U.S. Free Market History

We are in real danger of losing our free market economy completely and being forced to submit to a socialist republic similar to the USSR. It seemed like a good time to review the history of our free market economy to determine when, why and how we began to allow our government to destroy it.

From the beginning of our English colonies in 1601, individual citizens were free to work to provide for themselves. The country was rich in resources, so it was possible to establish privately owned farms, timberland, mines and trade. For about 200 years, we functioned as a colony and built a large, free market economy on the eastern seaboard from Maine to “Georgia, with Tennessee and Kentucky as territories until 1804 when Thomas Jefferson purchased the northern half of the continent from Napoleon for $15 million. That was 828 thousand square miles for 3 cents per acre. That fortunate violation of constitutional authority was a beneficial exception. For the most part, government was limited in what it did and didn’t impede our productivity, in fact, the Louisiana Purchase ignited our productivity. Spain had owned the southwest and in the 1830s it went to Mexico. In 1848, the U.S. took the southwest.

The First Continental Congress met in 1774, elected by the people to represent the States. Their task was to discuss their problems and adopt a list of grievances to present to the English Parliament. The Boston massacre was the event that prompted the States to vote to seek independence.

Prior to 1775 we were an English Colony. England provided for our defense and levied taxes. We followed English Law. The States operated somewhat autonomously. The Revolutionary War began in 1775 and ended in 1883. The congress was made up of representatives from the States. The members of this congress met, discussed and began to create our founding documents and structure. They selected George Washington to conduct the revolutionary war and funded the army. In 1883 when the war ended the congress became the Constitutional Convention, finished our founding documents and elected George Washington to become the first President in 1789. The States provided government functions and retained most of these functions under the Constitution and 10th Amendment. The Federal Government would be responsible for national defense, coining money, approving foreign trade agreements, treaties with other nations, maintaining a postal service, establishing the House and Senate to write federal laws and establishing a federal court system to enforce these laws.

From 1789 forward, the federal government grew from hardly handling anything to do with our economy to meddling in almost everything and things aren’t going so well. We went from following the Constitution to the letter to not following it at all. Campaign contributing “special interest groups” have complete control over legislation and we find ourselves in a bloodless civil war. The benefits of big government have been trumped by running out of other peoples’ money.

Karl Marx (1818-1883) proposed that the means of production should be given to the government, there should be no private property and everyone should share equally in the fruits of everyone’s labor. There has never been any evidence that this actually works with any group larger than a generous family. Russia tried ‘forced sharing’ for about 75 years and went broke. We in the U.S. like most of Europe embarked on this experiment with socialism for about 80 years and now all of our socialist governments are broke. The adoption of socialism in the U.S. and Europe was gradual and so far, stopped short of governments taking private property. Instead, we established financially unsustainable “entitlement programs” to redistribute wealth and we established crony capitalist regulations to discourage competition. The end result is that our economic opportunity is shrinking. In addition, in the U.S., we have given away trillions of dollars to the international banking system, given all types of foreign aid to other countries and taken responsibility for the defense of countless countries. The cost of government entitlement programs and regulations and none of it is legal according to our Constitution as written.

The level of prosperity we have achieved until recently is due to our freedom to pursue opportunities to apply our hard work, initiative, intellect, skill and productivity. We are finding our freedom to provide for ourselves has diminished as opportunities have diminished.

Our decline was swift after the formation of the WTO in 1995 and the passage of GATT and NAFTA in1993. They said we were entering the “information age” as if we could make a living with that, but the information wasn’t good. We were about to export our manufacturing and with it, our economy. We had trouble getting other countries to honor our U.S. patent law and they were involved in pirating everything we invented. They lied when they said they would behave if we gave them our manufacturing industries. U.S. corporations bought it to escape the U.S., which was about to become a socialist, environmental straight jacket.

At the same time, environmental lobbies, who had been busy purchasing their own politicians pushed through productivity killing regulations. Logging and mining operations ceased, Oil and gas exploration came to a screeching halt. This was followed by an assault on farming and ranching that is still quietly going on. The weapon of choice for environmentalists is air and water regulation. In 1992, the U.N. saw a mechanism they could use to drain the last dollar from the U.S., using the environment as an excuse to collapse the U.S. and make it part of a “world government”. The “global warming” scam was intended to push financially irresponsible wind and solar power, kill oil and gas and make our electric bills 5 times higher than they were using coal and nuclear. The U.N. wants legal authority over our water, in order to tax us for using it. We have been sold out by our own government with the help of our own corporations.

The only principle we hold dear is the right of companies to move anywhere they like. If you don’t let them, they will simply move to a country that will let them. Now we need to figure out what to do.

In 1792, Our entire federal government revenue was $4.6 million. A 15.1% tariff funded this revenue. Tariffs remained our only source of funded our federal government until 1913, except for the civil war years when an income tax was imposed. Tariff rates varied from a low of 6.5% in 1815 to a high of 44.6% in 1870. For the industrial northern states, tariffs on imported goods off-set prices to protect our manufacturing industries. In the agricultural south, the tariffs often spiked the prices of their exports and made them uncompetitive.

By 1900, we were celebrating a very successful century. We had expanded our territory and found a wealth of resources. We also enjoyed a bounty of new inventions we would continue to perfect throughout the 20th century.

Abandoning the Constitution

In 1913, tariff revenue was joined by income tax revenue. The tariff revenue that year was $318.8 million and the income tax revenue was $35 million for a total of $353.8 million. From 1913 to 2010, reliance on tariff revenue decreased as income tax revenue increased. In 2010, tariff revenue was about $25.298 billion and income tax revenue was $2.163 trillion for a total of $2.188 trillion. Tariffs are sales taxes aimed at leveling price differences between imports and domestically produced products. In 2010, our tariff rate was 1.2%. In 1970, it was 6%. Our tariff can produce about 25 billion per percentage point, so a move back to 6% would produce $150 billion in revenue.

The increase in the scale of revenue growth comes primarily from inflation caused by the Federal Reserve printing more money. In 1913 a loaf of bread was 6 cents, now it’s over $2.00. This currency debasement has averaged about 4% per year for almost 100 years.

The other cause of the increase in revenue and spending is excessive and illegal federal government involvement in the private and global economies. Special interest groups now own our government through billions in campaign contributions. Our lack of control over the government has resulted in the federal government exercises productivity crushing control over our ability to operate a free market economy. They own over 35% of the land mass and are currently on a land grab binge to pander to special interest. The result is that they are shutting down our productive capacity.

Saving the Free Market

To reverse this, we must cut federal government spending by $1 trillion a year. We would take a 7% reduction in the GDP. If we do this, we should expect the stock market to tank again and unemployment to go from our current real 20% to 30%. These will primarily be government employees or employees of government contractors, plus main street goods and services they will cut back on.

To lower our unemployment, it is important for us to shut down legal immigration of the 1 million a year we currently allow. We should certainly continue to try to lose the 11 million illegal immigrants who still remain.

Housing prices will decline again and apartment building will halt as the unemployed move in with relatives. It will also affect future investment plans, but these will be replaced with more useful, less wasteful plans to provide necessities for our 300 million population market. We may stabilize for a bit before the next bubbles break. It will be twice as bad in what are now the emerging markets for those countries who are now importing to the U.S. like China.

It’s also important for us to abandon all unnecessary government expenses including foreign aid of all types as well as government activities that are actually harmful, like the UN Agenda 21 implementation. The federal government has been spending about twice its income and it should cut the budget in half to match expected revenue. As foreign investors flee U.S. Treasuries, the Fed will buy up the difference.

If the Federal Reserve doesn’t pull back its printed money, the dollar will undergo hyperinflation and our economy will crash. Once again, the stock market will tank even further, housing prices will tank and unemployment will hit 50%. At that point we will replace our front yards with vegetable gardens and it will be bizarre.

The federal government will be in even worse shape because it took over and bought all the student, mortgage, commercial and retail loans and these will all default. We will come close to a total collapse of our economy. None of this is avoidable, so it is very important for us to cut immigration and get ready for tha crashes.

We will have multiple bubble crashes and their combined effect will be far worse than the 2008 meltdown. The government debt, corporate debt, personal debt and dollar crash bubbles will pretty much go off together. The European sovereign debt crash may well be the signal to watch for. The will rename this one the Great Depression and begin to refer to the one in the 1930s as the Mild Depression.

The 2nd Civil War

We are in a bloodless civil war. We are divided into two camps. We are Free Enterprisers. Our camp wants to roll back federal government spending from $3.9 trillion to under $2.2 trillion a year. We would do this by ending all foreign aid of any kind and closing most of our military bases. We would also close all federal departments and agencies that are not allowed by the Constitution as written and enforce the 10th Amendment. All unconstitutional functions would go to the States and the People. We would lower our corporate income tax to 5% for companies whose manufacturing is U.S. based. We would audit the Federal Reserve, disband the Council on Foreign Relations and quit the U.N., WTO and IMF. Global companies would handle their own affairs.

The real financial end-game is a battle being fought now by the Free Enterprisers vs. the Kick the Can Down the Road gang. Democrats and RINOs are in the Kick the Can group, that’s why you don’t see a reduced federal budget being passed. The Liberals, you could say are all Kick the Can folks. Free Enterprisers are Ron Paul Republicans, Tea Party Leaders and anybody who believe we need to stop government spending. Our solution is to return to the Constitution as written We need to reset our federal government back to a date where it worked. Our reset date is 1900.

Norb Leahy, Dunwoody GA Tea Party Leader, ntl@mindspring.com NTL Conservative Blog