National Review stands beside History yelling "Go!"

While House Republicans’ repeal of Obamacare is laudable, the stark truth is that true repeal is still elusive. An alternative some have considered -- as opposed to waiting on the courts or a new government -- is to try nullification, the oft-maligned, seldom-employed tactic used by state governments where they refuse to enforce laws they deem unconstitutional.

Tom Woods of the Ludwig von Mises Institute has written not one but two recent books advocating nullification. In “Nullification” and “Rollback” Woods encourages the use of the tactic in a political landscape where choices between the two governing parties could hardly be worse.

No shortage of liberal writers have denounced Woods’ book or the idea of nullification. But when scholars in reputedly conservative journals join the dog-pile of their defense of the status quo, one has to wonder why these conservative intellectuals are so intent on letting unconstitutional legislation become more easily enshrined.

In the February 21, 2011 dead-tree issue of National Review (not online), Gettysburg College professor Allen C. Guelzo discards nullification and reaches a nearly identical conclusion as the liberal Princeton professor Sean Wilentz does in The New Republic.*

The subtitle of Guelzo’s “Nullification Temptation” is “Let’s stop Obamacare without blowing up the constitutional order.” In case Guelzo didn’t choose the title or subtitle himself, he immediate clarifies that there is no hyperbole when he refers to nullification as a “nuclear option” and declares “Its danger lies in how easily it could destroy not just Obamacare but the entire Constitution.”

Guelzo proceeds to list all the major events in the history of nullification: the Kentucky and Virginia Resolutions of 1798 and 1799, South Carolina’s attempt to nullify the 1832 “Tariff of Abominations,” and Wisconsin’s efforts to avoid enforcing the 1850 Fugitive Slave Act. Guelzo finishes this section by saying, “At no point, however, did nullification prevail.”

So if Professor Guelzo admits that nullification never prevailed against the comparatively miniscule federal government of the 19th Century, why is he saying that nullification today could “destroy . . . the entire Constitution” when Americans now live under a far more consolidated, bureaucratic, and intrusive state?

Does Guelzo expect his readers to believe that an America where cameras adorn nearly every intersection, IRS agents harass citizens for not relinquishing enough of their money to the state, and has a federal capitol employing more than 2 million, that even one state’s refusal to enforce Obamacare is enough to upend the whole edifice? A high school student wouldn’t get away with that sort of nonsense.

By opposing the very theory of nullification, liberal Wilentz and conservative Guelzo both endorse the criminalization of speech against the president (the Kentucky and Virginia Resolutions contra the Alien and Sedition Acts) and that slaves, even if they escaped to a free state like Wisconsin, had to be returned to their masters.

So why does Guelzo go to the trouble to discredit nullification? It makes sense for a liberal like Wilentz to recoil at any idea of resistance to the Washington leviathan. But why does someone posing as a proponent of limited government accept such a broad interpretation of the Constitution that would justify any and every expansive big government scheme?

One might assume that Guelzo might like to see nullification employed to frustrate Democratic health care legislation but that position forces him to confront what he cannot bear: What if someday Republicans pass legislation Democratic state governments find constitutionally wanting? Republican nullification would set the precedent that state governments can slow down or halt Washington’s machinations. To ensure that Republican monstrosities can govern the land Guelzo has to let Democratic fiascos remain too.

It’s the same reason Democrats haven’t repealed the Patriot Act and Republicans have never taken a scalpel to the welfare state. Both sides scream at each other but they always end up preserving each others’ programs. When the minority party becomes the majority they realize they can use their adversaries’ initiatives for their own gain.

If this is the state of the conservative opposition leading up to 2012 it’s no wonder a state-run health care operative like Mitt Romney is considered a serious contender to unseat a state-run health care operative like President Barack Obama.


*The title of Wilentz’s blog is “States of Anarchy.” In Guelzo’s, he calls nullification “the spirit of anarchy.” When historians who are supposed to represent two different sides of the spectrum end up with arguments and rhetoric so similar that one could almost charge the other with plagiarism, it is hard to refute the claim that there isn’t a dime’s worth of difference between the parties.

Cash Clunker

*This post is a little old. It was composed before a trip I took to my old Kentucky home. This issue has faded somewhat, but the same problems exist.



The recession is on its way out! The “Cash for Clunkers” program has been a rousing success. The government agreed to give away money and people surprisingly lined up with their hands eagerly held out. The government printed up money (“It’s free money from the government!”) and the auto industry is back on its feet and soon it will be better than ever.

If only.

The lunacy of the Cash for Clunkers boondoggle is a testament to the government’s inability to learn from its mistakes.

Like the vaunted stimulus earlier this year, the “Cash for Clunkers” program was sold to the public as the avenue through which the economy will be jump-started. Just throw some money at a problem and like magic, it will go away. People aren’t buying enough cars? The solution must be the government paying people to start the process.

Unsurprisingly, the initial response to the program was successful. Despite saying that they are tired of others getting tax breaks and special treatment, people are generally receptive when they are the ones getting “free money” from the government.

So people are now buying new cars, maybe even American cars. That’s great, and all it took was a little government spending, $1 billion, to get the ball rolling.

And just like the housing bubble that inevitably burst, the “Cash for Clunkers” program is but a band-aid that brings no permanent relief, much less stabilization.

At a time when jobs are still not coming back, “Cash for Clunkers” offers no genuine solutions. Sure, people are buying cars, but does that alone mean the economy is on the way back? Closed dealerships remain closed. Factories aren’t reopening. The only certainty to come out of “Cash for Clunkers” is that it plunges the United States and its citizens further into debt.

Less than a year after the housing market hit rock bottom, people seem to believe that the government can create money out of thin air, pass it out, and then think that reality won’t set in when the money cannot be paid back.

Look at the housing crisis. Credit was massively expanded making more “money” available in the form of loans so that people traditionally deprived of loans could buy the home of their dreams. But the bills came due and people who should not have been approved for loans in the first place lost their homes. The same thing can’t happen to eager car buyers, can it?

The same general principle is at work in “Cash for Clunkers.” People are enticed with money that appeared out of nowhere so they can buy a new fuel-efficient car that they don’t necessarily need.

For a country that is still suffering through a recession and incalculable debt, it is dumbfounding to see that Congress and President Obama believe that creating more debt will somehow alleviate the current problems. It’s as if a doctor treating a stab wound victim decides that shoving the knife deeper into the tissue will make the stab wound go away. It makes no sense.

This program brings only temporary benefits but it cannot go on forever. Eventually the program will stop and lots of people will probably default on their car payments making this whole exercise a waste. But in the meantime, it’s quite likely that the same logic, handing out money, will be extended to some other industry. The U.S. Postal Service is in some financial trouble and thousands of offices might close. Will the government begin handing out tax rebates so we’ll send out more packages from the post office? Will they raise taxes to support the next scam?

Not likely. We already hear that taxes cannot be raised because we’re already in a recession and people can’t be deprived of yet more of their money. But isn’t that what “Cash for Clunkers” inevitably leads to? People losing yet more of their money for cars they might not even need?

The program encourages more spending when people should be saving.

But stopping programs like “Cash for Clunkers” is only stopping a symptom. It is the entire mentality that government can just hand out money to spur spending that needs to change. And the entity that needs to be confronted is the one that makes such schemes possible in the first place. It is not President Obama or even the dim-witted Congress, but the Federal Reserve, that giant printing press.

Printing up money that doesn’t exist is exactly what gets average citizens thrown into jail. But as long as the government has a “private” agency that officially finances its spending, people can be convinced that their taxes won’t have to be raised so the auto industry can stay afloat or that government-run health care is even remotely possible.

But before the Fed can be stopped, it has to first be examined. That is what Ron Paul’s “Audit the Fed” is designed to do. Already with over 250 co-sponsors in the House, the companion bill has a growing number of co-sponsors in the Senate. If we can expect government spending to actually slow down or even stop, we have to stop the mechanism that makes deficit spending possible.

To adapt from the historian Tom Woods, To stop the spending machine, you have to go after the money machine.

Audit the Fed.

The Fed Did It

Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, by Thomas E. Woods, Jr.

Last fall the bank bailouts, Wall Street bailouts, and home foreclosure crisis all hit at virtually the same time creating a fiscal disaster for millions and a political disaster for the incumbent party, its president, and his potential successor. People panicked when John McCain, who had been picking up steam, validated his Republican primary assertion that he didn’t understand much about the economy, and anxious voters sitting on the fence flocked to the freshman senator from Illinois.

Talking heads filled the TV screens with each party hack pointing to their adversary, claiming that it was their party’s policies that set up the financial Armageddon. Democrats pointed to the Bush tax cuts and Republican deregulation policies while the GOP said it was the affirmative action-backed Community Reinvestment Act begun under Jimmy Carter and rejuvenated by Bill Clinton that was the real reason for the economic tsunami.

The Democrats claimed that it was all the banks’ fault for the housing crisis. It was because of President Bush’s deregulation of the market that caused banks to loan out money to people who could not pay it back. They used the crisis as the justification for economic regulation because laissez-faire economics, like everything else he touched, had obviously failed under George W. Bush. In fact, George W. Bush did true free marketeers no favors when he made his prime-time television address pleading for the bank bailout and readily conceded that he had to "chuck" his free market principles.

The speech was played perfectly by the Democrats who could point out that even President Bush could concede that his deregulation contributed to the problem. That, however, operates on the assumption that just because George W. Bush said something means it is true.

An alternative reading of recent history is made by historian and best-selling author Tom Woods of the Ludwig von Mises Institute, the prominent libertarian think tank. In his concise, highly readable, but quickly assembled book, Dr. Woods points to an altogether different culprit, one that is neither the Republicans’ supposed deregulation nor the Democrats’ affirmative action feel-good policies.

The author asks, why would so many institutions, in different areas of the business world, suddenly collapse and look like total buffoons all at the same time? Perhaps the variable is something outside of them. Woods’ thesis is that the source of all our money problems is the Federal Reserve.

One of the most neglected components of American life, Woods argues that the actions of the Fed preclude us from having a genuinely free market. The Fed was brought into life to succeed the First and Second Banks of the United States by a legislative act in 1913. For nearly 100 years, the Fed has been a part of American life that has received virtually no scrutiny. Woods believes it is time to scrutinize.

The Federal Reserve, he says, keeps interest rates artificially low by continually injecting dollars into the money supply, creating the illusion that more saving has been done which can thus be used in long-term projects such as home construction. Woods (along with economists Murray Rothbard, Ludwig von Mises, and F. A. Hayek) concludes that these conditions, manipulated by the Fed in an earlier epoch, also caused the Great Depression.

Woods address both sides of the political aisle and indicts both for their hand in the crisis. Woods digs into the history of the Community Reinvestment Act of 1977 (CRA), a piece of legislation supported by President Jimmy Carter designed to pressure banks into making home loans to people of all segments of society, regardless of their credit history. The act resurfaced during Bill Clinton’s administration and the spirit of the act was invoked by George W. Bush in his push for an "ownership society."

The CRA resulted with banks receiving threats of lawsuits which ultimately led to the lowering of their lending standards, and a symptom of the crisis becomes evident. A condemnatory passage of the Democrats, Woods relates the story of Clinton HUD secretary Andrew Cuomo patting himself on the back for winning a "discrimination" settlement against AccuBanc Mortgage that ended with the bank being forced to issue loans on an affirmative action basis, which the secretary knew full well would end in a higher number of defaults (20-21).

Far from a real laissez-faire capitalist, George W. Bush threw in his lot with the "home-owning for minorities" scheme that his Democratic predecessors conjured up. He regularly supported regulations, even if not in word, certainly in deed.

Woods unequivocally rejects regulation as the solution for this and any financial crisis. Similar to security restrictions after a terrorist attack, the regulations and restrictions imposed are designed to protect people from yesterday’s catastrophe. Regulations are, in short, counterproductive and miss the current and potentially future crisis.

The answer, Woods insists, is not regulation because it has already been tried and failed.

He points out that regulators are government employees, not business savvy men. Shortly before Enron imploded in 2001, the SEC checked them out and found things A-OK. As we know from the Enron debacle, it was insiders who really knew what was going on and figured it out, which, while certainly late in the game, was still faster than the government discovered it.

Another example of government regulation of the economy is the presence of insured commercial bank deposits. He writes, "Any 'deregulation' of the banking system that permits the banks to take greater risks while maintaining government (that is, tax payer) insurance of their deposits is not genuine deregulation from a free-market point of view," (46).

But all of these examples are really symptoms of the problem. While affirmative action legislation is bad and regulations are unfruitful and government pressure on banks is also bad, they would all go away if only the Federal Reserve was abolished. The Fed is the instrument that powers all of these poor economic activities. The Fed is the lender responsible for the money banks lend out to unqualified borrowers. The Fed is run by unelected men and truly accountable to no one. It prints paper money which, by virtue of no metal backing, can never be exchanged, and is literally, only paper.

A secondary aspect of Woods’ solution is to return to a gold standard monetary system. Since 1971 and the Bretton-Woods accord, the United States has been on fiat money, that is, money that is not backed by any metal, be it gold, silver, or anything else. Since the government never has to worry about people coming in and demanding gold or silver in exchange for their reserve notes, the people are stuck with them. And since there is nothing to restrain the government by way of the people regarding money, they are free to continue printing as much paper money as they want. This, Woods concludes, is what makes bailouts possible.

This, in fact, is one of Woods’ most compelling arguments. If money can truly be printed at will, and there is nothing people can do that would force government to spend responsibly, that makes bailouts not only possible, but likely. A currency that is based on an exchangeable metal is actually a restraint on government. If politicians have to worry about people coming in and demanding gold or silver for their paper money, they will think twice before spending beyond their means. Also, the very existence of a central bank feeds into the bailout mentality as the "lender of last resort," usually means it will ultimately get to fulfill that duty.

All of this supports the famed Austrian Theory of the Business Cycle, a theory which won F. A Hayek the Nobel Prize in Economics in 1974. The theory states that whenever a central bank creates circumstances which create a false prosperity through the printing of money, which lowers interest rates, a bust will inevitably end the boom. This is precisely what happened in America. People who would have otherwise been considered unqualified for loans received loans. Woods says it is similar to a basketball team expanding the roster by two spots. Even though two more people get to be on the team, they would not have otherwise been considered qualified for the team.

The point is that reality eventually caught up with the housing bubble and caused the collapse. It was a predictable but inevitable event. The central bank can try to delay the bust but doing so only makes the bust worse, since there would be more time to manipulate the false sense of prosperity. According to this argument and logic, the Federal Reserve is the institution that made the housing bubble and bust possible.

The only downside of Meltdown is a common one among free market uber alles advocates. Woods writes about the free market as if all problems would instantly vanish without regulations and the central bank. While I cannot help but agree that the country’s financial situation would improve if we really enacted a laissez-faire economic where the government actually kept its hands off the economic system, the reader cannot help but notice the faith rhetoric that is inherent to the free market system.

Take a passage from page 65: "The market gradually weeds out business owners who do a poor job as stewards of capital and forecasters of consumer demand by punishing them with losses and, if their inefficiency persists, driving them out of business altogether. So why should businessmen, even those well established and who have passed the market test year after year, suddenly all make the same error?" Now simply replace "market" with "God" and the reader can get the sense that the free market is supposed to be infallible. If only the market was really free, then all the financial problems of this country would be resolved. One can almost see the biting satire of Stephen Colbert and his claims of Republican "Moneytheism." Yet, that is really the only shortcoming in Meltdown, one of interpretation and the fear of parody.

Now that the recession is in full swing, and by virtue of this book, we have an opportunity to confront the problem. Shall we continue to blame everyone on the other side and point to policies that have made themselves obsolete while an institution, the Fed, remains untouched? If Woods (and his polemical predecessor Murray Rothbard) is correct and the Fed is the main reason for not only the current crisis but the Great Depression, isn’t it time that there was finally at least a debate on the American central bank? Isn’t it time that we at least begin to discuss whether an unaccountable government institution might be the source of our problems instead of some inane bickering about regulations or the CRA?

Stop It!

One of my favorite Mad TV sketches features Bob Newhart, as a therapist whose only advice to any patient was contained in two words: Stop it! When a woman who suffers from an irrational fear of being buried alive in a box comes in, his advice is the same: "Stop it!" No matter what inner difficulties the woman brought up, the therapist’s answer was always “Stop it!” I heartily recommend that our lawmakers see Bob Newhart’s most recent rendition of therapy.

One of President Barack Obama’s first initiatives as the chief executive is to implement an economic stimulus package that he repeatedly tells his countrymen is designed to save the American economy from the catastrophes of tax cuts and capitalism.

It should not be too surprising that Democrats wish to pass a package that would be the more invasive than any government measure into the economy since the New Deal, at a time when the current hardships are still nowhere near those endured during the Great Depression, which was only exacerbated because of those interventions. In short, the stimulus package is not so much meant to stimulate the economy, but an initiative to create more political capital for the new president. One portion that has since been excluded from the package, perhaps due to its sheer odiousness, was bailout money for Planned Parenthood (I don’t know about any of you, but I don’t believe the killing industry has any shortage of business).

The more President Obama says some version of "We have to do something because to do nothing would be worse," more people will get scared, remain scared, and eventually begin to believe it. Think of it as a Patriot Act for Democrats.

The Democratic president disparages the Bush tax cuts, one of his predecessor’s finest measures, because the national debt skyrocketed and our nation’s financial institutions crumbled during the final months of the lame duck administration. In other words, the new president is trying to tell us that the economy is teetering toward collapse because Americans were allowed to have more money in their paycheck, and nothing to do with the ridiculous spending spree President Bush and the Republicans went on. President Obama’s prescription for economic recovery seems to be, don’t cut taxes, but go on a ridiculous spending spree. President Bush’s problem was not that he cut taxes, but that he cut taxes, and then did not begin reducing the size of the government to compensate for the lost revenue. President Obama wants to leave taxes where they are, for the time-being it would seem, and then increase the size of the federal government.

Now that the Democratic-bashing portion of the blog is through, let us move on to the Democrats’ henchmen.

What should be more surprising, but that I fear is not, is that the Republicans are willing co-participants in this mad spending scheme as well.

How? you might say, didn’t every House Republican vote against the stimulus bill as it appeared in the House of Representatives? Yes, but every House Republican voted against a massive spending bill that could have caused revolts among their constituents had they voted for it, and every House Republican voted against a massive spending bill that did not need any of their votes.

The Democrats have such a strong majority in the House that they got the bill passed without any Republicans. By voting against the bill out of pure political expediency, they avoided the heat from their home districts. While many Republican cheerleaders on talk radio praised the Republicans and suggested that they might be returning to their fiscal principles, their votes meant nothing because the bill still passed.

By having nothing to lose by doing so, they voted against it. We still need time to see if the Republicans have made a prodigal journey back to fiscal sanity.

But what really made me reach for the Tums is what the party’s senators began attempting once the package reached their chamber.

When Democrats first suggested a $300 billion stimulus package, the Republicans gave the nod to them and then some: they said $445 billion would be just fine.

Republican senators want to give tax credits to homeowners since the housing market bubble has utterly popped. A tax credit, which sounds like it might be good, is really just another manifestation of welfare. Whereas a tax cut in the form of George W. Bush or Ronald Reagan, allows the taxpayer to keep more of their income in their paycheck, a tax credit is a check from the federal government, with money that was printed from out of nowhere.

We can honestly say that we have a bipartisan government.

President Obama, during his never-ending campaign, said that he would bring Americans together and help heal our partisan wounds. Well, all that has happened since he took office is bring Republicans and Democrats together in a massive feast of pork. The parties are fighting over how much money should be in these stimulus packages and that should sound off alarms to conscientious citizens.

The only debate occurring over the spending bills are regarding how much should be spent and on what. There is no debate regarding whether so much money should be spent in the first place.

People seem to have forgotten that one short year ago, President Bush introduced a stimulus package to help boost a slumping economy. The stimulus did nothing to stop the collapse and nationalization of Fannie Mae, Freddie Mac, and Lehman Brothers. President Bush’s massive spending bill did nothing to stop the impending economic disaster. President Obama’s massive spending bill is even more massive and will only exacerbate the problem and ultimately cause more suffering for reasons already illuminated.

My prescription for the economy is to actually do very little. The current system cannot fix the disaster. It has been the invasive bipartisan federal government of this country that has caused this disaster.

Another appealing solution is to simply eliminate the Federal Reserve, that corrupt printer of bad money, which is the topic of Thomas E. Woods’ forthcoming book, Meltdown, A Free Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts will Make Things Worse.

Let this prescription for the horrific levels of spending and bad money be quick and to the point: Stop It!