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Some lessons on government funding brought to you by Madison and Hamilton

September 9, 2010

September 08, 2010

Patrick Jakeway

James Madison and Alexander Hamilton wrote in the Federalist Papers numbers 36 and 54 about the importance of constraining the tendency of governments to lapse into partiality, venality, corruption and tyranny when it comes to the power of taxation:

Hamilton in the Federalist 36:

“Let it be recollected, that the proportion of these taxes is not to be left to the discretion of the national legislature: but it is to be determined by the numbers of each state, as described in the second section of the first article. An actual census, or enumeration of the people, must furnish the rule; a circumstance which effectually shuts the door to partiality or oppression. The abuse of this power of taxation seems to have been provided against with guarded circumspection. In addition to the precaution just mentioned, there is a provision that ‘all duties imposts and excises shall be UNIFORM throughout the United States.”

James Madison elaborated on the importance of the population count as a governing function restraining abuses of taxation at the end of Federalist number 54:

“In one respect, the establishment of a common measure for representation and taxation, will have a very salutary effect. As the accuracy of the census to be obtained by congress, will necessarily depend, in a considerable degree, on the disposition, if not the co-operation of the states, it is of great importance that the states should feel as little bias as possible, to swell or reduce the amount of their numbers. Were their share of representation alone to be governed by this rule, they would have an interest in exaggerating their inhabitants. Were the rule to decide their share of taxation alone, a contrary temptation would prevail. By extending the rule to both objects, the states will have opposite interests, which will control and balance each other, and produce the requisite impartiality.”

The genius of the original form of the Constitution is plain to see here.  The government of the United States now spends an obscene amount of money.  Exactly what Madison predicted has come to pass: the states now have an incentive to exaggerate their population numbers in order to gain transfer payments to their citizens from the welfare state which is in turn dependent on the income tax as opposed to the direct “head tax” which the Founders established. This is in turn affects all manner of domestic and national security politics: e.g. education, immigration, border security.

Ever since the birth of the income tax on Christmas eve 1913, the growth, corruption and power of government has continued unabated.  While marginal income tax rates have varied dramatically over the years, revenues have, on average, consistently expanded through the decades.  Correspondingly, the burden and oppression of government has magnified to the point that it has become a yoke on the citizenry. 

Think ahead to 12/24/2013, the centennial of the income tax. Reflect upon where this country was 200 and 100 years ago. Imagine what it will be like on Christmas eve 2013 (the eve of Obamacare). Finally, envision the condition in which you hope to leave this great nation for your children and grandchildren on Christmas eve 2113.  It is self-evident to me that we are not on the right track to sustain life, liberty and the pursuit of happiness for the long term and that we as a country need to move back toward the Founders’ vision of how we should fund the government of the United States.

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