Nov 5, 2007

Kevin Duffy: "Most Americans wouldn’t know freedom if it hit them in the head"

Most Americans wouldn’t know freedom if it hit them in the head. They think if the majority votes for something they can legitimately steal it from the minority who were opposed. They think preemptively toppling dictators is consistent with our heritage. They think government has the right to subsidize our housing, regulate our health care, brainwash our children, and mandate our savings. And as long as the majority who is willing to cast a ballot goes along with this, they call it “freedom” and “democracy”.

This is a sad state of affairs.

“We are endowed, by our creator, with these inalienable rights, the rights to life, liberty, and property.” This is what freedom used to mean. This was the foundation of the American Revolution and the American experiment a bit over 200 years ago. The Founders were human and their constitution wasn’t perfect (e.g. slavery). But they were on to something. And they knew that public schooling, income taxation, and a military that went “in search of monsters to destroy” were inconsistent with freedom.

Americans today, sadly, don’t have a clue. How did we get from there to here, the omnipotent state? There were several critical episodes. The major ones began with Lincoln. His war was not motivated by abolishing slavery, but by his desire to “preserve the union” for the purpose of subjugating the minority in the South. Not even a century earlier, the Founders established the idea of states’ rights and secession as the ultimate check on federal power. Lincoln smashed this concept with brute force. Then there was Woodrow Wilson who brought us a central bank, income taxation, and our first major foray into foreign entanglements, ignoring the wisdom of the Founders. Less than 80 years later, the Fed has destroyed over 95% of the value of the dollar, government steals around 35% from its citizens (up from roughly 3-5% in 1913), and the American military is the most powerful, expansive, and dangerous on earth. Next comes FDR who lied about raising taxes and getting us into WWII. Using the Fed-induced Great Depression as an excuse, he expanded the role of the federal government on a massive scale, giving us nightmares such as the SEC and social security (both passed in 1934) that are with us today. Sure, he created plenty of make-work jobs, but income taxes had to explode in order to pay for it.

That leaves us with good ‘ole Ronny Reagan, truly an endearing figure, especially compared to the motley cast of characters who preceeded him. Government was failing during the late 1970s thanks to an overwhelming regulatory apparatus and the Fed’s printing press, no longer tethered to gold in any way (the final tie severed at Bretton Woods in 1971), which ignited a wave of inflation. Reagan was given a clear mandate to roll back the state. Yet not one federal department was shuttered. Top income tax rates were lowered, but payroll taxes were raised. Spending continued to grow, as did government’s share of our wealth through taxation. For all the hoopla, the Reagan Revolution was a dud. Despite the Great Orator’s fiery rhetoric, the momentum for greater freedom and limited government was lost.

~ Kevin Duffy, Bearing Asset Management, November 4, 2004

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