“Sanitary Fairs” sprung up spontaneously around the country and served Union soldiers traveling to or from the front. All-volunteer in nature, these were places of caring, rest, sustenance and all were born out of a patriotic sentiment and gratitude to the Union troops.

President Lincoln, The Great Emancipator

The shepherd drives the wolf from the sheep’s throat, for which the sheep thanks the shepherd as a liberator, while the wolf denounces him for the same act as the destroyer of liberty… Plainly the sheep and the wolf are not agreed upon a definition of the word liberty…

And how are things this morning in America? People will gather today to decry the taking of their property in the form of taxation, and nearly half of America will shake their heads and say that they can’t believe these Tea Party people are real. The people present at these Tea Parties, for their part, can hardly believe that recently in Wisconsin, public union employees were protesting, rallying, and decrying the “oppressive” actions of their government, whose objective was something as tyrannical as balancing their budget. Here we find ourselves.

We may yet have a long way to go. I recently heard a Congresswoman speaking before a group of Republicans, and her over-riding theme was that there are no easy answers with the budget; governing is hard work; it is difficult to find places to cut spending; and we have to govern. As a public service, I would respectfully submit the following to you, for your unattributed use, should you ever hear such a sentiment uttered.

We have district boards of education that manage the affairs of our district’s schools. We have county-wide regional superintendents of schools. We have state Boards of Education. We have a federal Department of Education. Now this last agency keeps growing and getting bigger, but are you aware of the degree? The measure of a company’s assets in excess of its liabilities is called its net worth, and the USDOE has a net worth of $87.6 billion; that is money that has been taken from Americans in taxes and built up, over time. This agency (you can see their annual report for yourself) spent $99.6 billion in 2010. If we’re challenged on where to cut expenditures, $100 billion a year plus the $87 billion in the bank is a good place to start. Let the states fund their educational systems however they please.

Indeed, we may have a long way to go. We’re as divided as we’ve been in a long time. Finding common ground will be a challenge, but our alternative – a bleak, acrimonious future of debt and failure – is not much of an alternative. If you attend a Tea Party, enjoy yourself, but remember that shouting and rallying only accomplishes so much. At some point, we need to get engaged and begin to take back the high ground in our relationship with government at all levels. At some point, we need to speak to all Americans on the serious Republic-threatening risks before us.

We may not ever come up with a definition of liberty that all people can agree upon, but it is worth trying.

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.

In “No Taxation Without Ramifications“, Marie Leone notes that with Japan’s planned 5% reduction in corporate tax rates, the United States will have the dubious distinction of having the highest corporate tax rates in the world. While our federal government is contemplating tax rate cuts, the divided nature of political control in Washington D.C. will ensure that cuts in tax rates are net-neutral to the government, likely by eliminating tax credits or other “loopholes.”

Q: Why are our tax rates so high? A: They have to be.

Difficult to admit, but we created it.

Let’s imagine for a minute that the government in Washington D.C. was divorced from the truly domestic matters of the lives of Americans; and that, consistent with its intended purpose and founding charter, it focused on strictly defined national issues best addressed by a national government. Taxation would be radically different than it is today. States, or even “smaller” units of government, would have the dominant interaction with citizens, and would be the dominant taxers. National matters, like war, would be addressed as they have been in the past (think War Bonds in World War II). Citizens would have more attachment to their entire form of government at all levels because their entire form of government at all levels would be more respectful of them. There would be a right ordering of that relationship – government serving the people.

High levels of taxation result in discouraging certain behaviors. As a society, we tax cigarettes, alcohol, and gasoline, among other things, because we want to discourage their use or consumption. When we have the highest tax rates in the world, we discourage corporate investment, job creation, and innovation. Discouraging these behaviors and activities is counterproductive and damaging in the long-term.

In an earlier post entitled “Cause and Effect“, we offered the following prescription for our tax/entitlement/government problems:

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 the coming year, we’re going to begin touting the stories of our activists who are working every day to hold government accountable. If you, or someone you know wants to get involved, or has such a story, drop me a line and share it.

$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.