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The power of the purse

Last week I discussed the importance of abolishing the income tax
because of its tendency to form a habit of servility in the souls of a
people that accepts it. Servility of soul is bad not only in itself, it
is also an open door through which will soon walk the abuses of
ambitious government power. Leaders who find themselves with
governmental power over a servile people will be quick to conclude that
such a people exist to serve them. And in the 20th century we have seen
the horrors to which such conclusions tend.

President Clinton is a kind of prophetic precursor of the kind of
leader we can expect increasingly to see — naturally and easily
presuming that the entire people he leads is merely an instrument of his
own ego. This trend has been going on throughout the course of the 20th
century, and is now coming to a head in the explicit precedents set by
Clinton of the usurpation and abuse of power. The leaders of tomorrow’s
America are watching now to see just how much this people will put up
with, and they are forming their ambitions accordingly.

If we pay any attention at all to the current fake debate on tax
cuts, it should be with this overall ambition of our governing class in
mind. It is bad enough that Republicans expect us to be overjoyed at a
tax cut that is less than half of the Reagan era tax cuts, and that is
stretched out over 10 years. The tax cuts they are offering us are less
than one third of what we are predicted to pay in “extra” taxes over
that period. It is like overpaying for a car by $3 thousand, and being
happy to get a check back for $8 hundred.

Yet what is worse is that even this minimal tax cut is being opposed
in the Congress explicitly as a waste of federal dollars! But keeping
more of our own money can be a waste of federal dollars only on the
assumption that all of the money belongs to the federal government, and
that politicians are doing us a favor when they let us keep a bit of it.
This is exactly how they talk — and I don’t just mean Democrats. All
the politicians in the country speak of it as a great favor when they
let us keep a little more of what we have earned, and expect us to go
down on our knees in gratitude and vote them back into office.

I believe that the reason our ruling class in Washington talks about
all income as the property of government is that since the passage of
the 16th Amendment, it really is. We made a major mistake at the
beginning of this century, and as a result of that mistake we turned
over to the government control, in principle, every last penny that
anybody in this country makes or earns.

If I agree to turn over to someone a certain percentage of my income
and also agree that the same person gets to set the percentage — how
much of my money does that person control? The answer, of course, is
that he controls all of it. Anything he lets me keep based on an
arrangement like that is simply a favor. Once I’ve made the agreement I
have ceded to him the right to take whatever percent of my money he
wants. The income tax is a system under which we have ceded to the
government a pre-emptive claim to a certain percentage of our income,
and the government sets the percentage. In principle, the government
controls all of our money. That is why those in power talk as if they
control all of our money — they do.

The limitless extent of control the income tax gives to government
was understood and recognized by some people even when the income tax
was being instituted, and they fought it tooth and nail. Some of them
pointed to the fact that, in the 19th century, Marx and Engels had
written about the income tax for this very reason. One of the major
elements of the communist agenda was taking over the people’s money by
means of the income tax, precisely because of the unlimited nature of
the control it offered. So as we have been fighting communism throughout
the 20th century, we had already put in place at the beginning of the
century one of most important elements of communism,
and we suffer under it right now.

The income tax, and the Federal Reserve system that arrived along
with it, are instruments of the increased centralization of money and
control over our economy, with all the bad effects that result from such
control. As our political class becomes more ambitious, unscrupulous and
dangerous, the entrenched centralization of our economic system remains
an ever-present opportunity for them to extend further control over our

The debate goes on about farm policy, for example. Every few years we
have a new cycle of it, while we lose more and more of our farm
families. Every politician under the sun, of course, stands up to say
that we must “save the family farm.” And yet every time a bill is passed
to save the family farm, we lose more family farms.

The root reality that must be faced by those struggling to protect
the family farm in America is that we cannot sustain a system of family
farms in an economy with a centralized financial structure. This was the
basis of the debate in the 19th century between supporters and opponents
of a national bank. Opponents understood that the survival of grass
roots institutions, including the preservation of businesses and farms
in the hands of people in their communities, required banks that were
citizens of those communities. Banks answering to higher powers,
including centralized authority, and using the resources flowing through
them to beef up the bottom line of institutions that don’t answer to
local citizens and aren’t part of the local community will let local
institutions go under when the times get tough. In such institutions,
the family farm is struggling against a financial structure that is
incompatible with its existence and survival.

Survival of the family farm won’t be secure until we have changed the
fundamental structure of finance and lending that services family
farming. We must get control of local economic resources back in the
hands of people in responsive local institutions that will care about
what happens to the people who live in the local community. And what is
true of the family farm is true as well of all forms of real local
community and corporate life. We simply cannot expect that local and
private institutions will flourish, and remain free, if we do not take
ongoing and fundamental care to shift the balance of power and control
back to them. If we permit economic power to remain centralized, this
instrument of manipulation will be increasingly attractive to ambitious
men, and used to bring us further under their control. Our founders
understood that economic sovereignty was a pillar of defense against a
political class eager to abuse its people. They were fond of quoting
Blackstone, who said that “A power over a man’s resources is a power
over his will.”

With the presidency of Bill Clinton we have entered an era of
politicians who openly view government power as a means to personal
gratification. The habits of shame and respect for the rule of law will
not restrain our presidents, at least until the disgraceful Clinton
precedents are reversed, and the Senate’s pusillanimous acquittal of
Clinton shows that the people’s representatives cannot be relied upon
either. The break-up of centralized governmental authority over our
economic lives, and above all the elimination of the income tax, has
never been a more pressing moral and political imperative. We must
reclaim our economic sovereignty, so we can limit the damage our
increasingly corrupt political class can inflict on our property, our
wills, and our character.