Liberty | More Liberty - Less Government

What You Should Know about Tax Inversions

October 24, 2014January 28, 2016 George Noga

By: George Noga – October 24, 2014

I had not planned a posting about corporate tax inversions but I am working this in because I believe you will read a perspective herein not to be found anywhere else and, as a CPA, I don’t need to invest a lot of time in research. To begin, a tax inversion is the relocation of a US corporation’s headquarters to a lower tax nation so that it “inverts“, i.e. becomes a foreign corporation for US tax purposes. The US, unique among developed nations, imposes taxes on income earned abroad by American corporations – but the tax is not payable until the income (cash) is repatriated, i.e. returned to the US from abroad. Although there often are crucial non-tax considerations involved in inversions, the main driver usually is avoidance of US tax on income earned abroad and the ability to repatriate such funds.

Because US taxes are not due until the foreign-earned profits are repatriated, US corporations with foreign operations keep the money offshore. For perspective, 75% of US corporations’ cash is kept outside the US – about $2.1 trillion currently. For example, Microsoft has $70 billion but less than $10 billion is in the US. Money held outside the US can’t be used for investment in plant, equipment or training in the US or to hire Americans; instead, it stays abroad.

The Obama administration rails against inversions because they assert it reduces the amount of corporate income tax collected. Bear in mind that most companies currently do not pay the tax anyway – that’s why they keep the $2.1 trillion overseas. Following an inversion however, profits (cash) can be brought back into the US without tax and be used to invest within the US to create new American jobs. The increased productivity from this added investment in capital goods, job training and hiring of new workers helps all Americans and increases their standard of living. Arguably, inversions are a net blessing to America in the long run even if corporate tax collections suffer in the short run.

I return to tax inversions and repatriation infra, but inversions do not exist in a vacuum. They are but one part – and a rather small one at that – of the overall US tax scheme. To put inversions into a proper framework, we must step back, understand what is really going on and look at US tax policy from 30,000 feet.

Getting the Most Feathers from the Geese with the Least Amount of Hissing

As described in the above aphorism from Louis XIV’s finance minister, Jean-Baptiste Colbert, politicians approach taxation as an art form in which they pluck the geese (taxpayers) to get the most feathers with the least hissing. The main alternatives (cutting spending or raising taxes directly) are anathema. Politicians always enact or raise taxes to make everything as opaque as possible to taxpayers. This, of course, is diametrically opposed to the best interests of taxpayers who should want all taxes to be as transparent and direct as possible. The best tax for taxpayers would be a tax on consumption or a flat tax on income with no deductions or exemptions whatsoever.

“Don’t tax me; don’t tax thee; tax the man behind the tree.”

Let’s postulate the US had a flat consumption tax of 19% with no other federal taxes, exemptions, or deductions whatsoever and that 19% tax represented 100% of the revenue to the government. If politicians wanted to increase spending, the only alternative would be to raise the tax rate to 20% or higher. Such a tax increase would be 100% transparent to every American every time he/she purchased anything. Citizens would know the true cost of government and everyone would have an interest in keeping spending under control. The reason we have a corporate income tax (and are now discussing tax inversions) is because it is a tax that takes many feathers from the geese without the geese ever being aware they are missing feathers. This is an important concept and is explained below.

Corporations Never Pay Taxes – Only People Pay Taxes

Wouldn’t it be nice if no homo sapiens ever again paid tax? Only artificial constructs like corporations, with no heartbeat or pulse, would be taxed. This is like the mythical Germanic kingdom where candy grew on trees, lemonade flowed in rivers and the fattest, ugliest and stupidest man was king. Alas, non humans paying tax can’t happen even though politicians would like you to believe it. All taxes always are paid by real, living, breathing people; corporations never have, do not now and never will pay a penny of tax. If the government increases the tax on a company by “say” $1 gazillion, there are three, and only three, possibilities for bearing the burden of the tax.

It is true that businesses may remit tax revenue to the government, but it is not their money; they are simply transmitting funds to the government they have collected from other people. If the business chooses to pay the tax by reducing its profits by $1 gazillion, the owners (stockholders) pay the tax via lower dividends and/or a lower stock price. Most stockholders are ordinary thinking, feeling Americans investing through mutual funds, IRAs or 401(k) plans. Second, the company can cut its costs $1 gazillion; this of course means firing employees – again, very much alive ordinary Americans. Third, the company can increase its prices by $1 gazillion (and this is what happens 90% of the time) meaning consumers, again scient, feeling ordinary Americans, are paying the tax in the form of higher prices.

In reality, unlike in the mythical German kingdom, corporations don’t pay income taxes; there are only real-life human beings paying taxes; but politicians want to beguile you into believing fat-cat corporations are somehow not paying their fair share. Politicians want you to buy into their class warfare canard and they are counting on keeping you ignorant. In reality, the issue of tax inversions is moot and is a contrived tempest-in-a-teapot. Moreover, as observed supra, inversions in the long run may be a net benefit to ordinary Americans as it enables more money to be repatriated which can be used in America for capital investment to increase productivity and to employ more Americans.

Now that we all understand just how inconsequential inversions are, we still are faced with a political issue searching for a solution. The US corporate tax rate is the highest in the world at 35% federal and 6% state for a total of 41%. Everyone, including President Obama, agrees it should be lowered. Everyone also agrees the $2.1 trillion being kept abroad should be repatriated. A reasonable compromise would be to lower the US tax rate to 20% for a combined federal/state rate of 26% even though this still is higher than many countries that are between 12.5% and 20%. This should be combined with a tax holiday for companies to bring home the $2.1 trillion being held offshore by paying a nominal one-time tax. This was done in 2004 and 800 companies participated, repatriating over $300 billion in overseas profits.

In any other time with any other president, a compromise would be easy. However, President Obama, is intransigent; he will only compromise to lower the tax rate and to repatriate the funds if new and highly punitive corporate tax measures are part of the deal. Consequently, nothing will happen while Obama remains president. Inversions will continue; trillions of dollars will remain offshore; and ordinary Americans will suffer the consequences. Obama is banking that these same ordinary Americans will succumb to his anti-business, class warfare narrative that corporations pay tax and that inversions are a manifestation of corporate greed. In short, he is demagoguing the issue to death.

Jury Nullification – Closing Argument to Jury

October 10, 2014January 13, 2016 George Noga

By: George Noga – October 10, 2014

Of all I learned writing this blog, nothing is more crucial to achieving more liberty and less government than the issue of jury nullification, i.e. the idea that juries are sovereign and have the absolute right to vote to acquit for any reason. The right to a jury trial was enshrined in the Constitution and Bill of Rights not solely for the defendant, but for the jury. Nullification is not to be used lightly; but following are 10 specific examples where it may apply.

Laws have proliferated such that honest citizens acting in good faith unknowingly violate laws they never knew, or reasonably should have known, existed or that were so vague as to be meaningless;
The accused never intended to commit a crime and did not have a mens rea – or guilty mind – which formerly was a requirement for charging or convicting citizens;
Victimless crimes;
Laws that shouldn’t exist like Wisconsin’s making it a crime for a farmer to provide raw milk to the owner of the cows he boards even though consuming raw milk is perfectly legal;
Crimes for which the probable sentence (or minimum sentence) is out of proportion;
Disagreement with the law or the way it is being applied; laws only seldom or selectively enforced;
Abuse by police or prosecutors and/or charges that are political in nature;
Overzealous enforcement or profiling – one third of all adults have been arrested as have 40% of males before age 23 – 50% for black males under age 23. This is prima facie unreasonable;
Instances where justice is not being served; and
Matters of conscience.

Although widely sanctioned and practiced in the early years of our republic, today defense attorneys seldom are permitted to raise jury nullification at a trial. It should be permitted throughout our land. Following is the closing argument I would address to a jury if I were the defense attorney in a case that cried out for jury nullification.

Closing Speech to Jury from Defense Attorney

Ladies and gentlemen of the jury: Under our Constitution and common law you, when sitting as a jury, are sovereign. This means you can vote to acquit and thereby nullify the charges against my client for any reason or even for no reason and not be held to account or even asked to explain. You have absolute power including the right to ignore your juror’s oath and the judge’s instructions. This is a sacred right with a lengthy and honorable provenance.

In 1670 William Penn was tried in London for the putative crime of preaching Quakerism. The judge wanted him convicted but the jury refused. The judge then jailed the jury for four days without food, water or toilet facilities; they still refused to convict Penn. Ultimately England’s highest court ruled that a juror’s right to reject law and to vote conscience is traceable to the Magna Carta signed nearly exactly 800 years ago in 1215. Our laws are based on and incorporate English common law which, of course, traces back to Magna Carta and even earlier.

In America, a juror’s right to vote conscience emanates from the Constitution and Bill of Rights. The Constitution provides five separate sources with effective veto power before any law can be used to punish an offender; these are: (1) house of representatives; (2) senate; (3) president; (4) judiciary; and (5) jury. Even Congress passes a law, the president signs it and the courts allow it, the law will not stand if juries such as this one refuse to convict under it.

The right of juries to nullify was well understood by our founding fathers. President John Adams said: “It is not only the juror’s right, but his duty, to find the verdict according to his own best understanding, judgment and conscience, though in direct opposition to the direction of the court.” President Thomas Jefferson said: “Trial by jury is the only anchor by which a government can be held to the principles of its constitution.” The first chief justice, John Jay, stated: “The jury has the right to determine both the law and the facts.” I could continue for a long time with other similar quotes from great Americans, but I believe you already understand.

Jury nullification has a long and glorious history in America; let me tell you about just a few of the many instances where valiant juries have voted their conscience.

The Salem witch trials in 1692 ended for one reason and one reason only: jury nullification. Beginning in 1693 there were 52 consecutive hung juries and/or acquittals and prosecutors ceased bringing new cases.
In the 1760s juries refused to enforce forfeitures under the Navigation Acts. England then restricted jury trials as part of the Intolerable Acts which led directly to the American Revolution.
In the 1850s northern juries began acquitting abolitionists under the Fugitive Slave Laws.
In the 1890s corporations began losing jury verdicts in cases involving the organization of labor unions and strikes resulting in workers winning the right to organize.
Jury nullification played a big role in ending prohibition in the 1930s.
During the Vietnam War, juries acquitted protesters when informed of their sovereign power.
Juries refused to convict admitted consensual sex among adult gays under sodomy laws.
In 2012 an Iowa jury acquitted an “occupy” protester who admittedly violated curfew and trespass laws to remain on the grounds of the statehouse to peacefully protest. Immediately thereafter, 15 others accused under the same laws demanded jury trials.

Ladies and gentlemen of the jury, this case cries out for you to nullify an unjust law. Use your independent life experience, concept of justice, wisdom and beliefs; do not mindlessly follow the judge, other jurors or a bad law. You can and must hang a jury, by yourself if necessary, if your conscience so dictates; you must resist all pressure from other jurors to compromise. Ignore the cost of a retrial. It is your right and your duty.

“A majority is one person with courage.”

History shines upon courageous juries. Remember what your valiant ancestors did for peaceable Quakers, accused witches, fugitive slaves, workers’ rights, war protestors and persecuted homosexuals and do your duty as a sovereign jury. By doing so, other juries will follow suit; even one solitary American citizen voting his or her conscience can overturn an unjust law for a nation of 315 million. Finally, always remember that a majority is one person with courage!

MLLG State of the Union Address

October 1, 2014January 28, 2016 George Noga

By: George Noga – October 1, 2014

My fellow Americans: I begin with first principles. Governments are instituted among men to protect their rights which include life, liberty, property and the pursuit of happiness. Indeed, this is the only legitimate purpose for government. Experience has shown that legally sanctioned force, i.e. government is necessary to secure our rights including defense against foreign threats, protection from domestic violence and enforcement of contracts. Government therefore is a necessary, albeit evil, force that must be tightly controlled and used only for the carefully circumscribed purposes noted supra and then only to the absolute minimum extent necessary.

All of human experience demonstrates free people, free trade and free markets result in the greatest prosperity for all. Government is inherently coercive; it is not about logic, reason or persuasion; it is about brute force including the threat of force. In contrast, civil society is always voluntary and cooperative. No company, no matter how big or powerful, can compel you to buy its product or service. A consumer armed with a free choice is the most powerful force on earth.

The principles identified supra lead to twelve major initiatives I now announce. There is much more to be done; however, this is where we must begin to restore our Constitutional Republic.

The Constitutional Box: We are a government of laws and not men. The identity of those who hold executive, legislative or judicial offices should be of little consequence to citizens provided they act within the confines of the Constitution, i.e. stay inside the Constitutional box. This means shrinking government to its core responsibility of securing our rights and, to a very limited extent, providing infrastructure. Accordingly, we will scale the federal government back to 15% of GDP, a level which empirically is demonstrated to result in the maximum rate of economic growth and hence the maximum well-being for all our citizens.
Free Trade: Wealth and prosperity are created by trade among peoples. Traders take substantial risks and can accrue riches; however, their wealth ultimately depends on improving the lives of their customers. If they fail to make you better off, they do not prosper. Free and unfettered trade is universally good – always and everywhere. For that reason I announce the United States unilaterally will eliminate all tariffs and trade barriers – even if other countries do not reciprocate. We will be better off for that action and those who do not follow will be worse off.
Sound Money: The Federal Reserve will have one mission only: to maintain sound money. This means purchasing power will be maintained, inflation eliminated, and increases in the money supply subject to strict constraints. The Fed will be audited regularly and we will take a hard look at reestablishing a gold standard.
Taxation: As we scale government back to 15% of GDP, taxes can be slashed. I am asking for repeal of the 16th amendment to eliminate the income tax. We also will eliminate the death tax and Social Security/Medicare payroll taxes. These will be replaced by a consumption tax at the lowest rate possible – likely in a single digit. The 60% of Americans who currently pay no income tax (net of credits) will begin to enjoy the dignity that comes with being a taxpayer. Moreover, they will have a personal stake in controlling spending and holding taxes to the absolute minimum. The crisis of spending, debt and deficits will end instantaneously.
Defense and Foreign Affairs: We will follow the admonition of President John Quincy Adams that “America is a friend of freedom everywhere, but a custodian only of our own.” Simultaneously, we will observe George Washington’s advice that “The best way to keep the peace is to be prepared for war.” We will strengthen and then consistently maintain the military for the long term at such a high level as to deter any possibly adversary.
War on Drugs: The war on drugs is over. As we learned with prohibition, the drug war is unwinnable and never should have been fought. Henceforth, all drugs will be legal but regulated, taxed and discouraged just as with tobacco. Drug taxes collected will go solely for rehabilitation of those who continue to abuse them. We immediately will realize benefits including: (a) releasing non-violent drug offenders; (b) ending drug related crime; (c) putting drug cartels out of business; (d) reducing police corruption; (e) refocusing our foreign policy; (f) ensuring safety of drugs; and (g) eliminating drug dealers as role models.
Regulation: All regulations will automatically sunset ratably every 10 years. Congress must enact any that need to be replaced. Any regulations promulgated by bureaucrats that have an economic impact of over $25 million must be voted on and approved by Congress before taking effect.
Role of Juries: Henceforth, defendants (and their attorneys) will have the right to explain to juries that juries are sovereign and, as intended by our nation’s founders, have the final say about the legality and enforcement of all laws. The grand jury system will be reformed to stop prosecutorial abuse and to allow citizen grand juries.
War on Poverty: The war on poverty is finished. The percentage of Americans who, by their own reports, lack a healthy level of food, shelter, clothing or medical care is 2%-3%. This cohort is identical to the 2% to 3% of Americans with very low mental acuity, i.e. those who struggle to fill out a simple form. We will therefore refocus our attention and also our solutions to better deal with the real problem. Even though the percentage in poverty is low, it still equates to 7-8 million of our countrymen to whom we pledge a strong safety net.
Entitlements: Obamacare is to be repealed and replaced with free market solutions. Entitlements will be placed on budget. Social Security gradually and voluntarily will be privatized. In the interim, benefits will be maintained by changing indexing and lengthening eligibility ages. Medicare benefits will be maintained by gradually lengthening eligibility ages and changing to a premium support model; also, medical costs will moderate given real prices. Medicaid will be block granted to the states to administer as they see fit without interference.
Energy/Climate: The Keystone Pipeline will be built and natural gas exported. We will drill and frack in ANWR, offshore and on federal lands – all ASAP. Our national delusion about manmade global warming is over. Warming is a solar phenomenon to which man’s contribution is minimal. We will continue to develop alternative fuels for the future while eliminating subsidies for wind, solar and biofuels. The EPA’s mission will be refocused.
Education: School choice is the civil rights issue of our time. We will move with all deliberate speed to universal school vouchers. We will bring education into the 21st century with technology and by furthering alternatives such as online and home schooling and by creating entirely new paradigms.

Thank you and may God bless the United States of America.

Into the Eye of the Debt Hurricane

September 20, 2014January 28, 2016 George Noga

Update on the Crisis of Spending, Debt and Deficits
By: George Noga – September 20, 2014

By some metrics the debt storm has abated. Compared to earlier deficit projections published herein, the USA is slightly better off, with the difference due entirely to the massive Obama tax increases. The deficit this FY ending September 30 is $500 billion, equal to 3% of GDP; meanwhile GDP is increasing around 2%, meaning the deficit is growing only slightly faster than the economy, a marked improvement. However, great damage already has been done; moreover, we are merely in the eye of the debt hurricane – it may appear sunnier at the moment, but the deficit storm will soon resume with even more ferocity and we will all be blown away.

The Seen and the Unseen

The US economy already has sustained massive body blows. The reason we don’t clearly see the damage is due to the difference between the seen and unseen – or, more to the point, the difference between the reported and unreported.

In past recoveries following major recessions, the US economy has grown by an average of 5% for the subsequent 5 years; this results in a compound growth rate of 27.6%. Instead, we have experienced 2% compound growth yielding only 10.4%. The difference of 17.2% is the growth deficit. Simply, the average American today is 17% worse off than he/she should be; but we don’t see what should be; we only see what is. Nevertheless, the reality is that every American has been impoverished by 17% just during the past 5 years.
We see the increase in federal tax revenue and the concomitant reduction in the deficit. Unseen are the massive tax hikes that produced the revenue. Individual tax brackets increased with the top rate going to 39.6 % – a 13% increase. Investment related taxes were savaged with capital gains rates going from 15% to 23.8% (59% increase) and dividends from 15% to 43.4% (289% increase). Medicare taxes increased 62% and the upper limit was removed. There was a new surtax on investments of 3.8% and the death tax went from zero to 40%. New individual and employer Obamacare taxes took effect along with scores of other Obama tax hikes. The 35% corporate tax rate (world’s highest) is responsible for shifting jobs and investment abroad and businesses keeping $2 trillion overseas. The unseen effects of these massive tax increases will hobble the economy until abnegated.
We can see the reduction in the official unemployment rate; what is unseen is the jobs disaster that is America today. There are 12 million out of work, 12 million on disability and nearly 50 million (one in 5 households) in breadlines – err, on food stamps. The labor force participation rate hit a 35 year low. All (net) jobs being created are part time; there are legions of 29ers and 49ers. The true rate of unemployment is 15%, not the 6.2% reported.
We see Social Security and Medicare meeting their current obligations but we do not see the demographic time bomb looming for both programs. There is nothing on earth as certain as demographics; 77 million more boomers will retire (10,000 every day) and begin Social Security and Medicare. Spending on both these programs will grow by 8% compounded – doubling every 9 years. Within 10 years we will spend our entire budget on entitlements and interest on the debt leaving nothing left over for defense or for the rest of the government.
We see interest rates on federal debt hovering around record lows costing only $225 billion currently. We blissfully do not see what the interest would cost given a return to average interest rates, i.e. interest cost would increase $500 billion per year to $725 billion, or triple today’s cost. And that’s the rosy scenario. This is a no-win situation: keep rates low and the economy is grotesquely distorted and savings and investment are savaged or raise rates where they should be and the budget deficit goes thermonuclear.
We see government regulation exploding, uncertainty rampant and the scepter of Obamacare hanging over all of us like the sword of Damocles. We do not see the stultifying effects of all these on job creation and the economy.

Looking at the gestalt paints a funereal picture. Average Americans already are 17% poorer over the last 5 years than they would have been in a normal economic recovery – and they will continue to get relatively poorer and poorer each year without any end in sight. The tax and regulatory burden, particularly on investment, has skyrocketed, halting new investment and job creation. Behind the “official” 6.2% unemployment rate lays a dystopian jobs nightmare; we are turning into a country of part time workers. We are reaping a demographic whirlwind still in its early stage. We are living on the razor’s edge regarding interest rates; we have a Hobson’s choice: ballooning interest costs or maintaining negative real interest rates. Finally, all this exists within a milieu of hyper-regulation, vast uncertainty and, of course, Obamacare.

Current CBO Projections for Spending, Debt and the Deficit

Recently (July) the CBO released its latest forecast. The CBO alternate baseline forecast (its most realistic) assumed the average middle class family’s tax burden doubles over the coming generation; it also assumed no more recessions, wars, terrorist attacks, natural disasters and that interest rates remain low perpetually. Despite these horrific (taxes doubling) and grossly unrealistic assumptions, the results are disastrous. The deficit increases by over $100 trillion and the CBO stops forecasting because it can’t conceive of a functioning economy under those circumstances. And all this, dear readers, is based on an uber-optimistic forecast; the reality is much, much worse!

We have been grazing on the fiscal commons for a long time; the pasture is about to give out and the spring lambs are doomed to a life of quiet desperation. We can muddle through for a few – perhaps several – years with temporizing and half measures. Soon enough time will run out and the ineluctable tipping point (Minsky Moment) will be reached. It will get ugly for an extended period, i.e. a lost generation., Eventually, when we emerge from the rubble, we may get it right again – only because there are no other choices – and America will again enjoy more liberty and less government!

Why I Write This Blog?

September 10, 2014January 28, 2016 George Noga

By: George Noga – September 10, 2014

This posting marks the beginning of the end. Between now and mid-December I will publish the final MLLG posts. I often have been asked why I have taken the trouble. Why have I spent 1,000 hours writing 300 posts filling 900 pages containing 500,000 words since November 2007? Why have I written fact-based and principled tracts about public policy even though I am unenamored with politics and politicians? This post answers the question: why. In the Federalist, Alexander Hamilton questioned and challenged his fellow Americans thusly:

“Whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend on accident and force.”

If any society of men fails to get its politics right, it affects every aspect of life and life itself. Get politics right and we live our lives in freedom, prosperity and pursuit of our dreams. Get politics wrong and liberty, happiness and property are forfeit and life itself is nasty, brutal and brief. Politics, grubby as it is, is the sine qua non to having a life worth living.

Examples abound of those who got their politics wrong: Hitler’s Germany, Mussolini’s Italy, Imperial Japan, Mao’s China, Pol Pot’s Cambodia and Stalin’s USSR were all black holes where life and liberty were trampled. Today we have,inter alia, Putin’s Russia, the Jongs’ North Korea, the Castro brothers’ Cuba and Mugabe’s Zimbabwe. And don’t forget the entire Arab world, nearly all of Central and South America, Africa and any place ending in “stan”.

If you believe the western world is exempt, think again. WWI was a senseless slaughter with 40 million casualties; its politically inept conclusion led to WWII with its 150 million casualties. This was due to a failure of politics in Europe and also in the USA. In the past century and continuing to the present, “civilized” Europe has experienced 100 genocides, pogroms and ethnic cleansings. Vietnam was a colossal failure of American politics to get it right; it cost 58,220 American lives and 303,644 more wounded. Nor have we learned; we continue to get it wrong right up to this day.

If we don’t get our politics right, our children and our children’s children will live in an Orwellian torpor with their lives, liberty and property constantly at risk because of obeisance to failed ideologies, fantasies, vote buying, political correctness and the never ending and fruitless search for Utopias. Politics is inherently personal. Following are but some of the ways I have been directly harmed throughout my life by our failure to get politics right.

I had no father at home for 4 years during WWII which resulted from government ineptitude in fighting and ending WWI. Father was in Korea, also the result of political blunder, for another year during my childhood.
I received an execrable, pathetic non education in government schools from age 5 to 18.
The Federal Reserve created economic conditions that resulted in severe cycles, bubbles, panics, meltdowns and deep recessions throughout my life continuing to the present.
I was subject to income taxes of over 90%, creating perverse, uneconomic incentives.
It now requires $15,000 to buy what cost $1,000 when I was born due to government currency debasement.
Regulation run amok made owning my business onerous. The regulations, all in the guise of protecting consumers, in actuality, caused them (and me) great harm.
The politically micromanaged Vietnam War disrupted my life for the 6 years I served in the military.
The Fed has brutally devalued a lifetime of hard work via chronic negative real interest rates intended to protect a feckless government from the consequences of its ongoing debt binge.
A torpid, Europesque economy has been imposed, dooming me to economic stagnation instead of robust growth.
The current crisis of spending, debt and deficits ultimately will result in a lost generation.
Our government has recklessly created and/or exacerbated dangerous situations throughout the world by weakening our military and appeasing tyrants. An existential crisis likely will result.
Obamacare death panels will ration and deny medical care and ultimately could kill me.

Due entirely to failed politics I was fatherless for five years and lucky I wasn’t orphaned into a life of poverty. I survived utterly wretched government schools, incessant and severe economic cycles, debilitating inflation, astronomical tax rates and hyper regulation. Vietnam discombobulated my life. And all this was because of a government most consider one of the best extant. And all because we failed to get our politics right.

Now, in my eighth decade of life, our once vibrant economy is riven by government-created anemia. America has transmogrified into sclerotic Europe where men lead lives of quiet desperation. Government has created a crisis of spending, debt and deficits, one consequence being sustained negative real interest rates that savage my decades of prudence. My final indignity is Obamacare; its rationing and death panels may end my life prematurely.

Unfortunately, it doesn’t end with me. Our children and our children’s children are doomed to a much poorer and more dangerous future; they will be a lost generation. They will pay for our debt binge and generational theft with vastly reduced opportunity. They will inhabit a Clockwork Orange world where nuclear arms proliferate in places committed to our destruction and solely because we weakened our defense and kowtowed to tyrants. Our weakness invites terror and slaughter for which they will pay dearly, perhaps with their lives. And all this from a government most consider one of the best extant. And all because we failed to get our politics right.

“The correct answer to Alexander Hamilton’s question may be in the negative.”

As you can see, if we don’t get our politics right, our lives are vastly diminished and trivialized in countless ways; we condemn our progeny to economic stagnation and loss of freedom. Their lives and liberty are at grave risk because we failed to get our politics right. It appears the correct answer to Alexander Hamilton’s question may be in the negative.

I have tried mightily through this blog to show that the answer lies in more liberty and less government. Hopefully, my efforts have given our children’s children that infinitesimally better chance for liberty. And that is my answer to the question: why I write this blog.

Note to readers: I am striving to make the final postings between now and mid-December special as I seek to end my MLLG blog on a high note. I hope you enjoy them.

Why Government is Inherently Evil

May 24, 2014January 21, 2016 George Noga

By: George Noga – May 24, 2014

James Madison in Federalist 51 famously wrote: “In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.” More recently Milton Friedman put it thusly: “How can we keep the government we created (primarily to protect our freedom) from becoming a Frankenstein that will destroy the very freedom we established it to protect?” Very few realize how rare, delicate and fragile are liberty and freedom in the entire history of human experience. Of the estimated 110 billion humans who have ever lived, fewer than 1% have enjoyed liberty.

“Over 99% of humanity has lived only in tyranny and repression.”

The first step in protecting liberty is awareness of just how venal are all forms of power even the lowest. Let’s begin by looking at fraternities, homeowners associations and country clubs. In my college fraternity, elections for officers were corrupted; once elected few voluntarily relinquished power; elections for fraternity sweetheart were fixed; and those in power stole money – all this from a group of brothers.

Homeowners associations are a microcosm of government. Generally, the wrong people run for office and, once elected, abuse their power and transmogrify into power-hungry wannabe dictators. Even a small group of neighbors in the same socio-economic group cannot govern collegially. I once belonged to a club that had a committee for selecting the wines to be served in its restaurants. The committee became as permanent as the Soviet Politburo; new members were precluded from joining; and they instituted frequent parties for themselves to taste new wines. They, of course, needed food to go along with the wine tasting and they expected all this extravagance to be paid by the club. Bottom line: all power corrupts; it is endemic in all organizations beginning with the most basic. It is endemic because it is an inextricable and immutable part of the human condition.

“A government’s maleficence increases exponentially with its size and power.”

The bigger a government, the more corrupt. Local governments in my area have raised corruption to an art form. They find myriad ways to benefit from the public weal, albeit likely without technically violating the law. The schools are abysmal and dominated by (also corrupt) public employee unions. My state government is incapable of fixing a long running property insurance fiasco that threatens to bankrupt it. Our federal government (Amtrak) sells hamburgers for $9.50 to a captive audience and incredibly loses $6.50 each. Not to worry: they will make it up in volume. As to be expected, international organizations are the worst. The UN engages in child rape in Africa and the Nobel Committee admittedly awarded peace prizes solely for vindictiveness to punish Reagan and Bush.

Four Keys to Better Government

Some level of government has proven to be necessary to protect us from outside threats, domestic violence and to enforce contracts and property rights. We face the same dilemma as Madison and Friedman: how do we cede government a legal monoply on the use of force while simultaneously controlling it and making sure it protects (rather than destroys) our liberty? Following are universal truths constant throughout time and space and applicable to all governments:

The first step is understanding and internalizing the truth that power corrupts. Understand that government is inherently evil and requires eternal vigilance to keep it inside its constitutional box.
Because the evil in government is inherent (embedded in human nature), it can’t be eliminated or reformed. Part of the evil manifests itself in widespread waste, fraud and abuse – which also never can be exterminated.
Government maleficence cannot be eliminated, but it can be reduced. The only way is to shrink government, ipso facto creating less evil along with less of its miscegenistic stepchildren: waste, fraud and abuse.
The only way to make government smaller is to take away its money; the less money it has, the less harm it can perpetrate. Nothing else will ever work.

Upon accepting the Nobel Prize in economics, Friedrich Hayek said: “To act on the belief that we possess the knowledge and the power to shape the processes of society to our liking is likely to make us do much harm. . . The recognition of the insuperable limits of (man’s) knowledge ought indeed teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization. “