05/30/2015
"How the Fed Grows Government"
by Hunter Hastings - The Mises Institute
"...The Federal Reserve spearheads a process that enables largely unlimited government spending. It expands credit and enables fiat money, which is produced without practical limitation. Fiat money enables government to issue debt, which has been pursued without restraint. The unlimited government debt enables unrestrained growth in government spending. The citizenry has no power to change this through any voting mechanism.
Thus, the state is set free from having to collect tax revenue before it can spend, and as Mises explained, in such a case, there is no limitation on government at all:
The government has but one legitimate source of revenue — taxes. No taxation is legal without parliamentary consent. But if the government has other sources of income it can free itself from this control.
In other words, when faced with the possibility of voter reprisals, members of Congress are reluctant to raise taxes. But if government spending no longer necessitates taxes, government becomes much more free to spend.
Without restraints on government spending, there are no restraints on government’s mission, or on the growth in the bureaucracy that administers the spending. The result is a continuous increase in regulations, and a continuous expansion of state power.
****************************************************************
In the one hundred years since the creation of the Federal Reserve in 1913, US federal government spending has grown from $15.9 billion to a budgeted $3,778 billion in 2014 (a number we now refer to as $3.8 trillion to make the numerator seem less egregious). Spending as a percentage of GDP has advanced from 7.5 percent to 41.6 percent over the same period. A comparison of regulation growth is more difficult, but over 80,000 pages are published in the Federal Register annually today, versus less than 5,000 annually in 1936.
The evidence, therefore, is that voting makes no difference to this lava flow of spending and regulation. Whatever the will of the majority, government spending and government power will continue to expand, with consequent reduction in the economic growth --- the primary goal of the society that is being governed.
John Locke opined that, when governments “act contrary to the end for which they were constituted,” they are at a “state of war” with the citizens, and resistance is lawful. (Two Treatises of Government, p. 74). The theory and practice of unhampered markets and individual liberty are particularly relevant at election time. -- Hunter Hastings, The Mises Institute
