Printer Friendly

eMail Article

April 27, 2003

Gold Money And Equal Tax Rates!
by Nelson Hultberg

One of the popular theories of the 20th century was that political freedom and economic freedom can be separated -- that a nation can regiment its economy and monetary system with centralized controls and still remain politically free. History, however, is proving this premise to be a sad illusion. And today's Washington D.C. is a most obvious example.

Like a modern day Cyclops with one eye and a stunted brain, our Federal Government now grows fatter and fatter every decade as it corrupts the forces of freedom and the soundness of our money in its lust for hegemony both domestically and internationally. Grunting and belching, regimenting and taxing, spending and consuming with the abandon of a drunken Caesar, this gargantuan beast has, in the span of 90 years, transformed a once productive marvel and manufacturing leader of the world into a decadent debtor nation hellbent to follow Rome into the dustbin of history.

The two levers of power that have allowed Gargantua to grow into such a hideous beast were given to it in 1913 with the enactment of the Federal Reserve and the progressive income tax. These two institutions destroyed the idea of "limited government" that the Founders had given us in 1787. The Federal Reserve was granted the legal power to create paper money and thus rob Americans of their wealth surreptitously. With Nixon's closing of the gold window in 1971, this power then allowed the Fed to inflate the currency at will, which has increased Washington's capacity to depreciate the dollar even further and rob Americans of their wealth even faster. The progressive income tax gave to the Federal Government the power to sieze unlimited earnings from productive Americans to buy election day support from masses of parasitical Americans.

These two institutions were the death knell of a free and prosperous republic. With the ability to print money and confiscate our incomes, the Federal Government was thus able to grow exponentially over the past century -- well beyond the strictly constrained power that the Founding Fathers intended it to be.

If we, the producers of America, wish to stop this travesty of tyrannization over our lives, we must challenge these two institutions that give Gargantua its power to grow unabated. We must mount a relentless political attack against the policies of PAPER MONEY and PROGRESSIVE TAXATION. The Big Government-Big Banking combine has, for 90 years, crucified us on a cross of paper and progressivity! And it will continue to do so until it is exposed in a clear enough way to attract large numbers of voters. When kitchen lights are turned on cockroaches in the dead of night, they scurry frantically for cover. In like manner, we must shine the light of truth upon the corporate statists of Washington who are using paper money and progressive tax rates to insidiously expand their agenda of world-wide collectivism.

I submit that the means to that exposure is the formation of a third political party based upon radical MONETARY REFORM and radical TAX REFORM. If these two simple yet profound premises would become the foundational pillars of such a third party challenge, Americans would have in their grasp a political force that could storm the Bastille of Washington. We could take back our country from these Darth Vaders of the Potomac who ride around in black limousines and confiscate our hard earned money to perpetuate their power lust.

How could such a political party do this, you ask, when all third party movements of recent memory have been such glaring failures? George Wallace in '68, John Anderson in '80, and Ross Perot in '92 and '96 all went down to resounding defeats at the polls. The answer is that all third party challengers make two very serious mistakes that automatically doom them to defeat. Avoid these two crucial flaws, and a political movement could be fashioned that would force Washington's Demopublican establishment to alter its oppressive control over our lives and our economy. Let's examine why this is so.

Keep in mind, our two political pillars of reform are to be: 1) restoration of a "gold backed currency" and 2) enactment of an "equal rate tax system." It is upon these two policies that we as a people can regain the vital freedoms we have lost and then restore the manufacturing prowess of our nation. Let's first analyze these two pillars to see why they are so important in restoring freedom and productivity, and also so mandatory if we are to strip Washington of the power it has over our lives. Then we will investigate what the two mistakes are that have to be avoided in order to for a credible political movement and party to come into being.

The First Pillar of Reform
1) RESTORATON OF A "GOLD BACKED CURRENCY." What type of monetary system can a society possibly have when its government officials and federal bankers can simply print money up at will? What level of stability will there be for the prices and wages of that society? What level of confidence in the future will there be among the people?

History clearly teaches us that no stable, prosperous country can remain so very long if it leaves the control of its money supply up to the machinations of corruptible men in power at the government's Treasury and central bank. The temptation is simply too great for such men to promote excessive monetary expansion in order to create an illusion of prosperity so that the electorate will reward them with four more years in office.

Such temptation began in 1913 the minute the ink was dry on Congress' legal authorization of the Federal Reserve banking system. It was then greatly expanded with Roosevelt's confiscation of gold from Americans in 1933, along with his initiation of J.M Keynes' "new economics." This led to the disasterous spending policies and inflation-deflation cycles that we now endure. Ever since World War II ended, Fed currency expansion has resulted in our economy suffering from annual price inflations of 1%-13%, all under the Keynesian "necessity" of massive government spending and intervention into the economy. The Fed's monetary policy under Republican and Democratic administrations alike has always been to pump more credit (i.e., debt) into the system because according to Keynes and his academic progeny, this is the only way to maintain a prosperous economy. This assumes that the creation of money in paper form will increase wealth. It will not. Wealth is created by men and women engaging in productive enterprises -- planting and harvesting crops, running efficient factories, conveying services to their fellow man, etc. It cannot be created by government printing presses. All that will come about with such moonshine economics is a boom-bust economy in which inflationary periods and recessionary periods alternate over and over until finally the debt level becomes too overwhelming for the people to tolerate. At this time, the country and its economy must then go through a prolonged liquidation of such debt, i.e., a severe recession or depression of multi-year duration.

The Keynesian monetary philosophy of trying to increase demand with increases of fiat money is what led to the runaway inflation of the 1970's and to the hallucinatory bubble economy of the 1990's. We are now in the initial stages of a long curative unwinding of the extreme economic dislocations and malinvestments that were brought about by such fallacious policy.

Unless this unwinding is accompanied by radical monetary reform, we as a country are doomed, like Sisyphus rolling his stone up the hill and down again for all of eternity, to merely repeating the Keynesian fallacies. This means constant boom and bust cycles intermingled with periodic depressionary collapses well into the future. The only way to avert the recurrence of such instability and corruption is to restore a monetary standard other than the WHIMS of federal bankers and bureaucrats. History has shown that standard to be gold. Whether the restoration of such a standard takes shape as merely reenactment of the Gold Cover Clause as Jim Sinclair suggests, or as something deeper and more revolutionary, is not important at this juncture. The degree of reform and its questions of implementation can be worked out by the relevant experts involved as our cause progresses. The important point to be emphasized at present is that we as a country can no longer allow money to be created by a fascist cartel of bankers and bureaucrats in Washington via printing presses and computer entries.

The fixed pegging of the dollar to gold was, up until the inception of the Federal Reserve in 1913, the customary means of establishing a sound currency. It is not perfect, but it is far less imperfect than the arbitrary fiat money system that we now employ. History has told us time and again that gold is a chain of discipline around the appetite of government.

The great majority of economists in our government and in our colleges today will naturally attempt to deny the necessity of such a step, becoming almost apoplectic upon hearing that a gold standard is being advocated. They will go to great lengths to try and convince their audiences that the economy's money supply must be continually inflated in order to produce growth. But this is totally erroneous! As I have pointed out in past articles, America's productive growth during the 19th century was spectacular (it averaged 4.3% annually from 1870 to 1913),¹ and there was no Federal Reserve pumping unconvertible paper money into the system at all.

The reason the collectivists throughout the country oppose the stable monetary policy of a gold-backed currency is because they know their ever-expanding welfare state is tied directly to inflationary monetary policy. Without the ability to egregiously inflate the money supply year after year, the vast panoply of big government programs could not be financed because the people would not pay for such fiscal extravagance with taxes. Without such welfare programs, the collectivists' egalitarian dream of a Great Planned Society, regulated and manipulated from Washington, is dead.

The future of a free America lies in ending the Keynsian inflation-deflation cycle. This requires the restoration of a gold backed dollar. The answer to so many of our problems would come if we would just end monetary inflation by the Fed. Prices of goods and services would stop relentlessly rising. Excessive labor union demands would subside. Capital formation would increase. True prosperity would result. Poverty would shrink at a faster pace. Yet life would churn at a more moderate and predictable pace. The elderly would be able to keep the security they worked for. And we could all get off this infuriating treadmill of never quite catching up with our bills. In general, life would again be stable, productive, and free rather than the speculative, frenzied, Washington managed economy that has evolved under the whip of collectivist-liberal ideology.

The fate of a free country lies in the strength of its monetary system. The strength of a country's monetary system lies in the independence it has from government control and in its utilization of a fixed standard (such as gold) to back its issuance of paper notes. The independence it has from government control and its use of a fixed standard depends upon the rationality and will of "we the people." Do we still possess that necessary rationality and will in America? Or are we so myopic and decadent that we will tolerate being led down the path of Keynesian pseudo-economics until every last vestige of our free system is laid to waste in a nightmarish Brave New World future?

The Second Pillar of Reform
2) ENACTMENT OF AN "EQUAL RATE TAX SYSTEM." The fundamental principle of the Declaration of Independence, which undergirds our political and legal systems in this country, is that all citizens are to possess "equality under the law." Our whole concept of rights is based upon their being equal for all citizens of the Republic. This was the guiding star that spawned America and which sustained her through the first 125 years of her existence. In 1913, however, there took place a most shameful default on this concept of "equal rights under the law" when our Supreme Court judges allowed a progressive income tax to be enacted by an increasingly socialist minded Congress.

This default by the Supreme Court was challenged at the time by numerous outraged legal minds, but due to the prevailing socialist sentiment that was taking over the culture at the turn of the century, their challenge did not prevail. Too many powerful voices had gotten swept up in the egalitarian vision of Marxist philosophy, and they decided that government's purpose was to coercively implement such a vision. Tax policy became one of the tools with which to bring about such a leveling of society. Collectivist irrationality won the day, and it has lasted for 90 years, despite the fact that a progressive rate tax is clearly unconstitutional.

The reason why a progressive rate tax is unconstitutional in America is because different classes of society are assessed different rates under such a system, which denys American citizens an equal right to the disposal of their property (i.e., their income) and thus denys them equal protection under the laws of the land.

America is based upon each citizen's equal and inalienable right to life, liberty and property. How else does one preserve his life, enjoy his liberty and maintain his property than through the production and the consumption of his own income? If the State can take an arbitrary and unequal percentage of our income because 51% of the people deem it desirable, then we don't have much of a right to the use and disposal of our property, do we? We have only the permission for that use and disposal, and then only so long as we dutifully serve the reigning mobocracy in the manner it deems desirable.

If we are to uphold the idea of all men possessing equal rights under the law, then there can certainly be no justification for our present PROGRESSIVE tax system. It is dictatorial and contrary to everything for which America stands.

As the renowned Scottish economist, J.R. McCulloch, stated over 150 years ago, "The moment you abandon the cardinal principle of extracting from all individuals the same proportion of their income or of their property, you are at sea without a rudder or compass, and there is no amount of injustice or folly you may not commit." ²

Our own Thomas Jefferson astutely summed up such reasoning when he wrote, "The true foundation of republican government is the equal right of every citizen, in his person and property, and in their management." ³

Under our present system, the blindfolded Goddess of Justice has been allowed to peek. "Tell me first who you are and what you earn," she says, "then I will tell you how the tax laws apply to you." This is privilege and arbitrary law, the harbingers of every tyranny throughout history.

This then is the moral and philosophical case for abolishing the progressive income tax. It is simply unjust, unconstitutional, illegal, and dictatorial. But in addition to the philosophical case, there is also a very powerful practical reason why abolishing the progressiveincome tax is so important. This is because with progressive rates ended, there would no longer be any incentive for voters to try and gain their life's status by relentlessly increasing government spending, i.e., by redistributing wealth from the pockets of their neighbors.

The great majority of Americans do not understand it, but the major cause of explosive government spending is our use of progressive tax rates to redistribute wealth. This is because the progressive income tax permits large constituencies of voters to pay ZERO TAXES and equally large constituencies to pay NEXT TO ZERO TAXES. These two groups comprise approximately 40% of today's adult population.Thus, a progressive income tax spawns a "something for nothing" voter mindset that dominates all elections.

When large groups of voters are allowed the privilege of paying nothing and next to nothing in taxes, an irresponsible electorate will inevitably evolve to demand a steady expansion of government services. This is basic human nature and one of the cardinal laws of economics. If government benefits are free (or nearly free), demand for them will be infinite. Consequently, in every election there is an automatic 40% base of voters who always favor those politicians who propose increased government spending!

Overcoming this INFINITE DEMAND for government spending will be impossible until we radically reform the tax system and eliminate its "something for nothing" aspect. This means ending ALL deductions, special breaks, loopholes, and rate progressivity. This will necessitate the adoption of a simple equal rate tax that does not convey favors to anybody.

Since voters would then have to pay for all government subsidies and pork barrel programs proportionately out of their own pockets, they would lose their overwhelming desire for such subsidies and programs. They would begin to favor politicians who advocate REDUCTION of government instead of its constant expansion, because this is the only way they could get their own taxes reduced and more freedom into their lives. But as long as they pay zero taxes or next to zero taxes, they will continue to favor politicians who offer more programs and more pork every November at election time.

What this means is that if we are to have a fair and economically sound tax system, there can be no special privileges for this group or that group. The tax must be a SIMPLE FLAT TAX across the board. It would be about 10%, but could be steadily reduced ever lower as government spending is reduced. The key is that everyone who votes must pay the tax. In this way, all able-bodied men and women would be helping to pull the wagon of economic endeavor instead of riding in the wagon.

A uniform tax rate is the only way to restore a responsible electorate and legislature. It is the only way to substantially reduce government and save America! Only in this way can the scourge of "infinite demand" for more government programs every election year be ended. Therefore, our second order of business must be to abolish the policy of PROGRESSIVE taxation and its "something for nothing" mindset that is stultifying our nation.

These then are our two paramount goals -- a "gold backed currency" and an "equal rate tax system." These are the two pillars that must be used to form the foundation of any political challenge of the Demopublican establishment. Radical monetary reform and radical tax reform are the great unifying causes that can break the stranglehold that state authoritarianism and its collaborators have over American politics. The statist Bastille can be assailed with the battle cry of "Gold money and equal tax rates!" I believe Americans are ready to listen in large numbers.

How to Structure the Necessary Challenge
As I previously stated, a third political party needs to be formed. Let's call it the American Freedom Party for starters. (This is not meant to be the final, official name. Better ones can be thought of.) Our new party is to be based upon the above two pillars of reform. But it must be a party that is viable. It must avoid the two serious mistakes of all recent Third Party challenges. Let me explain.

Ross Perot's Reform Party, The Libertarian Party, and the Constitution Party (formerly the U.S. Taxpayer's Party) have appeared at times to be a start toward genuine political reformation. But all three have failed to gain adequate support because they have structured themselves upon one or the other of two flaws: 1) instant idealization, or 2) instant victory.

1) Campaigning on "instant idealization" is the flaw of the Libertarian and Constitution Parties. This means that these two parties both have ideal visions of the way that society should be politically organized, and they attempt to implement their visions all at once through the political process. They ignore the fact that politics is a game of incrementalism, that it is not an arena in which an "ideal society" can suddenly be voted into place.

For example, when asked what tax policy they advocate for the country, Libertarians reply that the income tax should be totally abolished and government should be stripped down to a minimal state that can exist upon excise taxes and tariffs. Now this is a beautiful vision of a truly limited government. It would be wonderful to have an America like that. But this is not a political platform to be gained through a political campaign; it is rather an "ideal" that perhaps could be approached in a hundred years or so. The members of the Constitution Party respond in the same way. Both of these parties wish to instantantly implement their visions of the ideal in total. There is no acceptance of the need for incrementalism that all of politics is based upon. As a result, both of these parties are marginalized as foolishly utopian. They end up getting at best 1% of the vote every year. They remain obscure fringe voices. No national media pursue them, no big money flows into their coffers, and they are never invited to the televised debates.

Thus, by trying to run their campaigns on a platform of full implementation of their ideological vision of the "ideal society," these two parties doom themselves to continual ineptitude. The solace that their members fall back upon is that at least they are functioning as an educational organization to spread the ideas of freedom to the electorate. But even that function is pretty meager, for only sparse audiences of curious spectators and hard core loyalists ever show up at their confabs. In other words, since they have no national media pursuing them, and since they never get invited to the debates, they really don't do much educating of the electorate. The bottom line is that because they campaign on "instant idealization," they fail.

2) The desire for "instant victory" is the flaw of groups like the Reform Party that Ross Perot founded. Because of its desire for immediately winning the Presidency, the Reform Party ended up becoming nothing but a Demopublican clone. While the Libertarians project too much radicalness, the Reform Party projected no radicalness. They ended up with no substantive differences ideologically between themselves and the Demopublicans. Because they wanted to win right away, they had to offer only more of the same statist pabulum of their opponents. They were thus reduced to running on the notion that they would somehow govern the monster welfare state better because they would bring "better personnel" to Washington. Their experts and bureaucrats would supposedly do a more professional job of confiscating our money and throwing it down the ratholes of political boondoggles. Needless to say, this did not excite the electorate who didn't see the need for still another big government party. The bottom line is that because the Reform Party campaigned on a platform designed for "instant victory," it failed.

These are the two crucial mistakes that any challenge of the establishment must avoid. If an American Freedom Party (AFP) is to succeed, it must offer radical enough change to separate itself from the Demopublicans, but not so radical that it becomes marginalized like the Libertarians. This will negate any chance of instant victory because the rule of incrementalism will be breached in the voters' minds. But here is the all important key. By keeping its radicalness to a minimum (e.g. advocacy of gold money and equal tax rates), I believe that an American Freedom Party could garner 15% of the vote, which would qualify it for the debates every year and bring national media to hang out on its front doorstep. It would thus have a national podium to disseminate its ideas out to 100 million voters, and it would scare the pants off of the Demopublicans. In no time at all, Demopublicans would be offering their own gold backed currency and their own 10% flat tax. If they didn't, I believe that the nation's voters would increase their support every year for the American Freedom Party until either the Demopublicans relented and enacted the two pillars into law, or the AFP achieved parity with the Demopublicans and actually won on election day. Either way, the AFP would win because its two pillars would be implemented. With implementation of the two pillars, Big Government would die, and freedom would be reborn.

So a Third Party does not have to win office to win its cause. But it does have to avoid the two pitfalls of marginalization and becoming a clone. If it is headed by someone of prominence with the necessary gravitas, and if it achieves the right blend of radicalness, there are 15 million voters in America who would join such a party, which would get it into the debates and make it a powerful force to reckon with. As a consequence, American politics would then be dramatically opened up to the ideas of freedom and limited government. As things stand now, such ideas are not even discussed. This is because all Third Parties make one of the two crucial errors mentioned above, and consequently become marginalized and never listened to, or they become clones with nothing different to offer. They, therefore, never become a potent enough threat to the Demopublicans to motivate them to alter their policy proposals.

What the Demopublicans fear most is a unified, credible effort from the political right -- a real grassroots freedom party that does not make the mistake of marginalization and cloning. They sense that millions of Americans would explode in righteous wrath and loyalty to such a party. Demopublicans know that the third parties of the left (the Naderites and the Socialists) will never be a threat to their rule, for their message of more socialism is blatantly alien to the American people. But the political parties of the right pose a serious threat because their vision potentially lays bare the illegitimacy of massive Demopublican statism. Their vision harkens back to the meaning of America, to the Constitution we have so shortsightedly abandoned, but still value in our hearts and souls. But such a threat lies wasted year after year because marginalization and cloning dominate all third parties.

I hereby propose a grand unification of all disenchanted third party members who wish to REDUCE government in Washington. To the Libertarians, Constitutionalists, Independent Americans, American Patriots, and Reformers, I say quit offering yourselves as sacrificial lambs to the Demopublican charade. Quit playing the game as amusing larks, media curiosities, and footnotes in history. Unify your efforts and adopt a simplified platform.

Make one grand party and base it on the two simple pillars of "gold money" and "equal tax rates," with the rest of the platform structured upon conventional Demopublican fare. Such a party would be able to attract a name candidate, and it would have a powerful distinctive message, which would allow it to capture 15% of the vote. The fear that would rise up in the establishment crowd would be heart pounding. Their corrupt game of buying votes through debasement of the currency and confiscatory taxation would be over. The authoritarian state would, within a decade, crumble like the Berlin Wall. The Darth Vaders of the Potomac would have to relinquish their black limousines and hightail it out of town.

I believe millions of voters would rally around such a cause. At least 15% of the American people are thoroughly fed up and firmly committed to the monetary and tax reform pillars. They want a radical, rational program that will offer them freedom, order and justice in their lives. They want a party that will end Gargantua's relentless expansion and domination of our society. They want a party that offers an eventual restoration of the vision of the Founding Fathers.

The two pillars of GOLD MONEY and EQUAL TAX RATES are the keys to bringing such a party and its success to fruition. By structuring itself upon these two pillars, and leaving other idealistic reforms for the future, such a third party would begin the purging process and move us toward reversal of the political authoritarianism that is consuming our country today. The time has come to form an American Freedom Party that has the ability to make a difference. Millions of patriotic citizens are eagerly waiting to join.

Notes:
¹ The Statistical History of the United States from Colonial Times to the Present (Stamford, CT: Fairfield Publishers, 1960), pp. 91, 141, 409, 413.
² J.R. McCulloch, Taxation and the Funding System (London 1845), pp. 141-143. Cited in Charles Adams, For Good and Evil: The Impact of Taxes on the Course of Civilization (Madison Books, 1993), p. 365. Emphasis added.
³ Letter to S. Kercheval, 1816. Saul K. Padover, ed., Thomas Jefferson On Democrary (New American Library, no date), pp. 34-35. Emphasis added.

Recommended Reading:
G. Edward Griffin, The Creature from Jekyll Island, American Media, 1998.
Alan Greenspan, "Gold and Economic Freedom," Chapter 6, in Ayn Rand, Capitalism: The Unknown Ideal, New American Library, 1966.
Nelson Hultberg, Why We Must Abolish the Income Tax, AFR Publications, 1996.
Charles Adams, Those Dirty Rotten Taxes, Simon & Schuster, 1998.

Nelson Hultberg
Americans for a Free Republic

Nelson Hultberg is a freelance writer in Dallas, Texas and the Executive Director of Americans for a Free Republic www .afr.org. His articles have appeared in such publications as The Dallas Morning News, Insight, The Freeman, Liberty, and The Social Critic, as well as numerous Internet sites. He is the author of Why We Must Abolish The Income Tax And The IRS (1997) and Breaking the Demopublican Monopoly(2004). He is presently finishing a book on political-economic philosophy entitled The Golden Mean: The Case for Libertarian Politics and Conservative Values.

Copyright © 2004-2008 Americans for a Free Republic

Image rendition and html coding Copyright © 2000-2009 SafeHaven.com

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »