Blowback V-The New Tax Revolt
The basic economic problem we will face in the next few years is that the Federal system no longer works correctly. In the same way that giant corporations like G.E., News Corp and Berkshire Hathaway have flattened their organizations and shrunk their corporate staff, we need to redesign the way we govern, tax and spend. The States are without sufficient taxing power to provide basic services for their people, as every single state government is in a fiscal crisis, exacerbated by the inability to keep capturing falling property tax revenues from county governments. Because the strength of the progressives resides in the State Houses of the largest states that have the greatest budget crisis, the Democratic Party needs to return to its roots and reexamine the philosophy of its founder Thomas Jefferson. Jefferson said, “The true theory of our Constitution is that the states are independent as to everything within themselves, and united as to everything respecting foreign nations.”
Since most of the concerns of citizens are local matters: Schools, Police, Housing, Power & Water, Public Transportation, and Health Care, these should be funded at the local level. Even though the Federal Government provides block grants to the States for these concerns, much of the tax revenue gets wasted in the Federal Bureaucracy. The New Federalist solution is to change the tax structure. Federal taxes should be radically cut, so that State taxes could rise to pay for the real needs of citizens. This would have two effects. The States would have sufficient taxing authority to pay for decent services, health care and infrastructure. Therefore local property taxes would not be hijacked by state governments and could remain at the county level to fund improved schools and local infrastructure. California currently sends $220 Billion a year in individual and corporate taxes to Washington and only $43 Billion to the state and the cities. California has a history of leading tax revolts, but I don’t profess to know how this shift could be accomplished short of a constitutional convention.
The Federal Government would have to drastically shrink the departments of Education, Agriculture, Health and Human Services, Housing and Urban Development, Commerce, Transportation and Labor which are 100% duplicative of state bureaucracies. However, the Federal taxes could more than adequately fund the needs of the Departments of Defense, State, Treasury, Veterans Affairs and Homeland Security as well as its Social Security and Medicare benefits. The addition of Tom Friedman’s Patriot Energy Tax, could also make up the shortfall in federal revenues and provide funds for common energy research.
Although the negative progressive reaction to the words “States Rights” was formed during the Civil Rights era, citizen uninterested in living in Dick Cheney World, should look to the heartening developments where Democratic state legislators and regulators are taking on corporate power in ways the Bush administration is unwilling to do. Let us assume that the United States Treasury will not be able to continue to borrow unlimited amounts of money from the rest of the world and repay those debts in falling dollars. If aggregate demand continues to fall as Roubini suggests, then state spending on infrastructure may be the best investment we as a society can make in our future. We cannot continue to be laggards in the digital future (see chart below) and expect to be competitive and so there are innovative public-private initiatives that could restore our competitive edge. Personally if I could ride a 250 MPH train like the TGV (top photo) from LA to San Francisco in 2 hours and avoid the airport nightmare and all the pollution, I would. But big projects like high speed rail that would put thousands of Californians to work are not possible without public and private sector cooperation. Next we will look at the role of the digital infrastructure in building a sustainable new model for growth in a deleveraging world.
Have you ever been to an “Inside the Beltway” cocktail party? I have. That was enough to turn me into a rabid states’-rights Federalist right there, were it not for the legacy of states’-rights in, for instance, the Civil Rights era. I am happy that there was a power greater than that of Lester Maddox. I’m happy that some in Washington managed to prosecute murderers under laws that were supreme over states’ ineffective prosecution…if there was any prosecution at all.
But the idea that we sent a buck to dolts “Inside the Beltway” who know we’re fools for doing it, and that then we’re lucky to get forty cents back on that buck with sixty going to a glad-handing bureaucrat…well don’t get me started, even though you just did.
The bureaucrats in Washington do not respect us out here in the provinces. They do not understand that they work for us. They do not worry about how to pay for health care plans. They are great at double and triple dipping…going back and forth between private and “public service” jobs to rack up multiple pensions. They know they’ve got us snockered. They know every address and suite number on K St. They know we work for them…
The most difficult thing for a bureaucrat to say is “yes” to anything. “Yes” may be something for which they have to answer. “No” is something for which they can never be responsible…the citizen has the right of appeal to the next level up. The bureaucrat doesn’t have to worry about making payroll or whether it will be made for him or her. It’s guaranteed. The farther the bureaucrat is from the theoretical constituency, the less connected he or she is to the issues at hand.
So yes, slash Washington by a good 50%, but do it over 10 years. Hell, we could afford that just by converting half the military budget into energy research and development.
I keep thinking that the USA is just too large and that it should perhaps be broken up into four or five countries. This model doesn’t work too well. Let’s try another…
Rick: “I keep thinking that the USA is just too large and that it should perhaps be broken up into four or five countries. ”
Break it up? The split countries would just end up back together again, and then you’d end up with the kind of internecine bickering that goes on in the EU.
Having said that, high speed rail is more likely to roll out in Europe than the US anytime soon (though it’ll probably be just as difficult to link up a consistent and efficient end-to-end journey across borders – we’ll just have to continue to rely on the Man in Seat 61 – http://www.seat61.com/).
And digital coverage is set to increase exponentially, in the UK at least, via fibre speed (see http://news.bbc.co.uk/1/hi/technology/7202396.stm).
Hmm, on second thought, maybe it is a matter or breaking it down to build it up again…
I’m all for increasing broadbrand capabilites in the U.S., but the graph you show is a bit deceiving. As other commentors have eluded to, the U.S. is a big country and the population is spread out! Comparing broadband access in the U.S. to broadband access in Hong Kong is a little deceptive. You can’t simply correct this by comparing “per 100 people”, you also have to consider population density to control for the logistical problems of connecting sprawling hubs.
As a relatively recent college graduate I’ve moved around several times in the last half decade, and have spent at least six months in 4 different states (CA, PA, NC, NY) so I like to think I have a decent sense of what’s going on around the country. Let’s say I’m on board with the idea of trimming federal bureaucracy to augment state bureaucracy (which I am in theory). My primary concern is that each state would now become dependent on strong local leadership. It’s probably overly cynical, but when I look around and feel like we can’t identify one group of good leaders to function in DC, how the hell are each of the 50 states going to make do with only those individuals committed to making it work in their state. I realize that ideally, each state knows how to best lead itself, but I fear that in this type of plan we’d have wildly diverse experiences across the country. And I don’t mean diverse in a good way.
Until we TRULY have a separation of church and state, I’m advocating tax protest:
The Picket Line offers some great suggestions for keeping your tax dollars away from Reverend Uncle Sam.
How To Resist the Federal Income Tax Through the “Don’t Owe Nothin’” Method.
http://sniggle.net/Experiment/index.php?entry=howto
Jon,
I’m glad to see I’m not the only one that thinks this way. I would love to see the power returned to the states. I’d even like to see the states pay the salaries of their own representatives. This amount could be set by each state.
The government’s purpose should be to take care of things that the private sector can’t or shouldn’t do. Otherwise, they should stay out of your lives.
BTW, great blog.