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Leave Me Alone!

One thing the Left and Right agree on...

THERE isn't much that the Left and Right agree upon these days, but there is one thing that they seem to share, writes Nathan Lewis NewWorldEconomics in this article first published at Forbes...

An increasing trend toward 'federalism'.

Oddly enough, means that more policymaking should be done at the State level, rather than the Federal.

This was the original vision of the United States, and is still the basis of the US Constitution, although we spent the last century ignoring that.

The enumerated powers of the Federal government were limited mostly to various aspects of foreign policy: the military, foreign trade, immigration and naturalization, and foreign relations. On the domestic side, the Federal government would enforce free trade between the States, preventing any State from erecting internal tariffs or barriers to travel.

There were a few rules regarding what the States could do internally; basically, the Bill of Rights and subsequent Amendments. Besides that, the States could do just about whatever they wanted, within the confines of their own State constitutions, this privilege explicitly defined and protected by the Tenth Amendment.

This was a radical vision for its day, when power was normally concentrated upon the monarchy and its administration. Over time, our government has become more and more monarchical, even if it is not an absolute monarchy like that of Louis XIV, but more like a Chinese emperor in the latter stages of the dynasty, when the monarch performs the duties of a ceremonial figurehead while the hidden mandarins run the show.

For those with a proper education in these matters, these details are rudimentary. But, such people are rare. I would guess that most people on the Left didn't know that for California to set up its own single-payer healthcare system is actually how its supposed to work in this country; and that many conservatives, who might oppose the idea on the Federal level, are actually quite comfortable letting California go right ahead and do it, as long as they pay for it themselves.

For one thing, Californians might find out how much it costs, and then have some second thoughts. This is also how it is supposed to work.

I've long expected that the present crisis era (if that is what it is) would result in the remaking of all the post-WWII institutions, all of which have become decrepit with age, obesity and gnawing corruption. This includes: Social Security and other retirement-related systems including private pensions, the combination of state-provided and employer-provided healthcare that emerged after WWII, the postwar university, the welfare state in general, the size of government as a percentage of GDP, the tax system, the Dollar-centric world monetary system, the Federal Reserve (which did not exist before 1913, and did not have a monopoly on US currency creation until 1940), the K-12 educational system, the CIA, the permanent globe-spanning military, the low-density automobile-dependent suburb, the major media, various forms of the War on Drugs, the hypertrophied finance industry, the use of Russia as an all-purpose bogeyman, the International Monetary Fund, the United Nations, and most any other institution you could name.

During the crisis era, the new forms and institutions can begin to make their appearance, without yet becoming dominant. Social Security, which became operational in 1937, was almost irrelevant at first. It looks to me like Federalism – returning the Federal government to more like its original role, and consequently empowering the States – could be a part of this new order. It is just bubbling up these days, like marijuana legalization, homeschooling, a return to urban centers, and Bitcoin.

Anyway, the original Federalism should be part of our future. For one thing, a much smaller Federal government would be much cheaper – small enough to be paid for with a modest flat income tax (without Federal payroll taxes), or, if we are bold enough to repeal the Sixteenth Amendment, some kind of indirect tax such as a national sales tax or tariff. In 1910, the Federal government's primary revenue sources were tariffs and excise taxes on things like alcohol. There was no income tax.

That is not very feasible today. Arguments for a return to that indirect-taxes-only model (such as the "fair tax") have stumbled on the fact that the Federal government's present revenue needs make any such tax system into a caricature. However, a much smaller Federal government could once again sustain itself in this way.

I would like to see all sorts of domestic policy devolved back to the States, and the Federal government return toward its original role primarily as an agent of foreign affairs. Oddly enough, the big-government Left might like this plan too, as it allows that relatively small number of metropolitan coastal Blue Counties to do as they please. We would still have Big Government, but it would be contained.

As it turns out, states like California and New York have the same big-city Blue and rural Red split as the US as a whole. But, dissatisfied conservative New Yorkers or Californians could easily move to Texas or New Hampshire, choosing with their feet among fifty competing visions of government.

On a more practical basis, today's wildly different values might drive a push towards Federalism as an alternative to outright secessionist movements. The idea of having California secede might seem like a joke until you think of the real consequences of having the West Coast of North America home to a foreign country, possibly with communist tendencies and allegiances, possibly hostile, and possibly nuclear-armed.

Formerly a chief economist providing advice to institutional investors, Nathan Lewis now runs a private investing partnership in New York state. Published in the Financial Times, Asian Wall Street Journal, Huffington Post, Daily Yomiuri, The Daily Reckoning, Pravda, Forbes magazine, and by Dow Jones Newswires, he is also the author – with Addison Wiggin – of Gold: The Once and Future Money (John Wiley & Sons, 2007), as well as the essays and thoughts at New World Economics.

See the full archive of Nathan Lewis articles.

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