A Tale of Two Speeches

January 15, 2016 Frank Kuchar

This past Tuesday President Obama gave the final “State of the Union” address of his presidency. I’ve noticed over the years that in every speech any of our recent presidents have given, they always proclaim “and the state of our union is strong.” This President’s final speech ended on that proclamation, but such could not be further from the truth.

We have seen our nation sorely divided at several times during our history. The Federalists under John Adams versus the Republicans led by Thomas Jefferson. The southern states versus the northern states throughout most of our history. Racial divisions, economic divisions, etc have at times been severe, and today these are as prominent as they have not been for some time, thanks in large part to this president’s leadership (or lack of) and agenda.

Today, these speeches by the sitting president have turned into a big production with little relation to what was originally intended by the founders. Any more, they are nothing more than a big “pep rally” where the party In power gives itself a huge “pat on the back” and a long laundry list of “ornaments” it wants to “hang on the tree” of government expansion.

Such was not always the case. As a matter of fact, if you read some of these addresses by our early presidents you will see where they read more like a corporate annual report – facts, plans and real accounting of revenues and expenditures. Not only this, but in some instances the speeches were not even delivered orally, but rather were sent to the Congress in letter form.

So, by way of example, I close by sharing with you some quotes from President Thomas Jefferson’s first “Annual Message” (as it was called then), and you can compare the tenor of it with what you heard on Tuesday evening:

“When we consider that this government is charged with the external and mutual relations only of these states; that the states themselves have principal care of our persons, our property, and our reputation, constituting the great field of human concerns, we may well doubt whether our organization is not too complicated, too expensive; whether offices or officers have not been multiplied unnecessarily, and sometimes injuriously to the service they were meant to promote. I will cause to be laid before you an essay toward a statement of those who, under public employment of various kinds, draw money from the treasury or from our citizens. Time has not permitted a perfect enumeration, the ramifications of office being too multipled and remote to be completely traced in a first trial. Among those who are dependent on executive discretion, I have begun the reduction of what was deemed necessary. The expenses of diplomatic agency have been considerably diminished. The inspectors of internal revenue who were found to obstruct the accountability of the institution, have been discontinued. Several agencies created by executive authority, on salaries fixed by that also, have been suppressed, and should suggest the expediency of regulating that power by law, so as to subject its exercises to legislative inspection and sanction. Other reformations of the same kind will be pursued with that caution which is requisite in removing useless things, not to injure what is retained….

Considering the general tendency to multiply offices and dependencies, and to increase expense to the ultimate term of burden which the citizen can bear, it behooves us to avail ourselves of every occasion which presents itself for taking off the surcharge; that it may never be seen here that, after leaving to labor the smallest portion of its earnings on which it can subsist, government shall itself consume the residue of what it was instituted to guard.

In our care, too, of the public contributions intrusted to our direction, it would be prudent to multiply barriers against their dissipation, by appropriating specific sums to every specific purpose susceptible of definition; by disallowing applications of money varying from the appropriation in object, or transcending it in amount; by reducing the undefined field of contingencies, and thereby circumscribing discretionary powers over money; and by bringing back to a single department all accountabilities for money where the examination may be prompt, efficacious, and uniform.”

This is just a sample of what a real President, intent upon upholding the Constitution he took an oath to protect and having an interest in securing our freedom and liberties would say. Alas, this is not the kind of rhetoric we heard on Tuesday evening.

-January 15, 2016

What to Do – Part VI

October 16, 2015October 16, 2015 Frank Kuchar

During this election cycle we are hearing candidates spout different plans for reforming our tax code/system. Since revenue is the other side of the coin (spending being the other) that most directly impacts our deficit and increasing debt, it is an major piece of the puzzle that requires addressing. The issue raised by leftists is we need more “revenue” (i.e., taxes), but history has shown that rarely, if ever, does an increase in “revenue” result in a decrease in deficit spending, but rather spurs on even more spending on more unconstitutional programs and agencies.

Could the country use more revenue? Yes, if that additional amount is used solely to pay down our debt. To this end I would submit that once our tax system is replaced, not “reformed”, that excess revenues be required by law be applied to debt reduction. So what tax system would be best?

This cannot be fully answered in a short essay, as I’ve written in years past many pages on analyzing the various options being bandied about. I would submit that the best choice is to replace all income-related taxes with a consumption tax. There has been a bill in the House of Representatives (and a companion one in the Senate) since the early 1990s’ that leadership will not allow to come to the floor for a debate and vote that would do away with these taxes, the IRS, and call for a repeal of the 16th amendment. This bill is most commonly known as “The Fair Tax Act”.

I cannot get into the details of how this system would work, but I will list the main points:

Studies have shown that it would be cost neutral in terms of product and service prices once the transition to it has been fully accomplished as everything we purchase has built into them a 23% cost directly tied to income-related taxes. When those taxes are eliminated, market forces will cause the prices for everything to fall by at least that amount.
It gives everyone an immediate 7.65% pay increase as Social Security and Medicare taxes are no longer deducted from workers’ pay checks (a special benefit to lower wage earners).
It will actually increase revenue in that those who currently pay no taxes on income due to the so-called “underground economy” and illegal activities would now pay taxes when they make purchases.
The wealthy will pay more in taxes as they buy more high-priced items, and we all know that the higher the cost, the greater the sales tax.
We each will control the amount of tax we pay by managing our purchases instead of the government extracting what it determines we should pay and when it must be paid from our earnings.

In 1997 a Congressional Joint Committee on Taxation issued a report compiled by a number of leading economists who had conducted a modeling analysis of our current income tax system with some modifications that were being proposed at the time along with models of changing the system completely to a consumption tax. On page 19 of their report it states

“From the medium to long-run perspective, the consumption tax produced a stronger positive growth effect than the unified income tax….” Then on page 34 it goes on to state that “…tax restructuring in the form of a consumption tax will ultimately produce higher economic growth….”

The benefits that aided in producing these results were spelled out to be the following:

“…reducing the cost of capital through less taxation of capital provides an incentive for additional investment; reducing the marginal tax rate on labor provides an incentive for increased labor effort; increasing the returns to labor through capital deepening can provide an incentive for more labor; and,…reducing distortions in investment decisions by eliminating differential taxation of different types of capital promotes a more efficient allocation of resources.”

In short, moving to the Fair Tax, according to this report, would be the stabilizing boost our economy so desperately needs:

“The broad consensus of all the modeling approaches, that moving from the present-law income tax base to a uniform consumption tax base will result in a long-run increase in GDP, capital investment, and labor effort,”

In closing, I will answer the matter I mentioned in Part V of this series, namely what to do with the employees of the IRS when that agency is reduced. In order to increase enforcement of our immigration laws and auditing of businesses to ensure their compliance in not hiring illegal aliens, many of these individuals could be moved over to the Immigration and Naturalization agency, thus solving a manpower requirement there without having to increase the number of government employees.

-October 16, 2015

What to Do – Part V

October 9, 2015 Frank Kuchar

A debate can easily be had over what is the greatest threat to the US today. Credible arguments can be made for international threats from ISIS, Russia, China and Korea. However dangerous as those threats are thanks to the deliberate evisceration of our military and global strategy by this president, the more immediate threat comes from within, again thanks to Obama and his minions in Congress as this threat is not only a danger to us in the form of terrorism, but even more so in financial terms. So, as we are looking at solutions to corralling the government’s runaway spending we must while implementing the previous four parts I’ve suggested turn our attention to the threat of immigration, both legal and illegal.

It cannot be denied that illegal immigration places a heavy burden upon our financial stability as these individuals cost schools, cities, counties, and states, in additional to the federal government, much more than they can ever hope to contribute. In addition they take jobs that could/should go to Americans (despite the false argument that they only do jobs that Americans won’t do), thus compounding more financial worries upon those unemployed and straining government budgets at every level.

Legal immigration also poses a problem in that those we allow in many times are either highly educated and thus complete for jobs against native Americans with similar education and training (think H1B visas) or they are from the lower economic rungs and offer little to our economy.

So, in approaching the issue of immigration both legal and illegal must be addressed. Several argue that we should put a moratorium on all legal immigration, and that would be a needed first step in that arena. We should not be letting immigrants into the country unless we at first are certain they are needed. 2015 America is not the same as 1900 America (or earlier).

As for illegal immigrants, there are several things that must be done, all of which have been put forth by various other individuals (for the best information on the threat of illegal immigration I highly recommend the documentary series produced by Dennis Michael Lynch: They Come to America – I, II, III).

First, the economic magnet that draws them here must be dismantled. As Milton Friedman stated, you cannot have a welfare state and open borders as those pouring across into the country for all the “free stuff” will overwhelm and sink the system. This means no more public education, no in-state tuition at universities and colleges, no free medical care at hospital emergency rooms, no food stamps, no housing assistance, etc. It also means heavy penalties for businesses and individuals who hire illegals. The enforcement of our immigration laws will not require an expansion of our government, and I’ll outline how in the next installment of this series.

Finally, those caught here must be deported back to their country of origin and the cost of such action be imposed via a corresponding reduction of foreign aid to the governments of those countries or the imposition of a tariff fee on imports from them (limited strictly to the cost of deportation). This is the only way to incentivize those governments to focus on improving their own lot instead of sending their problems of impoverishment to our shores.

As you can see, the solution to our looming fiscal crisis is not just limited to “reduce spending” or elimination of duplication in the government or even unconstitutional spending. All of these suggestions I have put forth are part of a fabric that most be woven and implemented together if any are to succeed. The next piece of the puzzle is the other side of the fiscal coin, namely, revenue and how it is collected.

-October 9, 2015

What to Do – Part IV

October 9, 2015 Frank Kuchar

Well, the fiscal year ended Wednesday and again our elected officials, both in the administration and in Congress failed to fulfill their fiscal duty to create and pass a budget for this new fiscal year we have just entered. Instead they passed yet another “continuing resolution” to spend, spend, and spend with no regard to the constitutionality of what our money is being spent on or the increase in the debt burden they have placed upon us and future generations.

While Congress should be putting the brakes on spending, prioritizing and eliminating unconstitutional bureaucracies, subsidies and duplicative programs, repealing unlawfully created regulations, the issues of welfare reform and immigration must also be addressed as they are huge contributors to our budget and deficit.

The great Nobel prize winning economist, Milton Friedman, correctly pointed out that you cannot have a welfare state and open borders as those in the lower levels of other countries will pour into the country seeking the freebies offered by that welfare system. This is precisely what we see happening today and why these two issues are so closely intertwined and must be addressed together (along with the other previously discussed steps).

We had taken great steps towards welfare reform and a reduction in the welfare rolls in the 1990s’ but subsequent administrations and congresses have undone those reforms and instead broadened and multiplied the programs offered. We must return to the mindset we had in place twenty years ago, build upon it, and further work to reduce those programs and costs. If government will quit interfering in the economy so that it can grow and expand, then such programs will become less essential. As I said with the bureaucracies in a previous essay, they obviously cannot be eliminated immediately, but they too need to be prioritized, duplications eliminated, and a step-down plan put in place that will wean us from them.

Tied to that, as mentioned, is the need to secure our borders, which topic I will address in the next installment. In closing this essay, I leave you with these words of wisdom from MIlton Friedman’s classic work, Free to Choose, which contains an excellent section on the Welfare State:

“The waste is distressing, but it is the least of the evils of the paternalistic programs that have grown to such massive size. Their major evil is their effect on the fabric of our society. They weaken the family; reduce the incentive to work, save, and innovate; reduce the accumulation of capital; and limit our freedom. These are the fundamental standards by which they should be judged.”

– October 2, 2015

What to Do – Part III

September 25, 2015 Frank Kuchar

What to Do? – Part III

Since FDR’s New Deal, the general government in Washington has grown into an insufferable Medusa. To “slay” this “Medusa” (and no, I’m not suggesting destroying our government) so that it becomes the small, constitutionally limited government it was created to be will require more than just stopping spending (What to Do – Part I) and eliminating unconstitutional and overlapping agencies that have been created over the past 70 years (What to Do – Part II) .

To rein in these agencies we must get to the source of the power these agencies have over our lives, namely the repeal of the Administrative Procedure Act of 1946. You may not have heard of this legislation, but it was what gave life to the regulatory, enforcement and adjudication powers of these myriad agencies that we seek to eliminate. The Act provides the procedural guidelines that all agencies are expected to follow in two major areas – rulemaking (which is nothing more than legislating) and adjudication (which is simply rendering judicial decisions regarding the rules they have promulgated). The Act requires that public notice be given for public comment and input before implementing any proposed new regulation, and Congress, by the passage of a joint resolution, has the authority to disapprove any such proposed rule within 60 days of its finalization.

There are several problems with this Act which should make any constitutionally-minded member of Congress eager to support its repeal. First and foremost, it is the very embodiment of James Madison’s definition of tyranny:

“The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny…the preservation of liberty requires that the three great departments of power should be separate and distinct” (The Federalist Papers, No. 47).

As pointed out above, in passing the APA Congress granted all three of these powers into the hands of these agencies.

Second, as these regulations are given the standing of law, enforced as law, and we are judged against them as though they are law, the Act violates the Constitution and thereby should have been stricken down before the ink of President Truman’s signature on it had dried. Article I Section 1 of the Constitution begins by stating that “All legislative Powers herein granted shall be vested in a Congress of the United States”. Article II Section 1 begins “The executive Power shall be vested in a President of the United States of America.” Article III Section 1 similarly leads off by stating “The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” The language in these three sections are very clear – in no wise are these powers to be shared between the three branches or some other entity, period! For these agencies to hold all three powers indisputably places them in violation of the Constitution.

Third, as far as public notice and Congressional review goes, consider these facts. In 2014 alone the Obama Administration issued 75,000 pages of new regulations. In the first three days of 2014, the Feds released 141 new regulations, and since Obama became president there have been 21,000 new regulations issued as of December 2014. What citizen, much less representative or senator, can possibly have time to review such a mountain of rules?

So here is the next step in the process of reducing spending and cutting our government back to its constitutional limits: repeal of the APA, return the responsibility of legislative action to the Congress, and either pass real legislation revoking the unconstitutionally created regulations these agencies have created over the years or simply proclaim them to no longer be in force as they were not law to begin with. That will be a huge task to accomplish, but again, freedom and the restoration of our liberties is worth the effort.

What to Do? – Part II

September 18, 2015 Frank Kuchar

In last week’s essay I set forth the first step in reining in our government’s appetite for spending, namely to simply stop the spending. By freezing the amount of spending the steps necessary to solve the root problem, i.e. unconstitutional financing, could then be implemented. Politicians never “cut” spending – they merely cut the amount of increase in their spending, and by reducing the increase they tell us that total spending has been reduced when in fact it has continued to go up.

Once the freeze is in place the matter of prioritizing and examining what the government is constitutionally authorized to collect taxes for and spend those funds on can begin. There is an unbelievable number of agencies/departments all with their sub-departments that are not within the purview of government, and these must be eliminated. The question is, how best to go about this process?

As much as I would like to say “just eliminate them completely, immediately”, I am realistic enough to recognize that such a step is not only economically unwise, but politically impossible. So once these agencies/departments have been identified (e.g., the departments of agriculture, energy, education, commerce) they should then be prioritized on the basis of which ones are having the most negative impact on the economy (e.g. the EPA) and which can be most quickly eliminated with the least negative impact on the economy. We must realize that in downsizing the government by eliminating these agencies there will have to be an adjustment period for those who have been addicted to their funds.

When these are prioritized, a determination would be made on just how much each one could be reduced. I would propose that each one be reduced by twenty percent every year so that by the end of a five year adjustment period, they will be completely gone; this way the states and others will have had time to adjust to the changes. These reductions would be announced the year before they are to begin so that states, cities, counties, et al would be given sufficient notice and could begin making preparations for the changes.

As these reductions are taking place, then other steps would need to be implemented simultaneously to ease the transition and boost the economy. I’ll address some of those next week. I acknowledge that what I’ve set forth this week (albeit very briefly) will be neither easy nor painless. However, if we are serious about securing our future from economic ruin and political collapse in which our freedom and liberties will be lost, then these first two steps (and the ones to follow) must be taken.

-September 18, 2015

What to Do? – Part I

September 11, 2015 Frank Kuchar

In my last essay I pointed out the reasons why an amendment to our Constitution for a balanced budget is both unwise and ineffective. So I’m asked, what do you propose is the solution to the run-away spending of our government and the debt it is piling up? As I stated then the problem is not spending per se, but spending on many things the government is not constitutionally authorized to finance (you can read some of the previous essays I’ve written here – I’ve written over 200 during the past 5 years and eventually hope to post more of them: http://frankkuchar.com/).

There are numerous afflictions propelling us into this abyss that must be addressed. My discussion in this essay and a few more to come will obviously be just a brief listing of suggestions that I think must be implemented to achieve financial stability and a return to fiscal soundness in our government . In addition, they will not be easy to implement nor painless as it will require political will and courage, two things sorely lacking in both our country’s leadership and many in our citizenry.

The first step in any situation where a family, business or country is living beyond its means is to simply stop spending. Obviously, to stop all unauthorized spending immediately is not realistic nor healthy as it would cause a gargantuan economic upheaval. Yet, if we do not stop it soon, that upheaval will occur and it will be even more cataclysmic.

To achieve this as quickly as possible Congress should begin by freezing all spending at our current levels (at a minimum) if not cutting back to a lower level. Next would be a prioritizing of what needs to be funded, based upon constitutional authority. Some of these areas could be subject to modest increases as needed (e.g., defense, border security/immigration).

Included in this process would be the elimination of all government subsidies for businesses and industries. This would include for example subsidies for the ethanol industry, these so-called “green companies” (like Solyndra and boondoggles of that ilk), corporate bailouts and guarantees, the Import/Export bank, etc.

This would give only slight relief, but would provide time to pause and put the brakes on our headlong rush into economic ruin, while the other steps are put in place to not only slow our descent but to then begin reversing our course and climbing out of this hole our leaders have put us in. That’s the starting point; a simple step but one that will be oh so hard for leadership to take and for the recipients who are addicted to that spending to accept.

-September 11, 2015

Balanced Budget Amendment – Good or Bad Idea?

September 4, 2015 Frank Kuchar

Whenever people become desperate, any idea that comes along and sounds like a good approach to a problem and offers an easy and quick fix, it is something that gains wide appeal. This month Congress will be debating the next fiscal year’s budget and whether or not to lift the debt ceiling, and if they raise it, the cry for a balanced budget amendment to the Constitution will crescendo. But is it the right answer? Will it deliver as promised, or is it instead a bad idea that sounds good to a citizenry desperate to rein in a government whose spending is out-of-control?

In a word, my answer to whether we should have a balanced budget amendment is “NO”! To explain why we must first understand the problem we are attempting to solve. Our problem as a country is not government spending, nor a lack of money flowing into the government coffers. Our problem is our government spending money on things for which it has no authority to finance. You cannot read our founders without repeatedly hearing the message that the new government they were forming in the Constitution was to be small and limited and therefore not in need of gargantuan sums of money. If the national government confine itself to its enumerated powers listed in the Constitution, the tax burden at the national level would be drastically reduced, there would be no deficit, and we could begin digging our way out of the pit of indebtedness we find ourselves in.

What makes a balanced budget amendment a bad idea is it does nothing to address this problem. Instead, it would do just the opposite. Every version I have read of a proposed amendment to balance the federal budget fails in that it does not point us back to the limitations imposed upon the government by the Constitution. Instead it “constitutionalizes” all of the unauthorized spending currently in the budget. It would allow the government to spend money on anything it wants so long as the budget “cap” is not breached.

Furthermore, if the limitations imposed upon the government in regards to its sphere of operations is so routinely ignored, then by what logic can we expect those in power to observe a constitutional limit on spending? In other words, if they brush aside the restrictions on what they can spend money on, is it likely they will abide by the restrictions on how much they can spend? These proposed amendments all have a loophole that would allow for exceeding the imposed limit, and history tells us that those in Congress would take advantage of it.

There are other ways to approach this problem that space in an essay as this is not conducive to exposition. I will consider laying out in future newsletters what I would suggest as a solution that would solve the problem. However, it is a solution that will not come without pain and will require a great amount of political will and courage, both on us and our leaders in all levels of government. Suffice it to say, the idea of a balanced budget amendment will not only fail in its intended purpose, but will codify all that is wrong with government’s approach to spending; but like all such ideas, it is the “chicken” way out – a path that skirts shouldering responsibility and statesmanship.

– September 4, 2015