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Belmont Club

The Indispensibles

June 14th, 2013 - 3:16 pm

The world is simultaneously less solid and more durable than we think. Take the EU. It isn’t forever. It didn’t even exist at the end of the Second World War. It had a beginning and perhaps it may even have an end.  Thus, joining it isn’t equivalent to ‘making it’.

A ratings agency has made Greece the first European country to be an ex-developed nation. “Greece’s long-running crisis has culminated in its downgrade to emerging-market status and its exit from the club of developed nations, according to one index provider.” Erin McCarthy and Prabha Natarajan of the Wall Street Journal say it is an insult to emerging markets.

Countries deemed to be emerging markets by Bank of America-Merrill Lynch are expected to grow an average of 4.9% this year, according to the bank’s analyst. In contract, the International Monetary Fund predicts Greece’s economy will contract by 4.2%….

“You don’t think of a submerging market like Greece when you think of emerging markets,” says Brian Jacobsen, chief portfolio strategist for Wells Fargo Funds Management, which advises on assets worth $225 billion. “Greece is a bit of a sore thumb that will stick out in the index.”

In some universe, probably the present one, it is possible for China and South Korea to overtake Europeans countries.  Rudyard Kipling once wrote that to be born British was to “win first place in the lottery of life.” A recent poll says Britain has fallen to 27th place, behind South Korea and Chile, in the current rankings of where people want to be born. It’s entirely possible for the words “I’m an American” to eventually become the equivalent of “I’m from India” someday.

The present changes.  Greece has become poor. The Atlantic has a photo gallery of homelessness in Greece set amidst abandoned theaters, public parks. They are  former hotel clerks, painters, small businessmen, chefs — not exactly the kind of alcoholic and dysfunctional crowd one might expect;  the detritus of an assured future that never was.

And yet Greece may become rich again.  The Economist argues that the fires of recession have burned out the fevers and leeched out the bad blood. The Germans are coming back to a cheapened Greece and the Russians are buying up everything in sight. “WHAT a difference a year makes.”

This summer should see a record 17m tourists crowding Greek beaches. Bookings from Germany and Russia are soaring, say travel agents. A projected rise of €1.5 billion-2 billion in tourist revenues will give the budget a boost, even though many hoteliers are struggling to service bank debts. Greek contractors expect to resume work in the autumn on €6 billion of EU-financed motorway projects stalled since the crisis. They could create 30,000 jobs.

Privatisation is under way after several false starts. Opap, the state gambling monopoly, has been sold for €712m to a consortium of Greek and east European investors. Gazprom is expected to bid for Depa, the natural-gas monopoly. Sintez, a private Russian energy company, and Socar, Azerbaijan’s state gas producer, are vying for the gas distributor Desfa.

Well who knows? Greece has been a long time dying. Byron famously wondered what had become of classical Greece when he saw its debased state in the 19th century.

THE isles of Greece! the isles of Greece
Where burning Sappho loved and sung,
Where grew the arts of war and peace,
Where Delos rose, and Phoebus sprung!
Eternal summer gilds them yet,
But all, except their sun, is set

Yet Greece even after the breakup of the Ottoman Empire, the World Wars and the crash of the EU lives still after a fashion. Perhaps the moral of the story is that the world keeps turning. You and I might not survive, but time marches on.

Populations in the aggregate  do what it takes to survive. The Pacific Standard describes a town in Spain that had to make a choice between dignity and cash. Cash won. Juzcar was a former tourist destination groaning under 40% unemployment.

And then, in 2011, the people of Juzcar learned that Hollywood location scouts had tapped the tiny hamlet—it has less than 1,000 residents—to set a feature-length version of childhood classic—and parental nightmare—The Smurfs. As Hollywood does, the producers told Juzcar’s town council that to get the gig, they would have to agree to temporarily paint every one of its classic, bone-white Andaluz stone buildings in a Smurfier baby blue. After the filming, the producers would pay to paint the whole town white again. Juzcar’s mayor quickly agreed.

So welcome to the only all-Smurf blue town in the world, in Spain.

We are often told that we can’t live without … [put your own word here] … government, the Internet, sliced bread, cars … you name it. But as Listverse notes in its enumeration of past financial catastrophes, humanity can take a whole lot of hits and keep trucking. It is sometimes a blessing in disguise as the loss of the old sometimes leads to the new. Apparently neither bubbles nor their dire consequences last forever.

1. Diocletian Destroys Rome’s Economy Fourth Century AD;
2. Pazzi Conspiracy and Medici Banking Collapse 1470s
3. Spanish Inflation 1600s
4. Bermuda’s Hog Money 1616-1624
5. Tipper and See-Saw 1621
6. Tulipmania Hits the Netherlands 1636-1637
7. South Seas Bubble 1719-1720
8. Mississippi Bubble 1716-1720
9. Confederacy Destroys its Economy 1860
10. Railroads and Silver Cripple America 1893

We live in hard times but if history is any guide, people living two generations hence will probably say of our troubles”what was that all about?” One of the more interesting Presidents in 20th century history was Calvin Coolidge, who the Narrative has made a concerted effort to forget because Silent Cal said something unforgivable.

He claimed we could live without a lot of government. Wikipedia says, “The regulatory state under Coolidge was, as one biographer described it, ‘thin to the point of invisibility.’” Silent Cal gave us the Roaring Twenties.

So why don’t we have less government?  One reason is the liberal argument that the impiety towards government must always be punished in the historical afterlife. In the manner of ‘Dry Bones’ Coolidge was connected to the Hoover and the Hoover connected to the Dee-presshun, and the Coolidge connected to Dee-presshun, oh hear the word of O! It’s an indirect argument at best, one whose  impetus is the force of belief. Most politics, especially Socialist politics, is really religion by other means. Remove the “of course” in government and there’s a whole lot that isn’t obvious. Perhaps the only thing that one can safely say is that many of the immutable givens in this world were once wild-eyed ideas themselves.

Take the IRS.

The IRS itself operates a website titled “Historical Highlights of the IRS” and many will be surprised to learn that the income tax did not exist since the dawn of time. In fact the 1040 form first made its appearance in 1913.  The IRS writes:

1862 – President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses. The measure created a Commissioner of Internal Revenue and the nation’s first income tax. It levied a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on incomes of more than $10,000.

1867 – Heeding public opposition to the income tax, Congress cut the tax rate. From 1868 until 1913, 90 percent of all revenue came from taxes on liquor, beer, wine and tobacco.

1872 – Income tax repealed.

1894 – The Wilson Tariff Act revived the income tax and an income tax division within the Bureau of Internal Revenue was created.

1895 – Supreme Court ruled the new income tax unconstitutional on the grounds that it was a direct tax and not apportioned among the states on the basis of population. The income tax division was disbanded.

1909 – President Taft recommended Congress propose a constitutional amendment that would give the government the power to tax incomes without apportioning the burden among the states in line with population. Congress also levied a 1 percent tax on net corporate incomes of more than $5,000.

1913 – As the threat of war loomed, Wyoming became the 36th and last state needed to ratify the 16th Amendment. The amendment stated, “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” Later, Congress adopted a 1 percent tax on net personal income of more than $3,000 with a surtax of 6 percent on incomes of more than $500,000. It also repealed the 1909 corporate income tax. The first Form 1040 was introduced.

It’s sobering to realize that Washington was not always there.  Anyone who visits it today will be struck by the sheer imperial vastness of it and more than that, a burgeoning quality. There is a newness, wealth and power about it that contrasts with the older cities of the Acela corridor. And yet that newness is proof of impermanence. The only really permanent thing in this world is that those who cannot cope with change cannot survive.

It’s an interesting context in which to situate the Washington Post’s report that “a group advocating for a flat sales tax is going up with a new nationwide ad buy urging members of Congress to abolish the IRS. Americans for Fair Taxation, a group headed by wealthy super PAC donor Leo Linbeck III, will launch the ads Monday. The ad buy is in the mid-six-figures, according to the group.” The video at the Post site goes:

“Our best chance ever to shutter the IRS is now,” the ad concludes, urging people to visit the EndtheIRS.com Web site and call an 800 number to join the effort. … Linbeck made a splash in the 2012 election by founding a super PAC devoted to unseating incumbents in primaries, called the Campaign for Primary Accountability.

That group will consider a lawmaker’s stance on abolishing the IRS as part of its criteria for determining whether to fund primary challenges against them.

Is it a hopeless idea?  Given what we know about history, bubbles, Smurfs and the history of the IRS itself — nothing is ipso facto out of the question. Ending the IRS is as radical an idea as creating it in the first place. The IRS had a beginning. And it’s a fair guess to surmise that it will someday have an end or at least change into something else. Hopefully into something better.

The whole point is to adapt. The greatest failure of the current elite is a failure of the imagination; an incapacity to imagine a world without them in control. Without their ideas in ascendancy. Americans for Fair Taxation are at least asking the right question: “do the present arrangements still make sense? What needs to change?” And if so, change it, because nothing man makes is forever.

Perhaps it is possible to find a better tax paradigm and find the world still turning as it has these thousands and billions of years.


The Three Conjectures at Amazon Kindle for $1.99

Storming the Castle at Amazon Kindle for $3.99

No Way In at Amazon Kindle $8.95, print $9.99

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Top Rated Comments   
I've long considered the 16th amendment to be a bad idea. The founders had it just exactly right. Absent the 16th Amendment, the Federal Government would have to figure out how much money it needed, then leave it to the states to decide how to tax the citizens to raise that money. They could have a flat tax, a progressive income tax, a state lottery, oil lease revenue, or whatever means they could come up with. The result would be a natural aversion at the state level to Federal growth, because the state legislatures would have to come up with the funds. With the Federal income tax, there is no state-level aversion to Federal growth, because so much money is funneled from the Federal government to the states. The Federal government bribes the state governments with the people's money. An unintended consequence of the 16th Amendment, or is this what the amendment was intended to do?
1 year ago
1 year ago Link To Comment
Believing in the UN is for the rubes. The players always speak on two wavelengths, that is to say, in code. The outward words say "we should bring the problem to the UN". The inner message is "let us settle things outside the constitutional process." The outward words are "guns are bad for children". The inner message is "give us power over you".

And that is why liberals, but not the really smart liberals, are so disappointed in Barack Obama. He said, "I will govern transparently, respect human rights, and be humane in all respects." The inner message was "I will blame Bush so that you will give me the power". The guys who understood the code read him loud and clear. But the Occupy chumps took him at his word.

Obama kept his word. We just misunderstood what the word was. When they said in campaign mode, "we want the UN to decide", what they really meant is that "we will decide".

The most basic mistake in politics is to think a politician is telling the truth. Look at where his interests lie, and not what he says.
1 year ago
1 year ago Link To Comment
If I had to choose between having an NSA and an IRS then I would take the NSA. At least if it was governed the NSA could be pointed at real enemies. The IRS exists to target us.

Until the growth of the income tax the government was funded by Customs (import duties) and excise (sin) taxes. While they raise less money than an income tax they raise enough to do what we need a government for.

If the bureaucrats were really smart, and many of them are, they would put out a plan to keep their jobs by targeting the IRS at enemies abroad. They could morph into a Virtual Viking Computer Customs Revenue Service. This would transform them from the Internal Revenue Service into an External Revenue Service. In effect we would be playing the same game that the Chinese play.

China doesn't run its government from revenues collected domestically. In fact the Chinese government never has had effective domestic administrative control. They export goods and import information and finance. The Russians do the same thing but less obviously through their government. They just flat out hack and steal.

Maybe the Greeks need to stop pretending to be First Worlders that end up paying for the dysfunctional. They tried so hard to prove they are real Europeans and belong in the club, when it was always a Mug's game. It would be better for them to embrace the example of their historical adversaries and seek conquest through demographics. Simply move 10,000 Greeks a year into Turkey, breed, and then demand welfare. This could be the beginning of a new Greek empire.
1 year ago
1 year ago Link To Comment
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All Comments   (74)
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The whole point of bankruptcy is for miss allocated or poorly allocated resources to be bought up cheaply and put to good use by people with new ideas, and to remove from positions of authority those who made poor decisions.
1 year ago
1 year ago Link To Comment
I wonder, will they add stuff like this [below] to the 'history' of the IRS?

Rampant INjustice: http://www.youtube.com/watch?feature=player_embedded&v=bFALonjLay0
1 year ago
1 year ago Link To Comment

I was Don Rodrigo,
Thank you. You got it. The NSA is a tool, and like many other tools such as hammers knives and guns, may be useful in reliable hands but some people must never be allowed unsupervised or in some cases any access. The IRS on the other hand is inherently dangerous and even worse corrupts legitimate government. It is like pornography or the Ring that lacks "redeeming social virtue" and destroys the user.

We do allow citizens and the government to keep firearms in the basement. We do not allow citizens to keep unlicensed nuclear plants or methamphetamine labs in their basements. You do not have a reason to prevent your sane law abiding neighbor from having a gun. You do not have a reason to prevent a sane law abiding government from operating an NSA on your behalf to investigate foreigners, and alert Law Enforcement when the wrong foreigners have contact with Americans. You do have reason to fear that even an IRS supervised by honest patriots and staffed by initially by prudent and cautious clerks would prove a threat to the people's liberties.

The problem with the NSA is the Administration and the culture. The problem with the IRS is more than that. It is the nature of it as a domestic control and social engineering machine.

LIII,

We disagree but hopefully without being disagreeable. Your right to be wrong is what I swore to defend. From my view the root problem is that people are allowed to vote themselves an income stream. Until we can separate the voters from the magic checks then all the worthy efforts to expose and pressure politicians to respect their constituents or confront a rogue agency, efforts that I applaud you for putting time and treasure into, will be at best palliative.

The SCOTUS just declared that states have no say over who votes and we are probably days away from having Amnesty rammed through. That means totally open borders in which US citizenship means nothing. The only thing that will matter will be, who pays and who gets.

Remember under my plan almost everybody who is a citizen would get to vote for either the federal or state offices or both. Tax Eaters would only get to vote for one. Most people would get to vote for both.
1 year ago
1 year ago Link To Comment
BFTP,

I agree we should disagree without being disagreeable by agreeing to agree to disagree. So at least we agree on that. Agreed? ;-)

Cheers,
L3
1 year ago
1 year ago Link To Comment
1913 – As the threat of war loomed, Wyoming became the 36th and last state needed to ratify the 16th Amendment.

Threat of war? It was 1913, the year before the outbreak of WWI, and it was Europe that was primarily concerened about the possibility of war, if they were even that far along in their perception of what was looming. I can look through this site: http://chroniclingamerica.loc.gov/, and maybe find some American commentary in 1913 about "threat of war," but I doubt I'll find much. I think the IRS folks made that up to help justify their existence. Remember, Americans were fiercely isolationist about "The Great War" until three years in.
1 year ago
1 year ago Link To Comment
"The illusion of freedom [in America] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater." --FRANK ZAPPA
1 year ago
1 year ago Link To Comment
Just reposting a comment I left over at Rick Moran's blog:

Rick,

The trap people are falling into in this debate is simple: pinning it all on Edward Snowden, as if there haven't been any other whistleblowers to come forward. The trolls at Little Green Footballs (which apparently nowadays consists of atheist Obama-lovers as opposed to anti-MSM Dubya lovers like ten years ago at the time of the Col. Killian memos) think if they discredit Snowden or he discredits himself, then that somehow makes the NSA not guilty of warrantless spying on Americans. It doesn't. On the other hand, Snowden's sudden swerve into discussing how the NSA spies on foreign nations, including allies, at G8 summits makes me a bit suspicious. Why take the focus off the domestic spying? Why not if he has documents showing that the NSA has shared illegally obtained data with other agencies -- including the dreaded IRS or even the White House -- why not come forward with that?

Either the Guardian's leftist agenda is getting in the way of their civil liberties agenda, thereby giving the blithering useful idiots of the Right who will always worship the three letter agencies a billy club, or Snowden is getting played or doing some playing. I honestly don't know. I do know the NSA and all the corrupt bastards in this government who've been using their data for commercial espionage and/or blackmail would like nothing better than to 'personalize' the target, to quote Alinsky, and have us all debating Snowden to kingdom come rather than making observations like, 'gee the NSA Utah facility is being constructed at a time when the DHS is buying 2 billion bullets, I wonder why?'
1 year ago
1 year ago Link To Comment
Point is -- the G8 spying might expose the U.S. government as hypocritical and even the supposed trust between its Western allies as garbage (I suspect besides the Turks the Germans are in for a lot of spying too).

But the foreign spying is NOT illegal, unlike the NSA warrantlessly collecting data. The foreign spying isn't blatantly unConstitutional, unlike using the fig leaves of a 'general' warrant and a 1979 SCOTUS ruling to soak up the 'metadata' of billions of Verizon calls so they can monitor 300 actual phone numbers routinely (LOL that's a pretty high signals to noise ratio, if you believe that crap).

I'm starting to wonder if Snowden himself is a CIA false flag. So that those who called him a hero can be discredited, while of course, those who vigorously defend the NSA can never be discredited no matter how many real whistleblowers like William Binney step forward.
1 year ago
1 year ago Link To Comment
I have the deepest respect & admiration for what L3 is trying to accomplish -- but Joe Hill has it right: the Political Class have spent all the money they can tax, all the money they can borrow, and now are spending all the money they can print. The only way the Political Class is going to relinquish power is when it is pried out of their cold dead hands.

The failure of the Political Class is a global phenomenon. UK has a "Conservative" Prime Minister who is well to the left of alGore, is despised by his own Party members, yet is untouchable. Australia has an imported PM who seems to be good only as a target for little kids' sandwiches, yet she too is untouchable. And let's not talk about the French!

Modern governance has degenerated into a self-perpetuating fascist oligarchy backed up by a self-serving bureaucratic nomenklatura. But all things must pass. Collapse is inevitable. And collapse may be the only cure.
1 year ago
1 year ago Link To Comment
The problem the founders did not really see was that there needed to be an inverse relationship between the size of the federal government and the size of the country. They did know that they wanted a relatively small limited central government but did not realize that to maintain that they needed to write something into the document itself.

The problem is less about how the Feds go about raising tax revenue, a consumption tax versus an income tax, but rather how much they are allowed to spend. For a while now conservatives have been trying to constrain the Feds by constraining revenue and taxation and Obama, Bernanke, and krugman have shown why that is pure folly. Once you create a fiat currency and government can create dollars ex nihilio the gig is up on that approach.

The solution is to constrain federal spending to a proportion of the GDP and really it ought to be a sliding scale with the bigger we grow the smaller the percentage they can spend. A central government limited to 10 or 12 percent of GDP ought to be more than sufficient. The is roughly what the Swiss confederation government spends and they are one of the very few examples of a successfully united yet highly diverse population.
1 year ago
1 year ago Link To Comment
You're talking about a $1.7 to $2 trillion dollar budget, and yes, that buys a lot of government.
1 year ago
1 year ago Link To Comment
US companies expend a lot money tracking quarterly goals. The amount of money that is essentially wasted complying with a tax code that is intentionally overly complicated. Where it gets truly dark is when you consider the attitude of institutional communists that consider tax code as social justice. They actually don't care about raising revenue. They believe in punishment and hate theology to reinvent society. Over taxation reduces revenue, decreases employment, and increases poverty. Still that is a fair outcome with the elite because this system allows them to run their greedy fingers through the dough and they get first count.
1 year ago
1 year ago Link To Comment
20 years ago a group of US Senators did a study that showed that the private sector expends an additional 40 cents for every dollar actually collected by the Federal Govt in taxes.

The Heritage Foundation more recently did a study that put the number at 30 cents on the dollar.

And of course that money actually goes somewhere. Aside from the IRS itself and the lobbying firms in DC, there are many private sector employees who get paid to handle taxes. Even the Reagan tax reforms were known as "The Tax Advisor Full Employment Act of 1984." The result is a large costituancy who will oppose any changes that will eliminate their jobs.
1 year ago
1 year ago Link To Comment
I told a lifelong New Yorker/Dominican that Tennessee, where I went to college (Vanderbilt) has No Income Tax. AND we had roads, streetlights, utilities, and all that: everything done just as well as in taxed states (and a lot better than the pothole hell of NYC streets).

She stared at me in frank disbelief. I urged her to look up Nashville on Youtube and see for herself -- then I said, "So, what is all that money being wasted on?"

She simply could not process the idea. Found it incredible. Funny how the Useful Idiots completely miss the graft/baksheesh concept, innit? not to mention the fact that the Goobermint types are the $600 Toilet Seats gang.
1 year ago
1 year ago Link To Comment
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