Monday, April 14, 2008

Growth of the Welfare State

With the tax filing deadline arriving on April 15th, I thought taxes would be an appropriate message for this week’s newsletter.

Our current federal government clearly violates the U.S. Constitution and the ideas of the founders of a limited government with low, indirect taxes. Thomas Pain taught that when government is just, taxes are few.[i] As government has expanded and grown in areas that are unconstitutional, so have taxes expanded and grown to support them. In 1901, the total spending of the federal government was $525 million. In the year 2000, the federal government spent $1.79 trillion. During those 100 years, federal government’s spending has increased by more than 3,000 times, while the population grew by only 6.5 times. Thus, the yearly cost per household increased from $32 in 1901 to $16,949 in 2000—over a 500 time increase in cost per household (see table). Much of this growth has been in welfare spending. Since 1971, more than half of all government spending has been for welfare.[ii]

The government’s future unfunded commitments show that this trend will continue. “By commitments, I mean things like unfunded promises for future Social Security and Medicare benefits. Our total accumulated fiscal burden is more than $46 trillion. . . The new Medicare prescription drug benefit represents more than $8 trillion of this accumulated burden. . . To put things into perspective, $46 trillion translates into a burden of $156,000 for every American alive today, or about $375,000 per full-time worker. . . The combined net worth of every American, including billionaires like Bill Gates and Warren Buffett, is only about $50 trillion. That means every American would have to hand over more than 90 percent of their net worth to cover the government’s current unfunded promises for future spending.”[iii] If this trend is not reserved, we will see the establishment of a complete socialistic government, the end of liberty and the collapse of the economy that will mirror the effects of the great depression.

Growth of the U.S. Federal Government [iv] (Be sure you read this footnote)
Year, Total Spending[v], # of U.S. Households[vi], Yearly Cost Per Household
1901, $525 million, 16 million, $32
1910, $694 million, 20 million, $34
1920, $6.3 billion, 24 million, $260
1930, $3.3 billion, 30 million, $111
1940, $9.5 billion, 35 million, $269
1950, $42.6 billion, 44 million, $977
1960, $92.2 billion, 53 million, $1,746
1970, $195.6 billion, 63 million, $3,112
1980, $590.9 billion, 80 million, $7,351
1990, $1.25 trillion, 92 million, $13,622
2000, $1.79 trillion, 106 million, $16,949

Restoring Freedom
The greatest way to reduce taxes is to reduce the size and scope of government. If the federal government only provided the services authorized by the constitution, the spending and cost to Americans would be a very small fraction of what it is today. If the current trends of government growth and the increase of government redistribution are not reversed, America will no longer be the land of the free and home of the brave, but the land of the slaves and home of the dependants. Action must be taken to freeze the growth and phase out all redistribution programs until the limited government created by the inspired constitution is restored.

The great men and women of this nation must again unite and work and fight for freedom as did our inspired founders. In a speech delivered to some who thought it better to have peace and bondage then fight for freedom, Patrick Henry said, “If we wish to be free . . . we must fight! . . . Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!”[vii] And in the words of George Washington, “We must now determine to be enslaved or free. If we make freedom our choice, we must obtain it by the blessing of Heaven on our united and vigorous efforts.”[viii]

Education is one of the greatest tools we have to fight for liberty. In 1792, Thomas Jefferson wrote to Thomas Paine, “Go on then in doing with your pen what in other times was done with the sword: shew that reformation is more practicable by operating on the mind than on the body of man.” Please share the message of this newsletter with others to help people understand the dangers of growing government our country is facing and the true cause and purpose of inflation. Education will help move our country toward demanding less government and away from a willingness to give up liberty and freedom for government-provided benefits such as health care, prescription drugs and retirement. Slavery is the result of seeking the illusion of government-supported security. Any society that gives up liberty in hope of security will find they lose both. Freedom and security are only to be found in our own liberty, industry, and production.

Special Report: How to Achieve Financial Peace of Mind through Asset Protection
If you have not yet read this complimentary special report, I would suggest that you do so. Taxes are the number one expense for many Americans’. In 2007, Americans worked longer to pay for government (120 days) than they worked for food, clothing and housing combined (105 days). From this report, you will learn “5 Ways to Reduce Your Taxes.” Also, it is estimated that a lawsuit is filed every 30 seconds in the United States. From this report, you will learn “How to Protect Your Assets against Lawsuits.” Click on the Special Report link at to download the report as a PDF.

[i] Thomas Paine, Life and Writings of Thomas Paine, Volume IV, (New York: Vincent Parke and Company, 1908) p. 233
[ii] Social Security Administration, Office of Research, Evaluation and Statistics, “Social Security Programs in the United States,” SSA Publication No. 13–11758, July 1997, p. 108
[iii] David M. Walker, “The Challenges & Opportunities of Public Service,” Marriott Alumni Magazine, Fall 2006, p. 24–25
[iv] The numbers in this table have not been adjusted for inflation because inflation is a hidden tax used by the federal government to fund the welfare programs. In the words of Alan Greenspan, chairman of the Board of Governors of the Federal Reserve of the United States from 1987–2006, “The welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is affected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending . . .to finance welfare expenditures on a large scale. . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists . . . Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth” (Ayn Rand, Capitalism, (New York: Signet, 1967) p. 100–101). The value of the American dollar declined in its purchasing power from 100 cents in 1901 to approximately 5 cents in the year 2000. From 1901–2000, the value of the dollar has been devalued by inflation 95 percent—in effect a 95 percent tax. In the words of Ezra Benson, United States Secretary of Agriculture from 1953–1961, “There is one and only one cause of inflation—expansion of the money supply faster than the growth of the nation’s material assets. Whether those assets are gold and silver, or food, machines and structures, the creation of money more rapidly than the creation of tangible items of value which people may want to purchase, floods the market place with more dollars than goods and dilutes the accepted value of money already in existence. In America, only the federal government can increase the money supply. Only government can create inflation. The most common method of increasing the money supply today is by spending more than is in the treasury, and then merely printing extra money to make up the difference. Technically this is called ‘deficit spending.’ Ethically, it is counterfeiting. Morally, it is wrong. Deficit spending, and the inflation it produces, constitutes a hidden tax against all Americans—especially those who own insurance policies, have savings accounts, or who are retired on fixed incomes. Every time the dollar drops another penny in value, it is the same as if the government had counted up all the money that you and I had in our pockets, in savings, or investments, and then taxed us one cent on each dollar. The tax in this case, however, does not show up on our W-2 forms. It is hidden from view in the nature of higher and still higher prices for all that we buy.” Even if the numbers in the table were adjusted for inflation it does not change the trend of increased government spending and cost per household. Adjusted for inflation, from 1901–2000 the spending of the federal government increased by 174 times while population grew by 6.5 times. Thus, the yearly cost per household increased from $627 ($32 adjusted for inflation to 2000 equivalent) in 1901 to $16,949 in 2000—a 27 time increase in cost per household.
[v] Executive Office of the President of the United States, Office of Management and Budget, “Budget of the United States Government, Fiscal Year 2004, Historical Tables,” Table 1.1: Summary of Receipts, Outlays and Surpluses or Deficits: 1789–2008, p. 21–22
[vi] U.S. Bureau of the Census, “Historical Statistics of the United States, Colonial Time to 1970,” (Washington, DC, 1975) p. 43; U.S. Department of Transportation, Federal Highway Administration, Exhibit 1.1 National Summary Statistics: 1960–2000
[vii] Orations of American Orators, (New York: Colonial Press, 1900) p. 59
[viii] Jared Sparks, The Writings of George Washington, Volume IV, (Boston: Ferdinand Andrews, 1838) p. 38

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