From: ipser@solomon.technet.sg (Ed Ipser)
Subject: Re: Federal Government and the US Constitution (was Re: deficit/debt)
Organization: TECHNET, Singapore
Date: Wed, 15 Apr 1992 05:32:48 GMT

In article <1992Apr13.204733.5717@icmv> degroff@IntelliCorp.COM (Les Degroff) writes:
>In article <1992Apr10.051314.1700@nuscc.nus.sg>, ipser@solomon.technet.sg (Ed Ipser) writes:
>|> The bulk of federal powers are granted to congress in Article I, Section 8.
>|> 
>|>       Section 8. The Congress shall have power
>|>       To lay and collect taxes, duties, imposts and excises, to pay the
>
>|>    debts and provide for the common defense and general welfare of
>                                                   ^^^^^^^^^^^^^^^
>
>Looks to me like part of the big mistake was putting that weasely term
>in there.... Lots of dead trees and spent electrons to argue how far
>"general welfare" can be stretched.  This i fact has been the discussion
>point ever since the signing.

There is no question that the taxation for general welfare has been one of
the loopholes through which socialism was injected into the US Constitution
along with the commerce clause and the implied powers clause.

However, it was not my intention to reopen this legal debate in sci.econ.
For our purposes, suffice it to say that there exists this alternative,
strict, interpretation of the explicit, limited powers of the federal
government which requires that if it shall have the power, for example:

      To raise and support armies, but no appropriation of money to that
   use shall be for a longer term than two years;

or

      To establish post offices and post roads;

or

      To promote the progress of science and useful arts, by securing
   for limited times to authors and inventors the exclusive right to
   their respective writings and discoveries;

that it must be granted those powers explicitly.

What is important about the US Constitution with respect to sci.econ is
the ECONOMIC implications of constitutional federalism. In particular, I
am claiming that not only is there this alternative interpretation of the
Constitution but that it is one which is economically superior to the
contingent federalism that prevails in modern federal legislation.

Moreover, if the deficit represents a threat to the solvency of the federal
government, not only do we have the institutions of private, city, county,
and state government to back it up, but a reacendency of the sovereignty
of the states within the context of this strict interpretation, would be
a major improvement to the operation of the US economy. The deficit may
well be a Good Thing for the economy, indirectly.

Perhaps I should have named this thread: The Economic Consequences of
Constitutional Federalism (as distinguished from contingent federalism).
In contingent federalism, the federal body delegates powers to
the lower levels of government according to its own preferences.
In a constitutional federal structure, such as that specified in the US
Constitution, the decision of what to centralize/decentaralize is a
constitutional one just like the organization of the federal government into
three branches or politicians' term of office. In a constitutional federal
system, congress can no more pass a law to take powers reserved to the
states than it can powers reserved to the executive branch or rights
retained by the people or extend their own term of office. Constitutional
federalism prevents most rent-seeking by the federal body that occurs in
contingent federalism. It places most government activities off limits to
the monopolistic central government. State politicians are, in turn,
limited in their rent-seeking ability by inter-state competition.

(There are those who argue that some powers which the federal government
has taken from the states are justifiable economically but constitutional
federalism does not preclude reallocation of powers between the states
and the federal government, it merely requires such reallocation to be
by constitutional amendment rather than by federal legislation.)

> the United States; but all duties, imposts and excises shall be
>|>    uniform throughout the United States;
>? Has any one ever gotten to the Supreme Court on this one vs graduated
>income tax?

Before the 16th Amendment they did...successfully. The first income tax
was repealed as unconstitutional.

>It can be interesting to contrast and compare the Depression 
>with the past 5 or 10 years economic news and realize, we may be 
>seeing a depression as it happens with many of the precautions established
>after then last one in action...the banks are failing but little to no 
>runs and virtually no catastrophy for small account holders...major
>unemployment buffered by unemployment, farmers and some industries
>sheilded by government subsidies or garentees....So NOW what happens
>with a ?strong? central government taking on much of the systematic
>imbalance by issuing debt and promises.

I think what we are seeing is a central government whose obligations exceed
its political support. The Bush recession did not begin in Europe as did
the Great Depression. There are some interesting similarities, though.

What would be funny is if the banks survive, thanks to federal deposit
insurance, but the insurance subsidies cause the federal government to
financially collapse.

>what's a feasible time table to deinstitutionalize
>the "unconstitutional" parts of the government?  Certainly a dumping of
>several million employees and cutting off tens of million Social Security
>recipiants is not feasible.

Nor is it necessary and Social Security provides an excellent example. The
solution to the Social Security problem, like most other functions of the
federal government, is privatization and decentralization.

The self-supporting insurance/retirement benefit aspects of Social Security
can be easily privatized by any number of means either by returning the
paid up benefits directly to each individual or creating a separate
corporation with clearly defined legal obligations to people in the system.

The income redistribution aspects of Social Security should be devolved to
the states who would have the choice, individually, of whether or not to
continue the program. New York probably would whereas New Hampshire might
not.

Similarly, federal employees would, in large part, become state and private
employees to the extent that their services are genuine and are not just
rent-seeking and pork barreling. (On the other hand, I don't see the
Democrats shedding tears for the military jobs they are trying to dump.)
At any rate, to the extent that we have more public employees than we need,
it should be viewed something like the flight of farmers to the cities when
agriculture was mechanized, a pain that will bring benefits in the long
term and which is merely prolonged by job protection schemes (we are, after
all, STILL protecting milk producers from low prices. Apparently 60 years
is not long enough for that industry to adjust.)
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