The Liberty Amendments

Between finishing my overdue manuscript for my publisher, work, out of town visitors, family life, and various computer breakdowns, I have not been able to write a regular column on a regular basis. That may change in the near future, so my fan should not worry himself.

In the meanwhile, I read an article in Forbes that so delighted me, I thought I would reprint it here, in part. It contains three things to delight my cold and logical heart: first, a denunciation of Woodrow Wilson; second, applause to Mark Levin, who points out that the framers of the US Constitution wisely put in TWO mechanisms for amendment, one of which does not require the consent or participation of the federal government, only of the states; third, recommending horsewhipping for the public dissemination of Keynesian Economics, which made the blithering nonsense of borrowing your way out of debt via currency debasement sound like wise advice from experts instead of the foam-grimaced raving ‘in the long run we are all dead’ Cloudcuckooland lunacy that it is.

You can read the whole thing here:

One hundred years ago, Woodrow Wilson was leading a counterrevolution against the Constitution.  Unfortunately, he was doing it from the White House, as President of the United States.  The more things change, the more they stay the same.

Wilson was one of the early leaders of the so-called Progressive Movement, which was an open conspiracy against the Constitution from the start.   Former President of Princeton University, he had the haughty attitude of superiority that marks so-called “Progressives” to this day.  He was so sure he was so much smarter than the Founding Fathers, who laid the careful foundations of the most successful country in the history of the world.  He displayed the contempt for the average American Progressives exhibit to this day as well, successfully running for reelection in 1916 on the Slogan “He kept us out of war,” before he led America into World War I the next year.

Wilson’s handiwork as President bedevils the nation to this day.  That includes the federal income tax, and the Federal Reserve Board.  Posterity is finally beginning to recognize the rotten seeds Wilson planted that have grown to ensnarl America in vines that now threaten to bring the whole nation down.

But now comes the most effective response to Wilson, and the whole Progressive Movement, since Ronald Reagan, in the new book from former Reagan Justice Dept. official, Landmark Legal Foundation President, and nationally syndicated talk radio host Mark Levin, The Liberty Amendments: Restoring the American Republic.

Levin recognizes the damage the Progressives have done over the last 100 years, and seeks to restore the original Constitution that served the country so well over its first two centuries.  In his book, he seeks to do that with 11 proposed Amendments to the Constitution, which he advances “not because I believe the Constitution, as originally structured is outdated and outmoded, thereby requiring modernization through amendments, but because of the opposite – that is, the necessity and urgency of restoring constitutional republicanism and preserving the civil society from the growing authoritarianism of a federal Leviathan.”

The proposed Amendments actually incorporate an impressive, sweeping, fundamental economic policy agenda.  That is because the Amendments include a Tax Limitation Amendment, a Spending Limitation Amendment, and a Balanced Budget Amendment.  Those Amendments represent a new, free market, Libertarian, supply side economics of economic growth and prosperity for all.

The Tax Limitation Amendment states, “Congress shall not collect more than 15% of a person’s annual income, from whatever source derived.”  Levin explains that as a limit on income taxes.  But the language would seem to apply as well to payroll taxes, sales or excise taxes, and any other federal tax actually, imposing a limit on federal taxation of 15% of income.

From whatever source derived means that the limit covers investment income as well as labor income, counting all forms of the multiple taxation of investment income.  That would mean it covers also capital gains taxes and taxes on dividends.  The Amendment prohibits outright death, or estate, taxes, which are another form of multiple taxation of capital income.  The Amendment protects labor as well from multiple taxation by also prohibiting a Value Added Tax (VAT) and a national sales tax.

Such tax limitation is highly desirable, because it prohibits the mob politics of the many ganging up on the few most productive earning the highest incomes.  Those at the highest incomes would still pay proportionally more under this limit.  Someone earning $10,000 could be subject to maximum federal taxes under this limit of $1,500 per year.  But someone earning 100 times as much at a million dollars would still be subject to maximum federal taxes of 100 times more, at $150,000 a year.  The tax burden could still be skewed proportionally more to the upper income earners, but only by reducing the burden on the lower income earners.  In other words, lower rates than 15% could still be imposed on those at the lower income levels, while the highest could still be subject to a top rate of 15%.

Consequently, the Amendment does not require a flat tax, but limits the depredation on any one person to 15%.  Note that supply side economics emphasizes marginal tax rates as the key factor on taxes providing incentives for economic growth, especially the top marginal tax rate.  Levin’s Tax Limitation Amendment is consequently wise in limiting the top marginal tax rate to 15%, as I recommended in my 2011 book, America’s Ticking Bankruptcy Bomb.

The Amendment also wisely subjects the ruling class to maximum fury over taxation, providing, “The deadline for filing federal income tax returns shall be the day before the date set for elections to federal office.”

The proposed Spending Limitation Amendment provides, “Total outlays of the federal government for each fiscal year shall not exceed 17.5 percent of the Gross National Product for the previous calendar year.”  Spending could still grow every year, but only to the extent the economy grows.  Another section of the Amendment wisely provides that if Congress fails to adopt a budget, to which the spending limit could be applied, then the spending limit that applies to all expenditures is 5 percent less than was spent the previous year.

This is another pro-growth policy, as it limits what the federal government could draw out of the private sector, where the resources can be most effectively utilized to increase jobs and wages.  Spending cuts were one of the planks of Reagan’s pro-growth economics, which produced a 25 year economic boom, the greatest economic boom in world history.

Levin’s Balanced Budget Amendment provides, “Total outlays of the federal government for any fiscal year shall not exceed its receipts for the fiscal year.”  That means the borrowing power of the federal government would be eliminated, which inherently limits government.  But Levin affords a necessary out which can apply in the case of war or other national emergency, providing that the balanced budget requirement can be suspended by a 60% vote by both houses of Congress.  America’s victory in World War II was financed by the biggest run up in government debt in world history, at least as a percent of GDP.  President Obama and his Democrats are taking us back to that same wartime debt record, which saved civilization from the fascists of Nazi Germany and Imperial Japan.  But this time there is no war for survival, only an overwhelming desire to buy votes and power, sort of a fiscal coup d’etat.

National Tax Limitation Committee President Lew Uhler points out that President Reagan’s proposed balanced budget amendment passed the Senate in 1982 with 69 bipartisan votes.  It only failed in Tip O’Neill’s Democrat majority House by just a few votes short of the required two-thirds majority.  Balanced Budget Amendment supporters would be wise to look closely at the language of that proposed Amendment, which eminent economists such as Milton Friedman and William Niskanen contributed to and supported.  There is no point to trying to reinvent the wheel on what was done right before.

But the best part of any Balanced Budget Amendment is that it renders Keynesian economics unconstitutional.  Keynesian economics holds that the key to promoting economic recovery is to increase federal spending, deficits and debt.  If that sounds nuts, that is because it is.  Borrowing or taxing a trillion dollars out of the private economy to spend another trillion dollars back into the economy does nothing to promote the economy or economic growth overall on net.  Counting dislocation effects of the policy, and the negative incentive effects of any higher taxes to finance the increased spending (higher deficits are recognized in the market as increased future taxes), the result is actually an overall net drag on the economy.

That is why President Obama’s blowout stimulus spending of nearly $1 trillion adopted as one of his first acts in office in 2009, never worked to produce the expected economic recovery and growth.  Instead, it produced the worst economic recovery from any recession since the Great Depression, reflecting the net drag on the economy discussed above, along with Obama’s explicit tax rate increases, and the Fed’s counterproductive monetary manipulations.

And that is why Keynesian economics never worked to pull the economy out of the Great Depression, which is what it was invented to do, nor has it ever worked at any other time, in America or anywhere else.  Those who believe in Keynesian economics do not do so because it is logical or has been proven to work.  They believe in it because it justifies what they want, and what the politicians want, which is increased spending, deficits and debt, while avoiding the burden and political negativity of imposing higher taxes to pay for the increased spending.

Keynesian economics is actually just an abuse of democracy, as well as academic freedom, and the First Amendment when it is publicly advocated, morally deserving of punishment in my opinion.  Forget about I don’t agree with what you say, but I would defend to the death your right to say it.  I myself would favor public flogging of the more abusive Keynesian advocates, such as Paul Krugman.  But just making their views unconstitutional would seem to be a reasonable, civil compromise.