Additional Titles








The Rot at the Heart of Statism








Grants Pass




By Attorney Steve Grow
26, 2012

In a recent article on this website, The Keynesian Spending Spree is Over, I pointed out that, according the Fed’s own reports, 61% of all the new US Government debt issued in 2011 was purchased by the Fed itself, probably with computer game money--electronically issued money backed by nothing except the purchased bonds, not by regular buyers or real tangible pre-existing bank capital of the Fed. I presume this continues in 2012, perhaps at an even higher percentage.

This means that the market among real buyers for US government debt has largely dried up, at least at the interest rates on offer—as well it should due to our government’s continuing reckless spending beyond its means.

Now when I refer to our government, I really mean all of us, because our politicians could not do it if we did not let them. I am not trying to give you permission to magnify your resentment of your favorite political villain in the piece, and escape from facing the full problem into a fantasy that if only your favorite villain in the piece would act differently, the whole problem would go away. Because I know a resentful approach to our problems will not enable us to face them soberly and address them realistically. Also, your resentment of anyone is a splendid way of directing attention away from your own small or large part in the drama, and of ignoring the real fact that there are things, large and small, that each of can do. See my previous article on this website, How Do You Gather and Share News?

Since Bush II took office in 2001, Keynesian economics has, to put it mildly, been given a better than fair trial on a HUGE, even GARTANTUAN, scale. When Bush II took the oath, the government was running surpluses, and had a national debt in the vicinity of $5 Trillion. Since then $11 Trillion in total government deficits (and new national debt) has been added—about $5 Trillion during Bush II’s 8 years, and another almost $6 Trillion during the 3 ½ years short years of the Obama administration so far. If Keynes were right, our economy should be booming now as never before.

None of this has produced economic health or any signs of it, but only deepening stagnation—masked by dishonest government statistics such as inflation (which massively understates the decay in the value of money—witness the movement of commodities markets almost across the board) and unemployment (which takes into account only 12 million of the nearly 23 million who would like work in computing the official unemployment rate), and by massive manipulation of the credit and money markets by the Fed—which in recent years has become the smoke and mirrors trying to disguise what is going on. We are in a deep hole and have so far been foolish enough to keep digging. (An old farmer once advised that “If you find yourself in a hole you don’t want to be in, then at least stop digging.”)

Keynesian economics has never worked—but it is a perpetual temptation to irresponsible politicians and citizens of both parties to spend beyond present means. The central flaw in it I have discussed in my previous article on this website The Central Economic Fallacy of Keynes and Our Politicians.

So, what do we do now that the overspending must soon come to a halt? To me there seem several obvious measures to consider. I will briefly summarize some of them here and expand my discussion in future articles (some have already been discussed at length in previous articles, which I will cite).

Guard Your Core Individual Freedoms. First and foremost, guard your core freedoms and all the teeth necessary to protect them. As I stressed in my last article, under no circumstances should we be tempted to sacrifice any of our core personal freedoms as individuals (or to pretend away any of our core personal responsibility as individuals). History has shown that free individuals working together, including by competing vigorously against each other in the marketplace of products and ideas, can do amazing things that work to the overall benefit of all. In contrast, people clinging to collectives and degraded to a status of nonpersons, officially or in fact, never accomplish much of anything—except to reduce everyone to a state of relatively impoverished, sullen servitude to some person or group of individuals who lord it over them. Important core freedoms need to be recognized and protected better. We the People, as individuals and working together in myriad ways, are the real core and center of any proper government. In a certain sense, ordinary people should be “ungovernable” and accorded a broad measure of privacy – on the other hand, politicians, government employees and staffs should be open to monitoring, closely watched and constrained with regard to their actions involving the public business, directly or indirectly. Anyone with a contrary view, I believe, is an enemy of freedom (even their own in the long run)—wittingly or unwittingly. See my previous articles on this website, The Rot at the Heart of Statism and Involuntary Political Contributions are Unconstitutional.

Open Up Government to Greater Scrutiny. I believe that, now and always, the central problem in politics is monitoring and governing those in political positions and their staffs and allies—so that ordinary people are the ultimate governors and can hold those in office accountable and constrain them so they cannot do things damaging to the public interest easily. Ordinary people deserve, and need, full legal protection of their privacy. In contrast, all activities of those in government, relating to public business, should be open to a high level of scrutiny at all times, and starved of the means to do much mischief. Along these lines, I’d specifically suggest:

a. Establish a Publicly-Available Internet Database Showing Virtually All Government Payments. Ordinary citizens and other interested persons should be able to watch the money, virtually all of it, in detail. Technology makes that easily possible. States like Nebraska have done it for a long time. With very few exceptions, all payments, payee by payee, item by item, should be viewable by anyone on the Internet. We can all watch that way. And as difficult choices are being made, everyone can have effective, informed input. My previous article argues the case in depth. I would be unsurprised if a LOT of the spending that has occurred would be so embarrassing as to stop when really watched carefully. See my previous article on this website, Quit Trusting the Trust-Us Politicians,

b. Reduce the Excessive Number of Closed Doors and Back Rooms in Government. In both Congress and the Executive Branch, too much of government is unnecessarily covert—hidden from We the People who are the government and for whom these folks are supposed to be working. Mischief is easier to carry out in hiding. I remember reading in the aftermath of the Savings and Loan scandal 20 years ago, that legislation was passed making it no longer legal for a government employee to make any kind of a note or record of being contacted by a Congressman or Congresswoman or member of their staff. Also government employees, including especially those on the staff in the legislative branch, have been largely stripped of freedom to reveal anything about what they do. Congress exempts itself from most employee-rights, whistle-blower and other protective legislation that allows people to report on, or hold the miscreants accountable for, mischief by their Congressmen and fellow staff members. This is utterly unacceptable. Anything remotely like this, including most gag legislation or policies (except in some very narrowly defined areas having to do with genuine national security or similar very legitimate confidentiality concerns), should be repealed and overridden and ended. Those fellow citizens staffing the Executive and Legislative Branches, should be able to help us watch what their colleagues and officials are doing, and report to us their fellow citizen--without being threatened with jail for doing so. It is a far, far healthier situation if government officials and employees fear ordinary citizens and expect to be watched by them, than for ordinary citizens to live in fear of their government. Any official or employee should fear for his job, and feel it in his paycheck, if he fails to do his duty properly, and should expect to have to explain himself or herself so that ordinary citizens can assess what they think about how the official or employee is doing.

Reduce Budgets for Congressional and Executive Branch Staff and Contractors. Large increases in government employment have occurred in recent years. The Republic got along adequately without these added employees and contractors very well for the first 235 years of its existence, and could surely do so again. Also, a rather large amount of money I am sure funds such frills as the government air force of passenger jets that ferries government officials and their staffs about. For starters, I would cut both the staff budget and the available trips on that air force by approximately half. Any automobiles or other transportation arrangements being furnished for government officials should also be greatly reduced. In addition, great frugality should \introduced at the White House and throughout government with regard to entertaining and other functions. Revealing every line item of every expense to every payee on the Internet database I proposed above, will help us all see how much ridiculous expense we have been incurring to allow our officials and their staffs to live and operate in a style to which we should never have let them become accustomed.

Implement Important Reforms in Pensions. Several important reforms are needed in pensions. (These comments are NOT directed to Social Security, but to all other private and governmental employee or official retirement plans.)

c. End the Era of Defined Benefit Plans Altogether. Both private and government employee pension systems have been unable to say “no” to promising defined benefit levels that that end up being grossly underfunded, This places great strains on companies and governments and also robs the current generation of workers to meet overpromises to a former, now retired, generation of workers. Employee retirement plans should no longer be able to offer defined benefit plans. All plans, in both private and public sector, should only be defined contribution plans, each year’s contributions fully funded in the current year—with no promised level of returns at all at retirement. (Now a person wanting to lock in a guaranteed return would be free to invest money received in the current year in an annuity or some other privately insured or promised program that would guarantee a fixed return in future. But neither the government or private employer, nor the taxpayers would be on the hook for any defined benefit.)

d. Allow any Pension Beneficiary to Separate His Funds from Any Plan into a Private Retirement Account. A step in that direction should be allowing individual employees to separate their funds into individual accounts rather than leave them under the management and control of employers or unions or others whose integrity or judgment they do not trust to make wise investments for them.

e. Bar Setting of Unrealistic Assumed Rates of Return by Any Existing Benefit Plan. Assumed rates of return on funds in such plans have repeatedly been set at unrealistically high levels—the result being that current recipients from the fund are taking out too much, leaving the future generation of retirees who also depend on the fund, out of luck when their time comes—or leaving taxpayers holding the bag if the pension is covered under the Pension Benefit Guarantee program, All plans must reset such rates of return and recalculate benefits accordingly on a very conservative, actuarially sound basis.

f. Permit Any Pension Plan to Go Through Bankruptcy Reorganization to Readjust its Promises to Reality. When a plan has made promises way out of kilter with reality (and everybody, all along, should have realized that), such plans should be able to go through a bankruptcy reorganization to readjust to reality.

g. Eliminate the Federal Pension Benefit Guarantee Program. Federal taxpayers have often been backstops, even for private or state and local government pensions, through the Pension Benefit Guarantee program. Those guarantees should be eliminated in due course. Instead tight regulations of plans need to be developed that make it highly unlikely that any significant number of plans could ever get in trouble. Then, it would become prudent for private insurers to issue guarantees or backstops. The era where government guarantees are routinely issued whenever it is reckless for any private person or company in its right mind to do so, should be brought to an end.

Allow State and Local Governments and their Political Subdivision to Go Through Bankruptcy Reorganization. Where promises have been made that cannot be kept, just as in private business, the bankruptcy court could readjust things to reality. If I have so overreached in my dealings with someone else that I’ve bullied or tricked him or her, or a government entity, into promising way more than they can deliver, then I am due a reality adjustment. I am not entitled to take the attitude that since I tricked them fair and square, they and ultimately taxpayers are just on the hook for promises it was never fair of me to ask them to make in the first place.

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Face the Spending and Untaxing Problem. The core of our financial problem is BOTH our spending (and promising to spend) AND our untaxing of ourselves. Of course, reality only allows a certain amount of tax to be collectible on a sustainable basis. The freer the private economy is from unnecessary regulation and from tax rates so prohibitive that they reduce economic activity and thus reduce total tax revenues collected, and the more correctly the economy is provided with needed regulation—the better it can flourish and yield income on a sustainable basis that can be taxed. The spending curtailment must also extend to federal government guarantees and promises of future payments, which don’t even show up in the national debt but add up over $120 Trillion (the official national debt is about $16 Trillion). Much more on this in a future article.

Establish Meaningful Incentive Pay Arrangements for All Government Officials and Employees. These pay arrangements should give every person working for government a personal financial incentive to make the government work efficiently and live within its means. I have several specific proposals about this, which a future article will outline.

� 2012 Steve Grow - All Rights Reserved

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Steve Grow holds degrees in physics, law and philosophy. He is a retired lawyer who practiced business law for many years. He studied philosophy and cognitive psychology at the graduate level, including working with one of the world’s leading scholars on the work of Aristotle. He was co-editor in chief of his college newspaper. He has observed and wondered about history, psychology, religion, politics, journalism and good (and bad) government since childhood.

He believes that, now and always, the central problem in politics is monitoring and governing those in political positions—so that ordinary people are the ultimate governors and can hold those in office fully accountable. Ordinary people deserve, and need, full legal protection of their privacy. In contrast, all activities of those in government should be open to full scrutiny at all times. In a certain sense, ordinary people should be “ungovernable” and accorded a broad measure of privacy – on the other hand, politicians and their actions should be open to monitoring, closely watched and constrained. Anyone with a contrary view, he believes, is an enemy of freedom—wittingly or unwittingly.

E-Mail: [email protected]









Allow State and Local Governments and their Political Subdivision to Go Through Bankruptcy Reorganization. Where promises have been made that cannot be kept, just as in private business, the bankruptcy court could readjust things to reality.