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"Men give me credit for some genius. All the genius I have lies in this; when I have a subject in hand, I study it profoundly. Day and night it is before me. My mind becomes pervaded with it. Then the effort that I have made is what people are pleased to call the fruit of genius. It is the fruit of labor and thought."
-- Alexander Hamilton
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2004-08-01 - *American Politics & Economics*


"That Americans are entitled to freedom is incontestable upon every rational principle. All men have one common original: they participate in one common nature, and consequently have one common right."--Alexander Hamilton

Occasionally on my mind is the economy and the political process in the United States that affects everyone worldwide. I read two articles tonight that I'm putting in with my journal. This is the anniversary of the death of American Patriot Alexander Hamilton. He has also been in the news this year due to the release of Ron Chernow's biography 'Alexander Hamilton'.


Ron Chernow's Alexander Hamilton ~CLICK HERE~

To underderstand the present we must understand thestand the past in this entry I will partially attempt to do that. I go into the poltical philosophical history of the United States rather than the an all out economic history which speaks volumes of why we are what we are today and where we are all headed.

All this also ties into my theme of Alexander Hamilton, his beliefs about how the United States system of government should work and how it has changed since his lifetime, as well as what is on my mind sometimes. We all have political convictions and I am exploring my own in this entry. Hamilton after all was America's best constitutional lawyer, created our economic system and ran the government under Washington. He more than anyone else laid the blueprint in the begining of the United States.

Here are two articles that illustrate when changes to his system occurred (at least partially) and what needs to be done today to correct the mistakes by the bureaucratic demagogues in Washington D.C.:

"How the Two Parties Have Overly Politicized the Business of Government

Commentary, Pablo Kasun,(Iowa) July 29,2004

The idea of a non-political governmental administration, a notion threatened today by multi-billion dollar contracts going to favorites of White House officials, originated with Alexander Hamilton.

The movement represented by Hamilton, who was Treasury Secretary from 1789 to 1795, realized that the value of equality is important for justice. For this reason, he began to form a federal government that was centralized and independent from politics. He helped organize a centralized government administration that would not be influenced by corruption.

With this idea, a corps administration in the federal government was being established that would work for the political party that had won the election. In this way, there would be less temptation for corruption and favoritism. This is important in the sense that the government is able to decide where millions or billions of dollars for government projects should go. A government that is more centralized, with impartial workers, is more just.

What does this idea really mean? It means that the government puts into practice the decisions of politics.In this way, there would be a lot less politics inside the administration of the federal government. The administration would be more stable and just in all the decisions made by the president, congress or courts of the United States.


The currency of the US Government carries the portrait of America's greatest terrorist, President Andrew Jackson. This criminal constantly defied the Constitution and the Supreme Court. Jackson ordered the killing of 8,000 women, children and men of the Cherokee Indian Nation, on a forced march called, "Jackson's Trail of Murder". Local vigilantes and militia were paid to harass and lynch Cherokee for years before the death march. Finally taken from their homes, with only what they had on their backs, Jackson locked them in diseased, fetid stockades for a year before they were forced marched in the dead of winter.

Many years after Hamilton died, his arch enemy Aaron Burr's protege' President Andrew Jackson had other ideas. He did not want an administration that was stable nor impartial. He wanted a federal administration that would depend upon which political party was in power.

With this type of federal government, the persons in charge of the implementation of the decisions had a compact with those in power. Since then, those representing the system of Jackson conquered those representing the system of Hamilton.

This means that the U.S. has operated primarily within the �spoils system� which means that those who have won, get the jobs and contracts.

A spoil�s system helps those people in the country who supported the political party that currently holds office. For example, we can now understand why many congressional representatives became angry when the administration of President George W. Bush gave �Haliburton� a large part of the work in Iraq, without advising anyone outside his group.

Jackson was the President from 1829 until 1837, and in those days, and for nearly 100 years, the prestige of being an employee of the Federal Government was quite low. The employees were servants of the politicians, which was different from being a professional with their proper field of study.

Today the situation is a little different, but continues along the path laid out by Jackson. In the days of Jackson, the state and local governments were forming. They adopted his ideas about organization and administrative control. Therefore, nearly all local and state governments depend upon political elections. What happens is that the experience of an administrator is valued less. What is more valuable, is how the administrator thinks � in terms of the party in power.

Local governments include city and county governments. Those who control the politics of the city or county, also control the administrative posts. The forces in the U.S. found its expression in Andrew Jackson, who made it a model for the country. This model is in direct contrast to the ideas and forces behind the work of Alexander Hamilton.

How can we use this idea to understand the consequences of a belief system?

For example, we can identify the politics of a person with the simple phrase, �I believe in local control of my school.� With our new understanding, we can see that local control of our schools means that those with power and money will control our school. In other words, the group that is better organized, financed, learned, or with the better jobs and houses control where the money goes. They help determine which school it goes: grade school, high school or university. This is the spoil�s system.

Therefore, when someone says, �I am for local control� it means, �I am for the powerful and wealthy in my community, who knows how to segregate people.� Segregation is designed to give poor people less than rich people. The facts show that schools for the poor receive at times half or less than half of other, privileged schools.

And why does this situation exist? In part, it exists because Andrew Jackson and the people behind him took control of the politics of the country, giving control to their supporters. For those in favor of a just society, a universal fairness, central control is better. It is better to have an administration, local, state or federal, that would not be affected by politics.

Even today many jobs are given out to people who pertain to a particular political party. For the poor, this signifies both injustice and exploitation. The man or woman who says, �I would like a society that is more just,� is a person who wants stable and central control of local, state and federal administrations who think on others.

The government exists for the advancement of the nation. The government has millions, billions and trillions of dollars at its disposal, helping huge companies, farms, and other industries. Can our government turn into a stable, centralized administration without politics and a servant of the poorest of the poor and of the whole nation and world?"


Now today we have inherited these problems and the question is how can we correct them. Of note it is interesting that the the federal deficit has been skyrocketing since Andrew Jackson battled Hamilton's banking system. Former Secretary of Commerce Peter G Peterson has written a book "Running On Empty: How The Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It ". There are similar problems looked at by Chalmers Johnson in his book "The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic". Such as how America's expanded military presence is bankrupting the United States of America.

Here is an article On Peterson's new book and his views:

"In his new book, Peter G. Peterson, chairman of the Blackstone Group and a former secretary of Commerce, explains how the theological war between Republicans and Democrats is bankrupting our future our two parties have organized themselves around two lopsided and mutually exclusive world views: Democrats believe every American is "entitled" to government largesse, while Republicans see only the ball and chain of punitive taxation. Each of these views has a set of self-justifying "myths." But their consequences go well beyond making our political process seem foolish. While federal deficit projections soar to dangerous heights, threatening our kids with unconscionable tax hikes, these myths have polarized the two parties and ruled out the sort of bipartisan consensus Americans need to avert fiscal catastrophe.

Five democratic myths about entitlements

Because federal benefits go to the poor, reform will amount to a shedding of our social safety net. We should never forget the critical role that federal benefits have played -- and continue to play -- in protecting Americans against the hardships of poverty. "I see one third of a nation ill- housed, ill-clad, and ill-nourished," announced President Roosevelt in 1937. Most of the benefits originally paid out through his New Deal programs were directly targeted at alleviating this misery. However, this is no longer the purpose toward which most benefits are directed. In 2002, out of $1.2 trillion in federal, state and local benefits, the poor received roughly $140 billion, according to the Census Bureau. That's about 12 cents of every full benefit dollar.

Even if they don't go to the poor, federal benefits foster equality by going mostly to lower-income households. In truth, social-welfare programs no longer redistribute wealth in favor of low-income households. Total federal benefits to the affluent are at least as substantial as those to the needy. Among Social Security beneficiaries, for instance, households with incomes of $150,000 or more receive, on average, checks that are twice as large as those of households with incomes of less than $15,000. If our purpose were simply to straighten out the national income distribution, we'd do a better job by mailing our benefit checks to random addresses. Even when we add back in other federal sources, including welfare and food stamps, benefits are distributed evenly across households of all incomes.

Federal benefits go to the elderly, who everyone knows are much less well off than younger Americans. Federal benefits do go mostly to the elderly. And 40 years ago it was true that the elderly were less well off than other demographic groups. But today, thanks in part to all the benefit programs that were expanded on their behalf, the elderly now have a lower poverty rate (10.4%) than any other age group.

Social Security and Medicare are earned rights by contract; beneficiaries are only getting back what they paid in. It seems natural to assume a certain justice about the arrangement. Until one considers timing and demographics, that is. When you start a new pension system, full contributions from covered workers start arriving right away -- but benefit payouts remain small for many years until enough workers with enough "credits" begin retiring. During the early years of both Social Security and Medicare, Congress kept tax rates unrealistically low and awarded ever-higher benefits to new retirees who had contributed only for a year or two. That meant that the children of the World War II generation (including the boomers) would have to contribute at much higher tax rates over their entire working lives just to keep benefits flowing to their parents. It's even worse news for today's young Americans, whose payroll tax rate will have to double to fund the demographic tsunami of retiring boomers unless the system is reformed.

The future growth in the cost of senior benefits, whatever they may be, can easily be borne by younger generations. Every year, the social security trustees release an estimate of the system's "actuarial deficit," which many assume represents what we would need in hand today to cover Social Security's cash shortfall over the next 75 years. In 2003, the actuarial deficit officially amounted to $3.5 trillion. But to arrive at a true estimate, we need to include Medicare as well as Social Security, unless we believe that health-care costs will miraculously turn around and head south on their own. This adds $15.6 trillion. (All of these dollar figures are "present values.") Next, we have to add back in the value of the mythical "trust funds," which aren't going to save the American people one nickel in future tax liabilities. Adds another $1.6 trillion. And if we use an unlimited time horizon, which we must do unless we want our kids to pass this problem along to their own kids, that adds an extra $24 trillion to the actuarial deficit, for a grand total of roughly $45 trillion in 2003, according to research commissioned by the Treasury Department. That exceeds our nation's entire net worth ($42 trillion).

Five republican tax myths ABOUT TAX CUTS

Because the American people are overtaxed, they want and deserve our tax cuts. Are we really overtaxed? certainly not compared to other developed countries. Of all 27 developed countries (defined by the OECD), the United States is roughly tied with Japan as the least taxed as a share of GDP. Are we overtaxed relative to our past? We'd have to go back to 1968 to find a year when total government revenues were lower as a share of GDP. Tax cutters often imply that Americans are becoming much more hostile to taxes over time. But this isn't true either. According to two Gallup polls taken in 2003, for example, the share of Americans who say that the federal income tax is "too high" is lower than in any year since 1962.

OK, forget the long-term tax burden. Our tax cuts are still a sensible near-term means of stimulating a weak economy back to health. This argument certainly has much truth to it. The vast majority of economists agree in principle that a tax cut could be a legitimate means to substitute for diminished consumer and investor demand. I say in principle, because the critical issue here is timing. To be effective, the stimulus must be applied during the early part of a recession. That is, it must put money now in the pockets of people who will spend it now. Over the entire last century, unfortunately, Congress has never been able to time this stimulus very well. The tax cuts typically don't kick in all the way until late in the recession and then continue long after the recession is over. That's certainly true for most of the recent Bush tax cuts. It's why many economists have grown to dislike countercyclical tax cuts in practice.

Even when they don't deliver near-term stimulus, tax cuts make the tax code more efficient. Over the years, many tax reformers have defended their proposals -- creating fewer tax brackets, establishing a national value-added or "flat" income tax, or phasing out the taxation of estates or dividends -- by citing efficiency advantages. In theory, we'd be better off with a tax code that raises the same revenue with fewer distortions in economic behavior. But a pure efficiency reform must leave revenue unchanged. Current proposals do not. Reducing the taxation on corporate earnings, for example, may marginally raise private-sector savings -- cited by some as an efficiency improvement. Even if it does, the extra savings will be overwhelmed by the loss in federal revenue, which adds directly to the federal debt and, over time, subtracts nearly dollar for dollar from national savings.

The critics just don't get it. What our tax cuts are really about is improving "supply side" incentives to work, save and invest. The marginal tax rate is the rate that applies to the last or highest or "marginal" dollar that you earn in a year. A core proposition of the "supply side" argument for tax reform is that reductions in high marginal tax rates can sometimes have a dramatic and positive impact on economic activity and (even) on revenue. The reality is that supply-side claims have become a theology, ruling out any reasonable discussion of the evidence. In fact, there's plenty of empirical evidence that when marginal tax rates are not high, the efficiencies you gain by cutting them may be modest and the impact on economic activity may be ambiguous.

Let's be honest. This is all about politics. In the long run, our tax cuts will force Congress to cut back spending and, with that, cut back government. I know several brilliant republicans who admit to me, in private, that much of the supply-side hype about the economics of tax cuts is not really true. But, they say, it's the only way to reduce government spending in a world in which powerful interest groups, allied with the opposition party, stand ready to punish any attempt to cut off the flow of government largesse. This is a clever apologia, but it is unfair because nothing excuses holding the next generation hostage on the dubious bet that another party will have the good will to relent. It is cynical because it assumes that Americans no longer share any common values on which open agreement can be reached. I for one refuse to accept this dismal view. And it is hypocritical. One could take the ostensible goal of the tax cutters -- smaller government -- more seriously if we saw that they were also at least trying to reduce government spending. But we see nothing of the sort. Instead, spending has exploded on their watch.

What needs to happen for all the myth-spinning to stop? The heads of the Democratic and Republican parties need to pause and assess the potential damage they're doing. Voters need to demand that politicians adhere to the truth, even if it's not what they want to hear. We must learn again to cooperate politically and embrace a positive vision of what our nation can become. Instead of obsessing over the tax hike that outrages us or the benefit cut that shocks us, we need to come to think of our future. Not since the Kennedy administration have presidents asked us what we can do for our country. It's time to demonstrate to the next generation that this is a virtue Americans have not forgotten."

The Kennedy administration was not able to do everything it sought out to do, but they did avert nuclear war. For that everyone on Earth should be forever grateful. We still have a world with nuclear arms at our disposal too, on which Kennedy said could lead to man's final war. We also still have a political process that can destroy us and needs to be fixed so that we can again be a United States of America, so to speak. All we need to do is look to our founding brothers, a fraternity of men who shaped this nation where as Jefferson stated �We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.� We must all trust this generation that could produce such statement's that led to the betterment of all mankind. They were unable to prevent the inevitable "Civil War" but did leave us with the tools needed to provide for in an economy and constitution that produces freedom. Only working together can we face the challenge of maintaining and securing that freedom in today's global economy. Finally I will close with words yet again from President Kennedy whom stated so well,"With a good conscience our only sure reward, with history the final judge of our deeds, let us go forth to lead the land we love, asking His blessing and His help, but knowing that here on earth God's work must truly be our own."


PUBLIUS

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