The American Founding Fathers created a federal republic as the best form of government they could devise to protect persons and property and ensure liberty.
Unfortunately, the federal government has evolved from the protector of the people to the biggest scammer. The Founders were not naïve about their fellow man. As Thomas Jefferson noted, there is a natural tendency for the government to grow at the expense of the liberties of the people. In an attempt to delay this process of decay, the federal government was given very few limited powers, with the remaining power delegated to the states and to the people.
As a reflection of these limited powers, George Washington organized his government in 1789 with only five principal officers, including himself. The officers were Jefferson as Secretary of State, Alexander Hamilton as Secretary of the Treasury, Henry Knox as Secretary of War (the War Department was renamed the Defense Department in 1947 – better optics), and Edmund Randolph as Attorney General. This five distinguished and manageable group of Cabinet officials has now grown to 25 people of Cabinet rank, 15 of whom are department heads. (Can the President recall the names and positions of all of these people, let alone manage them?)
There is no good reason for many of these Cabinet officials and Departments. Much of what they do is misallocate taxpayer dollars to less productive and corrupt uses. A quick look at five of the recent Cabinet departments created illustrates the problem. The Department of Housing and Urban Development was created in 1965 to reduce the blight of some of the inner cities. Where is the constitutional authority for such a department? Are not local officials better placed to assess and deal with local needs? Why should a homeowner in Orlando, Florida, be subsidizing a renter in Baltimore, Maryland?
The Department of Transportation was created in 1967. One of its functions is to oversee the operation of the FAA – which is required to maintain an efficient air traffic management system to minimize flight delays. Much of the time, the FAA does the opposite because of staffing problems and obsolete equipment and software. Some countries, like Canada, have privatized their air traffic control systems with much better results.
The Department of Energy was created in 1977 by President Jimmy Carter, who had totally bungled adequate energy production (after the Gulf oil crisis) in part through the use of price controls – which resulted in endless waits at gas pumps. His “solution” was the creation of the Department of Energy, which now has been used by the Biden administration to restrict the production of oil and gas through regulation – resulting in higher energy prices, which hurts the poorest among us the most.
The Department of Education was also created during the Carter administration in 1979. For the first two centuries of the American Republic, education had been handled at the local and state levels of government, and most of it still is. Standardized test scores have been falling despite the Department of Education spending $70 billion or so per year to “improve” educational outcomes. Fortunately, the school choice movement is growing rapidly, enabling parents and students to escape the tyranny of government schools. Would the nation be better off if the Department of Education was shuttered and the $70 billion distributed to parents in the form of educational vouchers, enabling them to select the best school for each of their children?
By far and away, the biggest government scam is the Federal Reserve, which was formed in 1913 as the U.S. central bank and in part to protect the value of the dollar. There was no persistent inflation before the formation of the Fed – that is, the price level in 1912 was about the same as it was in 1800. But since the creation of the Fed, the value of the dollar has consistently declined, so now it is only worth about one-thirtieth of what it was worth in 1913. The dollar has lost about 17% of its value just since Joe Biden has been President. If you had $10,000 in your checking account the day that Biden was inaugurated President, the purchasing power of that account is now only about $8,300.
If someone with a gun demanded your money and if you were lucky, the robber would be caught and sent to jail. But when you are robbed by the actions of the Federal Reserve, Chairman Jerome Powell and his fellow board members defend themselves by saying Congress made them do it because the Fed is required to fund the government’s deficits. The government needs to define legal tender for the payment of taxes and to pay its own bills – but whatever other monetary functions are needed can be well performed by the private sector.
Even conservative members of Congress, always fearful of losing an election, vote for deficit-funded projects that are not in the national interest but are alleged to benefit their district. As Pogo said, “We have met the enemy, and he is us.”
Over the last four decades, numerous studies have shown that the size of government in the U.S. and elsewhere is above the optimum level for job creation and economic growth. Perhaps the most direct way to reduce the government’s ability to scam the people is to amend the Constitution to require super-majorities (e.g., 60%) for all government spending and tax proposals.
• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.
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