“He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance.” – Declaration of Independence, 1776

The below pictures were from a presentation given at yesterday’s “Towne” Hall on May 24.  I’ve added a few comments with documentation links.  The quote above from the Declaration easily applies to the 22.5 million bureaucrats, America’s second largest job sector, who make nearly twice the average wage of the private sector.

While America is not Greece – or Iceland – there are glaring similarities.

While the Republocrats are not King George… they are far worse.

For Liberty and the Constitution,

Jake Towne

USDA link here.  Note the strong rise in number of SNAP food stamp recipients during the past year.  One would expect to see this number dropping or even flat-lining – along with employment rising – if a recovery were underway.

BLS link here.  Note that while the “newspaper” unemployment rate is still 10%, the U-6 figure – which more accurately describes total unemployment is 17% – a depression statistic.  I’ve described the common sense solutions to end rampant unemployment almost overnight in the campaign’s Jobs plank.

Since the BLS drops off workers from its U-6 figure, the real unemployment rate is most likely slightly greater than 17%.  Shadowstats estimates the rate at about 22%.

The current national debt – which is closely tied to the USTreasury market is now over $13 trillion.  Current government plans include massive deficit spending through 2013, and the government’s optimistic projections of a return to “normalcy” even then should be severely doubted.  Source of budget data.  However, due to the cash-based accounting method government uses, this hides the undeniable fact that the real national debt is much larger when GAAP (Generally Acceptable Accounting Principles) are used to identify future taxation sources and future debts such as Social Security and Medicare (see below).

The above is taken from the Treasury Department’s latest report from April 2010 where government’s inlays – social security and retirement taxes, income taxes (both personal and corporate), and excise taxes can be seen.  The average monthly level is about $170 billion per month.

From the same report, the level of government spending, which averages about $300 billion per month.  (Only the government can run that type of accounting, due to its money-printing!)  While Social Security and Medicare are a major expense, the level of “National Defense” spending appears deceptively low as it is just the DoD budget.  As I wrote about in “Guns or Health Care?” plenty of “Other Non-Defense” spending are in fact related to the military – Homeland Security, the nuclear arsenal under the Dept. of Energy, Veteran’s Affairs, the Treasury’s military retirement program, etc.

As seen in the official USTreasury report on page 178/254, the total unfunded liabilities for Medicare and Social Security is a jaw-dropping $107 trillion over the future of these programs.  While I predict the Democrats may bear the brunt of the blame for the collapse of Medicare, one must not forget that it was the Republican’s massive expansion of Part D’s prescription drug plan that worsened the fiscal situation.  One interesting possible interpretation of the recent health care takeover plan is it may simply be a stop-gap solution to temporarily increase taxes over the next few years.  (On Social Security, I will be delivering a presentation in more detail next Friday.)

The above is built from the Federal Reserve H.4.1 data here.  The red line is the total (reported) balance sheet of the FED, which has more than doubled since the time of the Banker Bailout.  While the original TARP bailout (not shown) accounted for much of the initial sharp increase, most of the debt has been replaced by $1.12 trillion of mortgage-backed securities from Freddie Mac and Fannie Mae (the purple line).   This graph shows the nationalization and propping of America’s entire residential housing industry. The yellow and green lines show the cumulative totals of USTreasury and USAgency debt held by the FED.  While the Federal Reserve has admitted it will take losses on the MBS debt, the question remains as to how much and when.

The purchasing power of the dollar has lost well over 94% since FDR took America off the classical gold standard in 1933 through monetary inflation.  The monetary inflation is caused by the FED.  They debase the dollar by creating more and more irredeemable paper dollars.  Graph provided by Bloomberg Financial, 2009.

The above chart shows the “real interest rate” from 1970 to 2009, formula below.  It is an approximation for the dollar’s purchasing power versus time.  While in 1980 it reached nearly +10% (savings rate of ~19% and inflation of ~10%), in 1990 this rate went negative and continued dropping.  The chart shows the capital and savings of America being ruthlessly destroyed by the FED and the government.  Source.

Real Rate of Interest = (Interest Rate earned by a bank savings account) minus (Inflation Rate)

The rising price of gold over the past decade demonstrates the destruction of the world’s paper currencies.  In the past several weeks, gold reached all-time record highs in dollars, yen, euros, Swiss francs, and British pounds.  As described in this article, the gold price is likely suppressed by governments in order to make their own currencies look good as I wrote about in “The Summers Gold Price Suppression Scheme.”  Gold trades over $20 billion USD per trading day – or over $20 trillion annually – a figure larger than the $15 trillion GDP figure used for the United States.

To cap off the situation with the dollar, the latest quarterly banking profile from the FDIC indicates the deposit insurance fund (DIF) is bankrupt.  While consumers at failed banks still receive “insured” funds, the losses are presumably filled in with dollars from the FED, as reported last here.  The current FDIC “watch list” rose to 775 banks, or almost 10% of all FDIC-insured banks in the US per p. 3/26.

The crux of the Over-the-Counter derivatives problem is its enormous size.  However the $600 trillion figure shown is the derivatives’ contracts notional value – a true market value cannot be assessed.  The primary issue with OTC derivatives is that they trade off of exchanges, so their contents are opaque to the rest of the marketplace.  Note that exchange-traded derivatives (EXD) are much smaller.

BIS data here.  Note the sharp drop following the 2008 financial crisis.  More details on derivatives can be learned in “What the Heck are Derivatives?” and “Bring Light to Dark Derivatives!”

Jake Towne is running for U.S. Congress in eastern Pennsylvania’s 15th district in 2010. Prior to returning home, he had been living in Shanghai as an engineer in the semiconductor industry for over 3 years. As part of defending liberty and championing the Constitution, Towne is offering the citizens in his area a novel form of accountable government called “Our Open Office.”

These guys just have money flowing out their ears, don’t they? One subsidy after another, add on some restrictive new laws, leech more money from the people to pay for this extravagance, and you have the work of a corporatist government. There is absolutely no regard for how this will be paid for, all we get is endless talk of the wonders of government efficiency and management (just look at the Department of Education or IRS). Somehow half the country is reassured that continuing massive deficits (what everyone was rightly complaining about under Bush) are nothing to worry about.

WASHINGTON – Trying to entice employers to keep early retirees on their medical plans, the Obama administration announced Tuesday it’s making $5 billion available until the safety net of the new health care law is in place.

Effective next month, federal subsidies will allow employers to recoup a big chunk of the cost of medical claims for retirees ages 55 to 64 not yet eligible for Medicare.

Older baby boomers working for large companies — and looking to downshift to less-demanding employment_ could be immediate beneficiaries.

http://bit.ly/d3KUeR

“We can do without butter, but, despite all our love of peace, not without arms.  One cannot shoot with butter, but with guns.” — Joseph Goebbels, Nazi Germany’s Reichminister of Propaganda

Throughout time, governments have strong tendencies to simultaneously splurge on both domestic spending and the more sinister business of warfare. This is referred to as the “guns versus butter” economic model. “Butter” is synonymous with domestic spending, while “guns” is synonymous with military spending. As with any economic goods or services, there is always scarcity of labor, machines, raw materials, land, et cetera. Individuals find it very easy to understand that if you want to spend 100% of one’s resources on “butter,” no “guns” can be purchased or vice versa; there is always a trade-off.  Steel can be formed into either a refrigerator or a tank; it can not be used for both.
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In recent years profits have gotten a bad name from many people and politicians. Profits are said to take advantage of others, encourage greed, among a variety of other allegations. These concerns can be legitimate but often miss a crucial point.

Profit represents the reward for taking a risk. You wouldn’t start a business if you knew you weren’t going to make more than you would spend creating that business, would you? However, if you can increase your income more than your expenditures through that business, you’ll feel much more inclined to continue with the operation. Obviously, people cannot survive operating a business at a loss.

Profits do not come without work and risk. It is only possible to make a profit if you can offer a product or a service that people want, in an efficient manner. No matter how greedy you may be, in a free market you cannot survive without efficiently producing a product that has market demand. You cannot force people to work for you, you cannot force people to invest in your business, and you cannot force people to purchase your product. Your greed is limited to free and voluntary exchange.
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It was in the 1750s when taxation without representation began gaining political steam in the American colonies. The colonists were frustrated by the fact that King George and a powerful British Parliament were able and willing to lay taxes on people who did not have any direct representation of the government. What’s important is that it was not a certain tax that got people riled up, it was the principle that a powerful few can dictate laws to people who have no say in the matter.  The Boston Tea Party was not simply about rebellion to the small tax on tea, it was a statement and effort against taxation without representation.

I bring this up because this is my first year paying taxes. I work a part time job for a self-employed online bookseller. Every time I am paid, an automatic amount is siphoned out for the federal income tax, Medicare, and Social Security. Recently I got to thinking about it. Do I have any say in this matter? How have I at all been represented for these taxes I’m required to pay?

Being a teen, it is hard enough getting a “legal” job. Thanks to state and federal law it is next to impossible to legally work before you are sixteen, due to minimum wage controls and child labor laws. The government will prevent two consenting parties from entering into a labor agreement, simply because one of the people is under sixteen or won’t be paid $9 an hour.

I am not saying I support the idea of seven year olds working in coalmines. Forceful or fraudulent contracts certainly must be punished, and the right to unionize is essential for all workers. But the laws, restrictions, and minimums that are put in place for the “working class” end up decreasing efficiency and take away or heavily limit job opportunities. I can say this from personal experience. The intentions of labor laws aren’t bad, but have grown far too complicated, unnecessary, and end up doing more long-term harm than good.

These are the thoughts going through my mind as I file my personal information with the IRS, an agency originally started to benefit the lower classes by taxing the wealthy. I cannot vote, I have not had any opportunity to represent myself with public policies, yet the government takes roughly 12% out of my paycheck. It does not matter that legally I cannot even drink, smoke, or vote; any money I make, the government will forcefully take a portion. As long as there is money to be had, the heavy hand of state comes crashing in.

The programs that I am forced to contribute to are laughable in their own right. The principles behind Social Security assume when government takes privately earned wealth, gives it to some bureaucrats, who then redistribute it fifty years later, that it will do more good than if people made their own choices about where they spend, save, or invest their money. I’ve already invested approximately $8,000 of the money I have earned over the course of my life (a good amount for someone my age), yet the government somehow has it in its head that it can make smarter decisions than me or anyone else. I do not need the government to take money from me in order to make my retirement easier. It is not their responsibility or business to make a decision that should purely be mine, plain and simple.

The chief purpose of government is no longer to protect natural rights; the tax system alone is enough to prove that. We are assumed guilty until proven innocent, our privacy is embarrassingly invaded, and no longer do we have the right to the fruits of our labor. In my case, I don’t even have the chance to vote for the person who wants to take away my money.

Don’t forget what Benjamin Franklin said regarding taxes:

“It would be thought a hard Government that should tax its People one tenth Part of their Time, to be employed in its Service.”

Over the past century lawmakers of the U.S. have become more concerned with tinkering around the edges than with actually analyzing the principles. We have given in to the flawed idea that government can force us to pay into various agencies and require citizens to have a number to keep them within those programs (Social Security numbers). It is becoming increasingly clear that government is gradually taking over the primary right to private property.

The early people of the Thirteen Colonies would not have made it very far if their only aim of the Boston Tea Party was to abolish the tax on tea. The greatest accomplishments in history are fulfilled by revolutionizing principles and the way people think. The colonists were sick of taxation without representation, and they went the full mile to eliminate that idea.

The way I see it, whether the income tax is at 1% or 95% is meaningless in the long run. The principle of government intrusion and power over property is there regardless of the rate at which it is enforced. Ever since the early 20th century, the U.S. has been built upon illusionist, tyrannical, invasive principles of taxation and power.

A nation will not succeed or fail because it’s tax rate is high or low, it is the principles upon which it is built that will lead to its everlasting success or painful demise. Ever since the U.S. veered off the path of personal liberty, Constitutionally limited government, and empowered responsibility, it has been riding on principles lacking in reason, morality, and natural legality. No country, government, or society has ever succeeded on principles neglecting freedom and individual liberty. It will not be a tax, enemy, or person who runs a country into the ground, it will come at heart simply because of a flawed principle.

It is time for the U.S. to return to the principles of a free nation. Cutting a tax, enacting a law, or creating a new regulation is not going to change the destiny, or lack thereof, of the U.S.

Solid principles alone control the will and fate of any country and people. Freedom does not come from government. No matter how many times it is ignored, stomped on, and abused, it does not matter. Freedom alone is the only principle that naturally destroys government power, elitism, and abuse, while masterfully strengthening individual creativity, responsibility, and sustainability.