The Federal Reserve has doubled down on its policy of devaluing your money.
During a speech in Jackson Hole last week, Federal Reserve Chairman Jerome Powell announced a shift in the central bank’s inflation policy.
In the past, the central bank has targeted a 2 percent inflation rate as measured by CPI. Now it will follow a policy of “average inflation targeting.” In effect, the Fed will allow the CPI to run “moderately” over 2 percent “for some time” to balance out periods where it runs under that level.
“Many find it counterintuitive that the Fed would want to push up inflation. However, inflation that is persistently too low can pose serious risks to the economy,” Powell said during prepared remarks at the summit.
The notion that falling prices are bad for the economy is ridiculous to begin with and is nothing more than Keynesian claptrap. But when you define inflation correctly—as an expansion of the money supply—it is anything but “too low.” In fact, it is at the highest level in history. But based on the consumer price index (CPI), “inflation” has been well below 2 percent for many years. In effect, this new policy means that the Fed will likely hold interest rates at zero for a significant amount of time—probably years—even if (when) CPI runs above 2 percent.
Fed inflation policy has evolved over time to allow for an ever-increasing devaluation of the dollar. The natural tendency in a healthy economy is for prices to decline. So originally, the Fed’s goal was “price stability. Early on, the central bank simply tried to keep prices from rising or falling. Eventually, it shifted to a 2 percent ceiling. It didn’t want rising prices, but it would tolerate them as long as they stayed below 2 percent. But eventually, 2 percent shifted from the ceiling to the target. And now the Fed has moved the goalposts once again with its 2 percent average.
The question is why does the Fed want inflation to begin with? Why does it think that falling or even stable prices “pose serious risks to the economy?”
The federal government could never get away with spending trillions every year on the welfare and warfare state if it had to directly tax Americans to pay for it. Instead, it pays for its profligacy through a hidden tax—inflation. It devalues the dollar and keeps interest rates artificially low to enable government borrowing.
The Fed doesn’t literally run off dollar bills in the basement of the Eccles Building. In practice, the Fed monetizes U.S. debt through the purchase of Treasury bonds on the open market with money it creates out of thin air. This creates artificial demand for U.S. bonds and holds interest rates artificially low. The Fed monetized trillions in debt after the 2008 financial crisis and held interest rates at zero for 7 years.
But the Fed has backed itself into a corner with its loose monetary policy. It can’t fight inflation. That requires rising interest rates. When former Federal Reserve Chair Paul Volker defeated stagflation that ran rampant in the 1970s, he allowed interest rates to rise to 20 percent. Given the amount of debt in the economy today—both government and private—a 20 percent interest rate would collapse the economy. In fact, the Fed couldn’t push rates above 2.5 percent after the Great Recession before the stock market crashed and the central bank pivoted back to rate cuts and money printing.
Since it can’t realistically fight inflation, the Federal Reserve has to keep redefining its inflation policy to justify rising consumer prices. It’s not because it’s “good for the economy.” It’s because it can’t let interest rates rise without popping the economic bubble. It can’t keep inflation constrained while maintaining the monetary policy necessary to sustain government spending. So, it simply moves the goalposts in order to justify continuing its money-printing and artificially low interest rate policies without having to explain why inflation is running hot.
Meanwhile, your purchasing power continues to diminish, the value of your savings dwindles, and the dollar flutters ever-closer to the edge of a cliff.
Because this can’t go on forever. At some point, the Fed will completely lose control of inflation. Now that the genie is out of the bottle, she’s not going back inside. Money printing can only go so long before inflation starts to run out of control. If the central bank still fails to act, it runs the risk of hyperinflation.
“Combined with a record level of debt accumulation by the US government, real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge.”
Eventually, economics always wins.
Even without hyperinflation, the constant devaluation of the dollar erodes the average person’s wealth. And the money-printing enables the government to continue growing. If you really want to limit the government, it’s imperative to end the Fed.
One of the biggest misconceptions I hear about the Constitution is that it was written to “protect our liberty.”
It wasn’t. At least not in a direct sense.
The confusion likely arises from the words of the Declaration of Independence:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”
It’s true that the Constitution was written during a time when protecting unalienable rights was widely viewed as the primary role of government. But the Constitution is not a philosophical document. It is a legal document that formed a political union and created a central government.
That’s all it does. Asking it to “protect your rights” is really asking too much. That wasn’t why it was written or ratified.
Now the Constitution does reflect the philosophy espoused in the Declaration in that it established a general government of limited, enumerated powers. The decentralized nature of the political system it created was intended to encourage liberty.
By strictly limiting the authority of the general government, the founding generation hoped it would never possess enough the power to intrude on our rights.
But there isn’t any provision in the Constitution that actually empowers the federal government to protect our liberty. In fact, the founding generation would have almost certainly considered that too much power for a general government to wield.
In practice, this means the federal government really doesn’t have any responsibility to “protect your rights” beyond staying within its constitutionally delegated powers. Its obligation isn’t to act in order to protect liberty, it is to not act outside of its legitimate authority.
In the same way, the Bill of Rights was never intended to empower the federal government to protect your rights. As the preamble to the Bill of Rights makes clear, it was intended to add “further declaratory and restrictive clauses” to the Constitution “in order to prevent misconstruction or abuse of its powers.” I have often said it would be better named “The Bill of Restrictions.”
A lot of people want the Constitution to deliver something it never promised. They want the government to serve as a liberty enforcement squad. This is a dangerous proposition. In order to protect your liberty, the government must define your liberty. The best thing the government can do is stay out of the way. The Constitution created a limited federal government for that purpose.
But it’s ultimately up to us to hold it within its limits. Unfortunately, by insisting that the government “protect their rights” they are doing the exact opposite.
But Congress will never abolish the central bank. It can’t even come up with the will to audit the Fed.
So what can we do?
Even though state action can’t end the Fed, there are steps states can take that will undermine the Federal Reserve’s monopoly on money. By passing laws that encourage and incentivize the use of gold, silver and cryptocurrency in daily transactions by the general public, state action has the potential to create a wide-reaching impact and set the foundation to nullify the Fed’s monopoly power over the monetary system.
Over the last two years, a number of states took concrete steps in this direction.
Repeal Taxes on Sound Money
The first step is to repeal taxes on gold and silver.
Imagine if you asked a grocery clerk to break a $5 bill and you were charged a 35 cent tax. Silly, right? After all, you were only exchanging one form of money for another. But that’s essentially what a sales tax on gold and silver does.
Sales tax and capital gains taxes treat gold and silver as a commodity instead of money. They also create a barrier to using gold and silver in everyday transactions. Repealing taxes is a crucial first step toward the use of specie as money.
Last year, Kansas and West Virginia both repealed their sales tax on the sale of gold, silver and other precious metal bullion. This is an important first step toward creating currency competition and breaking the Fed’s monopoly on money. They joined at least 37 states that have already done the same.
While repealing state sales taxes on precious metals may seem like a relatively small step, it removes one barrier to owning gold and silver and eliminates a penalty on the use of sound money.
Gold Bullion Depositories
Establishing gold bullion depositories that facilitate the use of sound money is another step states can take to undermine the Fed’s monopoly on money.
Gov. Greg Abbott signed legislation creating the state bullion and precious metal depository in June of 2015. The facility began accepting deposits on June 6, 2018. The depository provides a secure place for individuals, businesses, cities, counties, government agencies, and even other countries to store gold and other precious metals.
You don’t have to be a Texas resident to use the depository. Any U.S. citizen can set up an account online and then ship or personally deliver metal to the facility. The Texas Bullion Depository accepts gold, silver, platinum, rhodium and palladium.
The law also creates a mechanism to facilitate the everyday use of gold and silver in business transactions.
While the depository does not currently have a system in place to facilitate everyday transactions with gold and silver, it remains part of the long-term plan. According to an article in the Star-Telegram, state officials want a facility “with an e-commerce component that also provides for secure physical storage for Bullion.”
Ultimately, depositors will be able to use a bullion-funded debit card that seamlessly converts gold and silver to fiat currency in the background. This will enable them to make instant purchases wherever credit and debit cards are accepted.
By making gold and silver available for regular, daily transactions by the general public, the new depository has the potential for a wide-reaching effect. In practice, the Texas Bullion Depository will operate much like the privately-owned UPMA already established in Utah.
In 2019, Texas passed a constitutional amendment and enabling legislation that exempts precious metals stored in the Texas Bullion Depository from certain taxes. Enactment of this law ensures there won’t be any barriers to using gold and silver stored in the depository for everyday financial transactions.
The Crypto Alternative
Gold and silver aren’t the only currency alternative. Cryptocurrency could also crowd out federal reserve notes.
In 2018, Wyoming enacted several laws to facilitate and encourage the use of cryptocurrency, positioning itself to become the national leader in cryptocurrency and blockchain sectors.
The first law created a legal framework for chartering “special purpose depository banks” tailored to serve cryptocurrency and blockchain businesses. The second law specifies that digital assets are property within the Uniform Commercial Code and authorizes security interests in digital assets. The law also clears the way for banks to serve as crypto custodians. A third bill signed by the governor enables securities to be issued in a tokenized form in Wyoming. “Normally, a stock certificate is a piece of paper…If you want to use a blockchain token to represent a stock certificate, [that would be] legal in Wyoming. [It would be] a legally issued security,” the sponsor of the bill said.
In combination, these laws have not only set Wyoming on the path toward becoming the cryptocurrency capital; they also take an important first step toward generating currency competition.
If other forms of money, whether it be cryptocurrencies or gold and silver, gain a foothold in the marketplace against Federal Reserve notes, people will be able to choose them over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by these laws helps allow Wyoming residents to secure the purchasing power of their money.
All of these state efforts open the door for a serious push-back against the Fed and its monopoly on money. But state action alone won’t accomplish the goal. Ultimately, it will be up to everyday people to take advantage of these state laws and actually start using gold, silver and cryptocurrency as money.
For more details on state efforts to undermine the Federal Reserve’s monopoly on money, make sure you read our latest State of the Nullification Movement report. You can download it for free HERE.
This article was originally featured at the Tenth Amendment Center and is republished with permission.
Over the last several weeks, we have seen some libertarians participating in Black Live Matters protests against police violence. This has led to criticism. Should libertarians be linking arms with “Marxists” even if they have a common cause?
This raises a broader strategy question: should libertarians work with people ideologically opposed to their broader principles if the partnership can lead to an incremental shift toward liberty? For instance, should libertarians work with Black Lives Matter to fight against the growing police state? Or right-wingers to fight gun laws? (more…)
For the fiscal year (beginning Oct 1), the Trump administration has spent $2.74 trillion more than it’s taken in. The previous record deficit for an entire fiscal year was $1.4 trillion set in 2009 during Obama’s tenure in the White House. Despite Keynesian claims that the spending was necessary to stimulate the economy in the midst of the Great Recession, the (at the time) historic deficit set off a right-wing firestorm and birthed the Tea Party. With a Republican now sitting in the Oval Office today and spending magnitudes higher—crickets.
Spending in response to the coronavirus pandemic drove the June deficit to these astronomical levels. Uncle Sam blew through $1.1 trillion last month alone. Outlays were up by a staggering 223 percent on the month. That pushed federal spending for the fiscal year to just over $5 trillion.
The government shutdown of the economy has also squeezed government receipts. Revenue was down 28 percent, falling to $241 billion in June. Uncle Sam should get some relief with an influx of tax payments this month with the filing deadline set for July 15, but there is no end in sight to the spending. It seems almost certain Congress will pass another stimulus bill before the end of the year. And Donald Trump will sign it.
It’s easy to blame the deficit on COVID-19, but the Trump administration was already spending as if there was a crisis before the pandemic. Through the first two months of fiscal 2020, the deficit was already 12 percent over 2019’s huge Obama-like number and was on track to eclipse $1 trillion. Prior to this year, the U.S. government had only run deficits over $1 trillion four times, all during the Great Recession. We were approaching that number prior to the pandemic, despite what Trump kept calling “the greatest economy in the history of America.”
The June deficit adds to an already unfathomable level of debt, yet nobody seems particularly concerned. Virtually everybody agrees that trillions in government spending is “necessary” to boost the economy and mitigate the effect of the COVID-19 government shutdowns—Republicans and conservatives included.
Everybody is a Keynesian now.
But lack of concern or the perception of necessity does not change fundamental economics. Borrowed money has to be paid back. And yet nobody seems to be asking the most significant question: who is going to pay for all of this?
That answer is simple—you and me.
We will all be on the hook for this massive bill. We will either pay for it in higher real taxes or a massive inflation tax—probably both.
When it comes to the rapidly growing national surveillance state, federal agencies such as the NSA and FBI get most of the attention. But in fact, state and local law enforcement agencies, and increasingly private third-parties, make federal surveillance possible. A careful look at Immigration and Customs Enforcement (ICE) facial recognition surveillance reveals just how intertwined federal, state, local and third-party spying has become.
I’ve been arguing for years that the federal government encourages and funds surveillance technology at the state and local levels across the U.S., thereby gaining access to a massive data pool on Americans without having to expend the resources to collect the information itself.
The feds can share and tap into vast amounts of information gathered at the state and local level through fusion centers and a system known as the “information sharing environment” or ISE.
Fusion centers were sold as a tool to combat terrorism, but that is not how they are being used. The ACLU pointed to a bipartisan congressional report to demonstrate the true nature of government fusion centers: “They haven’t contributed anything meaningful to counterterrorism efforts. Instead, they have largely served as police surveillance and information sharing nodes for law enforcement efforts targeting the frequent subjects of police attention: Black and brown people, immigrants, dissidents, and the poor.”
Fusion centers operate within the broader ISE. According to its website, the ISE “provides analysts, operators, and investigators with information needed to enhance national security. These analysts, operators, and investigators…have mission needs to collaborate and share information with each other and with private sector partners and our foreign allies.” In other words, ISE serves as a conduit for the sharing of information gathered without a warrant. Known ISE partners include the Office of Director of National Intelligence which oversees 17 federal agencies and organizations, including the NSA. ISE utilizes these partnerships to collect and share data on the millions of unwitting people they track.
The feds created the infrastructure supporting the national surveillance state, and they supply a lot of the funding, but state and local law enforcement agencies do the grunt-work. And increasingly, private companies are stepping in to fill the gaps.
ICE reveals how this system functions in the real world.
Like most law enforcement agencies, ICE has waded into the world of facial recognition. But as an article published by Nextgov explains “rather than build its own database and biometric apps, the agency opts to use third-party services from the private sector, state and local law enforcement and other federal agencies.”
An ICE division known as Homeland Security Investigations (HSI) conducts all of the agency’s facial recognition services. According to the Nextgov report, third parties including other government agencies and private vendors do all of the actual work.
According to a privacy impact assessment (PIA) issued May 13 and released publicly last week, HSI agents either send photos to the facial recognition service through encrypted email or upload through a third-party website. At no point does HSI manage any facial recognition software or image databases.
The report lists a number of facial recognition “service providers” used by ICE.
State and local law enforcement
Regional and Subject Matter-Specific Intelligence Fusion Centers
Federal Agencies—This includes a number of databases starting with DHS’s Automated Biometric Identification System, or IDENT. This is currently on track to be replaced by the cloud-based Homeland Advanced Recognition Technology, or HART, system. ICE investigators also have access to the State Department’s Consular Consolidated Database allowing it to check images against passport photos. It can tap into the FBI’s Next Generation Identification System (NGI), a massive database that stores photos on more than 38 million convicted criminals. And finally, ICE can access the Defense Department’s Automated Biometric Identity System (ABIS). This is primarily used in support of military operations and could soon be connected directly to the IDENT/HART system, according to the PIA.
Commercial Vendors – primarily for open-source collections of publicly available images. Some vendors have also developed facial recognition software that HSI agents can use. In such cases, after an agent uploads an image to the application, the vendor is required to “delete the image immediately upon creation of a face template.” The PIA notes that, “While HSI cannot directly control the means or methods of a vendor’s data collection efforts, if HSI discovers that an FRS violates the privacy settings of an open-source system, HSI will discontinue using that vendor’s FRS.”
All of these existing databases allow ICE to run a facial recognition program without investing in facial recognition technology or expending the manpower to gather the data.
The Nextgov report focuses on ICE and facial recognition surveillance, but federal agencies almost certainly utilize the same strategy to facilitate other kinds of surveillance. It can tap into databases containing location data, cell phone information, license plate data, drone surveillance data and more without having to actually operate stingray devices, ALPRs, or drones. State and local cops gather the data and then dump it into these massive databases that every law enforcement agency in the country can access – including the feds.
The federal government continues to build out a national surveillance state, partnering with state, local and private entities to create a tangled web that becomes increasingly difficult to untangle. This is why it’s critical to limit the use of surveillance technology and data sharing at the state and local levels. Every limit on surveillance in a county or city takes a small bite out of the system. Data that is never gathered can’t be shared.
Qualified immunity is a legal doctrine that shields cops from liability for actions taken in the line of duty unless they violate rights “clearly established” by existing judicial precedent. No statute exists granting qualified immunity. It evolved over time based on a series of Supreme Court cases.
In practice, qualified immunity makes it extremely difficult to prosecute police officers for using excessive force or committing other acts of misconduct. As Supreme Court Justice Byron White wrote in the 1986 case Malley v. Briggs, qualified immunity protects “all but the plainly incompetent or those who knowingly violate the law.” Reuters called it “a highly effective shield in thousands of lawsuits seeking to hold cops accountable for using excessive force.”
But how did we end up with qualified immunity in the first place? The legal doctrine evolved over time thanks to federal judicial activism and was applied to every police department in the United States through the incorporation doctrine. The very existence of qualified immunity reinforces an ugly truth. We can’t trust the federal government to protect our rights. It almost always defers to government power.
We can trace the origins of qualified immunity back to the Civil Rights Act of 1871. The act was codified into law by 42 U.S. Code §1983—“Civil action for deprivation of rights.” In effect, it allows any U.S. citizen to sue a state or local official in federal court for “the deprivation of any rights, privileges, or immunities secured by the Constitution and laws.”
This was one of the first federal laws passed based on the 14th Amendment. The statute arguably overreaches the intent of the 14th. Regardless, for the first time, it created an avenue for individuals to hold state officials accountable through the federal courts.
Although §1983 did not specifically provide for an immunity defense, lawyers for government officials often argued for immunity based on common law, arguing it was implicit in the statute. Early on, immunity defenses were built on a case-by-case basis and not based on settled federal court precedent. But in the 1967 case Pierson v. Ray, the Supreme Court cemented the doctrine of qualified immunity into federal jurisprudence. The Court held that government officials who violate the law or constitutional limits on power in “good faith” can raise “qualified immunity” as a defense.
Chief Justice Earl Warren wrote the majority opinion.
“Under the prevailing view in this country, a peace officer who arrests someone with probable cause is not liable for false arrest simply because the innocence of the suspect is later proved. A policeman’s lot is not so unhappy that he must choose between being charged with dereliction of duty if he does not arrest when he has probable cause, and being mulcted in damages if he does. Although the matter is not entirely free from doubt, the same consideration would seem to require excusing him from liability for acting under a statute that he reasonably believed to be valid but that was later held unconstitutional, on its face or as applied.”
The next step forward for qualified immunity came in the 1971 case Bivens v. Six Unknown Named Agents. The case opened the door for individuals to sue federal government officials for violations of rights given that §1983 only applied to state and local officials. Justice William Brennan wrote, “While there is no explicit right to file a civil lawsuit against federal government officials who have violated the Fourth Amendment, this right can be inferred. This is because a constitutional protection would not be meaningful if there were no way to seek a remedy for a violation of it.”
In 1982, Harlow v. Fitzgeraldestablished qualified immunity for federal government officials and set the stage for the current definition of qualified immunity. The Court held that government actors are entitled to qualified immunity due to “the need to protect officials who are required to exercise discretion and the related public interest in encouraging the vigorous exercise of official authority.”
“Government officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” [Empashis added]
“The test requires courts to undertake an objective analysis of the circumstances surrounding the use of force. Even if a court decides that the use of force was unreasonable and thus unconstitutional, the second step of the inquiry is the qualified immunity analysis: Was it ‘clearly established‘ that this kind of force in this kind of circumstance is unconstitutional? If not, the officer escapes liability.” [Emphasis added]
Grahm also established that all police excessive force cases involving arrests, searches, or investigatory stops must be evaluated under the Fourth Amendment, not the due process clause of the 14th.
Wurman argues that the “clearly established” test erects an almost insurmountable hurdle to those trying to prove excessive force or a violation of their rights.
“The qualified immunity test poses an almost insurmountable analytical problem—the permutations are infinite. A given situation is rarely exactly like another. There will always be sufficient distinguishing facts to decide that there was no clearly established law.”
Bivens and subsequent cases all involved federal government officials, but eventually, the court effectively abandoned the statutory process in §1983 and began hearing cases against state agents directly under the Constitution. As Wurman explained, “Immunity doctrine traditionally looked to the common law to derive immunities in §1983 cases. This approach was lost, quite possibly as a result of historical accident, as the Court began to hear Bivens actions directly under the Constitution and not under any statute.”
Later, he writes, “[The Court] subsequently invented immunity doctrine out of whole cloth in other federal-officer cases and exported that doctrine to the §1983 cases rather than importing the relevant doctrine from the state-officer cases.”
The rationale for federalizing state and local police misconduct cases was good-intentioned. When Congress passed the Civil Rights Act of 1871, it was next to impossible for African-Americans to get a fair shake in many state courts and government officials could abuse their rights with virtual impunity.
But the end-result of centralizing power in the federal government was worse. Now it’s next to impossible for any person in any state to get a fair shake when challenging police misconduct. The federal courts have cemented a system in place that gives law enforcement officers almost complete immunity and allows them to violate any individual’s rights with virtual impunity.
Through the incorporation doctrine that applies the federal Bill of Rights to state and local governments, this system protects police officers in every city, county and state in the U.S. from Honolulu, Hawaii to West Quoddy Head, Maine.
A decentralized system where cases were heard under state law and state constitutions would undoubtedly have problems. Some states would probably extend almost complete protection to law enforcement officers just like the federalized system. But surely some would be better.
The lesson here is pretty clear. Government protects its own. Centralized power almost never benefits the average person in the long-run. And we cannot count on federal courts to protect our rights.
Welcome to your future. Your government is spending it right now. And your children’s and grandchildren’s future to boot.
The U.S. Treasury projected that it would borrow $2.99 trillion in the second quarter fo this year. The Trump administration also plans to borrow another $677 billion in the July-September quarter, bringing the total fiscal 2020 debt to $4.48 trillion.
To put it into some perspective, before the pandemic, the CBO projected that the federal deficit would come in at just over $1 trillion in fiscal 2020. The government is set to borrow nearly three times that in just three months. And the one-year total borrowing will nearly equal the total of the four biggest yearly budget deficits on record. The level of government borrowing will crush the previous quarterly record of $596 billion set during the height of the 2008 financial crisis. It’s nearly two-and-a-half times the total amount of money the U.S. Treasury borrowed in all of 2019.
The national debt hit $25 trillion just a few weeks ago and it’s already knocking on the door of $26 trillion. By the end of the fiscal year, it will likely be well north of $27 trillion and climbing.
Here’s the most important thing to remember: Uncle Sam was already borrowing and spending at an unsustainable pace before coronavirus.
The federal government has run deficits over $1 trillion in four fiscal years, all during the Great Recession. The fifth trillion-dollar deficit was coming down the pike in fiscal 2020, despite what President Trump kept calling “the greatest economy in the history of America.” Simply put, the Trump administration was already running significant budget deficits even before the coronavirus crisis and debt was piling up at a dizzying pace. The deficit already featured numbers you would expect to see during a massive economic slowdown—before the massive economic slowdown. Response to the pandemic put spending and debt in hyperdrive.
Pretty much everybody accepts that borrowing and spending are necessary due to the economic destruction wrought by the government shutdowns. As the AP put it, “Private economists believe that the government has little choice but to spend the money now to prevent an even worse downturn and possibly even a situation like the Great Depression of the 1930s.”
Whether the government as a choice or not remains up for debate. What’s not debatable is that at some point we’re going to have to pay for all of this.
Never forget—borrowed money has to be paid back. Uncle Sam is effectively taking future productivity and spending it now. When the bills start coming due, the government will have two choices. It can raise taxes or it can pay the debt off through inflation.
I’d expect both.
Don’t think you can reelect Trump and avoid tax increases. The president can’t snap his fingers and suspend economic reality. At some point in the not-too-distant future, Congress will have to raise taxes to address budgetary realities. But tax increases are unpopular and politically unpalatable, so also expect a lot of inflation.
In fact, the Federal Reserve is already inflating the money supply at an unprecedented rate. Were it not for the central bank backstopping all of this borrowing, bond prices would tank and interest rates would soar. But the Fed is set up and primed to monetize all of this debt through QE Infinity. In effect, the central bank is printing money and buying U.S. Treasury bonds. Ostensibly, by creating artificial demand for Treasuries, the Fed will be able to soak up excess supply and hold interest rates down. It has no choice because rising interest rates would be the death knell for this debt-riddled, overleveraged economy.
“No man can, by natural right, oblige the lands he occupied, or the persons who succeed him in that occupation, to the paiment of debts contracted by him. For if he could, he might, during his own life, eat up the usufruct of the lands for several generations to come, and then the lands would belong to the dead, and not to the living, which would be the reverse of our principle.”
Politicians have short time-horizons. That’s why they generally make poor decisions. They don’t care about the future beyond the next election cycle. They certainly don’t care about my children. Elected officials do the popular thing now to secure reelection tomorrow. with little concern for the long-term consequences. It’s a neverending game of kick the can down the road—until you run out of road.
Three trillion borrowed dollars in the span of three months will make that road mighty short.
I hear a lot of bad constitutional arguments justifying this or that federal action. One common justification for expanding federal power is: “This thing is necessary! It needs to be done.”
But it doesn’t follow that the federal government has to do the thing. In fact, the founding generation expected that the states and the people would do most of the “necessary things” – not the federal government.
Tench Coxe was a prominent and influential advocate for ratification of the Constitution and a delegate for Pennsylvania to the Continental Congress in 1788-1789. He later served as Secretary of the Treasury. He wrote three essays published in the Pennsylvania Gazette in early 1788 under the pen-name “A Freeman.”
In these essays, Coxe offered some of the most forceful arguments asserting the limited nature of the federal government under the proposed Constitution. He insisted that many, if not most, of the “necessary” things for society would be taken on by state and local governments, not the federal government. He wrote:
“It will be found, on a careful examination, that many things, which are indispensibly necessary to the existence and good order of society, cannot be performed by the fœderal government, but will require the agency and powers of the state legislatures or sovereignties, with their various appurtenances and appendages.” [Emphasis added]
Why can’t the federal government perform these things? Because as James Madison explained in Federalist #45, “The powers delegated to the federal government by the proposed Constitution are few and defined.” [Emphasis added]
Coxe drove his point home by listing ten broad areas where the federal government has no authority to act. Several of these are self-evident, but the long list included in the tenth point drives home the extremely limited nature of the federal government supporters of the Constitution promised.
“They cannot interfere with the opening of rivers and canals; the making or regulation of roads, except post roads; building bridges; erecting ferries; establishment of state seminaries of learning; libraries; literary, religious, trading or manufacturing societies; erecting or regulating the police of cities, towns or boroughs; creating new state offices; building light houses, public wharves, county gaols, markets, or other public buildings; making sale of state lands, and other state property; receiving or appropriating the incomes of state buildings and property; executing the state laws; altering the criminal law; nor can they do any other matter or thing appertaining to the internal affairs of any state, whether legislative, executive or judicial, civil or ecclesiastical.” [Emphasis Added]
In his second essay, Coxe approaches the issue from the other side, enumerating “what the state governments must or may do.” Again, many of the items Coxe lists as the exclusive purview of the states reveals just how far the federal government has usurped state authority.
“The several states can create corporations civil and religious; prohibit or impose duties on the importation of slaves into their own ports; establish seminaries of learning; erect boroughs, cities and counties; promote and establish manufactures; open roads; clear rivers; cut canals; regulate descents and marriages; licence taverns; alter the criminal law; constitute new courts and offices; establish ferries; erect public buildings; sell, lease and appropriate the proceeds and rents of their lands, and of every other species of state property; establish poor houses, hospitals, and houses of employment; regulate the police; and many other things of the utmost importance to the happiness of their respective citizens. In short, besides the particulars enumerated, every thing of a domestic nature must or can be done by them.” [Emphasis Added]
So yes – a lot of things are “necessary.” But that doesn’t mean the federal government can do them. The federal government remains limited by its delegated powers. “Necessary” isn’t a constitutional argument.
Remember all of the government bailouts and stimulus in response to the 2008 financial crisis? Conservatives threw a fit. The Tea Party movement grew out of worry about the impact of all of the stimulus, money-printing, and the taxes they knew were coming down the pike.
My, how things have changed in 12 short years—and with a Republican sitting in the Oval Office.
Today, pretty much everybody supports the stimulus and bailouts gushing out of Washington D.C. even though they dwarf anything imagined during the Obama administration.
“This is different!” so we’re told. Government policy set up the 2008 financial crisis and a lot of “bad actors” got bailed out. The Obama stimulus undermined the free market!
But now we’re being told that you can’t pin this economic meltdown on the government. You can’t blame anybody for coronavirus. This crisis really is too big for the free market to handle. Government needs to step in.
But the truth is big government set the stage for this economic meltdown just like it set the stage for the 2008 financial crisis. This is a prime example of the government breaking your legs and then giving you a wheelchair.
Don’t let the irony get lost on you. Government intervention in the economy set things up for a crisis like this. Now virtually everybody thinks we need the government because the free market can’t handle a crisis like this. Even people who claim to favor free markets are pushing for the bailouts.
A healthy economy could weather the coronavirus. In a truly free market, businesses and consumers would have savings. These government shutdowns would stress a healthy economy, but they wouldn’t kill it.
But we don’t have a free market.
We have a central bank that manipulates interest rates and a bloated government that taxes, borrows and spends us into oblivion. As a result, the United States went into the coronavirus pandemic with a bubble economy built on a mountain of debt.
By holding interest rates at artificially low levels for more than a decade after the 2008 financial crisis, the Federal Reserve incentivized borrowing. As a result, consumer debt, corporate debt and the national debt were all at record levels before COVID-19 reared its ugly head.
Meanwhile, the federal government was already spending trillions of dollars to prop up the economy. The Trump administration was on track to run a $1 trillion budget deficit in 2020 before the pandemic. This is the kind of budget deficit one would expect to see during a major economic downturn. The federal government has only run deficits over $1 trillion in four fiscal years, all during the Great Recession. The current Congress and the Trump administration were approaching that number before the pandemic, despite having what Trump kept calling “the greatest economy in the history of America.”
The Fed facilitates this deficit spending by monetizing the debt—buying U.S. Treasury bonds on the open market with money created out of thin air. Without the Fed backstopping the financial system and effectively printing money, the U.S. government wouldn’t have the ability to borrow and spend as it does.
Meanwhile, the tax burden necessary to sustain big-government spending policies stresses family and corporate budgets to the breaking point. When people have to hand a big percentage of their income to the taxman, it becomes that much more difficult to save for a rainy day—or a government shutdown of the economy.
And why save when you can borrow? Artificially low interest rates make it easy to borrow and pointless to save. You get no return on your savings. Might as well borrow and spend now.
This is all well-and-good until the economy hits a bump in the road like the coronavirus pandemic. Suddenly you have no income, no savings and a massive pile of debt. It doesn’t take long to go from a hiccup to a full-blown crisis.
This is where the United States finds itself today. After a decade of easy-money and borrowing, coupled with out of control spending in Washington D.C., the coronavirus shutdowns popped the economic bubble that the government helped create. Now the air is coming out and everybody is turning to the government to bail them out.
That’s not to say the coronavirus shutdowns would have been a walk in the park if the economy wasn’t already broken. But a healthy economy could have weathered the storm. If the Fed hadn’t intervened in the economy, people wouldn’t have been able to bury themselves in debt. If the government wasn’t levying high taxes on corporate earnings, companies would have had more money saved to push through a crisis. If people didn’t rely on government programs like Social Security for their savings, they could have saved money on their own and they would have had it to tap into during this crisis.
“It’s the government that crippled the economy in the first place. The solution – the answer to that – is not to have a bigger government crutch so we can hobble around. How about getting rid of all of that government? Liberating the economy from the dead weight of government.”
The Supreme Court handed down another opinion eroding the Fourth Amendment in a case that should have never gone to the federal court.
Kansas v. Gloverrevolves around a traffic stop by Douglas County Sheriff’s Deputy Mark Mehrer. He pulled Charles Glover over after running his license plate and finding that Glover had a suspended driver’s license. Glover entered a motion to suppresses evidence gathered during the stop, arguing there was no reasonable suspicion of an actual crime. The deputy stopped the car based on the assumption that the registered owner was probably driving.
The district court granted the motion. An appellate court overturned the lower court. The Kansas Supreme Court reversed again, holding that the stop violated the Fourth Amendment. According to the Kansas Supreme Court, Mehrer did not have reasonable suspicion to pull the vehicle over because his inference that Glover was behind the wheel amounted to “only a hunch.” The court further held the deputy’s “hunch” involved “applying and stacking unstated assumptions that are unreasonable without further factual basis.”
Kansas prosecutors appealed to the Supreme Court and it overturned the Kansas Supreme Court in an 8-1 decision. Writing for the majority, Justice Clarence Thomas said Mehrer “drew the commonsense inference that Glover was likely the driver of the vehicle, which provided more than reasonable suspicion to initiate the stop … The fact that the registered owner of a vehicle is not always the driver of the vehicle does not negate the reasonableness of [the officer’s] inferences.”
In her dissent, Justice Sonia Sotomayor wrote that the majority opinion “destroys Fourth Amendment jurisprudence that requires individualized suspicion.”
But this case was not a federal case. It should have never gone to the Supreme Court. And it wouldn’t have except for the bastardization of the 14th Amendment known as the “incorporation doctrine.”
The Supreme Court invented the incorporation doctrine out of thin air 57 years after the ratification of the 14th Amendment to apply the federal Bill of Rights to state governments.
A lot of civil libertarians like the incorporation doctrine because they believe the federal courts will protect our liberty from overreaching, onerous state and local governments. In theory, the incorporation doctrine empowers federal courts to police the states in order to stop state governments from violating individual rights. In practice, it centralizes power at the federal level and allows the Supreme Court to apply liberty-destroying decisions to the entire United States.
The theory falls apart because federal courts rarely hand down decisions that expand liberty. They almost always increase government power and place limitations on individual rights.
Kansas v. Glover provides an example of the tendency in the extreme. The state court handed down a decision that protected liberty and restrained government, only to be overruled by the central authority.
Sadly, the Kansas Supreme Court opened the door to federal intervention by basing its decision on the Fourth Amendment of the federal Bill of Rights. It should have rested its case on the Kansas state constitution. The state bill of rights § 15 reads as follows:
“Search and seizure. The right of the people to be secure in their persons and property against unreasonable searches and seizures, shall be inviolate; and no warrant shall issue but on probable cause, supported by oath or affirmation, particularly describing the place to be searched and the persons or property to be seized.”
There was no need to invoke the Fourth Amendment. But the Fourth Amendment got invoked because thanks to the incorporation doctrine, everything now qualifies as a federal case.
So, why do so many liberty-minded people possess this impulse to centralize power? What drives their fixation on monopolizing decision-making at the highest level?
In a nutshell – power. They operate on the misguided notion that they can someday gain control of the levers of power and impose liberty top-down.
The problem is it never happens. Centralized government is antithetical to individual liberty. It will never care about you.
And you will never control it.
“But, what if the state courts get it wrong?” they plead. “State and local governments can be just as tyrannical as the federal government,” they insist. “Are you saying we just have to put up with state or local tyranny?”
Fair questions. State courts often do get it wrong. The judicial branches of both state and federal governments typically side with the government when it comes to the extent of the government’s powers. But a bad outcome at the state level only applies to that state. A bad outcome at the Supreme Court ends up as a judicial precedent that applies all across the entire United States.
Kansas v. Glover illustrates the worst-case scenario. In this instance, the state court got it right. It was a win for liberty for Kansans. But thanks to the incorporation doctrine and the Supreme Court, we now have a judicial precedent that diminishes the Fourth Amendment and applies sets the precedent every single police department in the US will now follow.
We just centralized our way to another loss of liberty.
Centralizing government in the name of liberty will always fail. You might get a few crumbs from the table now and then. The Supreme Court will occasionally issue an opinion that protects liberty. But most of the time, it will hand down garbage that empowers government at the expense of your rights.
Through the proliferation of joint law enforcement task forces, the federal government is creating a national police force that operates in a legal twilight zone with little or no oversight.
Law enforcement officers from various state, local and federal law enforcement agencies make up these joint task forces. The concept evolved out of the unconstitutional “War on Drugs” launched by President Richard Nixon. The first multi-jurisdictional task forces were put together in the 1970s.
Dan Baum chronicled the evolution of these multi-jurisdictional police forces in his book, Smoke and Mirrors: The War on Drugs and the Politics of Failure. Radley Balko summarized Baum’s description of the origins of these task forces in a Washington Post article writing, “Nixon wanted ‘strike forces’ that could kick down doors and put the fear of God into drug offenders without burdensome hurdles like the Fourth Amendment or the separation of powers.”
Initially, many local law enforcement agencies weren’t interested in getting in bed with federal cops and were wary of the aggressive tactics employed by the joint task forces. But the feds used federal grants and asset forfeiture money to bribe reticent departments and incentivize participation. The number of joint task forces grew exponentially in the 1980s and 1990s. The deployment of these task forces also expended beyond the “war on drugs.”
Today, you will find hundreds of joint state-federal task forces across the U.S. Just consider this list of task forces in the Pittsburgh area alone.
The U.S. Marshalls run 60 Fugitive Task Forces. The ATF oversees the National Explosives Task Force and forms task forces for specific investigations. According to Balko, the U.S. Attorney General runs 18 task forces through the Organized Crime Drug Enforcement Task Force program. And then there are the countless temporary joint task forces created every year for special investigations and law enforcement initiatives.
Due to their nature, joint task forces operate in a legal twilight zone that gives them wide latitude. As Balko explained, they often go about their business with little or no oversight. Often, it’s impossible to identify any local officials overseeing their work. And even when somebody is technically in charge of the task force, they often give it free rein.
With little oversight, they have a record of overstepping and misdeeds, from excessive force to shootings, to mistaken raids, to straight-up corruption.”
This jurisdictional neverland also allows members of these task forces to escape accountability or punishment when they use excessive force, destroy property, or simply engage in sloppy police work. Balko’s article chronicles the story of a man who was beaten senseless after undercover members of a joint task force mistook him for a wanted individual. The state and federal law enforcement officers both dodged prosecution by playing ping-pong with state and federal jurisdictions. As Balko illustrates, In practice, joint task forces can “pick whichever laws — state or federal — afforded them the most power and the least accountability.”
Ironically, the Obama administration couldn’t even conduct a cost-benefit study on joint police task forces because records were almost nonexistent. According to those conducting the study, “Not only were data insufficient to estimate what task forces accomplished, data were inadequate to even tell what the task forces did as routine work.”
There are other pernicious consequences resulting from the rise of joint police task forces.
Local police can circumvent strict state asset forfeiture laws by claiming cases are federal in nature due to the participation in a joint task force. Under these arrangements, state officials simply hand cases over to a federal agency, participate in the case, and then receive up to 80 percent of the proceeds.
And the money and power that comes when local cops partner up with the feds incentives local police to focus on “national” priorities such as the war on drugs, federal gun control and “anti-terrorism” efforts instead of prioritizing more routine local policing such as murder, rape and property crime.
We also see the influence of these task forces in the state legislative process. Police lobbyists often oppose warrant requirements, limits on state and local cooperation with federal surveillance, prohibitions on the state enforcement of unconstitutional federal gun control, asset forfeiture reform, and other laws blocking state enforcement of unconstitutional federal laws because they don’t want to jeopardize “our federal partnerships.” In other words, their relationships with their “federal partners” trumps the Constitution.
The federal government was never intended to exercise “police powers” in the first place. The Constitution only defines four federal crimes – treason, piracies and felonies committed on the high Seas, counterfeiting, and crimes against the law of nations. The federal government also has criminal jurisdiction within Washington D.C. and its other enclaves.
The creation of every other federal crime violates the Constitution.
In other words, virtually the entire federal law enforcement apparatus is unconstitutional.
Nevertheless, the federal government is developing a national police force that operates outside of any jurisdictional, legal or constitutional boundaries. Joint task forces are a threat to liberty. States should simply withdraw.
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