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February 26th, 2009
Self-Sustaining Sovereignty
Like parched lips to the water fountain, insolvent states are lapping up the dollars coming from the federal government in the latest round of socialist thievery and intergenerational slavery. Rather than face the hard task of balancing their own budgets based on available tax revenue, they welcome the (supposedly) free money as a political lifeline. Unwilling to face reality, they embrace the federal fantasy such a stimulus of necessity creates.
The Constitution’s framers created a system whereby sovereign and independent states delegated some of their powers to a central, federal government who could secure the blessings of liberty and provide for the general welfare of all. Thomas Jefferson described this structure once in a letter to Robert J. Garnett:
The best general key for the solution of questions of power between our governments is the fact that ‘every foreign and federal power is given to the Federal Government, and to the States every power purely domestic.’ I recollect but one instance of control vested in the Federal over the State authorities in a matter purely domestic, which is that of metallic tenders. The Federal is, in truth, our foreign government, which department alone is taken from the sovereignty of the separate States. (Thomas Jefferson, via Quoty)
Today, however, the tentacles of the federal government have a far greater and deeper reach into the affairs of its subservient state governments. In most cases, sovereignty has been replaced with dependency; assertion of power with groveling for assistance; exercise of delegated authority with fear of stepping on the federal government’s toes.
But in nearly every case, federal money is welcomed with open arms and visible relief. State leaders seem unwilling to recognize the simple fact that what the federal government pays for, it controls. Such control may start out slowly and with measured reticence, but nobody finances the operation of anything without ultimately having a say in how it is carried out.
From this we learn that in order to be sovereign, one must be self-sustaining. The ability to self-govern (acting instead of being acted upon) requires not being in bondage through slavery (financial or otherwise) to another party. Thus, by accepting federal money for internal projects and programs, states are further surrendering their sovereignty and eroding any sort of division between state and federal spheres of authority.
Just as a drug addict is dependent upon his supplier for the continual provision of resources he “needs”, so too do the states increase their addiction to easy money by accepting handouts from Uncle Sam. Both the supplier and the federal government know that once the addict is hooked, they’ll do anything demanded of them in order to get just one more fix they so desperately need.
30 Responses to “Self-Sustaining Sovereignty”
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Not to mention the welfare among the states. I doubt the money received by California or New York matches the incremental taxes that will come from Californians or New Yorkers on the federal level.
I think I liked your first metaphor better — money as life-sustaining water, rather than drugs to an addict.
I remember when Reagan inveighed against ‘big government’, as you still do. Even Clinton had to give lip-service to the notion. Thank goodness those days are over. I think it’s refreshing to see Obama being an unapologetic ‘big government’ guy. We need one of those every once in a while. For the big projects, government does it better than anyone else.
I understand why you’re honked off about the stimulus; it’s not very conservative, and by ‘conservative’, I mean, ‘thinking that the government should sit on its butt, doing nothing’. Although, if memory serves, you’ve argued that the government really shouldn’t do much of anything, including roads and infrastructure, or making labor laws that protect children from exploitation. So I doubt there was really going to be anything you’d like about the stimulus.
Maybe in retrospect, years from now, you’ll look back on the Obama years and decide that investing in energy, education, and health care had some good consequences. Or maybe you’ll just take the economic success of the Obama years for granted, like you now do for roads, firefighters, the Hoover Dam, and Social Security (which you’ll no doubt refuse).
Where do you stand on volcano monitoring?
Daniel,
Aren’t you really arguing against Jefferson? “…and to the States every power purely domestic…” sounds like a plan to me. How much are what you mentioned really investments when it all has to be paid back, with interest? Utah has just gone through a lot of budget cutting and will be fine. I rather think a lot of other states could get by without federal “stimulus” money. Of course everyone will accept it because they will have to pay for it in the end. My last year’s “stimulus” check is in the bank as a hedge against future taxes.
The federal government should get out of the states’ business. If its appetite for borrowed money was curbed perhaps the states could keep more of their money and implement some of the “purely domestic” programs.
I admire Jefferson’s intellect (and his probable atheism), but I would never turn him into some kind of fetish for adoration as people habitually do. We face situations he never dreamed of, and he knew we would.
I suspect many people do not understand the point of a stimulus. The point of economic stimulus is to spend money.Then the money multiplies through the economy. Money is therefore not so hard to come by. Sounds counterintuitive, but it’s all very Keynesian, and seems to have a salubrious effect.
Oh — but I wasn’t talking about Rick’s check in the bank just then. I commend you for your prudence. If people saved more and didn’t depend so heavily on credit, perhaps the current crisis could have been avoided.
I think it’s refreshing to see Obama being an unapologetic ‘big government’ guy
I think it would be refreshing for the unapologetic “big government” guys to openly admit that they dislike and are intentionally ignoring the 10th amendment.
I like the 10th Amendment, but it’s not my favourite. (That would be the 1st.) How would all of this interfere with the states? Sorry, it’s early here.
The dangerous fetish here is the one for big federal government. Most people know what the idea of a stimulus is for. If it is such a good thing to spend then why not get out all the credit cards and have at it? The real problem is that many of us do not have confidence in the government’s idea of a stimulus and are holding on to our money, liquidating our stocks, and not taking on any big financial commitments. Because higher taxes (Obama announced some today) and inflation will follow, the wise are moving into liquidity so as to be ready for the changes ahead. These huge deficits will come to no good.
If it is such a good thing to spend then why not get out all the credit cards and have at it?
I’m no economist, but I think economic stimulation only works if you use actual money and not credit.
I’m no economist, but I think economic stimulation only works if you use actual money and not credit.
I don’t think I’ve ever agreed with you more than on this sentence. But what you’re not realizing here is that the government is flat out broke (and worse). You heap praises upon big government and its salubrious Keynesianism, but fail to admit that its only tool to achieve these “big projects” it so loves is… credit! A dollar bill is credit. A treasury bill is credit. An account at the Fed’s discount window is credit. Or, put more correctly: debt (since true credit comes from savings, of which the government has none).
If you’ve yet to watch it (any of you), set aside 45 minutes and watch this video on the relationship between money and credit/debt.
I am not economist either. If I spend on my credit card I am borrowing money. As you know the government stimulus package is all borrowed money (on top of trillions of borrowed money). What’s the difference? I pay off my credit card off at the end of the month while we’ll be lucky if the government can pay it’s debt by the end of the century.
So the trick would be to get me to spend my money and the government to conserve theirs. But because of government overspending my confidence is shaken hence I need to save for the future. If government would quit deficit spending the people with money to spend might just pick up some of the slack.
Hey, not bad for a non-economist.
Daniel,
. . . economic stimulation only works if you use actual money and not credit.
Where do you stand on the notion that the government is just making money out of thin air? Do you not believe that doing this to the nth degree tends to cause run-away inflation?
I disagree with your notion that big government does things better than anyone else. All of those things you mentioned above for example have been done privately or by smaller governments for less money and/or more effectively.
The only advantage big government has is the ability to collect enough money to take on the really big projects. But lb-for-lb each and every project big government takes on, private industry or smaller governments do a better job as measured by the most bang for your buck.
As for the stimulus–yes, the point of a stimulus is to spend money. But spend it on what? An economy is strong because it produces something. Are we spending money on ventures that produce a useful good or service? Even Keynesian economics admits this premise. Where it fails is the assumption that any circulation of funds means a useful good or service was provide to someone who had a demand for it. This is false.
1) Valcano monitoring: While I understand the “ounce of prevention” principle, this research is already being done with current funding and charitable donations. The additional monies being spent on this is only to “fine tune” instruments and studies. (with generic numbers) We’re spending 50% more money to get 2% more information. Not very efficient.
2) Health care: Yes, this might be an important issue. But spending more money on it is not going to produce any useful good or service. No more people will be treated or cured by paying hospitals and doctors’ offices. If this were spent on research for some incurable disease (the Leukemia society is badly in need of funding) then I could see that as something being produced. But all this is doing is spending to make drug companies, medical equipment companies etc, doctors and nurses richer than they already are while providing the same goods and services already being provided. I thought Obama was trying to fight the rich. Hmmm.
3) Transportation: At least this will get money into the hands of the common folk. But are we producing anything? No. The roads are already there. And as stated above, if adminstrated by states, roads are built much more economically and efficiently than those by federal administration. (Trust me, this is an area of my profession).
4) Green energy: This is another area of my profession. Few forms of energy are cheaper than coal and natural gas. And the pollution that current plants put out are really low. So, when we put money into green energy, we are actually reducing production of energy. So, what are we producing?
5) The vast majority of the funding went to “pet projects” — pork. Yes, it will stimulate a few special interest groups. But that won’t help the economy. Still nothing is being produced.
We could go down the list. I ask “what is being produced?” A good or a service that does not exist today that will be created by this package? I’m sure there are some. But the percentage is really low. Without something being produced, you’re looking at a degenerative cycle. To turn that degenerative cycle into hyperdrive makes it degenerate all that much faster.
One last set of questions:
. . . you’ll just take the economic success of the Obama years for granted.
I’ll grant that time will tell. I will even grant that it takes time for certain programs to take effect.
But how long are you willing to wait? What economic markers are you going to be looking at to determine success?
If those terms are not satisfied, how bad and for how long will things have to go down before you would be willing to admit that it doesn’t work? Or are you just going to wait for some other administration to fix things and say,”Hey look, Obama did do some good. It just took time for the programs to take effect.”
If you answer these thoughtfully, I would be perfectly willing to have you turn the tables on me.
Connor,
I watched the video you linked to in your comment. It was very interesting, especially about having to create debt to create money. And it is curious how many people and organizations are all in debt at the same time. It also explains why the government is so anxious to borrow money – so that it can create more money. It also seems to support why it is viewed as a negative that many are paying down debts. Theoretically that would take out of circulation a lot of money, multiples of the original debt. It’s as if we are all competing against one another in a system where most of us are destined to lose, because of our flawed monetary system. Fascinating stuff.
The premise of Federal incentive spending is a long and shaky one, and the more I think about it the more I think it’s a sneaky sort of loophole for the federal government. For example, a national drinking age would be unconstitutional so the feds withhold some highway funds for states with a drinking age under 21. It’s a way for the federal government to have effective control over states in certain departments (at least those without principled leaders) without having to grant themselves the explicit power.
(Still, I’d quibble over use of the term “socialism” when “Keynesian” would be more appropriate. However one may disagree with both philosophies, regulation and federal involvement in distribution and production does not equate to state ownership and worker control of the same.)
A fascinating topic! I’ve been driven once again to some reading.
A comparison to the New Deal is inevitable, so let’s get to it. Turns out that the government ran huge deficits then (amounting to something like half the federal budget), and the resulting spending pulled the US out of the Great Depression. I’m not for running deficits all the time, but c’mon people, this is a crisis here.
Note also that the deficit spending of the New Deal didn’t cause the hyper-inflation that Germany had in the 20’s either, which leads me to suspect that there must be some difference between deficit spending and just printing money. I don’t know why, but they don’t seem to have the same effect. This isn’t just a New Deal phenomenon — deficits under Reagan, Bush, and B*sh were huge, but weren’t paired with inflation. Lots of factors here, of course, but that should tell us there’s something different going on.
The point about private corporations doing things more efficiently than government may be right or wrong — it’s a moot point here because the private sector (surprise) doesn’t have the money to embark on big spending right now. The government does, and by doing so, they can put people to work and shore up our infrastructure for the next 50 to 70 years building things we’ll all use.
I don’t really mind if such endeavours aren’t conservative enough to satisfy conservatives (or anarchists for that matter), who won’t be happy until government is drowned in the Norquistian bathtub. That kind of talk has had its day; people are ready to try the other approach. You know, the one that worked last time the market got us into such trouble.
So what’s the timeline for success here? I’d like to see some major indicators turn around by one year to 18 months. If we can bring unemployment back down, and get production (GDP) back up, while keeping inflation down where it ought to be, I’d say things would be looking up.
Anyone reading Krugman’s blog? Just wondering.
Connor, I’m not sure I believe this statement:
Those I have talked to in state government are aware that what the Federal government pays for it controls, but despite the control issue they are generally happy that those things are being paid for by taxes they can’t be blamed for.
Also, a common attitude is that if the federal government is already taking the money we might as well get to use it.
Daniel,
While you’re reading, be sure to add this to your list. Should you choose to read it, you’ll soon learn that no, the huge deficits and resulting spending from the New Deal did not pull us out of the Great Depression; in reality, it made things worse and prolonged the market correction.
The same thing is happening now. Government intervention into the market, its rewards going to the incompetent players, and its efforts to prop up prices all have the effect of prolonging what otherwise would be a fairly quick liquidation of debt and return to stable prices.
Rothbard beats Krugman (and that Bartlett dude) any day of the week.
David,
Those I have talked to in state government are aware that what the Federal government pays for it controls, but despite the control issue they are generally happy that those things are being paid for by taxes they can’t be blamed for.
I think Utah and a couple other states are aware of the control issue (the “strings attached”), but I’ve yet to see this verbal recognition on the part of other state politicians. Perhaps they do feel as you express here, in that they consciously know the federal government will have more oversight into their state affairs and yet don’t care. But I just haven’t seen a majority of states saying that, so I can’t make that assumption.
Also, a common attitude is that if the federal government is already taking the money we might as well get to use it.
I agree, this is a very common attitude. However, the feds are giving us money that they are printing and borrowing—they are not simply returning to Virginia the taxes that Virginians paid. I think this is a fallacious argument, one which I discussed here.
I agree that it is a fallacious argument, but it is the attitude (or at least a common attitude) that drives the state governments to take the money without asking many questions.
State governments will take the money because they are unwilling/unable to cut their state spending enough to remain in the black – or at least not incomprehensibly in the red.
And even if the stimulus money is printed and borrowed now, at some point the debt will come due and that means we’ll be paying for it through taxes.
While I have followed Connor’s Conundrums for several years now, I seldom participate as I once did due to the attempts by some to immediately interject confusion and minimize the importance of the message. Of course, not all will be prone to accepting the entirety of the message, but some, obviously have a propensity toward disruption and argumentation as their sole purpose for participating. It is glaringly clear to me that some participants are rather more concerned with their self-important ability to discount the message and the messenger while proclaiming they merely disagree. Fortunately however, most are not deceived by this fallacious chicanery.
As a “Bitter Clinger,” and one who spends perhaps an inordinate amount of time contemplating the ramifications of the 2nd. Amendment, I am hopeful that the prevailing wisdom of the Constitution of the United States will render those who are trying to destroy it with sufficient understanding to cease their satanic endeavors before it is everlastingly too late. Unfortunately, I hold little hope they will cease and desist sufficiently. Hopefully, most true patriots will finally start acting before they are acted upon.
Daniel,
Very well. 12-18 months; Unemployment, GDP, Inflation.
I would agree that this would be a good time table because it was about that long that the depression of 1920 corrected itself without government intervention. (Yes, 1920, not 1929).
Unemployment: I would agree if they are jobs similar to or comparable to the jobs prior to Oct 2007. If they are just government beaurocracy jobs where they are essentially getting paid to fill out a form that didn’t exist before or to move rocks back and forth, I wouldn’t consider that much of an improvement. They need to be real jobs.
Inflation: This is a fine meter as long as it is a real number. From Reagan to Clinton, they changed the way the CPI was calculated which boasted artificially low numbers. I’ve heard rumors but have not confirmed that Bush II also tweaked it further.
GDP: As long as it is REAL GDP with real inflation and they don’t change the way it is calculated, I think this is a good meter as well.
For the record: I’ve interpreted your comment to mean that these indicators will have returned to Pre Oct 2008 numbers by 18 months of Obama’s inauguration. Is this what you meant?
The argument that the New Deal spending got us out of the depression is an old one and a false one (as Connor points out). And yes, Reagan through Bush II were guilty of defecit spending galore. And I’ll grant that Clinton was the least of the offenders in this regard. But when Obama signs laws that will create a bigger defecit in one month than all the four previous presidents combined did in their entire tenures, I have to wonder why you don’t find that alarming. In addition, he’s asking for further funds that equal that amount. That doesn’t alarm you?
What level of defecit spending will alarm you? How about if we continue through June of this year while he asks for and congress approves funds on the order of $500 B+ every single month. Will that be necessary because we are in a crisis? Or will you consider that alarming?
I believe we all agree that spending money we don’t have is irresponsible on some level. We might even agree that we can excuse some level of defecit spending in a crisis (except for some purists). But how far is too far — even for a crisis?
Connor, keep up the great writing.
“The only advantage big government has is the ability to collect enough money to take on the really big projects. But lb-for-lb each and every project big government takes on, private industry or smaller governments do a better job as measured by the most bang for your buck.”
If there is profit to be made, the private sector can get it done. The only advantage big government has is the ability to not be accountable. Government doesn’t require a return on investment and doesn’t compete, though there are a few exceptions such as postage. Because government never competes, efficiency isn’t necessarily valued though efficiency is what creates value.
A good stimulus would be one that promotes efficiency, lowers transactions costs and creates value. Some solutions are better than others. With the right motivation, I’m sure the private sector would be able to come up with better ideas than a bullet train to Vegas and childcare in Arizona.
Adrien,
Accountability & profit. I can’t deny these factors in the equation. But I am having difficulty imagining an individual company gathering the capital required to do some large projects projects. But then again, I’m having difficulty thinking of really large projects that don’t eventually produce a profit.
To turn it on its flip side, I also note that when some companies get enormously huge, they are run very much like government. They have little to no accountability. Profit is only marginally looked at. I’m not against capitalism. But I am really disappointed when I see such inefficiency in large businesses.
In the oil and gas industry there is TREMENDOUS inefficiency in the management of some of the projects. These range from the $50k projects to the $1B projects. I’ve never been on a project that didn’t go over budget or behind schedule.
There is so much fuel that goes through these refineries that even when these projects go WAY over budget, it tends to pay for itself rather quickly. The numbers we are talking about are so huge it’s difficult for the average person to imagine. In fact, I believe the corporate executives have a hard time understanding what is going on. Rockefeller would roll over in his grave.
My predictions:
If Obama makes it a full 4 years, the national debt will have doubled (or worse) from the time he took office. This may or may not include programs that were already in the works when Bush left. And it certainly includes interest.
Barring some catastrophic event like a major war or some world changing event like the advent of the NWO, the depression will drag on until around 2012-2015. Then things will hit rock bottom and begin to rise again. At this point, I have no predictions for how long it will take to get back to “normal”.
In a news story released yesterday, we learn that the Obama administration is thinking of turning marijuana-related drug enforcement laws back to the states. This line from the article just cracked me up:
That Mr. Obama is being highly selective on which subjects this applies to is evident by the subject of this blog post alone, let alone thousands of other domestic issues upon which the federal government will no doubt retain a tight grip.
Ah, but circumvention through BRIBERY (the dangling of federal funds with strings attached) is completely appropriate š
“Just as a drug addict is dependent upon his supplier for the continual provision of resources he ‘needs'”
This is the driving force of what will become restrictions on assault weapons in the U.S. 60 minutes ran a story last night on the growing violence in Mexico and tossed in a little ditty about how 90 percent of the weapons involved in the drug war originate in the U.S.
drugs = slavery = loss of other rights.
Can’t you see the difference? You see, drugs are something that The One doesn’t really know how to handle and still be popular. So, he naturally will brush it off to the states. But the economy is such a simple thing to master that he knows he can handle such a paltry little dillemma.