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He Who Pays the Piper Calls the Tune

By: Fergus Hodgson - @FergHodgson - Nov 4, 2013, 1:36 am

Over the past few weeks, John Suarez, in his “Rights Watch” column, has explored pivotal errors that have led to what he describes as a post-constitutional United States. The Constitution, “for all express purposes it is a dead letter,” he writes.

That seems almost uncontroversial to anyone paying attention, and allow me to augment Suarez’s discussion with what I see as an additional piece of the puzzle that compels attention.

There is a lot one could unpack from Suarez’s articles, and to do so is a worthwhile endeavor, if one wishes to restore or enable a constitutional republic of limited, enumerated powers. His three part series identifies the following tipping points towards tyranny:

A natural question, however, is why? Why have federal officials gotten away with such contemptible actions? Where was and is the pushback?

There has been a failure of omission on the part of constituent representatives, particularly in the state legislatures — the natural counterweight to federal overreach. Although nullification has in very recent times risen in popularity, it remains the rare exception. (See Nullification by Tom Woods.) Further, state legislators have not once banded together to use their Article V authority to amend the Constitution and place additional constraints on the federal government.

They have failed to push back and are hamstrung because of immense financial dominance from the federal level. In other words, state legislators are so dependent on federal aid, the majority are afraid to show a spine and bite the hand that feeds them — with money from their own constituents, no less. This dependence has risen dramatically in recent years, and in 2010, both Louisiana and Oklahoma received 50 percent of their funds directly from the federal government.

Further, federal officials have structured their taxation powers to punish states that do not comply with their unconstitutional edicts. Consider Unemployment Insurance (UI), which all states have adopted, along with Washington D.C., the US Virgin Islands, and Puerto Rico. The federal government imposes a 6 percent UI tax on the first US$7,000 of each employee’s wages, but they “refund” 5.4 percent if a state is in compliance.

So you’re not forced to participate, but they will tax you at 10 times the rate if you do not comply. Hmm, that sounds so familiar.

This federal dominance, in my assessment, stems from three key sources:

  • the Federal Reserve’s easy line of debt and the inflation tax via money creation;
  • the lack of any constitutional barrier to deficit spending;
  • direct income taxation that bypasses the states and generates leverage over constituents.

As Suarez notes in the first of his series, though, this is not a question of political parties. The two dominant parties in the United States are equally culpable for bringing an end to the republic, even if in slightly different realms. So he-said-she-said battles are hardly going to help anyone.

crisisRather, the constitutional structure and financial incentives at play make the subservient position of the states and constituents somewhat of an inevitability. If you want to change the outcome, you need to address the prevailing rules of the game — and Suarez will be addressing potential solutions in his upcoming columns. Stay tuned!

Keep in mind, there are additional ways to address the fall of the United States as a constitutional republic. Robert Higgs of the Independent Institute, for example, takes a different angle and focuses on the particular timing of the errors towards tyranny.

His book on the matter is Crisis and Leviathan: Critical Episodes in the Growth of American Government, which has a 25th anniversary edition out. As the title suggests, he believes that crises, be they overblown or not, have provided the vulnerable points and cover for the ratcheting up of government.

If you’d rather listen than read, he has a ten-part lecture series, on “Crisis and Liberty,” available for free through the Mises Institute. Here is the first in that series (85 minutes, mp3).

Fergus Hodgson Fergus Hodgson

Fergus Hodgson was the founding editor in chief of the PanAm Post, up until January 2016, and he now studies finance at Tulane University in Louisiana and Francisco Marroquín University in Guatemala. Originally from New Zealand, he has also lived in Argentina, Canada, Colombia, Ecuador, Ireland, and the United States. Follow @FergHodgson and his Facebook page.