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NOTE The Revolution of 1913

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Okay, the topic for today, or this morning, is what I call the revolution of 1913 and combining economics and history again, and then this afternoon I'm going to talk about antitrust and the history of antitrust.

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And in 1913 is an interesting year in terms of economics and liberty,

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Because in that one year, we had the creation of the Federal Reserve Bank,

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the 16th Amendment that created the income tax finally,

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and the 17th Amendment, which created the system of the direct election of United States Senators.

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Prior to that, Senators were appointed by state legislatures.

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And I want to explain why that was profoundly important.

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And there was also, I've wrote on the screen here, antitrust will run amok, but I'm going to talk about antitrust this afternoon, so I'm not going to really get into that now, but that was stepped up also at the same time, and so this was, you know, shortly after Woodrow Wilson was elected president, and so I'm going to talk about what I think is the significance of these things and make some generalizations

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and then we'll do the usual, take questions and answers later. Now let's start with the

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17th Amendment. This is something that hardly anybody ever thought about, I think most students

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or even faculty who come here and talk about political economy, but the original system

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In the United States, under the Constitution, senators were appointed by state legislators

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and they were very clear of why they were doing that and I'll quote Roger Sherman, one

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of the early founders, in a letter to John Adams, President John Adams, eventually became

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president, as to why they were doing this, why they were not electing senators and having

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the state legislatures appoint them and he said this, the senators being dependent on

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on State Legislatures for Re-election will be vigilant in supporting their rights against infringement by the legislative or executive of the United States.

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So they saw this as an extra protection against the usurpation by the central government.

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They saw, you know, we need to be protected from the legislature and the nation's capital.

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We need to protect ourselves against the president, the executive, they didn't mention the Supreme Court here, but our, that is, we the citizens, our ability to appoint our senators via legislators, they thought would be a help in protecting against infringement of their liberties by the central government, different branches of the central government.

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Today, of course, you'll have the Senator from Alabama will head straight to New York City and Hollywood to raise money for his reelection campaign.

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And so what that means is that he is mostly beholding to the people who gave him money on Wall Street or in California much more than the average schmuck here in Auburn, Alabama.

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Not that they're all schmucks in Auburn, Alabama like him, right? For example, right there.

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And so, and that is exactly the kind of thing that they anticipated would happen with the direct election of senators, and they thought that they would be less likely to act against the interests of the people in their home states if they owed their job to the people who were elected by the people back in the home state directly, the state legislature. That was the idea anyway.

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Alexander Hamilton said, quote, the election of senators by legislatures was an absolute safeguard.

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George Mason, George Mason was known for more than having the name of a basketball team, believe it or not.

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He was author of the Virginia Bill of Rights, which is said to be the model of the Bill of Rights in the Constitution.

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The Election of Senators by Legislatures gives the states some means of defending themselves against encroachments of the national government.

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This was a practical mechanism of divided sovereignty that I talked about yesterday.

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They theorized about divided sovereignty, but this is where the rubber hit the road, so to speak.

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This is one of the vehicles which they intended to use to implement divided sovereignty, states' rights in other words, for the people of the states to protect them against these tyrants in the nation's capital.

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Fisher Ames said, senators are ambassadors of the states.

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of States, James Madison in the Federalist Papers, number 62, said this, the appointment

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of senators by state legislatures gives to state governments such an agency in the formation

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of the federal government as much secure the authority of the former.

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And he also said, Madison also said that the enumeration of power, you know, the Constitution

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as the Article 1, Section 8 says, these are the legitimate functions that the Congress can spend tax dollars on, about 18 different things that are listed there.

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And, you know, a lot of conservatives are always pointing to this, that if only we would enforce Article 1, Section 8, we'd get government back to its original size.

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Well, the founders never thought that this would be magically enforced.

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Even Madison himself said the mere enumeration of powers would never be sufficient.

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He said, as these were mere parchment barriers, he called them parchment barriers, mere paper.

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He said structural arrangements were necessary, that is, there has to be some mechanism for

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the people to stop the explosion of the central government beyond its bounds in Article 1,

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Section 8.

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And this is one of the vehicles.

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It wasn't just educating the public about the Constitution.

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And also what state legislators did is they instructed their senators how to vote.

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So they would take orders from back home on how to vote and the very first instruction

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they were given is vote in public because when the United States Senate first convened

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these guys all got together and said well let's go behind closed doors and talk about

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this.

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The people back home were alarmed immediately at that, and they said, no, no, the votes have to be in public and made public.

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And so that was the first instruction that was actually given to the United States Senate out there.

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And when I mentioned the Kentucky and Virginia Resolve yesterday, those were the work of state legislators.

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The ideas that were embedded in the Kentucky Resolve of 1798 authored by Thomas Jefferson,

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That was the work of the Kentucky State Legislature, which instructed its senators to promote this view in the nation's capital.

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And the same with Virginia and other states that did similar things.

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You know, and I mentioned also the opposition to the Bank of the United States.

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That was the state legislatures instructing their senators to vote against the Bank of the United States.

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That's how this happened. That's how Andrew Jackson was able to veto the rechartering of the Bank of the United States and not have his veto overturned by the Senate.

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The Senate took their, some of the Senate, enough of the Senate took their advice and their instructions from the people.

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In fact, the United States Senate did have a majority vote to censor Andrew Jackson for vetoing the re-chartering of this central bank, the Bank of the United States.

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But you know, you need a qualified majority to overturn a veto. You need more than just a 51% majority for that.

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And they weren't able to do that. But after that, after the United States censored Andrew Jackson for being opposed to central banking,

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Several southern states instructed their senators to vote against the censure.

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They didn't. They went up to the nation's capital, and they kind of liked all the power and the prestige and everything,

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and they wanted to get along, they wanted to cut deals.

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So they voted to censure Andrew Jackson, and all seven of them were recalled and fired by the state legislatures.

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They immediately said, you're out of here.

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And so that's a clear example of the intention of what occurred before the 17th Amendment, the appointment of senators.

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Because the people in the states, they didn't like this corrupt bank. They were on Andrew Jackson's side.

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But I forget who it was, some conservative commentator said a few years ago that conservatives who get elected to politics,

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Before they're in politics, they complain about what a swamp Washington, D.C. is, but then once they get there, they kind of think of it more like a hot tub.

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They kind of like it. And that's nothing new. It apparently has always been true. Once you get there, they kind of like it.

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What's not to like? Taking bribes can be fun and games for everybody.

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And so that's a good example. So the founders, they never believed that you could rely on the Supreme Court to protect the rights of the citizens of the states.

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And another forgotten part of American history is the Anti-Federalists. In many of their ideas I've been talking about the last couple of days, I just haven't identified them as Anti-Federalists.

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Federalists, but a lot of these essays were written under pseudonyms and one of them was Brutus, and he commented on this, on the appointment of senators.

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He said this, it would never be in the self-interest of the court, that is the Supreme Court, to strike down federal laws trenching on the inviolable and residuary sovereignty of the states,

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in the United States, because every extension of power of the general legislature, meaning the central government, as well as of the judicial powers of the central government, will increase the powers of the courts, end quote.

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And he also said that it would increase the court's remuneration, it would increase what the federal judges get paid.

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If you have a more and more powerful central government with more and more responsibilities it'll be easier to make the case that we need better people, we need to pay them more.

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Just the opposite of the great old H.L. Mencken who once said in one of his essays that politicians should be paid next to nothing.

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Don't encourage them with money.

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And this argument was never refuted during the time when the Anti-Federalists were debating over the Constitution here.

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And so these are some of the reasons why we originally had the appointment of United States Senators and not the direct election.

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And of course the 17th Amendment came in 1913, this all ended, and we had direct democracy.

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and you know among the reasons I wrote a little syllogism here down as an

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explanation maybe I'll share with you so why this came about let's see what I do

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with my paper well I'll just say it on the papers way over there can't read you

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the syllogism is democracy leads to corruption and plunder that's point

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number one point number two is everyone knows this the conclusion is therefore

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or We Need More Democracy.

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That seems to be what happened, and I'm going to explain what I mean by this.

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What happened was there was a law in 1866, as soon as the war to prevent southern independence

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was over, that mandated, a federal law mandated how the state legislatures were to appoint

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their senators.

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So right away, when states' rights had been all but abolished by Lincoln's war, they went

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The right to work, it's snuffing out any remnants of states' rights, and one of the very first

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things they did is to say, well, yeah, you're appointing your senators to come to Washington,

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D.C., but we're going to tell you how to do it.

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You can't decide for yourselves how to appoint these senators.

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And so the central government forced the states to first take a voice vote in each house on

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and the candidates and then a concurrent vote would be taken of both houses if there wasn't

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an overwhelming choice by a voice vote and so that was how they were instructed to do

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it by their new dictator, the President of the United States and the United States Congress

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and what happened was the voice vote revealed information about voting preferences and it

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And it gave the minority an idea of who the opposition was and what they had to do to

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defeat the opposition, who they had to bribe, who they had to threaten to change their vote

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and so forth.

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And so the voice votes were often inconclusive, they couldn't tell, but it did give the people

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there on the floor listening to the voices an idea of who the opposition was.

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And so they typically then went to work politicking to get their preferred candidate in, and this

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This involved a great deal of bribery.

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What else would it involve?

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That's politics.

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And so sometimes the bribery would go on and on and on for months, sometimes years.

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And so as a result, there were some states that would go for a long period of time without

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two senators because the state legislatures were busy haggling over how to choose a senator.

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This didn't happen before.

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This was a result of the new set of rules imposed by the central government.

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And so that was democracy, supposedly.

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That was the new form of democracy.

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This is how we're going to do it.

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We're going to tell you how to choose this.

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And so all the bribery led to calls for reform.

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We need more democracy to put an end to all the bribery.

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And so that was one of the main arguments for having the direct election of senators.

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Don't let the state legislatures do it anymore.

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They take too long, they haggle, look at all the bribery going on, but that was all a direct

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result of this law in 1866 that came.

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They didn't have this dilemma prior to that.

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And there's a congressman named James Blaine who commented on this aspect of it, of how

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Prior to the war, every power was withheld from the national government, which could

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be, by any possibility, be exercised by the state governments.

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After the war, it was believed that everything which may be done by either nation or state

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may be better done and more securely done by the nation.

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And so one of the legacies of the Civil War is this idea that the central government is a master problem solver.

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If there's any kind of problem, they'll solve it. Look what they did with the war.

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And another force, I guess, was progressivism and populism, which made a god of democracy.

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As Hans Hoppe will tell you, if you read his book, Democracy, the God that Failed, they really did make a god out of democracy.

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and this came and I of course blame it all on Lincoln when he said that the war

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was fought for about government of the people by the people democracy that's

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what he was claiming that was sort of the first step and then when he was made

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a god his ideas were made were deified also and I think that was the first step

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along the way of this is a worshiping of democracy and of course the American

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founders if you read James Madison and Federalist number 10 he says the whole

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The whole purpose of the Constitution is to block democracy, you know, we want as little democracy as possible here.

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He said he called it the violence of faction, but democracy is what he's talking about.

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But this had totally changed by the late 19th century, and the democracy was being deified by everybody.

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And there are relatively few scholars who have actually written about this.

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A pretty good book on this by Ralph Rossum, R-O-S-S-U-M, on the 17th Amendment.

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It has a lot of great references, very scholarly.

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Another scholar is Todd Zywicky, Z-Y-W-I-C-K-I, Todd Zywicky.

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He had an article in the Cleveland State Law Review in 1997, and I'm going to quote one line.

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And he said this, the ratchet effect of federal intervention persisting after the dissipation

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of a crisis, which purportedly spawned it, was absent from American history until 1913.

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So he was saying that beginning around 1913 with the 17th Amendment, if there was some

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kind of a crisis, like a war that led to a ratcheting up of government, he said prior

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Prior to that, the government tended to recede a great deal, almost back to where it was.

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But he's arguing, and he has some data there to back up what he was saying, is that after

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1913, because of this glorification of democracy, once government power was ratcheted up during

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the emergency, a war or a deep recession, whatever it might have been, it tended to

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keep ratcheting and keep going up and up and up.

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And he blames the 17th Amendment on that.

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He Blames the Boon to Democracy that was created by the 17th Amendment.

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And so anyway, I was asked yesterday, what can we do practically to move in a direction

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of freedom?

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Abolishing the 17th Amendment would be a good thing, I think, getting rid of that.

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Now the bank, the Fed.

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Most of you have read a good bit about the Fed, and if you read Mises.org, you've read

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a lot about the Fed and central banking and so I was thinking what I would have to do in terms of talking about this this aspect of the revolution is to give you a little historical background about the fight for a central bank that I'm guessing a lot of you may not be that terribly familiar with but it does start in with the Whigs the Whig Party and Lincoln I've mentioned the last couple of days

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National Banking, a tariff and corporate welfare was what defined the Whigs and

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then later the Republicans and but to emphasize how important a central bank

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was it always was along with a protectionist tariff central bank was

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the thing because this is how the Whigs and then later the Republicans thought

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they would be in power forever if we could print money what a what a

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brilliant idea if we could just counterfeit then we could buy as many

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There's a very scholarly and very gigantic book called The Rise and Fall of the American

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Whig Party by Michael Holt, who's a historian at the University of Virginia, and talking

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about Lincoln himself, he said, you know, Lincoln crisscrossed the state of Illinois

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ardently and eloquently defending Whig programs like a national bank.

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He says few people in the party were so committed to its economic agenda as Lincoln.

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An economist named Richard Timberlake, who's a friend of the Austrian School, he's a Chicago School economist, but he's mostly friendly toward the eye, he's had some debates with the Austrians over monetary policy, but he's basically a pretty solid free market guy, Richard Timberlake, and he wrote a treatise called The Monetary Policy of the United States, sort of his life's work, he taught monetary theory at the University of Georgia for many years.

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To the Whigs, a national bank was their life, the vital principle without which they could

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not live as a party, the power which was to give them power.

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To lose it was to lose the fruits of the election with the prospect of losing the party itself.

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And so they certainly, that's why people like Lincoln, who was a Whig longer than he was

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a Republican, fought tooth and nail in the political trenches for decades over this.

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And one of the best books on the story of Andrew Jackson that I keep bringing up is

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by Robert Remini.

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Robert Remini is a well-known biographer, he's written biographies of a lot of famous

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This political figure is spelled R-E-M-I-N-I, Robert Vemini, and it's Andrew Jackson and

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the Bank War is the title of this book, and it's kind of interesting to read what people

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like Andrew Jackson said about central banking, and Jackson thought it was, quote, the instrument

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of the swindler and the cheat, sounds just like Murray Rothbard, doesn't it, if you ever

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read Murray's writings on the bank.

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Timberlake himself talks about this, Jackson and the Bank of the United States, and he

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explains why it was that so many of the people of the states back in Ohio and elsewhere were

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distrustful of this bank.

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And here's what Timberlake says, he says, the states were properly jealous and fearful

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of encroachment by the federal government, since a central bank would necessarily be

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be a federal bank and would maintain and operate state branches from a distant center. Proponents

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of states' rights found opposition to a national bank almost mandatory. And so they thought

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that no good could come from this bank run by politicians in Washington, D.C. or Philadelphia

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or wherever the capital happened to be at the time. But we got the bank. It was Alexander

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Hamilton's baby. And it was chartered for a period of years and then it had to be re-chartered

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by the Congress and voted by the President too.

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That's how it came to be unchartered in the 1830s.

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But the first, one reason why people were always suspicious

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of a central bank run by politicians

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in the nation's capital was the very first President

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of the Bank of the United States.

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You know, Alexander Hamilton wrote this big report

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making the case for a central bank.

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He presented it to George Washington and Thomas Jefferson argued against it to George Washington

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and Hamilton won the argument. There were all these big arguments. So who gets appointed to be the

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first president of this bank that Hamilton went through all this trouble and all this scholarship

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and everything? Well, it was a man named William Jones who was a U.S. Navy captain who had no

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banking experience at all and who had just gone personally bankrupt, but he was politically

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The Great Jefferson and the Great Hamilton and George Washington contemplating this for months and months and months, who do they point, some jackass who just went bankrupt, who knew nothing about banking?

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Well, you know, that might be the perfect candidate for a job like this, because if you want to be a politician who is really the controller of the bank, that's who you want.

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you want. You want a loser who owes everything to you appointing him in this job. He could

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never get a better job than that. He could never make more money than that. So therefore

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the politicians were really in charge of the bank, not ostensibly the political appointee.

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He's the kind of guy. FDR did the same thing. They appointed the head of the Fed as somebody

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And anyway, Murray Rothbard, his doctoral dissertation was The Panic of 1819, and he blames Jones for creating the panic of 1819 through his misguided monetary policies.

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So right from the very beginning of central banking, long before there was a Fed, this was almost a hundred years before the Fed came into being, a central bank was creating a boom and bust cycle.

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The second president was a man named Nicholas Biddle, and he was a highly skilled politician, among other things, and he was distrusted by the opponents of centralized governmental power just as well.

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Andrew Jackson's Treasury Secretary was Roger B. Taney, who would later be the Supreme Court Justice, who I talked about yesterday and who John Denson talked about yesterday.

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And Tawny, when he was Treasury Secretary, complained of this bank's corrupting influence

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and its patronage greater than that of the government.

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And what was he talking about?

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Well, they just had to observe what was going on.

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Henry Clay, who was a huge proponent of the bank, Lincoln's idol, his role model, Henry

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Clay accumulated about $40,000 in personal debt by 1822.

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And so that's a lot of debt. In 1822, $40,000 in debt, that's a lot of credit card debt

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today, $40,000. And so he needed to resign from Congress to work to make money to pay

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off this gigantic debt, $40,000, probably well over a million dollars in today's money

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easily, maybe a couple of million. And so how did he propose to make this money? Well,

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He became the general counsel to the Bank of the United States.

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He became the lawyer for the Bank of the United States.

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And after a mere two years, he made enough, his biographer, one of his biographers, a man

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named Maurice Baxter, wrote this.

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The amount he made apparently amounted to what he needed to pay off his personal debts.

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So he made a lot of money, not just in salary, but all sorts of inside deals that were orchestrated

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Daniel Webster, another big proponent of the bank, he didn't bother resigning from Congress in order to support the bank. He just demanded bribes.

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He didn't say, I'm going to resign from Congress and then you give me a job and I'll make a lot of money. He just demanded bribes.

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There's a letter that he wrote to Nicholas Biddle saying this, as a member of Congress.

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He says, he demanded a retainer if it be wished that my relation to the bank should be continued, end quote.

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So as a member of Congress, he said, if my relation to the bank, that is a proponent of the bank in Congress,

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if you wish this to be continued, I need a retainer.

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So back in those days, I guess politicians were a little more explicit than they are today about demanding bribes.

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It's all sort of hidden today, but they were explicit back there.

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And Biddle proved Andrew Jackson and all the critics of central banking right with his behavior.

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During the 1828 national election, he spent more than $100,000 on all the bank's deposits.

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These were deposits of tax revenues from American taxpayers.

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That's what funded the bank, tax dollars.

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$100,000 in support of Andrew Jackson's political opponents.

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So he literally financed the campaign of Andrew Jackson's political opponents.

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He promised Bank of the United States money to friendly politicians to spend on their

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internal improvement projects in their states, you know, vote for the bank and against Jackson.

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And he reprinted all of Henry Clay's speeches in support of the bank at taxpayers' expense.

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And so just proving all these people right.

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They were corrupt, you know, the use of tax dollars for...

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Thomas Jefferson once, and I've quoted him a thousand times

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in different publications from the Virginia Statute

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of Religious Liberty saying that to compel a man

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to pay for a political cause with which he disagrees

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is sinful and tyrannical.

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And Jefferson certainly would have thought

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that this would be sinful and tyrannical.

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Jefferson was referring to a state-sponsored religion,

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but to have the government use tax dollars

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to subsidize one side of a political debate

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certainly is tyrannical.

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I don't know about sinful, you have to ask somebody else

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about that, I'm a heathen,

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so I don't know about those things.

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And so anyway, it did end temporarily.

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Jackson won the battle,

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I'm not gonna repeat that story again.

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And then in his place was something called

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the Independent Treasury System,

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where the only recognizable money was gold and silver coins and all currency was redeemable on demand in gold and silver.

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And so Richard Timberlake in his book says this was probably the best monetary system America had ever had consistent with the gold standard up to that point and beyond that point.

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And Jeffrey Hummel, in his book, Emancipating Slaves and Slaving Free Men, which talks a lot about these economic issues, says the same thing, that this was probably the most stable economic system we had, certainly in the 19th century, and that lasted until the Lincoln administration.

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So we had this kind of solid money, sound money, but the Whigs and then the Republicans were the champions of fiat money and they were opposed to money that was backed or redeemable by gold and silver for obvious reasons.

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They wanted a printing press to be able to print money, to buy votes and keep themselves in power indefinitely, especially buying votes by distributing money here and there across the nation for internal improvements, railroad subsidies, canal building subsidies, whatever would be beneficial to them.

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And one funny story about Lincoln himself that I'll tell you is that when he was in the state legislature, there was a bill that had passed that would go into law January 1st, and what the bill would say was that the currency within the state of Illinois had to be redeemable in gold or silver.

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So they were moving back to sound money, okay, and the Whigs were desperate to do something to have this law not go into effect, and so they had to put an end to the legislature, they had to vote that we were done with our business, it was the end of the year, and they had to do this, and so they could move on, this would become law, and Lincoln was desperate for any tactic, and so he gathered up the Whigs and bolted for the door so that they couldn't vote

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to End the Session of the Legislature, and apparently the rules said if the session was still in progress, this legislation would still be pending, it wouldn't become law, and so the door was locked and under armed guard, and this story is told by David Donald in his biography of Lincoln, and so Lincoln, the only other alternative he had was to jump out the window, which he did, he jumped out a second story window and all the other wings followed him out the window,

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The legislature, after that, called him a leaping Lincoln and his flying brethren, because it ultimately didn't work, the law came into effect, but that's sort of a silly story that illustrates his devotion to the cause, I think, and he made some long-winded speeches in favor of the bank and against the independent treasury system and denouncing the redeemability of currency in gold and silver. And to understand what this means,

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And there's a great quote in Murray Rothbard's book, What Has Government Done to Our Money,

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and about this idea of not being able to redeem currency in gold and silver.

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Okay, here's what Murray said, the bluntest way for government to foster inflation is

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to grant banks the special privilege of refusing to pay their obligations while yet continuing

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in their operation.

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While everyone else must pay their debts or go bankrupt, the banks are permitted to refuse

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redemption of their receipts, at the same time forcing their own debtors to pay when

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their loans fall due.

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The usual name for this is a suspension of specie payment.

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That's what Lincoln was for and the Whigs and the Republicans.

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A more accurate name would be, quote, license for theft.

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Or what else can we call a government permission to continue business without fulfilling one's

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contract?

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So there's a license for theft, and of course the Fed multiplied this a thousand times over.

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So this independent treasury system foiled the plans of the Whigs, but they finally prevailed

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during the Lincoln administration.

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On February 25th, 1862, the Legal Tender Act empowered the Secretary of Treasury to

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The issue of paper money greenbacks that was not immediately redeemable in gold and silver.

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Then came the Currency Acts of 1863 and 1864 that created nationally chartered banks and

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at the same time they put a 10% tax on state chartered banks to drive them out of business

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and because if there was going to be counterfeiting they wanted the central government to have

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a monopoly in counterfeiting and this was the origin of the Secret Service also.

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The Secret Service was set up to police the state chartered banks against counterfeiting

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to assure a monopoly and counterfeiting by the central bank, by the central government.

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And so this was a big victory, and this was not 1913 yet, but this was a big step along

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the way to 1913 and the creation of the Fed.

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And what Murray Rothbard had to say about this particular episode is that, in this way,

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the Republican Party, which inherited the Whig admiration for paper money and governmental

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control and sponsorship of inflationary banking, was able to implant the soft money tradition

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permanently in the American system.

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So it was implanted, so to speak.

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And then after that came a 50-year crusade to establish a total central monopoly in banking.

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There was still too much competition, too much redeemability in gold and silver, which

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was allowed after the war was over.

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And so there was this big crusade for the Fed, which of course was finally achieved

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in 1913.

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But I'll just read one or two more quotes here to illustrate the proponents of the central

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bank and what they hope to achieve with the central bank in terms of comments on what

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happened during the Lincoln administration.

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Senator John Sherman, whose name is on the Sherman Antitrust Act, was the brother of

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General William Tecumseh Sherman.

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He was the chairman of the Senate Finance Committee during the 1860s, the mid-1860s.

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And he said this about the bank, the National Currency Act.

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He said that the Republican Party's objective was, quote, to nationalize as much as possible

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even the currency so as to make men love their country before their states.

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All private interests, all local interests, all banking interests, the interests of individuals,

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everything should be subordinate now to the interests of the government, end quote.

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That was always the objective, so that is exactly what Jefferson and Jackson and the rest always knew and always feared that this was what a bank would do, a central bank would do, would make the citizens of the states subordinate to the central government.

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That's why they were opposed to it. They didn't want that. That's tyranny. But they got it in the 1860s.

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The New York Times editorialized on March 9th, 1863 by saying this,

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The Legal Tender Act and the National Currency Bill crystallized a centralization of power,

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such as Hamilton might have eulogized as magnificence.

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And then there's a woman named Heather Cox Richardson who wrote a book on domestic legislation during the Civil War,

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so-called, called The Greatest Nation on the Earth.

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She looked at all this big government legislation, high tariff, central banking, and says, greatest nation on the earth. They did all these things.

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And she points out that even by that time, by the 1860s, the Republican Party, they weren't just only pork barrel politicians who wanted a central bank to finance pork.

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They also were imperialists, they wanted the US government to be able to finance imperialistic ventures, they were talking about trying to conquer Canada, Ulysses S. Grant wanted to conquer Santo Domingo, Cuba, there was always talk about China, going to China, as far as that goes, Mexico, Grant was itching to invade Mexico at the end of the Civil War, they had troops down there in Texas, they wanted to keep on going, in fact the British were terrified,

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and here's what Richardson says, she says, by 1863 the Republicans envisioned a dominant international role for a unified American government.

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They thought that since they had traded with the Confederate government a great deal all during the war, they were fearful that this army would then sail across the Atlantic and attack England in revenge for the War of 1812,

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burn down number 10 Downing Street and things like that. They were seriously concerned about that.

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and here's what Richardson says she says by 1863 the Republicans envisioned a dominant international role for a unified American nation and Sherman, Senator Sherman, promised that the bank bill with its implicit strengthening of the national government would advance that goal so they always saw this as advancing that goal but it still wasn't quite as powerful as the Fed was when the Fed came along it really did create an ironclad monopoly

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and the Creation of Money, and it's not just an accident that the Fed came along in 1913

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and then the United States entered World War I a few years later.

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I really don't think the United States would have been capable of financing its entry into World War I

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without the Fed, and certainly not without the Fed and the income tax, which came in the same year.

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So this was all a part of the plan, in my view.

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The book I mentioned to you yesterday by Jim Powell, Wilson's War, he does make a compelling

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case that had the Americans not entered World War I, there may not have been a World War

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II, because it strengthened the hand of the Russian Communists as well as the Versailles

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Treaty leading to Hitler in Germany, and so I recommend the book very highly.

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He has another book coming out in a couple of months on Teddy Roosevelt, it's called

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Bully Boy, about Teddy Roosevelt, but anyway. So I'm not going to say much more about the

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Fed. Most of the people here have read about the Fed. Other than that, it was the second

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plank in the revolution of 1913, the 17th Amendment of the Fed. Now the income tax,

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the first income tax was, anybody know under whose administration we had the first income tax?

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Lincoln, during the war, income tax was put in place, and it was ended several years later,

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but it was the first income tax, and it started out as a flat tax, but then it was quickly

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turned to a progressive tax, and as far as I know, this may be where the ability to pay

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principle was first popularized, if not invented, it was first popularized, that is, the people

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The people with more money should pay a higher rate of tax than people who earn less money.

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And I call it the Willie Sutton Principle of Taxation.

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Anybody know who Willie Sutton was?

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He's kind of a famous, and sort of a folklore, an American folklore, he was a bank robber.

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And the part of the folklore is Willie got caught after robbing a bunch of banks and

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was asked, Willie, why did you rob all those banks?

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And he said, well, that's where all the money is.

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That's why I rob those banks.

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So the so-called ability-to-pay principle that sounds kind of scholarly and sober, the ability-to-pay principle, it's a principle.

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And it's in all the public finance textbooks. But it's essentially the Willie Sutton principle.

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Why do we tax people with more money? Because that's where the money is.

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That's who make more money. We tax people with more income because that's where the money is.

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Why would we rob a poor man when we could rob a rich man instead?

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It doesn't make any sense.

387
00:42:46.180 --> 00:42:50.180
And so that was first introduced when we had a slightly progressive tax.

388
00:42:50.180 --> 00:42:52.680
The rates were like three and five percent.

389
00:42:52.680 --> 00:42:56.180
They even introduced a version of withholding during the Lincoln administration.

390
00:42:56.180 --> 00:43:01.680
It only applied to corporations, not individuals, and they didn't raise much money.

391
00:43:01.680 --> 00:43:07.180
But they did introduce the idea of withholding taxes during the administration.

392
00:43:07.180 --> 00:43:19.260
and then it became defunct, it was 1877 I think, but it was sort of like giving somebody,

393
00:43:19.260 --> 00:43:24.980
giving a pot smoker a couple of good jolts of heroin, he sort of came to like it and

394
00:43:24.980 --> 00:43:31.660
want more of it and so a lot of people got addicted to his income tax, special interests

395
00:43:31.660 --> 00:43:36.620
especially like the income tax. They could fund all their their income transfers.

396
00:43:36.620 --> 00:43:43.980
And so that spawned a decades-long crusade to put the income tax in permanently.

397
00:43:44.540 --> 00:43:49.100
And they almost did it in the 1880s when Grover Cleveland was president, but he

398
00:43:49.100 --> 00:43:55.420
successfully fought it off. And as an interesting side effect of the whole tariff issue,

399
00:43:55.420 --> 00:43:59.340
you know, after the the war to prevent southern independence, as I mentioned, the

400
00:43:59.340 --> 00:44:05.500
Average tariff rate in America was wavered between 40 and 50 percent, extremely high,

401
00:44:05.500 --> 00:44:11.420
and that just killed the American farmers, disproportionately harmed the American farmers,

402
00:44:11.420 --> 00:44:16.300
and so they became a natural constituency for the income tax because they thought the income tax

403
00:44:16.300 --> 00:44:22.940
would take some of the burden off of them in terms of tariffs being the primary way of financing the

404
00:44:22.940 --> 00:44:24.620
of the U.S. Government.

405
00:44:24.620 --> 00:44:27.380
And so, we did get the income tax.

406
00:44:27.380 --> 00:44:32.380
That was sort of the deal that was struck.

407
00:44:32.540 --> 00:44:36.340
We'll have an income tax and a lower tariff.

408
00:44:37.520 --> 00:44:39.880
But that lasted for a while.

409
00:44:39.880 --> 00:44:42.640
The income tax came in finally in 1913.

410
00:44:43.500 --> 00:44:48.380
They did drop the tariff, but by 19, what was it, 22?

411
00:44:48.380 --> 00:44:50.540
I think it was 1922.

412
00:44:50.540 --> 00:45:00.540
The Fordney-McCumber tariff, the average tariff rate was raised back up to about 33% again.

413
00:45:00.540 --> 00:45:08.540
And then by 1929, the Smoot-Hawley tariff raised the average tariff rate up to around 60% from the 60% range.

414
00:45:08.540 --> 00:45:10.540
So it was a classic bait and switch.

415
00:45:10.540 --> 00:45:17.540
We'll cut the tariff rate and if you vote for the income tax, they voted for the income tax, tariff rate shot right back up.

416
00:45:17.540 --> 00:45:28.820
And this table I handed out to you, over here, this is taken from Bob Higgs's book, Crisis in Leviathan, where he has a section of a chapter on the origins of the income tax.

417
00:45:30.100 --> 00:45:39.020
There was also a big bait and switch that happened there too. The argument was, well, this is only going to apply to the very wealthy people, the Ted Kennedys of the world.

418
00:45:39.020 --> 00:45:43.460
I don't think they actually said Ted Kennedy back then, but it was only wealthy people.

419
00:45:43.460 --> 00:45:56.460
The first bracket was 1% and you had to earn $20,000 originally to be in the 1% tax bracket and back in 1913 $20,000 was a huge amount of income for most people.

420
00:45:56.460 --> 00:46:04.460
The top bracket was only 7% and you had to earn half a million a year in 1913 to be in the top bracket of 7%.

421
00:46:04.460 --> 00:46:34.460
by 1916, the top bracket edged up to 15%. And then by 1917, it was 67%, went up to 77% by 1918. That, of course, is to help finance World War I. And then even after the war was long over, by 1928, the top bracket still went down to only 25%. It didn't go down anywhere near back to 7%. And, and also the first bracket, the top bracket,

422
00:46:34.460 --> 00:46:39.940
You know, it went from $20,000 to be eligible to pay income tax down to $4,000.

423
00:46:39.940 --> 00:46:45.100
Now all of a sudden, anybody who made $4,000 was paying the federal income tax.

424
00:46:45.100 --> 00:46:52.780
And so that was sort of a big bait-and-switch game also, promising a low tax rate,

425
00:46:52.780 --> 00:46:58.300
only the other, the rich people are going to pay most of it, okay, we're going to reduce your tariffs.

426
00:46:58.300 --> 00:47:01.380
Good deal. Turned out to be not so good.

427
00:47:01.380 --> 00:47:13.140
and of course that it destroyed any restraint that there might have been on military interventionism

428
00:47:13.140 --> 00:47:17.220
in World War I because it provided the financing vehicle.

429
00:47:17.220 --> 00:47:23.420
And I'm going to close with a couple of statements on the significance of the income tax by Frank

430
00:47:23.420 --> 00:47:24.420
Chataroff.

431
00:47:24.420 --> 00:47:29.620
I mentioned a few times this excellent little book called The Income Tax, Root of All Evil

432
00:47:29.620 --> 00:47:42.620
and Charteroff really had a way of putting things straight. He said, let's see, where is this?

433
00:47:42.620 --> 00:47:51.580
About the income tax, he said, the income tax amendment puts no limit on governmental

434
00:47:51.580 --> 00:47:57.820
confiscation. The government can, under the law, take everything the citizen earns, even to the

435
00:47:57.820 --> 00:48:15.820
Whichever way you turn this amendment, you come up with the fact that it gives government a prior lean on all the property produced by its subjects.

436
00:48:15.820 --> 00:48:23.820
In short, when this amendment became part of the Constitution in 1913, the absolute right of private property in the United States was violated.

437
00:48:23.820 --> 00:48:26.820
That, of course, is the essence of socialism.

438
00:48:26.820 --> 00:48:29.820
And that certainly is true of the income tax.

439
00:48:29.820 --> 00:48:34.620
The implicit assumption is that the government owns all of your income.

440
00:48:34.620 --> 00:48:39.420
And by setting the rate and the exemptions and so forth,

441
00:48:39.420 --> 00:48:43.620
it tells you how much of your income that you earned that you may keep.

442
00:48:43.620 --> 00:48:49.020
But we're all at the mercy of the politicians telling us how much of our income we may keep.

443
00:48:49.020 --> 00:48:52.120
The American founders were dead opposed to an income tax.

444
00:48:52.120 --> 00:48:54.920
There was no such income tax at all.

445
00:48:54.920 --> 00:49:01.920
The 16th Amendment corroded the American concept of natural rights, ultimately reduced the American citizen to a status of subject, so much so that he is not aware of it.

446
00:49:24.920 --> 00:49:34.920
It enhanced executive power to the point of reducing Congress to inocuity, I assume that means neutered,

447
00:49:34.920 --> 00:49:41.920
and enabled the central government to bribe the states, once independent units, into subservience.

448
00:49:41.920 --> 00:49:47.920
So in other words, he's saying that was the final nail in the coffin of states' rights, the income tax.

449
00:49:47.920 --> 00:49:51.920
No kingship in the history of the world ever exercised more power than our presidency,

450
00:50:21.920 --> 00:50:34.920
So that's why I think this was a revolutionary year. I'm not the first one to say this, but it's one of those parts of economic history that is sometimes overlooked or praised.

451
00:50:34.920 --> 00:50:41.920
One of the books I've read on the history of the income tax by an author named Weissman, he gives the standard line.

452
00:50:41.920 --> 00:50:49.920
If you were to go and dig up over the Auburn Library a half a dozen books, if you could find a half a dozen books on the history of income taxation,

453
00:50:49.920 --> 00:50:58.920
And I would bet they would all say the same thing, essentially, that thank God we got the income tax in 1913, otherwise we would not have been able to get into World War I.

454
00:50:58.920 --> 00:51:05.920
And what a disaster that would have been if we wouldn't have been able to do that, and we wouldn't have had the New Deal and all these things.

455
00:51:05.920 --> 00:51:10.920
And of course, most people here would think that that's just the opposite.

456
00:51:10.920 --> 00:51:14.920
And so that's why it's a revolution, and that's about all I wanted to say for now.

457
00:51:14.920 --> 00:51:20.920
And I welcome your brilliant questions and comments, as usual, about anything.

458
00:51:22.920 --> 00:51:30.920
What was the economic logic originally used for a central bank?

459
00:51:31.920 --> 00:51:42.920
Well, Hamilton, a central bank, he was a nationalist, and even today's proponents

460
00:51:42.920 --> 00:52:12.920
of the Central Bank, and even today's defenders of Hamilton. There are some relatively new books out about Hamilton biographies and they talk about the whole bank controversy, and he wanted the ability to create money to pursue national objectives, whatever those might be, especially military, and he talked a lot about defensive military objectives, that if a war were to come, he advocated a standing army, and they needed money to finance it.

461
00:52:12.920 --> 00:52:13.760
and the Standing Army.

462
00:52:13.760 --> 00:52:16.400
You couldn't rely on contributions from the states

463
00:52:16.400 --> 00:52:17.880
to have a Standing Army.

464
00:52:17.880 --> 00:52:19.800
Jefferson and others were dead set

465
00:52:19.800 --> 00:52:21.720
against the Standing Army.

466
00:52:21.720 --> 00:52:25.600
The US Constitution only allows for a Standing Army

467
00:52:25.600 --> 00:52:28.260
for two years, and then it has to be disbanded

468
00:52:28.260 --> 00:52:30.880
or the law has to be renewed.

469
00:52:30.880 --> 00:52:34.780
And so this was all partly part of the debate

470
00:52:34.780 --> 00:52:37.740
over a Standing Army, that he wanted a central bank

471
00:52:37.740 --> 00:52:41.360
to be able to finance this, a depository of tax revenues

472
00:52:41.360 --> 00:53:11.320
that can be used by politicians to spend on whatever they want them to issue and to borrow money and another thing, Hamilton on public credit on debt, government debt, the reason he gave for a government going into debt or a government selling bonds to raise money to be put into his bank was he wanted to tie the affluent and wealthy people of the country to the government.

473
00:53:11.320 --> 00:53:23.320
He wanted them to vote for and to support the government, because they had to, because if they owned these government bonds, they wanted the government to be able to pay them off, pay them back in their interest and principle.

474
00:53:23.320 --> 00:53:29.320
And so he was very explicit in that he wanted the wealthy people of the country to be statists.

475
00:53:29.320 --> 00:53:35.320
And how could you make them become statists rather than being like Thomas Jefferson, his nemesis?

476
00:53:35.320 --> 00:53:38.320
He was a wealthy landowner who wasn't a statist.

477
00:53:38.320 --> 00:53:45.760
Well, if his financial self-interest was wrapped up in a growing state, in a more activist state,

478
00:53:45.760 --> 00:53:48.880
he would be bribed into becoming a statist.

479
00:53:48.880 --> 00:53:54.560
And that was basically, that's a paraphrasing of Hamilton's position, but that was his position.

480
00:53:54.560 --> 00:53:58.880
And I think he thought a central bank would be instrumental in issuing debt like this,

481
00:53:58.880 --> 00:54:04.240
and tying the money elite, if you will, or even the money masses, you know,

482
00:54:04.240 --> 00:54:07.560
and has to be an elitist to the government.

483
00:54:07.560 --> 00:54:09.640
And that's the whole debate between Hamilton

484
00:54:09.640 --> 00:54:13.800
and Jefferson ultimately is do we have a highly centralized

485
00:54:13.800 --> 00:54:15.840
and activist government or the opposite?

486
00:54:15.840 --> 00:54:17.320
Do we have a highly decentralized

487
00:54:17.320 --> 00:54:19.520
and not very activist government,

488
00:54:19.520 --> 00:54:22.480
one that will just protect live liberties and properties

489
00:54:22.480 --> 00:54:23.440
and that's it?

490
00:54:23.440 --> 00:54:25.720
Hamilton wanted much more.

491
00:54:25.720 --> 00:54:29.440
He wanted a permanent president too,

492
00:54:29.440 --> 00:54:32.920
which I would call a dictator of some sort,

493
00:54:32.920 --> 00:54:57.920
You can read his report if you're serious about some scholarship there. There's a little book called Hamilton's Reports. All his arguments are right there. It's not very big. It's about this big. It's like three reports. He did one on public credit, one on manufacturers, and one on the bank in particular, the central bank in particular.

494
00:54:57.920 --> 00:55:07.920
Well, I don't know what prompted that, you know, Ludwig von Mises and Zell Miller's resolution on how to deal with that.

495
00:55:07.920 --> 00:55:16.920
But I wondered if there had been any serious interference in the United States in terms of what the costs are.

496
00:55:16.920 --> 00:55:39.920
Well yeah, that's a good point. Zell Miller did propose a resolution to abolish the 17th Amendment, and I've written an article or two on the web, and Bruce Bartlett has written about it, and he has a syndicated column, he supported it at the time, but I don't think anything else has come of that.

497
00:55:39.920 --> 00:55:48.920
Well, there is, you know, if you go on the Internet, you could find, there's an abolish the 17th Amendment group.

498
00:55:48.920 --> 00:55:52.920
But I don't know who they are or how big they are, but I found it on the Internet.

499
00:55:52.920 --> 00:55:59.920
And the literature is very good, and their literature explains the history of the 17th Amendment and so forth.

500
00:55:59.920 --> 00:56:02.920
But I don't know, I don't know who they are. So there is some kind of a movement.

501
00:56:02.920 --> 00:56:08.920
If you do a little bit of searching, you could find them and see what they're about.

502
00:56:08.920 --> 00:56:17.680
Since this was so highly celebrated by statists, it would certainly be a good step in the right

503
00:56:17.680 --> 00:56:28.480
direction of reversing things in the United States, especially, not as good as secession.

504
00:56:28.480 --> 00:56:33.720
My ultimate plan is to break the country up into seven or eight different republics and

505
00:56:33.720 --> 00:56:37.960
then whittle away at all those republics so that we can have maybe 300 million republics.

506
00:56:37.960 --> 00:56:50.620
No, the movement by the government is a question that we cannot answer. We're not like the opposition.

507
00:56:50.620 --> 00:56:55.720
No, the movement by the government is a question that we cannot answer. We're not like the opposition.

508
00:57:07.960 --> 00:57:20.960
nd the central bank. The banking industry itself was a part of this whole cartel, if you will, that wanted the central bank.

509
00:57:20.960 --> 00:57:32.960
In fact, the Mises Institute had a conference on a Fed in Jekyll Island, Georgia some years ago, and that's where the Fed was created.

510
00:57:32.960 --> 00:58:02.960
and we actually went in the room that had all sort of the pictures of all the men who were there at the time plotting to get the government to adopt the Federal Reserve Bank and it has a big plaque, these men were indispensable in creating the Federal Reserve Act of 1913 and it was like mugshot after mugshot after mugshot and they were almost exclusively New York bankers and Wall Street bankers and so they wanted the Fed and so we went down

511
00:58:02.960 --> 00:58:09.960
and the Fed Bashing Conference in the belly of the beast, where it was created.

512
00:58:09.960 --> 00:58:12.960
And so that was a big part of the constituency.

513
00:58:12.960 --> 00:58:17.960
Murray Rothbard has written about this in his books on the Fed.

514
00:58:17.960 --> 00:58:24.960
It would be very easy to dig up the whole story with a cast of characters of who wanted the Fed.

515
00:58:24.960 --> 00:58:29.960
And there were also always, politicians always understood that this would be,

516
00:58:29.960 --> 00:58:44.960
Having a counterfeit operation would be an easy way to keep yourself in political power from day one, Hamilton, beginning with Hamilton, to Clay, to Lincoln, to Woodrow Wilson, and all the rest.

517
00:58:44.960 --> 00:58:48.960
Right down the line. Yes sir, I think that is him.

518
00:58:48.960 --> 00:58:53.960
Is it occasionally risky thinking about the rampant pace of politics at 16 million?

519
00:58:53.960 --> 00:58:54.460
Yeah.

520
00:58:54.460 --> 00:58:57.960
A little bit about that and have heard that it might not have been a...

521
00:58:57.960 --> 00:59:06.960
Yeah, usually if I bring this up in an audience of, a libertarian audience, there will be somebody who will stand up and say that

522
00:59:06.960 --> 00:59:13.960
I've been researching this for 57 years and I have an ironclad argument that the 16th Amendment is unconstitutional

523
00:59:13.960 --> 00:59:15.960
and that we do not have to pay income tax.

524
00:59:15.960 --> 00:59:21.960
and you can't argue with these people because they know that you don't have to pay the income tax

525
00:59:21.960 --> 00:59:28.960
and nothing you say can persuade them otherwise and they have been studying this for 57, maybe 157 years.

526
00:59:28.960 --> 00:59:36.960
That's the way they talk anyway, but I'm not a legal scholar, I've never looked into all these legal arguments

527
00:59:36.960 --> 00:59:40.960
but I've heard these people say these things, but I think it's bunk.

528
00:59:40.960 --> 00:59:48.960
The fact is the government has enough guns with which to enforce the income tax, therefore you must pay the income tax.

529
00:59:48.960 --> 00:59:54.960
And so there's this guy, Erwin Schiff, I think he might have passed away recently.

530
00:59:54.960 --> 01:00:00.960
He spent his whole life writing books saying it's unconstitutional, you don't have to pay the income tax.

531
01:00:00.960 --> 01:00:03.960
And he didn't pay the income tax. Then he went to prison.

532
01:00:03.960 --> 01:00:07.960
While in prison he would write another book saying you don't have to pay the income tax.

533
01:00:07.960 --> 01:00:37.960
Hey, get out of prison, wouldn't pay the income tax, go back to prison, write another book, spend his whole life doing that, and it just seems to me the people that say these things are crackpots, they're lunatics, I mean, even if they have what sounds like a logical argument, the government has the force to make us pay, so you have to pay, and that's what government is about. But I'm not schooled in all these arguments because I think it's a waste of time to become schooled in all these arguments, but I've heard long recitations

534
01:00:37.960 --> 01:01:00.960
You don't have to pay the income tax, but it just seems like a big waste of time to me to even entertain the thought as though the federal, the Supreme Court would ever say, oh, you know you're right, and outlaw the income tax, that would never happen, you know, elephants will fly out of my ears before that happens.

535
01:01:00.960 --> 01:01:11.960
I was told that the 50th Amendment was passed in very shady circumstances, all kinds of things, or from the physical presence at the time.

536
01:01:13.960 --> 01:01:19.960
I was told it was like a North Mountain one day, and basically like a holiday was passed on.

537
01:01:30.960 --> 01:01:39.960
I said that doesn't really mean anything in my opinion, that it's been in effect all these years and the government has the guns with which to make us pay.

538
01:01:39.960 --> 01:01:47.960
In one of my MBA classes, I made a statement once that the government actually literally has the right to kill you if you refuse to pay the income tax.

539
01:01:47.960 --> 01:01:53.960
And they thought I was crazy. But if you think about it, what if you do refuse to pay the income tax? What will happen?

540
01:01:53.960 --> 01:01:59.680
Well, they'll put a lien on your property, and then they'll have to take your property,

541
01:01:59.680 --> 01:02:04.200
your house, let's say, at some point, and then what happens if they come to take your

542
01:02:04.200 --> 01:02:06.200
house and you resist?

543
01:02:06.200 --> 01:02:07.440
You don't want them to take your house.

544
01:02:07.440 --> 01:02:12.600
Well, they will send armed federal marshals out there to get you out of your house.

545
01:02:12.600 --> 01:02:16.120
And if you resist, you know, could end up in a gunfight, and they would have the right

546
01:02:16.120 --> 01:02:20.880
to shoot you if you resist them taking your house to pay the income tax.

547
01:02:20.880 --> 01:02:23.080
That has happened and it could happen.

548
01:02:23.080 --> 01:02:30.200
And so, you have to pay the income tax, regardless of how, if there are any minor technicalities

549
01:02:30.200 --> 01:02:33.760
that were occurred in the passing of the income tax.

550
01:02:33.760 --> 01:02:38.920
The 14th Amendment is the same thing, the 14th Amendment was never legally passed, but

551
01:02:38.920 --> 01:02:39.920
that doesn't really matter.

552
01:02:39.920 --> 01:02:45.800
It's the 14th Amendment, it's enshrined into law, it doesn't really matter.

553
01:02:45.800 --> 01:02:53.680
The southern states were kicked out of the Union and forced to ratify the 14th Amendment

554
01:02:53.680 --> 01:02:56.360
as a condition of re-entering the Union.

555
01:02:56.360 --> 01:02:59.640
So after fighting a war to save the Union, the first thing the U.S. government did was

556
01:02:59.640 --> 01:03:06.640
to break up the Union to get this passed, and it never was fully ratified because Ohio

557
01:03:06.640 --> 01:03:14.800
and Oregon rescinded their ratification as a protest against this tyrannical act of

558
01:03:14.800 --> 01:03:22.800
the extortion of telling the southern states, you can't come back into the Union unless you ratify the 14th Amendment.

559
01:03:22.800 --> 01:03:30.800
So once Ohio and Oregon withdrew their ratification, it didn't get the sufficient number of states to ratify.

560
01:03:30.800 --> 01:03:37.800
But then the US Senate simply declared it ratified. They said, that doesn't matter. We think it's ratified. It's enough.

561
01:03:37.800 --> 01:03:42.800
We're two votes short, but that's close enough. And so it's been like that ever since.

562
01:03:42.800 --> 01:03:48.800
And so a lot of the libertarians who are champions of the 14th Amendment never seem to mention this.

563
01:03:48.800 --> 01:03:53.800
They're also champions of the proper procedure for putting into place laws like this.

564
01:03:53.800 --> 01:03:57.800
But it's a real problem with them because there wasn't a proper procedure.

565
01:03:57.800 --> 01:03:59.800
They never was legally ratified.

566
01:03:59.800 --> 01:04:02.800
But again, it doesn't matter.

567
01:04:02.800 --> 01:04:08.800
The government has the guns to declare the 14th Amendment also.

568
01:04:08.800 --> 01:04:15.800
How was Nicholas Fiddle politically connected such that he received the presidency of the bank?

569
01:04:38.800 --> 01:04:46.300
Right across the street from the 9-11 site, there's a little church there. I was there about a year ago and his grave was there.

570
01:04:46.300 --> 01:04:55.300
I stood over it for about 10 minutes and there was no movement, so I felt safe and I could move on somewhere else.

571
01:04:55.300 --> 01:05:05.300
But it was a church that had all charred and giant molting chunks of iron fell on some of the graves there.

572
01:05:05.300 --> 01:05:30.300
How was the first contact after the expansion of the 99? When was the first time you discussed it in the U.S. or in the United States?

573
01:05:35.300 --> 01:05:43.940
I was in the Lincoln administration, but when the Constitution came in, they were all dead

574
01:05:43.940 --> 01:05:45.860
set against a direct tax like that.

575
01:05:45.860 --> 01:05:51.820
That was actually enshrined in the Constitution, and any taxes were to be apportioned among

576
01:05:51.820 --> 01:06:00.420
the states according to population, and all we had was tariffs and excise taxes.

577
01:06:00.420 --> 01:06:05.500
And then after the Whiskey Rebellion, Jefferson said that he thought even the excise taxes

578
01:06:05.500 --> 01:06:11.660
was a bad idea, that they made a mistake and they shouldn't allow even that in the Constitution.

579
01:06:11.660 --> 01:06:16.940
So just from my reading of U.S. history at the very beginning, pretty much everyone understood

580
01:06:16.940 --> 01:06:20.540
that this was a bad idea to do this.

581
01:06:20.540 --> 01:06:26.460
And I don't know if there were, I can't, I don't know of any calls for income taxation

582
01:06:26.460 --> 01:06:56.460
before that because you know socialism didn't really come around as a prominent ideological force in the eye of the public until what the 1840s and 50s in Europe the communist manifesto was 1848 and so but I think once these ideas of all socialists have always advocated income taxation Karl Marx especially so there probably were some discussions after 1848 and in the US by

583
01:06:56.460 --> 01:07:00.940
Socialists who thought this was a good idea to have an income tax because like the quotation

584
01:07:00.940 --> 01:07:07.980
from Charterhouse's book says that this is essentially an abolition of the principle

585
01:07:07.980 --> 01:07:13.460
of private property. It essentially says the government lays claim to all your property

586
01:07:13.460 --> 01:07:18.420
in terms of your income anyway and will tell you how much of that property you get to keep

587
01:07:18.420 --> 01:07:22.780
for yourself. So it's a major blow against private property and that has always been

588
01:07:22.780 --> 01:07:29.080
and the top priority of socialists, hasn't it, the communist manifesto itself has a big

589
01:07:29.080 --> 01:07:34.180
bold letter, the abolition of private property, that's our agenda, and the income taxation

590
01:07:34.180 --> 01:07:39.020
was always one of their top vehicle for doing that.

591
01:07:39.020 --> 01:07:44.780
So I can't remember reading anything before the Lincoln administration, and of course

592
01:07:44.780 --> 01:07:52.260
after that socialism gained a lot of sway, and so there were a lot of arguments for the

593
01:07:52.260 --> 01:07:57.380
Income Tax, once it was in place temporarily. A good research topic for

594
01:07:57.380 --> 01:08:02.340
summer interns, the history of the American. There are, I often look up this

595
01:08:02.340 --> 01:08:07.340
book by Weisman on history of the income tax, maybe he has something about that,

596
01:08:07.340 --> 01:08:13.620
but I think, I'm pretty sure he starts at the Civil War in that book.

597
01:08:22.260 --> 01:08:32.260
Well, maybe the proposals put out by well-meaning people might not have bait and switch in them.

598
01:08:32.260 --> 01:08:38.260
But that is the nature of government, that if we had a flat tax put in, what's going to happen?

599
01:08:38.260 --> 01:08:44.260
If they say we'll have a flat tax of 20%, it'll be 25%, 30%, 40%, 40%.

600
01:08:44.260 --> 01:08:51.260
The next emergency that we have, whether it's a real emergency or not, will be used to justify raising the rate.

601
01:08:51.260 --> 01:09:21.260
So that's probably what would happen, just like the income tax, they'll say this has all these virtues, let's have this, and then it changes immediately to something different than what they had, but it all seems to me it's kind of rearranging the chairs on the Titanic, because the ultimate tax is government spending, because that determines how many resources will be taken out of the private sector one way or another, and it doesn't really matter that much whether it's a flat tax or a semi flat tax,

602
01:09:21.260 --> 01:09:32.260
The government is going to take our property from us to fund its unlimited appetite for spending.

603
01:09:32.260 --> 01:09:41.260
You can make some arguments that a flat tax has a little more advantage than a progressive tax in certain ways,

604
01:09:41.260 --> 01:09:47.260
but ultimately it's spending that is the ultimate tax and regulation that is the ultimate tax.

605
01:09:47.260 --> 01:09:51.580
and so and so as long as nothing is done about that I don't think it really

606
01:09:51.580 --> 01:09:56.020
matters that much you're only you're not even tinkering on the margins you're

607
01:09:56.020 --> 01:10:01.220
flicking at the margins and patting yourself on the back who's the guy Neil

608
01:10:01.220 --> 01:10:05.100
Bortz is he the guy who wrote the book he promotes it on his one his radio show

609
01:10:05.100 --> 01:10:09.860
and sells a million copies and it's not gonna have any effect even if they put

610
01:10:09.860 --> 01:10:15.500
it into place it won't be a good effect the flat tax politicians ideally would

611
01:10:15.500 --> 01:10:30.020
I've been saying to a few people in private conversations is that the whole way of thinking

612
01:10:30.020 --> 01:10:40.720
by reformers like this is to assume that we've got this centralized monster ruling over us

613
01:10:40.720 --> 01:10:47.440
and we always will and we always necessarily will have this and so our only hope is to try to move

614
01:10:47.440 --> 01:10:55.760
the monster to the right with a flat tax or term limits or you know elect Newt Gingrich or

615
01:10:55.760 --> 01:11:01.760
something like that but a different way of thinking is the devolution of power to strip the central

616
01:11:01.760 --> 01:11:06.960
government from power and what government functions you have move them closer to the people

617
01:11:06.960 --> 01:11:13.160
that way, that sort of vertical thinking as opposed to left and right horizontal thinking.

618
01:11:13.160 --> 01:11:17.680
And I think once you think about these things that way, then I think the focus ought to

619
01:11:17.680 --> 01:11:23.640
be more on such things as abolishing the 17th Amendment and the 14th Amendment for that

620
01:11:23.640 --> 01:11:29.480
matter and returning the power to the citizens as opposed to Washington, D.C.

621
01:11:29.480 --> 01:11:34.840
And so that all these reforms really are just sort of minor, trivial little attempts to

622
01:11:34.840 --> 01:11:37.600
to nudge the government to the right a little bit.

623
01:11:37.600 --> 01:11:40.440
And they might do that every once in a while.

624
01:11:40.440 --> 01:11:42.040
But we haven't had much success.

625
01:11:42.040 --> 01:11:46.160
The Reagan Revolution certainly didn't nudge things much.

626
01:11:46.160 --> 01:11:49.040
There were a few successes for about two years.

627
01:11:49.040 --> 01:11:52.400
And then that was over.

628
01:11:52.400 --> 01:11:57.360
You people, most of you are too young to remember firsthand

629
01:11:57.360 --> 01:12:02.680
the revolution of 1994, the Republican Revolution of 1994.

630
01:12:02.680 --> 01:12:04.560
And boy, what a revolution that was.

631
01:12:04.560 --> 01:12:11.560
Well, they really reversed the trend of government, didn't they, electing all those Republicans, ending up with George W. Bush?

632
01:12:11.560 --> 01:12:15.560
Well, somebody else had a hand up?

633
01:12:15.560 --> 01:12:33.560
Well, the 16th Amendment is, I call it the slavery amendment, because it really does make us all slaves.

634
01:12:33.560 --> 01:12:39.560
and if you're against slavery, you ought to be against the 16th Amendmental Income Taxation in general.

635
01:12:39.560 --> 01:12:46.560
Well, some years ago, Howard Phillips, who runs the conservative caucus in Washington, DC,

636
01:12:46.560 --> 01:12:52.560
he asked me and another author to write two reports for his organization,

637
01:12:52.560 --> 01:12:59.560
and the other author wrote a long paper on what government spending would be

638
01:12:59.560 --> 01:13:02.560
if the government actually did stick to its constitutional functions.

639
01:13:02.560 --> 01:13:07.760
Functions, then he asked me to write a paper about how to finance that, assuming we're

640
01:13:07.760 --> 01:13:13.240
going to have government in doing these things, how to finance it, and I basically said go

641
01:13:13.240 --> 01:13:18.680
back to the original design of tariffs, of revenue tariffs and a few excise taxes that

642
01:13:18.680 --> 01:13:24.480
will be perfectly enough to finance the constitutional functions of government.

643
01:13:24.480 --> 01:13:28.560
I think the other authors said that government spending would have had to be something like

644
01:13:28.560 --> 01:13:58.560
500 Billion, which is what it was when Ronald Reagan took office. It wasn't ten times that, like what it is now, and I thought that was an exaggeration. I thought that was much too big of a government because it kept in place the whole military establishment that was meant to fight the Cold War, and the Cold War was over at this time, so I thought that was far too big, 500 billion was far too big, with the other author. But that's, you know, tariffs and

645
01:13:58.560 --> 01:14:03.560
Fiat-sized taxes was a pretty good idea while it lasted.

646
01:14:03.560 --> 01:14:07.760
That's why all the bad guys were against it for so many decades.

647
01:14:07.760 --> 01:14:11.560
But that all ended, it lasted about 70 years, something like that.

648
01:14:11.560 --> 01:14:41.560
You think that, or can you comment on the fact that the federalists, the waves and the republicans, were pushing for 120 years to get central bank entrenched like the followers of the Socialist Party? And then with the election of 2012, the Democrats come to power and there is progressive growth in the Democrats and then they are the ones that actually get the followers of the South. Is this happening in that, in our position as the leaders of the Democrats?

649
01:14:41.560 --> 01:15:01.560
Well, the Democrats had changed. One of my articles on lewrockwell.com was about Grover Cleveland. It was called The Last Good Democrat. Grover Cleveland was the last Jeffersonian. After that, the Democratic Party became totally different.

650
01:15:01.560 --> 01:15:06.760
The Democratic Party was the, if there were any classical liberals in American politics

651
01:15:06.760 --> 01:15:11.040
up until the late 1880s, they were likely to be Democrats.

652
01:15:11.040 --> 01:15:15.440
The statists and the nationalists and the imperialists were Republicans for the most

653
01:15:15.440 --> 01:15:16.440
part.

654
01:15:16.440 --> 01:15:22.720
There might have been some, surely probably some deviationists or some Republican classical

655
01:15:22.720 --> 01:15:29.160
liberals and some Democrat statists and nationalists, but in general, that's the way it was.

656
01:15:29.160 --> 01:15:35.480
But there was a, Grover Cleveland was the last good Democrat in the Jeffersonian tradition,

657
01:15:35.480 --> 01:15:36.920
but that was the end of it.

658
01:15:36.920 --> 01:15:37.920
After that, it changed.

659
01:15:37.920 --> 01:15:43.280
So the Democratic Party of 1913, I see as a continuation of the Federalists, the Whigs,

660
01:15:43.280 --> 01:15:47.640
and the Republicans and the Democrats kind of merged at that point, and there really

661
01:15:47.640 --> 01:15:51.720
was no sharp distinction with regard to the role of government.

662
01:15:51.720 --> 01:15:55.360
The Republicans simply raised the money, as the old saying goes, they raised the money

663
01:15:55.360 --> 01:16:01.120
to finance the programs of the Democrats, so that when they took office, they could run those programs.

664
01:16:01.120 --> 01:16:03.440
That's the way they are today.

665
01:16:03.440 --> 01:16:06.040
That's why, you know, if you think of it, it's a mystery, isn't it?

666
01:16:06.040 --> 01:16:09.760
How did the Republican Party ever get to be known as the party of limited government?

667
01:16:09.760 --> 01:16:14.440
Or if you're a conservative and you want smaller government, when did they ever limit anything?

668
01:16:14.440 --> 01:16:19.200
They were the party of big, explosive government from the very beginning.

669
01:16:19.200 --> 01:16:22.400
The Democrats were the party of limited government.

670
01:16:22.400 --> 01:16:30.480
And then, by the 1920s, Coolidge and Harding were probably the best Republican Presidents ever,

671
01:16:30.480 --> 01:16:37.760
because they didn't do much. But still, the apparatus of government, the Fed was there,

672
01:16:37.760 --> 01:16:43.600
that it was pumping out money like crazy all during the 1920s. And Coolidge and Harding didn't

673
01:16:43.600 --> 01:16:51.040
do a lot to pressure the Fed to stop that. And politicians can put pressure on Fed officials,

674
01:16:51.040 --> 01:17:21.040
and then Hoover comes in, he was a status, he was a big activist, most of the New Deal programs were modeled after his ideas, and then you know after that Eisenhower, he wasn't especially a limited government guy, Nixon, we got the EPA and OSHA and all these agencies, price controls, and then you know by the time we got to Reagan, he did a few good things for about two years,

675
01:17:21.040 --> 01:17:28.200
and then but then he raised taxes and but in 85 and the federal budget was

676
01:17:28.200 --> 01:17:34.680
literally double in 1990 of what it was in 1980 so you know where's the limited

677
01:17:34.680 --> 01:17:38.280
government it's that's it's I don't see it it's kind of a mystery the people

678
01:17:38.280 --> 01:17:42.400
think that Republicans are limited government they became pretty much the

679
01:17:42.400 --> 01:17:49.960
same party as far as I can tell by 1913 there was one lone Jeffersonian who ran

680
01:17:49.960 --> 01:18:04.960
in the 1912 election, but he didn't win anything, but he was sort of, what the heck was his name? I'll have to dig up his name, but he was sort of the last gasp of Jeffersonians in American politics.

681
01:18:04.960 --> 01:18:15.960
Gary North wrote an article about him on Lew Rockwell about a year ago. I'll dig it up maybe later. Any other questions or brilliant commentaries, declarations?

682
01:18:15.960 --> 01:18:19.960
Okay. A quick one.

683
01:18:19.960 --> 01:18:27.960
The footnote I have, I could dig it up for you.

684
01:18:27.960 --> 01:18:34.960
I don't have it right here in front of me, but I could dig it up for you.

685
01:18:34.960 --> 01:18:38.960
It's from the book on the 17th Amendment by Ralph Rossum.

686
01:18:38.960 --> 01:18:42.960
And I have the footnote and everything there, but I'll get it to you later.

687
01:18:42.960 --> 01:18:49.960
Okay, maybe we'll take a break then. It's time to, in a half hour, it's time to put on the feedback again.