Monday, April 2, 2018

Fixing the US Economy


Why is government spending out of control? Why does government own entire industries that used to be part of the private sector?  How did education and healthcare costs become unsustainable?  How did the US become a debtor country?  What is the right balance between personal responsibility and government welfare?  The answers are in our history 

1789 to 1860
In 1789, when George Washington became our first President, tariffs, land sales and other fees were used to fund the government. The Revolutionary War debt was financed by a private bank and paid off over time. Tariffs made foreign-made goods more expensive, but it also allowed the US to establish its own manufacturing industries.

Our politicians have typically been business owners, whose businesses were running well enough to give them time to become active in local politics. Our Founders were plantation owners, business owners and professionals. Many were elected to posts in State Colonial governments

Their world-view was based on the writings of a select group of thinkers who believed in personal sovereignty, free will and natural rights. They were the heirs of the Magna Carta adopted in 1217 in England to begin to impose limits to the King’s powers.

These rights were enshrined in our founding documents, but they excluded slaves who were regarded as property and American Indians who were in the way. In the minds of our leaders, this oversight was not considered.  Our expansion was the only consideration at the time. We were not alone. In 1789, most other countries had no problem using slaves or abusing indigenous people, or restricting voting to property owners. There were 4 notable Presidents who get the credit for securing US expansion.

George Washington is credited for winning the Revolutionary War in 1783, serving as our first President from 1789 to 1797 and establishing the 2 term limit.

Thomas Jefferson is credited with writing the Declaration of Independence in 1776, securing the Louisiana Purchase in 1803 and serving as President from 1801 to 1809.

Andrew Jackson is credited with winning the War of 1812, serving as President from 1829 to 1837 and pushing US expansion. 

James Polk is credited with completing our Western expansion by annexing Texas in 1846, winning the Mexican American War in 1848, being Andrew Jackson’s tag team partner for expansion, serving as President from 1845 to 1849 and refusing to serve a second term.

From 1789 – 1860, the US government operated according to the US Constitution (as written). It adhered to the limits of the enumerated powers.  During this period, the US government conducted wars of expansion to secure the territory it now occupies in North America and paid for these wars by selling the land it had won to its citizens. In 1848, the Mexican American War ended with the Treaty of Guadalupe. That allowed US citizens to complete the settlement of the West Coast.  The wars of expansion were limited to Indian Wars and those ended with the defeat of the Sioux in 1890 at the battle of Wounded Knee in South Dakota.

From 1789 to 1860, our elected officials presided over a free market economy as guardians and expanded across the continent to isolate us from foreign aggression, using 2 oceans and limiting conflict on the borders with Canada and Mexico. Government remained small and revenue was preserved to secure what was necessary. Citizens were responsible for themselves and free to be self-supporting. The free market system controlled prices.  In this period, the US completed its expansion and began to participate in the industrial revolution.

In 1795, the first railroad track was built to haul dirt from a mound removal project. In 1830, the first passenger railroad began operation using a coal fired steam engine. Rail systems were created to haul coal, mineral rock, freight and passengers throughout the US from 1830 to 1860.

In the 1800s, steam engines began to replace water wheels to run mills and were used to power factory equipment.
In 1825 we completed the Erie Canal.  It was built to create a navigable water route from New York City and the Atlantic Ocean to the Great Lakes

Conclusions
The US began with 13 colonies squeezed on the East Coast of the continent and expanded to 3.5 million square miles to the West Coast. It took 72 years from 1776 to 1848 to accomplish this. We followed the US Constitution (as written) and we prospered. The US population was 34.4 million in 1860. The industrial revolution had begun and companies were hiring workers as increasing levels. We had no unemployment, we had a labor shortage. From 1789 to 1860, the US functioned with maximum reliance on individual citizens’ personal responsibility and the US government honored the limits imposed in the US Constitution (as written).

1860 to 1900
In 1860, the US government was challenged with the secession of the Southern States and the Civil War raged from 1960 to 1865. The Northern States won the Civil War in 1865.

From 1860 to 1913, we completed the Western settlement and focused on connecting the country for commerce. The transcontinental railroad was built from 1863 to 1869. It connected Omaha Nebraska with San Francisco California and stretched 1,912 miles. We also worked on developing our manufacturing, transportation, energy, sanitation and communication technologies.

In 1844 the first telegraph line was running. In 1870, electric power was introduced. In 1893 the first US automobile manufacturing company was created.

In 1872, Congress seized 3468.4 square miles of land from Montana, Wyoming and Idaho in violation of the US Constitution without filing an Amendment for ratification by the States.

In 1898, the US invented military foreign aid by entering the Spanish American War to remove Spanish control of Cuba and the Philippines. This was the first of what would be many foreign wars the US military would fight to “protect US interests”.

In 1901, then Vice President Theodore Roosevelt became President after the assassination of William McKinley. He served until 1909. He stopped corporate mergers and proceeded to break up the large companies that had enabled the US to succeed in the Industrial Revolution. He was a big government, managed economy guy, who ignored the US Constitution. He coined the term “Progressive”.

In 1906, Theodore Roosevelt signed the American Antiquities Act allowing the federal government to seize more land for national parks, nature preserves and national monuments. There was no Amendment passed or ratified to allow this.  The US government now owns 30% of the US land mass they seized from the States.

Conclusions
We survived the Civil War. The US population was 31.4 million in 1865. We were in the middle of the industrial revolution and expanding railroads to the West. The industrial revolution culminated with a flood of inventions that included electric power. Our federal government failed to protect and defend the US Constitution (aw written) in 1872 and there were no consequences.

1913 to 1940

Prior to the passage of the 16th Amendment in 1913, the United States government funded its operations mainly through excise taxes, tariffs, customs duties and public land sales. The federal government had relatively few expenses compared to today and did not have as much need to raise large amounts of money.

In 1913, Congress passed the Income Tax Act with a 1% income tax rate.  The tax rate rose rapidly and the top rate reached 90%. 

They also passed the Federal Reserve Act, delegating their responsibility to coin money to a private bank and inflation rose 200%. A loaf of bread was 2 cents in 1913, now it’s $4.
The metaphor of boiling a frog is applicable here. In 1913, we quietly shifted from a free market economy to a managed economy. The poor do better in a free market economy with no government interference, because their earnings always lag inflation.

Governments can pay their bills in three ways: taxes, debt, and inflation. The public usually recognizes the first two, for they are difficult to hide. But the third tends to go unnoticed by the public because it involves a slow and subtle reduction in the value of money, a policy usually unarticulated and complex in design.

In 1914, World War I began in Europe between Austro-Hungary and Germany against Great Britain, France and Russia. The US entered the war in 1917 and won, but Europe never recovered and socialism took hold in the US and Europe.

In 1916, Congress passed the Child Labor Act, but it failed. Most children were homeschooled, had tutors and held jobs to help support the families.  Congress continued to attempt to pass child labor laws, but Amendments were rejected by the States.  In 1938 Congress passed the Fair Labor Standards Act with child labor provisions and ignored filing an Amendment.

In 1917, Communists had infiltrated Russia and began a civil war to depose the Czar. This resulted in the founding of the Soviet Union in 1922.

By the 1920s, all of the inventions were now available to consumers who could get electricity, telephones, automobiles, indoor plumbing and home appliances. This was the beginning of the middle class US consumer.

In 1929, the US stock market bubble crashed and unemployment reached 25% in the cities until 1940.

In 1930, US crops suffered a drought that lasted until 1940 and farmers went bankrupt.

By 1930, Communists had infiltrated the US government, media and universities and were hoping to create a socialist republic by following their goals published in 1920.

In 1933, we elected Franklin Roosevelt as President and he clearly didn’t follow the Constitution. He instituted “public works” to build infrastructure, but it didn’t prevent the wide-spread poverty. He did advance socialism in the US.

In 1935, Roosevelt passed the Social Security Act as a compulsory national pension Ponzi scheme that saddled the federal government with unfunded liabilities. This should have created individual accounts participants would own and could invest like a 401K.

In 1939, World War II began with the invasion of Poland by Germany.

Conclusions
Our federal government continued to ignore the limits imposed by the “enumerated powers” and was allowed to expand beyond the limits imposed by the Founders and there were no consequences. Nobody was interested in making the federal government follow the Law. World War I was all about “military foreign aid”.

1940 to 1950

By 1940, jobs were returning in cities to manufacture military equipment for sale to our allies who were at war with Germany.  Also, the drought was lifting and the farming economy returned.

In 1941, the US entered the war after the Japanese attack on Pearl Harbor and military equipment manufacturing exploded. All able-bodied US men were entering the US military and all able-bodied US women went to work in military manufacturing. US Unemployment ended.

The players in World War II were the “Axis” powers that included Germany, Italy and Japan at war with the “Allied” powers that included the US, Great Britain and the Soviet Union.

In 1940, troops from France and Great Britain landed in North Africa to fight the Germans.

In 1942, US troops joined the war in Europe by joining the North Africa campaign. We won in 1943 and moved on to Italy.

In 1943, Italy surrendered and allied troops moved up to confront Germany.  Also, Russian troops began to chase German troops back.

In 1944, allied forces landed in Normandy (France) we won the war in Europe with the surrender of Germany

In 1945 we won the war in the Pacific with the surrender of Japan.  The dropping of the atomic bomb on Nagasaki and Hiroshima caused the Japanese to surrender.

In 1945, US men began to return and the country began to reconvert back to consumer manufacturing. Housing boomed as young couples married and moved to the suburbs. All other consumer goods boomed. The US was the global manufacturing center and remained so until war-torn countries could rebuild their economies.

During World War II, the US had provided military equipment to England and the Soviet Union and after the war the US gave aid to Europe and had US General Douglas McArthur write a new constitution for Japan that enabled them to revive their economy.

In 1945, the Soviet Union refused to pull their troops back from Eastern Europe and the US failed to prevent this land grab. This was a mistake that would result in more cost to the US.  If the US had turned its armies on the Soviet Union to free Eastern Europe, our troops would have had to fight for another 2 years. We had the atomic bomb and the Soviet Union didn’t, so we would have won this additional war and contained the Soviet Union. We could have prevented the costly Cold War that lasted until 1989.

In 1945, the failed League of Nations was replaced with a more dangerous United Nations.

In 1947, Communists had infiltrated China, created a revolution and established a communist government in China.  Also in 1947, “Progressive” Justice Hugo Black wrote the Supreme Court opinion on the separation of church and state to begin the war on Christianity.

In 1947 the Cold War officially began and by 1949, the Soviet Union had the atomic bomb. They had won the bluff and secured the Eastern European countries and were ready for more expansion by installing communism in would-be satellite countries.

1950 to 1960

In the 1950s, the US economy offered full employment and great opportunity.  The cost of education, healthcare and interest was low.  The cost of living was reasonable. Most US citizens had automobiles, appliances, telephones, etc. Many bought homes in the suburbs. We began building the interstate highway system in 1956. It was a period of plenty even though the income tax had a top rate of 90%. The popular culture was still dominated by a strict moral code of behavior instilled in the population during the war. It continued in the media until the 1960s.

In 1950, Communists had infiltrated and secured North Korea and their troops invaded South Korea. The US intervened and established separate countries in 1953.

In 1953, Communists had infiltrated Cuba and created a rebellion to oppose their government.  The US gave aid to Castro. He established Cuba as a Communist country in 1959.

In 1955, Communists had infiltrated and secured North Vietnam and their troops invaded South Vietnam. The US intervened and lost the war in 1975 and Vietnam became a communist country.

1960 to 1980

By the 1960s, American Communists had achieved most of their goals to further advance socialism in the US. Race riots erupted, teens discovered drugs and sex, the birth control pill became available in 1964 and the media called it the “sexual revolution”.

In 1962, the Second Vatican Council ushered in the demise of church subsidies in education and healthcare.

In 1964, Lyndon Johnson passed Medicare, Medicaid and Welfare, greatly expanding the federal government’s exposure to unfunded liabilities. He passed the Civil Rights Act in 1964. In addition he expanded the Vietnam War to no avail and resigned in 1968.

In 1968, Richard Nixon won the Presidency as the “law and order” candidate. We were tired of race riots. In 1969, we landed on the moon and nobody was there. In 1970, Nixon imposed wage and price controls to fight inflation.  In 1972, Richard Nixon visited China to begin trade relations.

In 1975, Nixon ended the Vietnam War by giving South Vietnam to North Vietnam. The US fought this war from 1955 to 1975 and we lost.

In 1978 US automobile costs doubled and home mortgages were about to double. The federal government was monetizing the federal debt and inflation was cutting household incomes in half.

The Feminist Movement of the 1970s was the advanced public relations stunt to get women to work, because they could no longer afford to live on one income.

1980 to 1990

The Personal Computer was being developed in the 1970s and hobbyists had them. Portable phones and modems allowed us to access computers, but microprocessors were still to weak to allow internet access for home PCs.  In the 1980s, I had a DEC Rainbow connected to the internet at NJIT and could send and receive email with my group at WBSI Strategic Studies.

In 1993 I bought a Gateway PC and used it in my consulting practice.  By 1996, microprocessors were large enough to fully function and I was able to send files as email attachments. The PC revolution had a big economic impact on the US.

In the 1980s, advances in electronics components prompted a retooling of all companies and created economic prosperity that followed from the multiple design cycles created in most industries. This increased productivity as companies could automate functions, increase throughput and grow revenue.

This prosperity lasted through the 1990s, but off-shoring manufacturing in the late 1990s took our jobs away. We had solved the quality problems through automation and refined processes and these controls allowed companies to set up manufacturing operations in other countries to reduce their costs. These countries had lower labor costs, lower regulations and lower taxes.

By the 1980s, Communists had infiltrated countries in South America and Africa. The US intervened with aid to anti-communists, but failed in most cases.
In 1980, Ronald Reagan won the Presidency as the “truth teller”. He admitted that our inflation was caused by monetizing our debt. He cut income taxes, cut regulations, rebuilt the US military, brought interest rates down and Reagan is credited with ending the Cold War by 1988. The Soviet Union was broke and he knew it. He called them the “evil empire” in 1983, but then befriended their leader Mikhail Gorbachev and was supportive as he planned to dismantle the Soviet Union and free the satellite countries.

In 1986, Congress adopted a new Immigration Law that allowed unfettered immigration based on family reunification rather that labor needs

In 1988, George HW Bush was elected President and he served until 1992. In 1989, he doubled immigration that led to the excessive immigration of 60 million. In 1992 Bush signed off on UN Agenda 21 based on the global warming hoax.

In 1989, the Soviet Union was dissolved and the Russian Federation was created to replace it in 1991.

1990 to 2018

In 1990, George HW Bush conducted the Gulf War to free Kuwait from Iraq with coalition forces and defeated Iraq in 7 months, but didn’t depose Saddam Hussein

Most of the former Soviet Union satellite countries were successful in reestablishing themselves after they were declared independent, but Yugoslavia suffered a series of ethnically-based wars and insurgencies fought from 1991 to 2001. The result was the creation of 6 separate countries.

A few of the former Soviet Union satellite countries were able to adopt a free market system and expand their private sector economies.

In 1992, Bill Clinton became President and served until 2000. He balanced the federal budget by cutting military spending and reformed welfare.  He also ordered the implementation of UN Agenda 21 in the US.  In 1993, he joined NAFTA to allow US companies to locate US jobs overseas, but didn’t cut the US corporate tax rate. He also signed the Community Reinvestment Act of 1993 to force lenders to give mortgage loans to unqualified buyers. The US National Debt was $5 trillion in 2000.

In 2000, George W Bush became President and served until 2008. The terror attack on the Twin Towers in New York prompted him to send US military to Afghanistan and then to Iraq to chase the terrorists and do “nation-building. He also presided over the 2008 Meltdown caused by the Community Reinvestment Act. The US National Debt was $10 trillion in 2008.

In 2008, Barak Obama became President and served until 2016. He created Obamacare to destroy the US healthcare system. He was hired by George Soros to maintain open borders, increase immigration, eliminate fossil fuels to comply with US Agenda 21 and turn the US into a 3rd world country. He promoted Muslim infiltration in the US and the Arab Spring in the Middle East.  That allowed terror groups to grow.  The US National Debt was $20 trillion in 2016.

In 2017 Donald Trump became President to restore the US economy and clean up Obama’s mess. In his first year, he appointed a Constitutional Conservative to the Supreme Court, cut taxes, removed the US from UN climate accords and TPP, removed unnecessary regulations, removed Obamacare penalties and re-set foreign relations with his “America First” program.

Democrats have countered with “snowflake” riots, law suits, court challenges and Bolshevik marches.

The history of federal spending from 1790 to 2015 shows the jump from under 10% of GDP in 1940 to 20% of GDP in 2015.

Conclusions:
We have squandered our birthright on foreign wars and socialist programs for things that would have been better handled by the free market and using the law of supply and demand to allow the consumer to control prices. We should have stuck with the US Constitution (as written).

Going forward, we need to privatize most government functions and shrink the cost, size and footprint of government at all levels. We need to begin planning to pay off our National Debt back to the $5 trillion level.

We need to guard against future inflation. In 1960, a good household income was $10,000 a year. In 1980 a good household income was $60,000 a year. By 1990 a good household income was $100,000 a year.

If we allow the federal government to continue to monetize our debt, a good household income in 2050 will be $1 million a year.

Norb Leahy, Dunwoody GA Tea Party Leader

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