I’ve toyed with the idea before about finding a few really good analogies to describe what I think is our situation. To summarize, as a refresher: our form of government was deliberately created (it was created by design) after the ratification of our Constitution; the form, purpose and functioning of this new government isn’t a secret (it was created by men who took notes); along the way to our day, the people electing politicians got lazy or misled about how the government was supposed to work; and politicians either went along with this or took advantage of this, or both.

This put us in the predicament we’re in today. To summarize, we’re nearly $15 trillion dollars in debt. In an earlier post, The Institute on Air, I did the math and shared the back-up if you’re interested, but 87% of federal taxes are paid by taxpayers who make $67,000 a year or more. That makes their share of the debt $13,050,000,000,000.00. That’s a lot of zeros.

Any way you add it up, we're in a sea of red ink.

But even if in some fantasy land you could imagine that working, we’ve still got a gaping wound to bind up: politicians and the people who put them in office have no idea what the purpose of this government is supposed to be. Lucky you, America, because that’s about all I ever write about (hint, the question we all have to ask is: whose responsibility is it?).

Here’s the good news: once you understand the big picture, you see the correct principle applied everywhere. Two quick examples?

Example 1: to illustrate government is a tool, only able to do what it is designed to do properly, and will fail or deliver bad results if you deviate from this, try making some toast with your microwave. Or try cutting a sheet of plywood with a keyhole saw. Or try making grilled cheese with an iron. There are thousands of these examples that “meet people where they are.” Each of these explain the importance of original intent: why it matters that the people who created the tool had a specific plan in mind for how it should be used, and that screwing that up is almost always bad, and sometimes dangerous.

Example 2: to illustrate the concept of the division of powers, take any job or company and look at it from a design standpoint. I’ll use mine, and I’ll be as brief as possible.

I work at a big regional bank that makes loans to businesses. Local branches make their own decisions up to a certain point. Beyond a certain point, decisions have to be made by the corporate bosses. For example, if Janey works the opening teller shift, or not, isn’t relevant to the guys at headquarters. If we open a slot machine right next to an ATM is relevant to the guys at headquarters. If Janey opens an account for someone off the street isn’t terribly relevant. If she makes a $200 million loan to someone is terribly relevant. Got it? Decision making can’t all be centralized. If decisions like ordering Post-its and opening the day’s mail had to be run by the big shots in headquarters, nothing would ever get done. Just as bad, the things that the guys in HQ need to be focused on, the really important stuff, would be getting screwed up all the time because they’d be making decisions about light bulbs.

That, my friends, is exactly what we’re doing in America. We’ve got people in Washington telling people in San Diego what they should be teaching kids. And how much water should be in their toilets. And what types of light bulbs, God help us, they should be using.

Get educated, talk to people, and insist on better than we’ve been offered. Change the conversation. Don’t wait for someone else to do it; it’s each our duty as Americans. When politicians insist on concentrating power in Washington, what they’re saying is that we’re not responsible enough to make decisions about our lives. Are they right?

In the article “Local Governments Keep on Paring Payrolls“, it is reported that states and local governments shed 30,000 jobs last month. At the state and more importantly at the local level, revenues (tax receipts) are still below pre-recession levels; and budget shortfalls in local government can’t be made up by selling bonds to foreign investors. No, a local government budget shortfall has to be made up the old-fashioned way: cutting expenses.

Unfortunately, there's no money left to bail us out.

One slightly disturbing fact from the above article:

Federal government employment has fluctuated in recent years but has risen by 99,000 workers since the recession began in December 2007.

Got that? See, Washington D.C. doesn’t have to live by the same rules as you, your family, your business or employer, or even your local units of government do. When times are tough, we tighten our belts. We find ways to do more with less. We might even have to make some sacrifices; some of them might even be difficult. This natural process reminds us all that we’re not guaranteed anything in life, and that there are downs as well as ups. That we have more federal government workers today than we did when the recession began indicates that this mindset hasn’t reached the Swamp just yet.

It also indicates that a permanent and enduring solution to our federal spending problem should be a complete divestiture of domestic responsibilities from the government in Washington D.C.

Second, not a one of them knows what they are doing.

The entire piece is quite good, but in the interest of focusing on only one of many points I could make, we have to cut to the chase: regulation in Washington is ill-conceived, ill-implemented, and forever. Federal interference in the lives of Americans seems like it is never ending because once you commence regulating, it really doesn’t end, ever. As I said in this space on the topic of complexity and regulation:

So the financial reform bills coming out of Washington will of course spawn more agencies and government, attempting to do things that they certainly cannot do. In time, another crisis will come, based upon unintended consequences resulting from the passage of this reform. Less regulation is counter-intuitive, but is the likeliest long-term solution for problems and crises as they arise.

Behold the mighty Machine, and tremble.

Less regulation – simply, stop making laws in Washington that interfere with the domestic affairs of the lives of Americans and overturn existing laws that have the same effect – is the answer to our domestic problems. We’ve also cataloged those problems here too – oppressive taxation, out-of-control spending and a crushing debt burden. These problems have taken decades to pile up, and they won’t be corrected overnight. Nor will these problems be fixed in two years. They can be frozen; our “problem growth rate” can be arrested. This is our vision, our raison d’etre, and we’ll bang the drum on this until our arms fall off.

We have a new Congress, full of good intentions and riding a wave of public support that got them there. The measure of their success will be in how little they do; and that when they do anything, how much of that involves undoing the deeds of their predecessors. As a friend of mine famously quips, turning a common phrase upside down to make a point about our federal legislature: “Don’t do something, just stand there.”

$14 trillion - we're going to need a bigger calculator

We have a national financial problem on our hands, and it may even be fair to call it a national financial disaster. In my prior post, a report on public credit, I identified the unavoidable embodiment of our problem: our now $14 trillion national debt. This debt is the result of many things, but in recent years unchecked entitlement spending and hand-outs have exponentially grown this obligation. Entitlements form the origins of, and perpetuate our taxation problem. We have the second highest corporate tax rates in the world; this suppresses investment and job creation. Personally, in addition, your income is taxed. Your property is taxed. You are taxed when you shop. You are taxed when you die.

Taxes are a symptom, in a manner of speaking; they are the effect in a cause and effect relationship. While it may be a new way for you to think about it, taxes are simply the tangible manifestation of a responsibility transfer. Put another way, taxes are that which is seen, and the transfer of responsibility is that which is not seen. As individuals cede control of their lives and transfer responsibility to an external unit of government (or, more destructively, when a unit of government takes away from individuals some control of their lives), that unit of government needs resources to discharge the newly-acquired responsibility. A simple illustration of this are fire departments. In much of America, volunteer fire departments still exist. These largely rural communities haven’t consciously chosen to tax themselves in order to transfer this responsibility to their municipal unit of government. Continuing to accept the responsibility themselves, they “pay” for the service of a fire department with their time, energy and “in-kind” contributions (think equipment and the like).

Our financial woes – obscene debt and job-killing taxation – are also a symptom of something else. They are also an effect, one whose cause is an abdication of responsibility; and a lack of self-government is a lack of the cardinal virtue of restraint or temperance.

If you wrestle with our problems and come to a different diagnosis, your first action must be to run your own diagnosis through the cause and effect mill. There are those still today, despite the evidence to the contrary, who insist that the problem with public education is that we need to spend more money on the kids. Similar thinking persons will insist that our financial problems are the result of something else, and probably something they opposed. Never mind that the CBO and the U.S. Office of Management and Budget report that the total cost of the Iraq War was less than the 2009 stimulus bill; people will insist against the evidence that it couldn’t be entitlement growth.

However, if my diagnosis is correct, how does one go about re-kindling this virtue? How can we re-make a society from one that is overly dependent on the nanny state to one that is self-governing? This question is not dissimilar from the old joke about how does one eat an elephant. As the obvious answer goes: one bite at a time.

The work of this organization involves re-igniting that self-government gene. We do it by focusing on these principles and by getting people active in local government. Citizens have a right fundamentally to decide how much external government they want. The best way to hold all units of government accountable is to begin by holding some units of government accountable; and the best way to begin holding some units accountable is to hold a single unit of government accountable. The journey of a thousand miles does indeed begin with a single step.

In 2011, we’re going to continue to recruit volunteers to work with local units of government. We anticipate that some of our volunteers’ efforts won’t be appreciated; we’ll take comfort that shrieks of indignation are generally a good sign we’re on to something. We expect that our volunteers, armed with information, will be able to make great strides in holding local units of government accountable: we hope to see better budgeting, cost-savings and privatization of services to deliver more for less. Those volunteers, with some successes under their belts, will find new areas to focus their attention, and we’ll help them be a success in those areas as well. It remains our belief that there are no shortcuts to this work of restoring American Constitutional government. You have start at the bottom and work like hell, and pretty soon you start to see changes. Once you start treating the problem, you see, the symptoms start to disappear.

I’ll close this first post of the year with a final acknowledgment. There are many people who recognize the symptoms of what ails America, and many of those people desperately want us to be healthy again. In charting a course of treatment, it is incumbent upon us to resist the urge to find a quick fix. There are no super pills that will correct our problems – no great leader can do this work. Not even a new Congress can, because today’s legislation only has a two-year limited guarantee. The malady has taken a long time to establish itself, and it can’t be undone overnight. But slowly, in small ways, and then eventually in grand and surprising ones, we can begin to renew American Constitutional government, and procure prosperity and freedom for ages to come.

In “Waiting, Wondering, Worrying” Randy Myers interviews several corporate executives to assess which way the wind is blowing economically. Some observations are quite good. Most notably, one executive remarks that an economy built on malls and serving lattes isn’t a long-term viable system. In context, the author notes that manufacturing – the historical back bone of the United States and source of a large middle class – is, if not dying, certainly wounded.

Then there are some observations that are ideologically driven and entirely miss the mark. One such observation comes from Dean Baker, the co-director and economist at the Center for Economic Policy and Research. Mr. Baker, among other accolades, wrote a chapter for the book “Thinking Big: Progressive Ideas for a New Era.” He remarks:

“In the ’80s we went in a different direction, with policies that were antithetical to manufacturing, and we deregulated a lot of major industries such as airlines and telecommunications, which put more downward pressure on wages in those industries. In the short term that may benefit companies, but over the long term I don’t think it leads to healthy growth.”

Now there are a number of things that merit discussion in a reasonable debate over economic policy. However, if we’ve been losing manufacturing jobs for the last three decades, and wages have been subject to “downward pressure” in that time, we need to really take a look at what other reasons there are for the loss of these jobs. Fortunately for us all, beyond the obvious “cheap foreign labor” advantage other countries like China have, some corporate execs were kind enough to share with us their view of the major problem. Here’s a picture hint.

Taxing a behavior will discourage that behavior, right?

The United States has a high corporate tax rate – this is a fact. We have the second highest corporate tax rate in the world; please remember that the next time you hear someone bemoaning the greed of American corporations. If Washington politicians had their way it often seems like they’d have us pay the highest corporate tax rates in the world. I’m all for beating the Japanese in the business world, but we really don’t want to beat them in that regard. And why are taxes so high, you may ask? The answer is: we have a responsibility problem. This problem is evident (we can see the symptom) in our entitlement culture. In a world where you can’t be expected to take care of yourself, someone has to, and this isn’t cheap. The resulting tax burden – by the way, what is it called again if I forcibly took your property from you against your will? – crushes innovation and suppresses the power of the U.S. economy. But don’t take my word for it.

“[Our high corporate income tax rate]… has prompted U.S. companies to reinvest overseas much of the money they earn there, rather than repatriate it. John Chambers, CEO of $40 billion computer networking company Cisco Systems, recently said that if his company could bring home the roughly $30 billion it holds in foreign countries without suffering onerous tax consequences, the company would boost hiring in the United States by 10 percent.”

John Chambers isn’t alone in his assessment, but even if he was, he has 30 billion reasons he’s right. Cisco Systems would rather invest overseas because of our tax rates. What the “Thinking Big” crowd and Dean Baker progressive types fail to understand (or fail to acknowledge, given ideology and worldview) is that the whole entitlement scheme is unsustainable and logically results in the United States and pretty much every Western country becoming insolvent and defaulting on its obligations.

The next consequence of irresponsibility? We will eventually have to answer to our creditors.