States was after the revolution used to fund the government. Almost as the sole source of income. Alexander Hamilton had designed the whole system. He set up and got funding for a series of lighthouses and inspection clerks up and down the Atlantic coast. There clerks were to inspect all incoming and outgoing goods. They also had to determine the tariff on each item. They were called Customs Officers. Hamilton became the Secretary of the Treasury and further install his government revenue engine on the back of the Tariff act of 1789. The act is simply explained in its first section:

“Whereas it is necessary for that support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures, that duties be laid on goods, wares and merchandise:” — Section 1; Tariff Act of 1789

The tariff is essentially an indirect tax on goods coming and going out of the country. Hamilton saw the huge war debt from the revolution and knew that the US government had no source of income. There was no income tax or anything like that. (Wouldn’t come til 1912, I’ll explain later) So Hamilton being the genius he was, decided to convince President Washington to take out a loan and install the customs system (Tariff Act). He argued in one of many papers that America need to build credit. If you have a credit card or student loans like me then you know that building credit is paying off your debt. Hamilton’s system allowed the US government build credit, in fact one of the best credit ratings in the world for many years. Not everyone was on board with the plan. People like Thomas Jefferson and James Madison. However, they couldn’t stop Hamilton’s plan because war debt was owed to France and other creditors. The US didn’t have many options at that time.

So tariffs were the main source of income from 1789 to about 1911. The US government added liquor taxes, postage taxes, corporate taxes, tobacco taxes and the Panama canal as other sources of revenue. In 1912, tariffs made up about 20 percent of the income of the government. In 1913, the government passed a law that changed the source of US government forever. The law called the Revenue Act of 1913 or the Underwood Act was passed to impose an income tax and lower tariff rates from 40 to 25 percent. This marked the end of tariffs making up a significant portion of US government income. This act was possible by the newly passed 16th amendment. (For another post, the 16th allows for income tax under the direct taxation requirements in the constitution, which was previously ruled unconstitutional by the Supreme Court) Since 1913, our tariff income has only been about 1 percent of revenue. This figure is according to this website here, it also breaks down the tariff income based on type of good. All in all, 2013 saw about 30 billion dollars of income. This is compared to 311 million in 1912. In 2016 dollars, that tariff income would be about 7 billion. Obviously, since the early 1900s the conditions of the economy and our government budget has exploded.

You might be asking yourself but isn’t 7 billion dollars in 2016 or 2017 (Happy New Year) like chump change for the US government whose budget is around 2 or 3 trillion dollars. My answer would be yes. However, if you look at these numbers in terms of percentage and scale then you can imagine a viable tariff system for 2017. Remember tariffs made up 20 percent of the 1912 budget. Now tariffs make up 1.7 percent approximately in 2013. So lets say for argument that our budget under President Trump is 3 trillion. Trump decides in order to cut taxes he needs to increase revenues. (In some alternate logical world) So Trump orders an increase on tariffs. His cabinet comes up with about 600 billion in tariffs or about 20 percent of the budget. I think that 600 billion dollars is a pretty nice chunk of change. Imagine what that could pay for? Social Security? War? Food Stamps? But what would those tariffs look like?

Obviously to understand the role of tariffs, you need have an understanding of the global economy. I think its obvious that the world is complex. A significant part of an economy is trade. The trade between two countries or more is essential because it allows scarce resources to be spread. It also widens the markets for such goods. Its been in the news a lot lately about all the trade agreements. These agreements in a basic way remove the barriers and allow trade to flow freely. One of those barriers can be tariffs. There are two types of tariffs. Import tariffs are a tax on goods that imported from other countries. Import tariffs are often seen as protective to a country economy. This was the primary tariff beginning in 1789 because it (artificially) protected the US economy. Export tariffs are a tax on goods being exported to other countries. Export tariffs are typically seen as way to limit the exports of a certain good. For example, if oil became very scarce then the US might want to put a high export tariff to help curb the sale of oil abroad and keep here in the US.  (An export tariff would increase the price of oil outside the US)

I believe that introducing a new tax plan including tariffs might be beneficial to the US. I think you have to carefully consider what to put tariffs on and what kind of tariffs. But its definitely a source revenue that is not used as it once was. Now we rely on income tax so heavily, its crushing many Americans. Its a liberal fallacy to think that you can tax your way out of poverty. Its an irony. Taxes create more poverty than eliminate. I think I need to do another post on the subject of trade because this post is merely just one part of it. I need to do some further research before I offer any specifics on what a tariff revenue might look like. So I will leave this post as to be continued, my next post will try to figure out how to successfully incorporate tariffs into a free trade world.

Thanks for reading!

 

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Economic Series Part 2: Government Budget: Taxation and Spending

The most dreaded time of year is when everyone must file their taxes. Taxes are certain like death. Taxes are a necessary evil. To many people it seems that our taxes do very little for our own interests. Taxes are supposed to help the people who pay them but rather they seem to help special interests or people who don’t pay them. The responsible party of handing our taxes is the government. The IRS is the collector, Congress is the spender. I believe that this Economic Series Part 2 is probably one of the more important topics. This part will be a sort of contextual background for the last part of this series on GDP. (Gross Domestic Product) I think its very important to understand how the government balances or fails to balance the budget. The topic I choose is quite broad. However, I want to focus on why taxes are collected and how they are spent. I also want to point out how the national debt is growing and what we might do to stop it.

My own view on government taxation and spending is very much libertarian. I believe the government should spend as little as possible. This way our taxes are not the burden they have become. Government spending tends to go to ineffective programs and usually becomes wasteful. I think the best way to understand the federal government budget is by understanding some of the history behind. The creation of our federal budget and tax system was mostly implemented by one man. Alexander Hamilton is the responsible person for most our budget system.  If you remember from history class there was a lot of rebellion and distrust among the citizens of our new country. Many of Hamilton’s critics thought he wanted to become a pawn of the British or king of America through a tight relationship with England. Luckily for us, Hamilton’s set up turned out to be brilliant, and was kept in place until now.

One of the first ways that Hamilton helped set up the federal budget was by creating an import and customs service. It was necessary because when Hamilton became the secretary of treasury, the US had a war debt due to the revolution. In order to pay this war debt off, Hamilton created what is now the Coast Guard. He also set up customs and import agents along the ports. These agents were to collect the duties on the imports to America. The duties or tariffs were basically a tax on imported goods. This was the main source of income for the federal government after the Revolution. Another piece of the system that Hamilton created was the banking system. Hamilton realized that the US need a national bank. In part because of the debt and in part because of the wide range of currencies that existed among the former colonies. The Bank of America (similar to the one we have now) was created. Congress wrote a charter for it and it opened up by selling shares. These shares is how the bank made its money. The controversy came when it lead a lot money speculating among men who wanted to risk an investment in the bank.

The Bank of America also set up a line of credit for the federal government. This is was necessary because in order to pay back the war debt the US would need to take out a loan. Hence this created what we call credit. Hamilton’s system was much criticized by Republicans like Thomas Jefferson and Aaron Burr. One of Hamilton’s primary supporters was actually George Washington. With increasing responsibility due to the growing population and turmoil in France, the US needed to increase its revenue. Hamilton proposed and got a whiskey tax passed. This whiskey tax would put a small tax on whiskey and liquor. This lead to the Whiskey Rebellion in western Pennsylvania. Hamilton himself lead a rather big militia to help quell this protest.

Hamilton’s role in the banking, budget and tax collection in the US is monumental. It is often forgotten that he nearly created the whole system by himself. An impressive feat. It wasn’t until the 16th amendment that make income tax a thing in the US. This was passed in 1913 long after Hamilton’s death. Woodrow Wilson brought us into the modern era of taxes with the 16th amendment and the Federal Reserve Act. The Federal Reverse Act created the Fed as its usually called. The Federal Reserve Act basically moderates the US dollar according to the economic conditions. It also prints and controls the US dollar. Unfortunately, the Federal Reserve is mostly privatized. You may have heard the phrase “Audit the Fed” from politicians like Rand and Ron Paul. The problem is essentially, the Fed is undermining the US dollar and devaluing it. The Fed has its own agenda and nobody except the Fed knows what that agenda is. (Another post, another day)

Now in 2016, after over 200 years running our government, we find ourselves in 19 trillion-dollar debt. What could have gone wrong since Hamilton? The answer is hard to pinpoint. However, my working theory is that after War World 2, during the cold war, we started to spend more and more on defense. Defense spending became out of control and the Department of Defense was not held accountable. The DoD was allowed to “cook the books” on their budget numbers. Some estimates that I’ve seen put our spending during the Cold War at 16 trillion dollars. I would encourage you to check the national debt clock that shows our debt in real-time. It breaks down the debt into categories. The national debt being so high is due to overzealous spending and lack of accountability in the government.

As for a breakdown in spending and what we spend our tax money on. I found a nice infographic that shows how we spend our federal budget. It focuses on how the debt is effected by certain factors like raising and lowering taxes. You should definitely check it out right now. It’s from the Congressional Budget Office, a government agency. I think that paying taxes is obviously important however, I believe that some of our tax dollars are wasted. One of things that needs to happen is for the federal government to cut spending. Unfortunately, we don’t hold our government accountable for the money that it spends. A good analogy is like when you take your parents credit card and go on shopping spree. Your parents may give you the credit card with a reasonable expectation of what you will be spending it on.  Instead though, you spend it without any kind regard for how much or on what. Imagine if your parents never held you accountable for spending all their money. They would probably go bankrupt in most cases because without restrictions, then what’s the point of spending less?

This is how the federal government and taxpayer relationship basically works. The federal government is you as teenager with a parent’s credit card. The taxpayers are the parents. As taxpayers we are pretty irresponsible parents. We don’t hold our government accountable for their actions in spending money. The tragedy is that the US is in big trouble because of reckless government spending. The 19 trillion-dollar deficit is almost an insurmountable sum of money. Rather than discussing who is to blame for the problem, I think its more productive to discuss how to remedy it. The blame can be distributed to many people and government agencies. The blame can be put on US foreign policy too. However, there is a relatively easy and pain-free way to help cut the deficit and still keep our standard of living intact without raising taxes sky-high.

There are two primary solutions that I feel would work to greatly reduce our debt. One of those is a simple cut in unecesary government programs and spending. One of our biggest expenses is the military budget as you can see below:2016-budget-chart-total-spending2

So just imagine if we pulled back most of military troops from abroad and cut most of the unecessary research and development budet. I would only cut about half of the military budget. At nearly 634 billion dollars, let’s cut it down to 300 billion. The 300 billion left for the military would go towards the salaries of personnel mostly and all the war material necessary. In the case of an attack on us or our allies, then obviously the money could be restored. So where would that 334 billion that I cut off go to?

Take a look at the pie chart again. 60 precent of our budget is spend on healthcare and social security. Social Security, by the way is going bankrupt. So let’s put 334 billion into both of those. Approximately 150 billion to each service. In addtion, lets cut off the foreign aid to other countries and add another 30 billion to the pot. So imagine over eight years during just one president for two terms, with approximately 165 billion dollars going to sinking welfare programs. So in 8 years, the US would put nearly 2.6 trillion dollars into those welfare programs. You could even take a step further, take about 2 billion or 3 billion out of the 364 billion and put that into higher education. You could pay off the loans of all students each year. Just think about all this, this is just cutting the military budget by half. Which by the way, is nearly 10 times as big as the next country’s military budget.

My other option, which I have written about before and have over time, really have come to like is Basic Income. You should definitely read my post on Basic Income. I will explain in short, that Basic Income is basically a replacement for welfare. You cut all social programs including medicare and medicaid. Cut minimum wage. Cut everything related to social security.  Instead you give everyone over the age of 18 a check from the government for a certain amount each month. Now just imagine if we did as I describe in my basic income post and we cut the military budget. I truly believe that the effect of both of these actions could lower taxes and help eliminate the deficit.

The taxation and government budget problems are ones of responsibility and accountability. This in part comes from the lack of education how the taxes and spending work within the government. I hope that my brief explanation can help clear up some of the confusion and misunderstanding about how taxes and government budgets work. I mentioned that this series post prefaces my next topic of Gross Domestic Product. Its important to note that GDP is calculated without the input and outputs of the government. The government spending money on military war material and other research does not count towards GDP. This is a very significant fact in that it strongly affects the GDP numbers. As you will find out in my next post that GDP only measures the input of labor and the output of production by the private sector.

I would encourage you to research more outside of my post. Its a very interesting topic. Thank you for reading! Have a great day!

 

Memorial Day–An excuse to BBQ?

I find this holiday of Memorial Day to be quite interesting from historical to modern context. Usually, since I was a kid in cub scouts, I walked in our small town’s memorial day parade. I participated in the wreath ceremony at our big cemetery. Then my family would go home and have a classic American BBQ. I only know of one veteran in my family, my mother’s father. Unfortunately, he never met me because of his refusal to go to the doctor with skin cancer. His name was Paul Chase. He married my grandma who is still alive, in the late 1940s after the war. They ended up having three children, their first and only daughter was my mother. My grandfather was in military during World War 2, I don’t know much about his actual combat experience if he had any. But I know he was a military police or MP. He was also an avid baseball player, a catcher. From what I’ve been told, I have his some of his personality. My grandfather died of skin cancer in 1985 and is buried in a cemetery only a mile from my house.

This accounts for the most of the significance that I put on memorial day. However, being a history buff and knowing how many wars the US has fought. Its strange to think to that we would celebrate such a sad and sometimes tragic event like war deaths. On the other hand, its not strange in history to see civilizations honor their fallen heroes of war. War is a spectacle like none other. It has evolved over hundreds of years. It has killed unknown billions. Yet here in America we celebrate the soldiers that are dead and alive, that have fought our wars. America’s intentions have not always been pure or even moral. We have waged wars to pursue world power. We have waged them to pursue economic dominance. Presidents have tricked the American people into sending their boys into war on multiple occasions. So what is the point of celebrating this off-color history of war? More importantly why do we BBQ and say “Happy” memorial day?

Memorial Day like other holidays are federally mandated by the government. Usually when the government approves a holiday it means all federal offices are closed. It also means that kids have the day from school, businesses sometimes close too. My point that I’m trying to make is are we celebrating the individuals give some or gave everything for their country? Or are we celebrating the fact that war has made our soldiers heroic despite the reason for sending them there? Regardless of the answer to a question that can’t be answered, I believe Memorial Day has turned into kind of sham. I never understood the whole BBQ thing because that’s irrelevant to war and soldiers alike! Along with that, I don’t the find the holiday to be particularly happy? Many people say “Happy Memorial Day” like Merry Christmas. Memorial Day is more of a solemn reflection on the soldiers who maintain our way of life or our freedoms. (If freedoms still exist?) I am for one not very happy that over 5000 soldiers have died in Iraq and Afghanistan.  What did they die for, besides some stupid extreme religious nuts and some oil? The war has been more dangerous than ever and they had to give up their lives. That’s not fair to them.

Although I find nothing wrong with BBQ or the patriotism that comes out of Memorial Day. I just think that people should take it a little more seriously. In addition to that, we should be thanking our soldiers everyday for their service because they protect us even if its for the wrong reasons. Every day should be Memorial Day. I know that its a cliched argument. However, its clear that war heroes are very important, given that we have yet another under appreciated holiday called Veterans Day. Even worse than memorial day it represents a day off for 80 percent of people. I am under the belief that memorial day also encompasses those soldiers who are still living. The lucky ones who live through war, tend to have a lot of health problems. Its clear that the Veteran Affairs sections of the government is ill-equipped to give veterans what they need. The lack of fast service healthcare is even more a slap face to living veterans. Its just underlines the fact that a government run healthcare system would absolutely suck.

Without mentioning specific politicians, I just want to say that the mishandling of the VA hospitals and operations is appalling. Instead of Memorial Day being happy or about BBQs maybe we should be focusing on the real issues that face our veterans. I know that culture is a hard thing to change. My rantings probably won’t change anything. But I think on an individual level if we start respecting Memorial Day as a day of solemn reflection then it would be an more effective holiday. In addition, we need to recognize and fix problems that Veterans may face in healthcare and other things. I think one solution would be to get government out of the VA. Make it a privately run, charity donation based service. Have actual Veterans run and operate it so no scumbag outsider can steal money or fuck them over. There are enough veteran charities to help fund such an operation. If not, then the government can donate some money too, no strings attached.

Next Memorial Day, before we BBQ and get drunk and talk politics, lets try to remember the sacrifice that our soldiers have given to maintain America’s unique freedoms held in our constitution. Let’s also remember that war is not something happy, its pure hell. War is unnecessary till all other action is useless. If you are a veteran or current soldier reading this then hopefully you will be treated better than soldier’s past. There really is not words to say how much I have personally gained  from and appreciated your efforts. Thank you.

Thanks for reading!

 

 

Economic Intelligence: Politicans Lack it

Its occurred to me on multiple occasions that politicians seem to lack any sort of intelligence in regards to economics. My last post was a heated detest of Trump’s printing money comments. I scathingly scold him for being so stupid about messing with our currency and debt. Trump’s comment literally make me think that candidates running for President think that money grows on trees. In some magical way their tax plans and spending outlays will work out in some kind of utopian dream. Let’s be honest though, its not just Trump, its Bernie Sanders, Hillary Clinton, even recently dropped out Ted Cruz and John Kaisch. I think for me, the biggest weight of decision on who to vote for is through economic policy.

As I usually do, I want to pose a question then slowly answer using historical and modern references. This time instead of posing any real question I just want to review a little historical background on who made our economy because its the subject this great biography on Alexander Hamilton. Then I want to review why the policies of both democrats and republicans alike are misguided. I may also dive into the problems with our economic system. The best starting point on a such a broad topic is to actually narrow it. More specifically, I want to discuss the taxation throughout American history. Then I want to get into the federal budget and debt.

On the subject of taxation, there is famous saying from the Revolutionary War that was a common rallying cry for independence from Great Britain. You may even remember this saying from middle school history: No Taxation without Representation!  The British heavily taxed the colonies to pay for their ever-growing debt. The monarch, King George III had many foreign wars and colonies to protect. As a result, high taxes were levied on the American colonies. The problem was that colonists had no representation in the British constitutional monarchy. When the colonist tried to gain influence and resisted the taxes, the British responded with even harsher taxes. In a simplified version, this lead to the Revolution and ended with the American colonist winning the war.

After the war, the issues of taxes came up again. The main proponent of America’s future financial stability was Alexander Hamilton, first secretary of Treasury. Hamilton wrote and pushed through many of today’s financial laws in government. Hamilton was able to establish excellent credit through the payment of debts. He was able to consolidate state debt and federal debt because each state held its own debt before the constitution was created. In order to make sure that the federal power came before the state’s power, Hamilton pushed for the consolidation. Hamilton also created bonds to help pay for the war debt. The main form of income in the early 1790s was import duties. Hamilton revamped the customs, invented the coast guard and cut down on the smuggling. (Smuggling was popular during the Revolution against the British.)

As the United States grew bigger its need for government revenue increased. Obviously this meant an tax on actual citizens. While Hamilton was still alive there was no such support for an income or land tax. Part of the reason that many rich landowners were against it, the same ones that were also in government. It was not until the Civil War that an actual income tax was passed.  The government also tried varies taxes on goods like alcohols. This only resulted in rebellions. These measures were never popular. Of course as we progress to the early 20th century we can see that taxes increase by each decade. One of main sources of income by the federal government was through bonds especially during the World Wars. If you don’t know how bonds work then its basically a government backed loan. You pay 100 dollars for a bond slip. In a certain period of time your able to cash it in with an interest rate.

In modern times, by this I mean post WW2, taxes are generally considered to be fairly certain like death. Taxes have always fluctuated, such as during the 1950s into the late 1960s with the Vietnam War saw taxes go high. Then in the 1980s, Ronald Reagan cut taxes and the trend of lower taxes continue up until about the early 2000s. Of course, our tax code is very complicated due to politicians messing with it. Many former presidential  candidates wanted to scrap this tax code. I feel like I’m beating a dead horse because I have talked about tax plans numerous times. To save my word count, I will just generally say that all three current candidates tax plans are either very wrong or very misguided or both. (scroll through my blog to find their tax plans)

Alexander Hamilton did a ton of good for America’s financial system. He also held the opinion that being in debt was a good thing. I honestly think that if he knew that we have accumulated 20 trillion dollars in debt, he would roll in his grave. America has always been in and out of debt through our history. You can typically identify times of debt with wars. I have also noticed that following a war, the debt will vanish due to economic dominance. The best example is probably World War 2. The post-war period saw America as the world’s number one creditor and business leader. This is mainly due to the fact that most of Europe and Asia had been destroyed. I believe that and many economists believe that our debt is way too big. It will nearly impossible to pay it off. Not to mention that people like Donald Trump and Bernie Sanders want to wreck havoc with insane policies like printing money and spending as much as 10 trillion!

***

So your probably wondering where exactly I’m going with all this history and modern references. (to the bank, of course!) First, I think that Economic Intelligence is more than just an understanding of economics. Economic Intelligence is knowing when your policy is working or not working. Its knowing that printing money will surly ruin us, DONALD TRUMP! Economic Intelligence is being smart about money, its being similar to Alexander Hamilton. I’m not saying that Hamilton is the end all–be all, but his wisdom on economics has endured over 200 years. The fact is that I could take any of the three clowns running for president and poke holes in their economic and tax plans. The problem is that really don’t understand how economics works. Repentantly, they haven’t been paying attention because the last 75 years have shown that their methods won’t work.

For example, Hillary and Bernie plans to raise minimum wage and use a democratic socialism platform has been tried before by countries of similar or larger size. Let’s take Russia for example under the Bolsheviks, Lenin, Stalin. All these communism leaders installed a socialist economic system or state run economy. The Russians faced problems of shortages, starvation and to add insult to injury, genocide. In a similar fashion to what Sanders wants to do, Stalin also wanted to take down the rich people. Guess what happened, he certain took them out by killing them. State run economies just don’t work. You need capitalism because the market should decide. I think economically speaking, I would rather have some poor and disadvantaged over having many poor and disadvantaged.

Unfortunately, economics dictates that re-distribution through unnatural means leads to more distress and poor. In addition, the biggest and most irritating issue that of spending and debt. I would love to understand how printing money won’t lead to disaster. Also how will spending MONEY decrease our debt that was created by SPENDING money? In conclusion, I want to underline the point that economic intelligence is necessary in a good presidential candidate. History has shown us both good and bad ways to make an nation economically viable. We need to choose carefully otherwise face consequences not unlike economic unintelligent nations before us.

Thanks for reading! Sorry it was so long!

 

Source of Power!

If you have not heard yet, the 2016 campaign has taken a strange twist since this past Tuesday. Both Ted Cruz and John Kaisch have dropped out of the race! No, Trump didn’t deport them. However, this paves the way for Trump become the presumptive nominee barring any convention chaos. One of my very first posts was on Trump, a polarizing and controversial character. Now Donald Trump is a businessman and a successful politician. He seems to have accomplished something that everyone thought was a joke. He also has marketed his “business mindset” better than his predecessor Mitt Romney in 2012. I predicted that Trump’s media coverage would probably propel him very far in this presidential race. Trump is not your typical republican, because he uses the News Media as his second party helping get the nomination.

However, the real challenge for Trump is yet to come. Hillary is a veteran politician and has been on many campaigns including her own senate races, 2008 presidential bid and her husband’s presidential campaigns. For now, I will wait til to primaries are over to start breaking down the general election. As of right now, its pretty clear who the candidates will be. This post is not going to be all about Trump and Clinton. This post will combine some modern politics with those of Alexander Hamilton’s time. I started this amazing book named after our first Treasurer, Alexander Hamilton. I realized that Hamilton was a great founding father with today’s democratic values in terms of government power. I couldn’t believe it. Let me explain.

Alexander Hamilton was a part of the federalist party before and after the signing of the constitution. As a federalist, Hamilton believed in a strong central government that had control over the states. The federalist beliefs were pitted against the much less organized anti-federalist. The face of this group was by far, Thomas Jefferson. Anti-federalists, as the name indicates are against an strong central government. They believe that the states should hold most of the power and that the central government should be weaker.  If you paid attention in history class you might recall the federalist papers. Alexander Hamilton, John Jay and James Madison were the authors of this series of newspaper articles meant to help ratify the constitution.

Now let me explain the beliefs of both republicans and democrats in 2016 politics. Then I will make a nifty comparison bound to blow  you away. In 2016, the democrats believe that the central government should be strong. Just look at how Hillary Clinton or Bernie Sanders supports government programs to help people. Obamacare is another example of government power. When they want to raise the minimum wage or make federal education curriculum that makes for a strong central government. On the flip side of that Republicans typically want less government (OK its a little flawed, actually libertarian beliefs are closer to anti-federalist beliefs) with looser regulations on business, no minimum wage, privatized education and healthcare. So like I was saying Hamilton would be kinda of democrat…just look at this:

Federalist and Democrat believe in strong central government

Anti-Federalist and Republican* believe in a weaker central government that gives power to the states. 

That is just crazy to think about that one of our smartest founding fathers had today’s democratic values. Then again maybe its not crazy because thanks to the federalist, we have the great constitution that we have today. I think its important to realize how our government came into being.This is just one small facet. Many of our founding fathers drew on the classics like Machiavelli, Cicero, Aristotle, Adam Smith, and Locke. Our government was not just made up out of thin air. It’s actually strongly based in Roman political theory and enlightenment economics.

You may be asking yourself why does this federalist and anti-federalist even matter. Well, it matters for two reasons. One of George Washington’s warnings in his farewell address was to avoid political parties. The federalist party and anti-federalist were formed right after he left office against his will. As for the issue of the power of government would never go away. In fact, it lead to the bloodiest war on American soil, the civil war. Before I talk about how the Civil War was actually issue of government power, I need to discuss the colonial times.

You may know the before the colonies became states they fought in a revolution against England. In the colonial days, each colony was considered its own separate entity under the British Monarchy. The colonies had their own economies, their own money, their own laws plus the laws that the King passed. This tradition of being independent did not just magically disappear when they won the revolution and signed the constitution. It is evident even before the signing of the current constitution that the states wanted to keep their independence. The Articles of the Confederation were used for a few years until a new constitution could be written. The Articles of Confederation did exactly what the Anti-federalist wanted. It made a weak central government with strong states. The problem was that the states could never agree on anything. It became a similar problem to when you and your group of friends try to pick a place to eat and who’s gonna pay. One person wants Mcdonald’s because their cheap, another person wants Chinese, another person wants steak. You can almost never decide because everyone’s intentions and motivations are different.

Fortunately for us, the federalist did win the day with the constitution. It settle those pesky problems with the states independence. It equaled out the balance of power with size and population using compromises. Now let’s fast forward about 60 to 65 years from the signing of the constitution in 1789. This brings us to the civil war. The main issue of the Civil War was slavery. However, the deeper issue which causes many historians to debate is that of state’s rights. This time it was the southern states trying to claim their right to keep slaves. The question of the time was whether or not the southern states had the right to keep slaves or did the federal government have the right to outlaw it? History decided it with a war, as Abraham Lincoln put it to keep the Union together. Lincoln maintained that he would rather keep the union together by freeing all of the slaves, none of them or some of them. He didn’t care which one.

In end, the 13th amendment to the constitution was passed that outlaw slavery in the United States. The southern succession proved to be an error because the union had the economic and population advantage. States rights play a big role because the war wasn’t just to keep slaves but about the right to keep them. The odd thing is that slaves actually hurt the southern economy. Slaves often put poor whites in poverty. The slaves only helped produce an overstock of cotton to be sold to Europe. Unfortunately for the south just producing cotton wasn’t enough to win against an industrialized North.

Today states rights usually appears in the politics of education because of government legislation like common core or No Child Left Behind. The same fight still exists partly because of the interpretation of the constitution and partly because deep down the states will always feel like they need to have a say.

I hope you enjoy this post. Thanks for reading 🙂

*(More accurately Libertarian because we believe in no federal taxes and minimal regulation)

 

Short Post: The case against more taxation

When the thirteen colonies declared Independence from Britain on July 4, 1776, one thing they listed for a reason was because of unfair taxation. Among other things the British crown did to the colonies, the taxes seem to draw the most ire. The founding fathers understood the lunacy of taking orders and paying for the business of a monarch three thousand miles away. It was absolutely crazy that the colonies had to pay for the wars and greed of a monarch, King George III. The events leading up to that glorious day, like the Boston Tea Party and the many protests, were the hallmark of the colonies’ struggle for independence and respect.

The idea of taxation is as old as civilization itself. It usually involves the payment of wages either monetary or products produced to a government system. In many of the countries of the world today, there is taxes. It is usually said “There are but two certain things in life, death and taxes”. In America, taxes are mandatory and that is the case in most developed nations. The exceptions come in the ultra poor countries with no real organized government or countries that have deep oil reserves in their control. The scale of taxation is usually relative to the income of the populous. A richer country tends to tax more. A poorer country tends to tax less. Its a simple idea that you can only tax what your people have.

So what is the point of taxes? Why does anyone even care about 1776?

The point of taxes is to fund the government’s most basic functions. The functions are general welfare and defense. Over the decades, government has expanded its role in society. Government’s hand can found in everyday life. Its regulations keep us both safe and over-reach our freedoms. Taxes pay for government programs that provide general welfare for the population. In America today the social programs are numerous. Many countries in the world also carry out advanced social programs. Usually when a country provides numerous social programs it becomes known as nanny state. Most of Europe can be categorized as this. These programs provide services such as healthcare, child care, retirement help, education, and sometimes jobs. All of these programs are usually paid for by government via taxes.

1776?

Yes, in that year and that time the government was simpler. Compare the nanny states and America 2016 to the America of 1776 you would see a very different world. However, in 1789 once the constitution was ratified, would actually make a better comparsion in terms of government. The period from 1776 to 1787 was a time of war and planning, and organized choas in terms of government. So when war hero general George Washington was first elected by the contiental congress to be the first president, America’s government was simple and small. The constitution laid out the base plan with the addition of the Bill of Rights. The taxes in 1789 America were not what we might think of today. Every state had a different currency because during the colonial period they were all seperate entities under the king of england. Alexander Hamilton helped unify the currency by creating the Bank of America, yes that Bank of America. The US had just won a war in which they borrowed money from France. So the taxes asessed on the people were to simply pay for the war debt. The newly formed government only had war debt for the first 20 years or so. Taxes were simple and most government officials didn’t take pay because they were usually rich white men.

Today, we have a complex tax code with loopholes. We have many different types of taxes for different things. Sales tax, Income tax, Estate Tax, Gas Tax, Captial gains tax…etc. The question that I am posing with this comparsion is why did taxes become a way to control the population? Taxes were originally meant to help the basic function of government. Now it is still true that the government protects us. The US government spends about 800 billion to 1 trillion dollars on defense. It spends a couple hundred billion dollars on healthcare like medicare and medicaid. These are the two biggest expenduitures. However, now you hear presidential candidates talking about universal healthcare and education. Many people like to characterize this as “free”. I think they mean taxpayer subsidized healthcare and education.

I feel like its been forgotten that taxes are what support our government. In the constitution, it opens with “We the People”, an important phrase that allows the people to control government. In fact, we the people are supposed to hold the government accountable to the consitution. Unfortunately, the lack of constitutional knowledge and igonrance about politics has created an over-reaching, semi tyranical government that sees no limit to its power. Taxes is why we split from the England. So why do people want to pay more taxes so the government can baby them? Whoever thought that the government was a good babysitter was on something. The whole point of the consitution and the US is for personal freedom from government. The pursuit of Life, Liberty and Happiness. The problem that I have is that many other countries in the world are currently doing the socialist, nanny state type of government. The results are misleading.

There is no country that has a population and diversity like America that has ever tried socialism and had it work. Many of those high taxed countries that are socialist are homogenous (not diverse) and small like less than 100 million. If anything as Americans we should not look to Europe about how to run a government. Most of the EU is in major debt and economic crisies. America has been successful because of its relatively lower taxes and lack of a welfare state until the 1929. Its captialist nature has serve us well. Everyone must realize that paying taxes is mandatory but letting government do whatever it wants with your hard earned money is not. The evils of capitalism as some point out are that it takes advantage of the poor. That is only partly true. The poor have an equal shot to make it in an captialist economy assuming that there is a line of credit and money to be loaned. It is true that captialism has its ups and downs but a natural market is like a river on flat land, it wanders.

To make my point and end this “short” post, I want to describe a situation and think about how you might feel in either position.

George and Rodney are roomates living in the same apartment. They split all their expenses equally. George is a teacher at an highschool and he makes about 35,000 a year. Rodney is unemployed but makes his income on government programs like unemployment benefits and welfare like food stamps.  Rodney’s unemployment checks, welfare checks and food stamps give him an income worth about 20,000. (15,000 cash 5 ,000 food stamps) George is taxed 60 percent of salary and only takes home 21,000. Rodney is only taxed 20 percent and takes home 16,000.

If you were George what would you feel about Rodney just doing nothing and getting just four thousand less than you make?
If you were Rodney would you be happy and how would you handle George’s resenment towards you? (You do nothing)

Just think about it, if your George you would probably be mad or jealous. If your Rodney, you have no incentive to get a job and maybe just ignore George’s feelings because its not your problem.

Thanks for reading!