Was there ever really any doubt? This is the question being asked now that President Biden has signed into law an agreement to raise the debt ceiling, brokered among leading Republicans and Democrats on Capitol Hill. According to politicians in Washington, no, there was never a doubt that they would eventually agree to raise the government’s borrowing authority, or, in the worst case, that the president would invoke the 14th Amendment to take unilateral action. This is the answer overwhelmingly proffered by every stripe of insider — liberals and conservatives, lobbyists and reporters, lawyers and economists.
Why? Could it be true that insiders understand that our leaders possess an acumen for strategic financial decisions that, though unappreciated on a day-to-day basis by simplistic rubes like us, can be trusted to always deliver the right answers in the end? Of course not. If that were the case, politicians wouldn’t still be planning to vastly increase the already unprecedented ratio of government debt to national income over the next decade. Nor would they still be ignoring the dual threat of uncontrolled entitlement costs and an accelerating debt burden.
I, Government
The truth is that our politicians have not been making financial decisions in any strategic sense for at least 35 years, since Gramm–Rudman–Hollings legislation imposed spending constraints on the federal budget in 1987. During the ensuing decades, our leaders have opted out of taking responsibility for exerting strategic authority over government budgeting. In exchange, they have benefited from an elastic view of a federal government that doles out rewards to its subjects of greatest fealty. Through this neglect-and-rewards mechanism, the government has evolved into a perpetual-motion machine. The legislators, executives, judges and bureaucrats who built the machine have lost control over their progeny. The power of the machine, like a robot guided by rogue artificial intelligence, has eclipsed that of its creators.
Having shed the constraints of human reason, the machine now is accelerating its expansion. The machine leverages a modern form of authoritarianism that arises in a democracy when politicians convince us that we should have more important fears than a compromise of our liberty or a loss of control of our government. Enter the wars: the War on Drugs, the War on Crime, the War on Poverty, the War on Terror and, of course, war. The wars know no partisanship, no philosophical father, no nurturing mother, because the wars are the progeny of the machine itself. These perpetual wars are the second generation of automation that is free of human reason.
A bad relationship
The government machine feeds off its citizens in a lopsided co-dependent relationship. That relationship was empowered by the 16th Amendment, which authorized a direct personal income tax, and was activated by New Deal legislation. This combination of entitlement programs on the one hand and direct taxation on the other, fundamentally changed the relationship between citizens and government in America. Today that relationship looks more like indentured servitude than a citizen-controlled government of delimited powers.
What is there to stop the machine? The government has been able to raise funds effectively while keeping tax rates low enough to remain politically tolerable by taxing the largest base possible, national income. Ambitious politicians who dream of trimming entitlements are quickly marginalized by the machine in contrast to those politicians who support the machine and reap the benefits of government largess.
A Gold New Deal
We require a new relationship between citizens and the government, a “Gold” (for liberty) New Deal, in which states are empowered to stand as our representative bulwark against the federal government. States exerting the authority to chart their own political destiny and to stand up to federal encroachment may be the only mechanism by which limits may be imposed on the size and scope of the federal government.
Given the current situation in which the 10th Amendment has been retired de facto, a resurgence of state authority would have to take the form of a constitutional amendment ensuring the capability of states to opt-out of federal supremacy. This capability would mean states could assert their right to nullification in the form of settling in-state court conflicts that arise between state law and anything on the federal books. State would have the ability, through their own legislatures, to shed the effects of new federal legislation, regulation, court decisions, or executive orders, except for what is explicitly assigned to the federal government by the Constitution.
Particularly significant, the citizens of each state opting into such a new constitutional relationship would no longer be required to remain subject to federal taxation. Instead, each state effectively could ask to be billed by the federal government for its share of the defense budget. Each state could be free to raise revenue as it sees fit, effectively ending the role of the IRS in each state. Ending the IRS and decentralizing the federal government’s taxing mechanism is the most effective way to starve the machine’s appetite for our resources.
Other changes are needed to advance liberty within each state, of course, whether a state were to opt into such a Gold New Deal or not. These changes include ending public education, protecting bodily autonomy, ending bailouts, privatizing the way we hold police accountable, and reducing regulation of all types. But to be clear, the only path forward to these objectives is for states themselves to replace their subservience to the federal government with a more balanced relationship.