TCS Daily

What Blackstone Tells Us About the Future

By John E. Tamny - April 2, 2007 12:00 AM

While still serving as Fed Chairman, Alan Greenspan told the House Budget Committee that, "As a nation, we may have already made promises to coming generations of retirees that we will be unable to fulfill." That the federal government owes $53 trillion in future Medicare, Social Security and pensions seems to confirm Greenspan's dire warnings. According to USA Today, the unfunded debt works out to $473,456 per household

But while the numbers at first glance seem scary, they ignore market indicators and our increasing capacity for wealth creation; both suggesting that the future is much less scary than doomsayers presume. Indeed, the only threat we face in regards to unfunded liabilities is Congressional overreaction to the threat in the form of productivity-retarding tax increases.

The term "unfunded liability" is used to refer to a gap between the government's projected financial commitment under a particular program and the revenues that are expected to be available to fund that commitment. Under the strict terms of the definition, the United States is bankrupt.

To pay off these liabilities, the federal government has the power to tax, plus the U.S. Treasury can and does issue debt purchased by investors around the world to fund its financial obligations. U.S. debt is traded on world markets, and the yields on that debt provide us with forward-looking information about how serious our present financial situation actually is.

If markets felt the U.S. were truly "bankrupt," and incapable of meeting its debt requirements, yields, particularly on the long end of the Treasury curve, would be very high as a reflection of uncertainty over our future ability to pay back what we owe. And 30-year U.S. Treasury bonds are a particularly good market measure of our debt-paying capacity considering how many Americans are expected to retire within that timeframe.

Presently, the yield on 30-year Treasuries is 4.75 percent, a number lower than the short-term rate set by the Fed, along with U.S. Treasury yields on the shorter end of the yield curve. That the yield is so low suggests great confidence on the part of markets that debt fears are overdone.

Of course, the federal government could also reduce the real value of its debt through massive dollar devaluation. But if investors felt this was part of the U.S. game plan, Treasury yields would reflect this possibility through higher yields on the long end of the maturity spectrum. For comparison's sake, U.S. 30-year Treasuries yielded 15.2 percent in September of 1981 (an all-time high), and the much lower number today points to a high degree of investor certainty that the federal government will not devalue its way out of its liabilities.

Some would argue that low Treasury yields today are a function of Chinese demand, but as Trend Macrolytics chief economist David Gitlitz noted in a 2005 client piece, as recently as that year total net purchases by China amounted to just $30 billion out of a $4.5 trillion Treasury market.

Still, the question remains why markets are so sanguine about the U.S. debt picture. The answer lies in our existing and future wealth-creating capacity; the latter something that doomsaying economists tend to ignore in assuming that our liabilities will bankrupt us. Rather than static, our ability to create wealth is highly dynamic. For evidence, we need only look to the numbers involved in the upcoming Blackstone Group IPO.

When its shares are floated later this year, Blackstone is expected to be valued at $40 billion. Where this number becomes truly interesting is when one considers that Blackstone only employs 770 people, meaning wealth-creation per employee works out to $52 million each. Google purchased YouTube for $1.3 billion, which works out to $21 million per employee. At 10,700 employees, wealth-per-Google worker comes in at $13.5 million. Goldman Sachs employs 27,000 workers, and while at the "low" end, this works out to $3.2 million per employee.

The above numbers are particularly telling when wealth-per-employee at "old economy" giants such as Ford and GM is considered. Ford has a market cap of $14 billion, and with 283,000 employees, wealth works out to $52,000/per; at GM $63,000 per. All of this has to be remembered amidst hand-wringing over our future debt. If our ability to create wealth were static, we would presently face higher interest rates and much tougher terms for our debt.

But American wealth-creating capacity continues to grow, and with it, so will future revenues to pay off our looming debts.

Returning to threats we face, the marginal incentive to work and invest grows alongside lower income and capital gains taxes. If we increase both to face a "threat" that markets have already discounted, we'll only slow down the engine of economic growth that makes future debt payments realistic. If the federal government seeks to pay off its unfunded liabilities with higher taxes, sell bonds.

John Tamny is editor of RealClearMarkets. He can be reached at



Markets don't assume static variables, which is why I find the difficulties sustaining a long-term pro-growth economy in a two-party political system insurmountable, particularly since one of the parties - the Democrats - is dedicated to giving the economy an anti-growth makeover. So if the Democrats win the White House without losing the Congress, it's time to short bonds.

In politics, pundits regularly assume static variables, building up whole structures of argument around them. That's why many pundits advise against taking aggressive action against Iran - it will only rally the people around the present regime. That may be so, but the rally is likely to be short-lived, and things will quickly turn ugly for the regime if it loses the capacity to keep the electricity, petrol and fuel oil flowing. Hence, basing one's arguments against aggressive action against Iran on a rally is sloppy thinking.

It's interesting to see that in a discussion in which markets and politics overlap, the sloppy mental habits of political thought preempt.

Balance of Power
“Presently, the yield on 30-year Treasuries is 4.75 percent, a number lower than the short-term rate set by the Fed, along with U.S. Treasury yields on the shorter end of the yield curve. That the yield is so low suggests great confidence on the part of markets that debt fears are overdone. “

Long term dollar denominated yields have been around or below 5% since 2001. The FED’s deliberate action to raise short term rates above long term rates have explained by the past two FED chairmen as follows: We (the FED) know more than the markets…and/or…the markets are obviously wrong. The FED’s decision to raise interest rates 1.5-2% above where economic data and world wide markets indicate they should be has had a measurable impact...less than optimal economic performance in 2006 with more to follow.

And where has Congress, who is supposed to be “supervising” the FED, been all this time? As best I can tell, not one Congressman has attempted to hold the FED accountable for their policies. Many have talked of an “Imperial President” or the “Imperial Courts”. But at least the Presidency and the Courts are in the Constitution…an “Imperial FED” is definitely not. The biggest mistakes are made by those with unchecked power.

You tell 'em!
If only most Americans would learn about the Fed and fractional reserve banking....

There was a time when we did debate how the creation and control of the money supply would be handled. L. Frank Baum wrote the 'Wizard of Oz' as a direct parable of those debates. But, no more.
For those of you who want a good primer on the history of money, bankers and how the Fed was created, what its for, and alternatives to debt-issued currency, there are numerous books on the subject. But a good DVD I'd recommend would be The Money Masters. Disclosure: I don't make a cent on any of those DVDs. Just recommending out of the goodness of my heart.

Another recommendation is this quick primer on currency reform based upon negative-interest money (along with the real world historical experiment in Wörgl, Austria):

Until the people wake up and come to terms with the greatest scam perpetrated on humanity besides outright chattel slavery, issues about marginal tax effects are trivial by comparison.

predctable future
They say it hard to make predictions, especially about the future. But here's one case where it's 100% so; the future will bring more taxes and less freedom. That's the whole idea of organs of the government like central banks and the FED. CBs allow for fractional reserve banking which allows governments to go into debt to serve their interets that they wouldn't be able to get away with in a real economy, like: lining the pockets of them and their cronies, using the money to buy votes with 'bread and circus' entitlements, foreign (mis)adventures. And here's another predection; Blackstone will probably do as well as a public company as it did as a private one, and collectivists will heartily condemn it. I'm so sure of it that I'm thinking of getting some at its IPO.

What SuperBowl XLI Tells Us About the Future
The author overlooked the most obvious indicator of future economic prosperity - SuperBowl XLI.

The implications of Indy beating Chicago are obvious for any with a bit of understanding. Chicago lost, meaning there will be no bear market, adverse economic conditions were averted. Indy won, meaning the bulls will be rounded up and taken to market, economic bliss will follow.

My prediction of the future is as valid as the author's absurd notion that a future IPO tells us anything about the future of Social Security and Medicare funding.

I wonder how much money Tamny has at stake with the Blackstone IPO. There really is no other explanation for the contrived article, it's just another hype piece designed to separate investors from their money.

And where has Congress, who is supposed to be “supervising” the FED, been all this time? As best I can tell, not one Congressman has attempted to hold the FED accountable for their policies. Many have talked of an “Imperial President” or the “Imperial Courts”. But at least the Presidency and the Courts are in the Constitution…an “Imperial FED” is definitely not. The biggest mistakes are made by those with unchecked power.

Of course the Fed is made up of "experts" who have no human frailty. Why would they need supervision. Its not like the mere mortals could being to understand the Olympians, anyway.

Cut Benefits
The entire crisis is akin to parents worrying that their new baby will go to Harvard and it will cost them $500,000. When the kid grows up they can tell him/her that state school is perfectly fine, and it will only cost them $150,000.

Dangerous talk...
Not your's Robert. I mostly have a problem with our author, here.

For your part, however, the notion that one party or the other determines government policy going forward might be naive. Not that you are fundamentally, childlike. But let's be a little more cynical.

It is clearly time for the American government to fall back and retrench our National Debt. We started spending way too much on Defense this time out as an investment to put a quick end to our long term exposure in the Middle East. If a democratic Iraq with a robust economy pacified her neighboring societies over there then this adventure would have been blood and treasure well spent.

After all, there are Islamic nations in that region who are quite secular and progressive. However, the cultures we were trying to fix are simply not ready. So who knew? We will need to cut our losses and fold the tent.

Nice try, perhaps. Or maybe not. Either way, no more experiments in social engineering for us. We would run out of money. So now we need to increase taxes some, cut defense spending a bit, choke off the rate of growth in entitlements and make nice with those people who hate us. Sounds like a job for a Democrat.

This is a wired deal, Robert. We are not living in any kind of democracy. This mighty political struggle is all theatre. They have it completely worked out. It is like when you and the other side go into chambers with the judge. Everyone in the room already knows what really happened and what the legal outcome will be. You must still go through the motions for the clients. You need to make a good show of it because the losing lawyer must still get paid!

The two parties own this nation as partners in government, they like their jobs and they are working together to get it right. They only want us to think they are fighting about it. So we will think that we have an opinion. This drama also keeps the media employed. It is all kind of expensive. But there is entertainment value and we seem to have the money.

Back to John Tamny. He is a writer. But he does not seem to be much of an economist. He also does not seem to be familiar with the mechanics of finance and accounting.

For example: "Under the strict terms of the definition, the United States is bankrupt." Of course, this is a foolish statement that might be expected from an innocent civilian who does not understand what the term bankruptcy actually means. Receivership? In default? Can't make payroll? Facing liquidation? Right, Mr. Tamny.

The concept that we have long term debts in the form of underfunded entitlements that should be booked as liabilities onto some sort of National Balance Sheet is equally pedestrian. But it does get worse with this guy.

How about this: "Of course, the federal government could also reduce the real value of its debt through massive dollar devaluation." OK. Great idea there, John. And, exactly how would this be accomplished? You are talking about such an inflation that would destroy all nominal account balances, fixed rate portfolio investments and drive interest rates up to the point that the economy itself would shut down. The government could accomplish this by "printing money" to pay its bills instead of through tax revenues or by rolling over its Treasury debt instruments. Sufficient inflation to reduce the real value of our outstanding paper would drive up the effective interest rates on all our paper out there today and would thereby make it impossible for us to roll over mature issues at rates we could afford to pay. Simple math would show everyone that we must certainly default because that liability is, indeed, bookable. And the party would be over.

John Tamny casually suggests that the downside would be that "...if investors felt this was part of the U.S. game plan, Treasury yields would reflect this possibility through higher yields on the long end of the maturity spectrum." John. Please.

No one would touch our paper. The reason interest rates are low on Treasuries is that the risk of devaluation or default by the US is considered to be negligible. Otherwise, we all die. The actual downside would be the end of our global economy because interest bearing US Treasury debt instruments are the store of value for central banks everywhere. There would not be any hard currency left in the world! Why do you think the Fed is so concerned about inflation? Even the hint of inflation is dangerous. To suggest that the US might consider solving its National Debt problem by devaluing the dollar is reckless.

Mr. Tamny's one point worthy of note is the fact that the entire world does, indeed, believe that America will somehow manage to get control of its National Debt. The actual mechanisms required for the US government to slow down the growth of spending and to thereby let our tax revenues roll forward enough to start paying down that number will be painful and risky. We could still mess this up.

He actually compared the wealth creation potential of the economy of the United States to the market capitalization of YouTube.

Even the best business relationship involves cheating
Although taxes ought never to be raised, but rather the economy grown and taxes lowered accordingly, I agree with your ideas regarding the two political parties. Like you, I believe they usually function as a cooperative cartel, each assuming a brand name that monopolizes half of the political spectrum, each promoting policies counter to the other, and each hamming it up on the political stage to fool the voters, i.e. the numb-suck audience of government's Vaudeville theater. And so long as the media get a healthy cut of the box office take, they'll play along with the scam.

But then along comes Slick Willy with his triangulation strategy, and all the sudden the deal's in the tank! How could the Dems play the GOP's side of the ideological street? They must be punished! And they were: Slick Willy cheated and he paid for it, personally. The GOP saw to that. Now it seems we're back to business as usual.

The point of this diatribe is to show you that no matter how cooperative the (R) & (D) cartel is, both of its members still want power more than anything else on God's green earth. This all-consuming, out-of-control desire for power often impels them to lie, cheat and steal not only from the voters, but from each other, thereby destabilizing the cartel and producing true political competition capable of impelling dynamic political change beyond the cartel's control.

Like wealth, power is an inherently destabilizing influence that eventually erodes every static accord. This helps explain why America has so few friends in the world.

Disruption and risk...
As an element of this political theatre we allow and encourage the dishonest behavior during the struggle for power that you describe. This is somewhat like the violence we enjoy (watching) on the professional football field. It is real. People genuinely try to harm each other. And players do get hurt. Boxing is similar.

This is the way such contact sports were designed. Poor design.

When such expensive and dishonest struggles (as we see inside the routine management of government) occur in industry those companies become less competitive. Similarly, our process of government is disrupted with all this foolishness. Of course, we are not put at much risk as a result unless there is a better, faster and cheaper paradigm. I do not think we should assume that none of the 200 other sovereign states will fail to develop a fundamental breakthrough in political science.

Taxation is the lifeblood of government. It is also a mechanism through which to manage economic (GDP) rates of growth. Just as taxes might be lowered to encourage business development taxes could be raised to put on the brakes (rather than to increase interest rates).

We very much need to get back to generating a budget surplus and cutting into our National Debt burden. Higher taxes and reduced entitlements are politically unpopular if the government is pandering to voters. To slow down the rate of growth in Defense spending will make certain other voters nervous.

Nevertheless, we need to get our hands around this process sooner rather than later. We are, indeed, competing with nations where governments care quite a bit less (than we do) what their citizens might think.

I can't agree with your pronouncements on taxation, forest, because government has established beyond all doubt that it can't be trusted to use the mechanism of taxation for the purpose of regulating economic growth.

Government panders to the masses for power; this we've established. Let's examine in detail why a government that panders for power can't be trusted to use taxation as a mechanism for regulating economic growth.

A sadly significant sector of the masses want government to use taxation as a mechanism for social regulation instead of economic regulation, that is, redistributing wealth for the betterment of society, and the economy be damned. To get these people's votes, government dabbles in class war, thereby piddling away a vitally important margin of the tax code's utility to regulate economic growth.

Strike one.

Government at all levels panders to companies and their owners for power, imposing all manner of taxes to benefit one company or industry or sector at the expense of other companies, industries or sectors and always at the expense of consumers and taxpayers. Although they finance this sordid mess, the last two groups aren't paying attention, so it continues indefinitely and will never be cleaned up. In sum, government diddles one sector of the economy to draw cash out of the others to finance political campaigns, thereby using taxation as a mechanism to gain and keep power. And the economy be damned.

Strike two.

Government panders to all citizens, legal and natural alike, by throwing borrowed money at them. Money borrowed and spent today is tomorrow's locked-in tax burden. Uh, excuse me, doesn't this tax burden lock-in thwart tomorrow's government from using taxation as a mechanism to regulate tomorrow's economic growth? Right you are! Then doesn't it follow that yesterday's borrowing and spending (pandering) equals today's locked-in tax burden, thwarting today's government from using taxation as mechanism to regulated economic growth? Right you are, again!

Strike three.

At no time, past, present or future, has government proved itself trustworthy respecting its management of taxation for any purpose. This is why I see no urgency in paying off the national debt to free up margins for the government to pander for power using the tax code as bait. Worse, the American voter/citizen has proved himself just as vile as his government, for he is government's indispensable partner in both pandering and taxation.

So, until you reveal your realistic plan for changing these ubiquitous vile behaviors to virtuous ones, I must continue to advocate severely limiting government's taxing and spending power while enabling economic regulation primarily through monetary policy conducted by an independent central banking system.


PS: Strike four - past pandering can't be undone
Over 70% of today's tax revenues go to pay for yesterday's New Deal, Great Society, and Compassionate Conservatism panders. Even worse, undoing these panders is politically inconceivable; after all, isn't the point of pandering to turn the people's power and cash into one's own power and cash?

This means that over 2/3 of your taxation mechanism is locked in to financing past panders, rendering today's and tomorrows aspirations of using taxation as a mechanism to regulate economic growth largely specious.

PSS: Wow! Political pandering at the townhall devolves into a self-help rally
Need more be said (from the WSJ Opinion Journal's Best of the Web Today)?

It's All About Jenny Ballantine

Rush Limbaugh has a fascinating transcript from a town-hall meeting John and Elizabeth Edwards held at the University of New Hampshire Monday. They were questioned by an undergraduate named Jenny Ballantine, who had this to say:

I need to be able to look to my leader and see words of encouragement, words of hope. I need to be able to trust that person. I need to be able to know that I'm going to be grow [sic in transcript] in a world that's not going to be full of hate and prejudice and racism and to know that I matter, that I wasn't just dumped in this world for no particular reason whatsoever.

I'm busting my ass in school, I work 25 to 30 hours a week, and it's just me and my dog. So what can you do for the people that are in my situation, that are trying their damnedest in school, wanting to go to grad school, is going to be hit with the loans--and, uh, I have no idea what I want to do when I grow up. I don't know what I want to be when I'm an adult. But I'm 22 right now, so people are like, "Honey, you are an adult." You know what? It's about me. It's about me voting for you or supporting somebody who's going to be the next president. So it's all about me right now. Just give me something.

Here is how the Edwardses responded:

Mr. Edwards: God bless you. If I were choosing a president, uh, that's what I'd be doing. I'd be looking for the specifics of what they want to do, because that matters, but I would also be judging them personally, because we need to trust our president.

Mrs. Edwards: I want to say something, too. I was really impressed with you, Jenny Ballantine, and I think probably everybody in this room was, and I want everybody in this room who believes that Jenny Ballantine is going to be able to do it to give her a round of applause.

According to Foster's Daily Democrat of Dover, N.H., the audience gave Miss Ballantine not only a round of applause but a standing ovation.

And so, my fellow Americans: Ask not what your country can do for you. Ask what your country can do for Jenny Ballantine!

How the heck can you hang out with these people, forest, and keep a straight face?

100% and more...
We have made promises that we cannot live up to. There is not enough money today and there will never be enough money. But it is OK. We have only promised to do certain, impossibly stupid things. We have not actually done those things. Politicians are always breaking promises. This tactic is especially effective when the government pretends that the broken promises were made by the party currently out of power. It was those bad politicians (who are gone now) rather than by our (of the people, by the people and for the people) government itself. Very slick.

Nevertheless, and for all the reasons that you listed our government might not be able to start behaving until we actually start running out of money. And that would be long after it was too late to do anything other than finding someone to blame.

Corporate entities that fail and must be reorganized typically see disaster coming for years or decades before they hit the wall. The larger an entity is the longer the lag time from stupidity to pain. Indeed, the parties responsible for such problems are almost always gone before their iniquities are visited on their replacements. Similarly, the process of recovery can be agonizingly slow with a very large entity. Notice how long it took Japan to recover from the Plaza Accord (1985)? That's right. Twenty years. But the Japanese currency only deflated. Their government did not run out of money.

When the Soviet Union failed economically they could not simply float some junk bonds, close some plants and lay off lots of people. They simply ceased to be. Like Arthur Andersen and Enron an entity without liquidation value (income producing assets on the balance sheet) cannot survive a cash flow crunch. The larger such entities are (and this includes governments) the faster they vaporize. They do not fall with a loud noise. They simply blow away into history as everything they once did is immediately taken over by other people. Because the social tasks they appropriated as their own (including sovereignty) must be done by someone or civilization itself will fail. The next day someone else is, indeed, doing that work.

The United States government sits in precisely that position today. Our numbers clearly cannot be sustained. The longer we continue working this way the more irresistable the pull of total collapse will become. At some point we will be too far gone to avoid the inevitable. No matter how much pain we might (toward the end) be willing to endure.

Mechanically, the moment the world thinks we might default on our interest bearing Treasury debt instruments, even the remotest possibility, the price on those bonds will drop, effective interest will surge up and we will not be able to roll over mature paper without making matters worse. We need to start chopping away at the National Debt before any other economy in the world looks better than ours. We have 20 years, give or take.

The reason I speak about raising taxes to hold the economy in check without increasing interest rates is that taxes have less negative impact on entrepreneurs. This is because rapidly growing small companies need to borrow money and they are not profitable while they are still accounting on a cash basis (rather than accrual) and they do not pay taxes anyway yet. Small companies growing rapidly to become medium sized operations create wealth, expand the GDP and create new jobs. This is true everywhere. Including the United States.

You made the statement: "I must continue to advocate severely limiting government's taxing and spending power..." as the method to stop and reverse such behavior. However, there is no mechanism with which to execute that discipline. Advocating is about all you can do. The US government must control itself. But our political process might make this impossible. Too much pandering required.

The American Way worked better than any other when our financial capitalism expressed itself as an unassailable ability to wage modern warfare. However, there will not be any more World Wars or Cold Wars to fight and to win. That was last century. America's dominance in this regard is now moot and does not constitute an unfair advantage.

Going forward, in order to be competitive the earnings of financial economic entities (including governments that tax their own GDPs) must be husbanded and reinvested as working capital rather than to be consumed as ordnance. Those who continue to indulge in the military arena (beyond the clear and present interests of their own self-defense) do so out of vanity.

Robert, if we are certain that normal human group behavior will lead to the self-induced collapse of the government of the United States then such knowledge should give us an unfair advantage.

However, I do not calculate that we are already past the point of stopping. Indeed, I think the government might plan to make fundamental corrections as of 2009, with the Democrats in charge and blaming the Republicans for all the pain of increased taxes and reduced spending.

We now require a smaller worldwide military footprint (Powell Doctrine with summary interventions) and a substantially lower level of domestic social entitlement. Possibly with a more competitive health care industry (less FDA) delivering better products and services at lower costs. We should be enjoying full employment and an economy that makes lots of money continuing to lead global financial capitalism.

You know, Robert...
These are the people who want to keep the world just as it is...because it works just fine for them.

To suggest that we should "progress" into something better seems so Socialistic.

To imagine that we might create our own wealth, keep most of it, attend to our own social services, provide for our own, world-class, health care services, own appropriate sized banks ourselves and stay as far away from the sovereign as possible seems so...third world.

How that woman can smile when she tells America that she has inoperable, terminal cancer can only mean that this should help her become First Lady...and she wants that more than life itself. She is not brave. She is without emotion. Such people make me more than a little bit nervous, if you must know how I really feel about it.

Whatever you might think of him, George Bush would be crying like a little girl if it was his wife. And I would be too.

Constitutional amendment
I read recently about a constitutional amendment that's near adoption: Equal protection under the law for women. It was the first I'd ever heard about it because its ratification process has dragged on for over 20 years. This startled me because I'd always assumed that constitutional amendments were big deals that everyone talked about ad nauseum, and that amendments could never get into the US constitution on the sly. But I was wrong, so back to the drawing board for me.

The assumptions providing the foundation to which the framework rules of political reason attach are often false or invalid, such as (1) amending the US constitution is difficult, (2) constitutional amendments are reserved for wise, necessary laws, and (3) once done, constitutional amendments can't be undone (see (1)). Indeed, the more I examine the structure of popular political thought, the more it looks ugly, rickety and hazardous, like pine studs jammed into the mud with cardboard stapled to them.

I'm rambling, so here's my point: The legal mechanism for severely limiting Congress' power to tax and spend is a constitutional amendment. Several have been proposed, but I favor the ones citing a flat number like tax revenues may not exceed 15% of last year's GDP and all spending may not exceed 90% of tax revenues, with debt repayment expressly exempted. Other nifty features could include fiscal policy monitoring by the OMB, GAO and Federal Reserve System, a new national accounting scheme that's rationally and technically sound and can't be changed by Congress, removing the power to borrow from Congress and bestowing it on the Federal Reserve System, flushing Congress en-masse if it violates the spending provision, personal civil liability for Congressmen voting for bills mandating spending in excess of the spending limit, and of course, forbidding Congress from nationalizing private business assets (just in case Congress tries turning to nationalizing industries for cash) as well as making economic freedom an individual civil right on par with speech, assembly and religion (e.g. personal income tax liability may never exceed 20% of income from any source).

If power is ever to be limited, it must be set against itself. The Founders' assumptions about Congress, that it's size-composition-competing interests would accomplish this power limitation, were wrong. Today, there are only two parties so it makes no difference whether Congress hosts 535 scumbags or just 200, the national (R) & (D) cartel controls politics at every level, and there's no limit on borrowing so everybody gets a snout into the pork barrel. See what happens when you assume?

Congress can't be trusted with the fiscal power we give it, so let's We the People take it away, keep most of it for ourselves, and give the rest to someone else. All political power in America supposedly flows from the people, but We the American People behave as if we're not worthy of it.

Let's turn this around, shall we?

Give up on the sovereign...

The sovereign state as it is currently composed assumes the ownership and total legal control of everything and everyone inside its borders. How the government choses to manage such properties and its own population is ultimately not open to challenge without civil revolt leading to (in some cases) civil war. Of course, this is not entirely theoretical. Such struggles are historically ubiquitous.

The modern democratic process is a sham perpetuated for crowd control.

The government does not compete with or take directions from its private entities. States are composed militarily and expected to compete with each other through violence or the "sabre rattling" threat of violence. Civil disobedience is met with a deadly stare.

The institution of sovereignty is already a burdensome anachronism regarding the operation of global society. It disrupts the mechanisms of financial capitalism.

Human social entities are self-perpetuating. Manufacturing companies, for example, often produce a variety of finished goods that are sold into different markets. When growth opportunities in some such businesses slow down the numbers committed to in the Annual Plan might be made up for elsewhere in the product mix.

Similarly, if the sovereign cannot continue expanding its interests through military adventures or justifying its existence defending the nation against foreign intrusion it might reasonably seek to expand into other goods and services. And to justify this as "in the best interests of the nation".

The sovereign need not tolerate competition regarding any services it wants to take over. The government may simply write a law declaring that any such activity on the part of private citizens is forbidden. To compete with the state is a criminal act and appropriately punishable.

As Christians we have been carefully prepared to accept the rule of law. No matter how unreasonable or illogical it might seem.

For example, you cannot eat meat on Fridays during Lent if you are a Catholic. You cannot eat pork ever at all if you are Jewish or Islamic. You cannot eat beef if you are a Hindu. And this is only a short list of rules regarding dietary protein, that may have made some sense hundreds or thousands of years ago but are still complied with obsessively today. People are very serious about these matters and many, many others. Consequently, we are very well prepared to accept whatever the government tells us to do.

But, remember. It is not the people who work for government. They are only executing tasks according to the specific culture of behavior for that group. If they do not perform as reasonably expected then they are violating a code of ethics. They are literally not doing their jobs.

If you do not understand the fundamental nature of the sovereign then you will always be disappointed when the state does what the state must do.

Government is like having a dog in your house. He will pee on the rug a little bit from time to time and sleep on the couch when you are not there. If you want such behavior out of your life then get rid of the dog.

I'm with you 100%
What I admire most about where I live is how families take care of one another, how their money stays in the family providing opportunity for family members instead of going to the government to provide ... funding for nonsense, and how that opportunity comes with strings attached.

The Jenny Ballantines of the world want government with no strings attached. But that's just the start of it: government must also be their god, their ideal of what humanity could be - trustworthy, hopeful, good - if only humanity would allow itself to be led by its better tendencies. They want government to be their savior, ridding the world of racism, hatred, bigotry and injustice so they don't have to confront these things themselves. But most of all, they want government to be Big Daddy, holding them by the hand all their lives, telling them what to be, instructing them how to live, making all their important decisions for them, and bailing them out of every trouble so they never have to grow up, stand on their own feet and confront the responsibilities, trade-offs, hardships of the freedom their forebears won, spilling rivers of their own blood and burying mountains of their own treasure to be free.

It's all about me, government, me and my dog. Give me something, no strings attached.

You make good points, forest, and wise ones too. Still, if we're going to progress to something better, let's start by leaving narcissism and the power hungry shysters who pander to it behind.


Give up on Natural Law - No; Give up on the Sovereign - Yes
Christians are primed for submission to the sovereign because we believe (or several of the assumptions forming the basis of the rules by which we reason hold) that certain rules are a function of nature and human nature, and being themselves evidences linking the authority and design of their creator, revealed commands of the Creator. This is an eye-crossing way of saying, "No matter how you slice it, lying, stealing, killing, adultery, and envy really are bad ju ju leading to worse ju ju when left unchecked and unresolved."

Since the sovereign is uniquely well situated to check and resolve bad ju ju, issuing laws to that end and sometimes enforcing them, we find ourselves readily submitting to this function of the sovereign, and by extension, the remainder of the sovereign's functions. It's these latter functions that bunch my knickers, for they're often excessive, irrational and inefficient. Who, understanding how pensions work, really believes that the sovereign is uniquely well situated to administer pensions?

Now, the idea that the natural law really does bind the sovereign and limit its powers, that is, that the law of Nature and Nature's God proscribes the sovereign lying, stealing, killing, betraying and corrupting, is relatively new to western civilization. More importantly, this idea formed the intellectual, social, cultural and yes, spiritual basis of America.

Supposedly, in these postmodern times moral and cultural relativism have established this idea's unworkability. In truth, postmodern man has left himself morally and culturally adrift, viscerally hostile to the half-hearted arguments he proffers in favor of whatever watered-down, adulterated moral code he periodically observes out of mere convenience.

At this woeful pass, we have several options, forest. But the two we've been discussing is chucking the sovereign vs. reforming the sovereign by severely limiting its power. I favor the latter solution - the classical liberal one - because it's workable (it's been done before) and because man isn't yet ready (and I believe never will be) to voluntarily behave and keep his hands to himself.


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