Let’s Repeal Two Constitutional Amendments

“A hand from Washington will be stretched out and placed upon every man’s business; the eye of the Federal inspector will be in every man’s counting house.” — Richard E. Byrd, Speaker of the Virginia House of Delegates during the Ratification Debate for the 16th Amendment.

On June 5, 2013 I posted an essay on the tyranny the passage and ratification of the 16^th Amendment has caused entitled “How Did We Get Into This IRS Mess?”

When our Constitution was written and adopted it contained two specific enumerations as to how Congress could raise money from the citizens.

The first was Article I, Section 8.1 that states:

“The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.”

The second can be found in Article I, Section 9.4 that states:

“No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”

This clause basically refers to a tax on property, such as a tax based on the value of land, as well as a capitation — a poll tax; an imposition which is yearly laid on each person according to his estate and ability. One must also realize that “property” in the eyes of our Founders included everything from land and the realization of your labor, i.e. money to one’s opinions. In other words our Founders did not want the federal government to be able to take any of your property in taxes. They wanted to pay for the cost of maintaining all of the items enumerated in Article I, Section 8 through the collection of duties, imposts, and excise taxes.

When our Founders wrote the Constitution they divided the federal government into three branches; legislative, executive, and judiciary. The purpose of this was to impose checks and balances on the powers that could be exercised by any one branch of government. Our founders also wanted the legislative branch to be the more powerful of the three branches so they set forth additional checks on this branch by dividing it into two chambers. It was their intent to make the lower chamber — the House of Representatives — the chamber most responsive to the people and the passions of the day. This is why members of this chamber are subject to a two-year term and can be easily replaced by the citizens of their respective districts. The also wanted all spending bills to originate in this house. In essence they wanted the House of Representative to control the purse strings of the federal government. All of this is laid out in Article I, Sections 1 and 2 of the Constitution.

The upper chamber — the Senate — is defined in Section 3 of Article I. It grants separate powers to the Senate not granted to the House and gives senators a term of six years with a one-third turnover of the Senate every two years:

“The Senate of the United States shall be composed of two Senators from each state, chosen by the legislature thereof, for six years; and each Senator shall have one vote.

Immediately after they shall be assembled in consequence of the first election, they shall be divided as equally as may be into three classes. The seats of the Senators of the first class shall be vacated at the expiration of the second year, of the second class at the expiration of the fourth year, and the third class at the expiration of the sixth year, so that one third may be chosen every second year; and if vacancies happen by resignation, or otherwise, during the recess of the legislature of any state, the executive thereof may make temporary appointments until the next meeting of the legislature, which shall then fill such vacancies.”

It was the intent of the Founders to make the Senate a more deliberative body less influenced by the passions and factions of the day and more responsible to the will of their respective state legislatures. This is why they wanted senators appointed by the various state legislatures and not elected by popular vote.

As noted above Article I, Section 3 states:

“The Senate of the United States shall be composed of two Senators from each state, chosen by the legislature thereof, for six years; and each Senator shall have one vote.”

This was a carryover from the Articles of Confederation and the fear that the individual states would relinquish too much power to the central government under the concept of “Federalism.”

This was changed by the passage and ratification of the 17th Amendment in 1912-1913:

“The Senate of the United States shall be composed of two Senators from each state, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislatures.

When vacancies happen in the representation of any state in the Senate, the executive authority of such state shall issue writs of election to fill such vacancies: Provided, that the legislature of any state may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct.

This amendment shall not be so construed as to affect the election or term of any Senator chosen before it becomes valid as part of the Constitution.”

Article I, Section 7 spells out how revenue shall be raised:

“All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.

Every bill which shall have passed the House of Representatives and the Senate, shall, before it become a law, be presented to the President of the United States; if he approve he shall sign it, but if not he shall return it, with his objections to that House in which it shall have originated, who shall enter the objections at large on their journal, and proceed to reconsider it. If after such reconsideration two thirds of that House shall agree to pass the bill, it shall be sent, together with the objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a law. But in all such cases the votes of both Houses shall be determined by yeas and nays, and the names of the persons voting for and against the bill shall be entered on the journal of each House respectively. If any bill shall not be returned by the President within ten days (Sundays excepted) after it shall have been presented to him, the same shall be a law, in like manner as if he had signed it, unless the Congress by their adjournment prevent its return, in which case it shall not be a law.

Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him, or being disapproved by him, shall be repassed by two thirds of the Senate and House of Representatives, according to the rules and limitations prescribed in the case of a bill.”

In order to convince the states (former colonies) to ratify the new constitution Alexander Hamilton, James Madison, and John Jay authored a series of 85 essays that were published in the newspapers of the day. These essays became known as the Federalist Papers and set forth the arguments for ratification of the new constitution along with explanations that were designed to allay the fears of the states.

In one of the most famous of the essays, Federalist 10, James Madison make the argument for the adoption of a republican form of government rather than a direct democracy based on his fear of “factions” that could impose a a tyranny of either the majority of minority where he states:

“By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.”

Madison continues his argument:

“Hence, it clearly appears, that the same advantage which a republic has over a democracy, in controlling the effects of faction, is enjoyed by a large over a small republic,--is enjoyed by the Union over the States composing it. Does the advantage consist in the substitution of representatives whose enlightened views and virtuous sentiments render them superior to local prejudices and schemes of injustice? It will not be denied that the representation of the Union will be most likely to possess these requisite endowments. Does it consist in the greater security afforded by a greater variety of parties, against the event of any one party being able to outnumber and oppress the rest? In an equal degree does the increased variety of parties comprised within the Union, increase this security. Does it, in fine, consist in the greater obstacles opposed to the concert and accomplishment of the secret wishes of an unjust and interested majority? Here, again, the extent of the Union gives it the most palpable advantage.”

In Federalist 51 where Madison argues that the structure of the government must furnish the proper checks and balances between the different departments:

“The interest of the man must be connected with the constitutional rights of the place. It may be a reflection on human nature, that such devices should be necessary to control the abuses of government. But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions. This policy of supplying, by opposite and rival interests, the defect of better motives, might be traced through the whole system of human affairs, private as well as public. We see it particularly displayed in all the subordinate distributions of power, where the constant aim is to divide and arrange the several offices in such a manner as that each may be a check on the other that the private interest of every individual may be a sentinel over the public rights.”

…

“Justice is the end of government. It is the end of civil society. It ever has been and ever will be pursued until it be obtained, or until liberty be lost in the pursuit. In a society under the forms of which the stronger faction can readily unite and oppress the weaker, anarchy may as truly be said to reign as in a state of nature, where the weaker individual is not secured against the violence of the stronger; and as, in the latter state, even the stronger individuals are prompted, by the uncertainty of their condition, to submit to a government which may protect the weak as well as themselves; so, in the former state, will the more powerful factions or parties be gradually induced, by a like motive, to wish for a government which will protect all parties, the weaker as well as the more powerful.”

Today we have the situation where massive and complicated laws, like ObamaCare (over 3,000 pages) are passed without having been read or debated by the legislators themselves, let alone discussed in the press and by the people. When this sad state has been reached, the law itself, as Madison eloquently says, “poisons the blessings of liberty.” James Madison stated in Federalist No. 62 where he writes about the power, duties, and responsibilities of the Senate:

“The mutability in the public councils arising from a rapid succession of new members, however qualified they may be, points out, in the strongest manner, the necessity of some stable institution in the government. Every new election in the States is found to change one half of the representatives. From this change of men must proceed a change of opinions; and from a change of opinions, a change of measures. But a continual change even of good measures is inconsistent with every rule of prudence and every prospect of success. The remark is verified in private life, and becomes more just, as well as more important, in national transactions.

To trace the mischievous effects of a mutable government would fill a volume. I will hint a few only, each of which will be perceived to be a source of innumerable others.

In the first place, it forfeits the respect and confidence of other nations, and all the advantages connected with national character. An individual who is observed to be inconstant to his plans, or perhaps to carry on his affairs without any plan at all, is marked at once, by all prudent people, as a speedy victim to his own unsteadiness and folly. His more friendly neighbors may pity him, but all will decline to connect their fortunes with his; and not a few will seize the opportunity of making their fortunes out of his. One nation is to another what one individual is to another; with this melancholy distinction perhaps, that the former, with fewer of the benevolent emotions than the latter, are under fewer restraints also from taking undue advantage from the indiscretions of each other. Every nation, consequently, whose affairs betray a want of wisdom and stability, may calculate on every loss which can be sustained from the more systematic policy of their wiser neighbors. But the best instruction on this subject is unhappily conveyed to America by the example of her own situation. She finds that she is held in no respect by her friends; that she is the derision of her enemies; and that she is a prey to every nation which has an interest in speculating on her fluctuating councils and embarrassed affairs.

The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uniformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the FEW, not for the MANY.

In another point of view, great injury results from an unstable government. The want of confidence in the public councils damps every useful undertaking, the success and profit of which may depend on a continuance of existing arrangements. What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government? In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady system of national policy.

But the most deplorable effect of all is that diminution of attachment and reverence which steals into the hearts of the people, towards a political system which betrays so many marks of infirmity, and disappoints so many of their flattering hopes. No government, any more than an individual, will long be respected without being truly respectable; nor be truly respectable, without possessing a certain portion of order and stability.”

Americans may be able to regain control over their federal government by moving their respective individual state legislatures to invalidate the 16th and 17th Amendments to the United States Constitution. Essentially, this is a vote to reverse ratification of an Amendment without a Constitutional Convention.

Repeal of the 16th Amendment starves the federal beast by depriving it of its consumption of money from the states and the taxpayers through income taxes. States could exercise better control over how or even if their money is spent.

Repeal of the 17th Amendment makes United States senators directly appointed by the state legislatures, as they were at our nation's founding, and representative of the will of each state and its citizens. This action would check the federal government's proclivity to pass laws binding the states to unfunded mandates. It would increase the sovereignty of the several states and restore true federalism back into our system of government.

The states can do this by individual vote; this way, a Constitutional Convention and the subsequent dangers presents to liberty can be avoided. According to Article V of the Constitution three-fourths of the state legislatures would have to vote to repeal each or any Amendment.

“The Congress, whenever two thirds of both houses shall deem it necessary, shall propose amendments to this Constitution, or, on the application of the legislatures of two thirds of the several states, shall call a convention for proposing amendments, which, in either case, shall be valid to all intents and purposes, as part of this Constitution, when ratified by the legislatures of three fourths of the several states, or by conventions in three fourths thereof, as the one or the other mode of ratification may be proposed by the Congress; provided that no amendment which may be made prior to the year one thousand eight hundred and eight shall in any manner affect the first and fourth clauses in the ninth section of the first article; and that no state, without its consent, shall be deprived of its equal suffrage in the Senate.” [Emphasis added]

Once each state votes to invalidate an Amendment, the vote is sent to the Archivist of the National Archives. The result would be a return to the Constitution as it existed before the now repealed Amendments were included.

The United States of America was founded as a representative republic, where several sovereign states voluntarily joined under a common federal sovereign to better guarantee the unalienable rights of "We the People." This federal government was to be strictly limited to the enumerated powers given to it under the Constitution of the United States by the sovereignty of the several states and the people, who themselves are sovereign individuals. This is why we have the Ninth and Tenth Amendments.

The federal government is supposed to be strictly limited in power to only those things authorized in the Constitution. The several states were to always enjoy plenary power — that is, power over everything not specifically given over to the federal government. Any powers not delegated to the several states were to be with the people as individuals.

Today, the federal government has been allowed to grow in size and scope of authority where it now imposes its will in every way over our individual daily lives. It has usurped the plenary powers of the several states. Every issue making news today seems to have a federal solution proposed or enacted instead of allowing the states, which are closer to the people within them, to address those issues.

The root of the current problem is that the federal government bends and contorts and stretches the plain meaning of the U.S. Constitution. It is allowed to do this, in part, by its taxing authority. The federal government taxes almost everything, taking the wealth of each state and of every individual for its own use.

The federal government redistributes this wealth as it sees fit to enact controls over the several states and the people through various administrative agencies, policies, and programs. The purported original need for an administrative agency, policy, or program is rarely, if ever, met.

In fact, the original need becomes modified with other causes and objectives requiring these agencies to grow; new policies and programs must be promulgated to better meet real or imagined demands.

Thus, the system is self-perpetuating. Without proper checks by the Congress, the administrative state becomes all-encompassing, oppressive, and in some respects, tyrannical.

But Congress has repeatedly failed to act. It benefits as an institution because the money the government gets is first distributed by its own members. This is properly so if each respective branch of our government works according to separation of powers as intended by the Framers.

Too often, the "separate powers" of the federal government seem to work in unison against the will of the American people. It is in those times that the Framers asserted the American people must respectfully move to regain control and place each house in proper order.

An effective method of dealing with this is for the several states to "starve" the federal Leviathan by reducing or denying its lifeblood of money. Prior to the enactment of the 16th Amendment to the United States Constitution, taxes were paid to the federal government by apportionment based on population, and through certain direct fees (taxes) on customs, alcohol, and other select commodities.

The 16th Amendment allows the federal government the authority to directly tax the incomes of all individuals by whatever type and means necessary. Repeal of this amendment is necessary for the several states to regain financial control over federal spending. Cutting the money tap will in effect reduce or eliminate federal borrowing and annual debt. It will also bring the power that comes with distributing that money back to the influence of the states, closer to the people.

With monies reduced, administrative bureaucracy, unnecessary policies, and unneeded programs will also reduce. Some, like the Department of Education and EPA, may be eliminated. A strictly limited federal government exercising only its constitutionally permitted powers restores trust and is beneficial to the American people.

Likewise, the 17th Amendment to the United States Constitution now allows for the direct election of United States senators. The Senate was originally the part of Congress that represented the several states and their respective state's interests.

The House of Representatives originally, as today, were the part of Congress elected directly by the people. With the Senate directly elected by the people instead of appointed by each state's legislature, the Senate has become a de facto extended-term of the House of Representatives.

Senators rarely represent the interests of their home state today, as demonstrated by their voting for huge indebtedness as a national issue and voting for unfunded mandates adversely affecting the state they purport to represent, among many other self-interest issues.

The United States Constitution can have amendments added to it via two methods: the first is by a proposed amendment approved by two-thirds of the House of Representatives and approved by two-thirds of the Senate. The proposed amendment then goes before each state's legislature for majority approval. When three fourths of all states (38) ratify the proposed amendment, the amendment then becomes part of the United States Constitution, the Supreme Law of the Land. The votes of each of the legislatures of the several states submit their letter of decision to the Archivist of the United States, in the National Archives. This method has been used exclusively since the first Constitutional Convention, and it includes all amendments (27) in existence today.

The second method is for two thirds of the states (33) to call a Constitutional Convention, propose an amendment, and then have it successfully ratified by a minimum of three fourths of the several states (38). The amendment then becomes part of the United States Constitution. The votes of each of the legislatures of the several states submit their letter of decision to the Archivist of the United States, in the National Archives.

The problem with the second method is the lack of control that might be exhibited by the delegates to the Constitutional Convention. A group intent on radically changing our Constitution could do away with many protections we enjoy today or grant certain offices or persons in government additional powers and authority never intended. Even though any proposed amendment proceeding forth would still have to be ratified by three-fourths of all the states to become part of the constitution, the danger to this republic is unknown.

A unique consideration would cause the legislatures of the several states to vote to de-ratify or nullify the 16th and then 17th Amendments. This should be accomplished with little danger to the republic in that once three fourths of the several states (38) vote to de-ratify an amendment, the Constitution would return to its former status as to law.

Since the action would not involve a Constitutional Convention, there would be no new amendment(s). Any changes would be perceived by the legislatures of the several states and would be close to the people for comment and redress of grievances.

Fixing a Rigged Game

“In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed an interest in doing this, and I am prepared to join them.” — Barack Obama

The game is rigged against the regular guy in America today. And it's rigged in favor of big business, the politically connected, and the wealthy.

If Republicans and conservatives want to reform themselves, they need to begin with this fact. Admit it. Understand it. Declare it. Decry it. And start fixing it.

Here's the evidence the game is rigged:

Corporate profits soared to a record $1.73 trillion annualized rate in the first quarter of 2013, more than triple what they were in 2001, according to data from the Bureau of Economic Analysis.

Banks made a record $40.1 billion in profits in the first quarter, 16 percent higher than a year before, according to FDIC data. The big banks have grown much faster than the economy. Last year, Bloomberg News found that the five largest banks held assets equal to 56 percent of the economy, up from 43 percent in 2006, before the fiscal crisis the big banks caused -- and before the taxpayers bailed them out.

And how's the regular guy doing?

New business formation continues to fall to record lows. In 1980, nearly half of all firms were less than five years old. The latest data from the Kaufmann Foundation puts that number at about one-third.

And the working man isn't faring better. Unemployment, while improving, is still high. Maybe worse is the collapse of median household income -- down more than 7 percent since 2008, and it is not noticeably climbing.

Meanwhile, federal spending hit a record 26.9 percent of GDP in 2010. While it dropped a bit to 24.8 percent in 2012, that is still higher than any year between World War II and 2009 and 18 percent higher than the average year from the previous five decades.

So it's no surprise that seven of the 10 richest counties in the United States are in the Washington, D.C., area. Revolving-door lobbyists and government contractors are living the high life in McLean, Georgetown, and Great Falls.

Jeff Jacoby reports in the Boston Globe that Washington booms – thanks to other people’s money:

“In the months since President Obama signed the order to cut federal outlays by $85 billion, the Washington Post reported last week, the region has added 40,000 jobs. “Income-tax receipts have surged in Virginia, beating expectations. Few government contractors have laid off workers.” There is no sign of the economic hellfire and brimstone foretold by Fuller, who says it’s a “surprise” to him that Washington’s economy is still booming. “We’ve done better than I expected,” he confessed.

The real surprise is that anyone is still surprised by the affluence of the Washington area.

According to the most recent census data, seven of the nation’s 10 wealthiest counties surround Washington — including the only three counties in the United States with median incomes above $100,000: Loudoun, Fairfax, and Arlington, all in Northern Virginia. In 2010, there were six Washington-area counties in the Top 10; in 2007, there were five. The Great Recession may have left great swaths of America reeling, but it didn’t stop Washington from surging even higher in the income rankings.

If the worst recession in decades couldn’t tarnish Washington’s opulence, sequestration — a political budget maneuver designed to achieve merely a tiny reduction in the growth of federal spending over the next decade — isn’t likely to either.

Coverage of the D.C. area’s high-flying economy sometimes sounds like an episode of “Lifestyles of the Rich and Famous.” In a front-page article last weekend — “What Sequester? Washington Booms as a New Gilded Age Takes Root” — The Wall Street Journal described the extraordinary wealth of Washington’s “moneyed brain trust,” beneficiaries of a generation’s worth of soaring government budgets and immense political aggrandizement. Examples of extravagance are everywhere, from the flourishing Aston Martin dealership selling sports cars at $120,000 and up to the Georgetown hotel that charges $22 for a martini.

Washington hasn’t grown so rich because it is home to industries that produce wealth through commerce or manufacturing or invention. Unlike Silicon Valley or Manhattan or Houston or Hollywood, Washington’s primary activity isn’t the creation of goods and services that have intrinsic value in themselves, and that raise the national standard of living. Government doesn’t generate new income — it redistributes income that others have already generated. Through taxes, spending, and regulation, the federal establishment now dominates more of the private economy than ever, directly confiscating trillions of dollars earned in the private economy, and indirectly controlling the fate of tens of trillions more.

“Power is the great aphrodisiac,” Henry Kissinger famously claimed. It is also a great conduit to other people’s money. When a single tweak in the tax code can make or break a business, when fortunes are being doled out through federal bailouts and contracts, when regulations can decide the future of industries and interest groups, it stands to reason that so many will spend so much to get a piece of what government controls.

“Most federal activity involves taking money from some people, giving it to others, and keeping a big chunk as a transaction fee,” says the Cato Institute’s David Boaz. At its broadest, that “transaction fee” is reflected in everything from overpaid federal employees to Washington’s gargantuan lobbying industry to the clustering of America’s wealthiest counties in suburban Washington.”

Take account of total compensation - wages plus benefits - and the disparity is even more striking. In 2008, total federal civilian compensation averaged $119,982 - more than twice the $59,908 in wages and benefits earned by the average private-sector employee. Chris Edwards, a scholar at the Cato Institute, has documented the steady widening of the gap: In 1960, federal workers averaged $1.24 for every $1 earned by a private employee. By 1980, the federal advantage was up to $1.51; in 2000 it was $1.66. Now it is $2 - and climbing. When ranked alongside 72 industries that span the US economy, federal employees take home the seventh-highest average compensation. Among the workers they out earn, Edwards shows, are those in such fields as computer systems design, chemical products, and legal services.

A full-page ad in The Wall Street Journal several years ago was the clearest evidence yet of the approaching showdown. “We are the Private Sector. And we’ve had enough,’’ the ad proclaimed. It announced the launch of The Free Enterprise Nation, which describes itself as the first national organization intended to represent the interests of the majority of Americans who work in the private economy. Its message was blunt: “The private sector provides pay and benefits for public-sector workers that we cannot afford to provide for ourselves .We need to change public policy

The game is rigged, and conservatives can point out that the chief game rigger is government. The tax code is convoluted, regulations are terrifying, big businesses that fail get bailed out while small entrepreneurs get crushed by bureaucracy.

If you're already doing well, or if you're well connected and can hire a former congressman, senator, or Cabinet secretary — you're OK. Otherwise, you're not.

Conservatives and Republicans would do well to admit this, and declare it a serious problem. Attacking Obama for "hating success" or being "anti-business" is not only factually flimsy, it is a political loser. Such attacks don't appeal to the folks who have been suffering in our current economy.

Driven by the insight that the game is rigged in favor of the wealthy and well-connected, Republicans can push a free-market populist response. Free-market populism is, for one thing, a moral stance, manifested through rhetoric and action.

Republicans have become more comfortable lately denouncing "crony capitalism" and even "corporate welfare." After blaming politicians who use public power to enrich private interests, Republicans also ought to shame some of the "capitalists" and their lobbyists who demand handouts and protective regulations.

Republicans ought to abolish corporate welfare, including subsidies for exports and green-energy projects. Break up the big banks. Get rid of corporate tax credits.

Politically, these policies checkmate Democrats because corporatism is at the heart of President Obama's economic agenda. Subsidies for Boeing, Chrysler and General Electric are the building blocks of Obama's "New Economic Patriotism." ObamaCare was built in collusion with drug makers and the hospital lobby.

If Republicans destroy the stale myth of Washington versus Wall Street — and make it clear it's really K Street, Wall Street and Pennsylvania Avenue versus Main Street — Democrats lose much of their rhetorical advantage.

Ending federally granted privilege is politically helpful because clear moral stances are winners. But voters often want something tangible and immediate from politicians. In the short term, dismantling corporatism helps mostly the minority of voters that are or want to be entrepreneurs.

Many conservative reformers advocate a package of policies to aid middle-class families. This is dangerous territory because the Left can always out-Santa Claus the Right. Any conservative "gifts" to the middle class should be consistent with the message that Big Government isn't their friend.

So, here's one: abolish the payroll tax — totally and permanently. It's a tax on employment. It's a tax on someone's first dollar. And it's specious to say that it funds Social Security and Medicare — both entitlements are funded on the margin by general revenues. So give up the charade and abolish a regressive federal tax.

As a pointed out in a previous blog: How Did We Get in this IRS Mess? A flat tax would be a good way to accomplish this.

“For example, let the flat rate be 20%, and let the deductions be $20,000 per adult and $7,000 per dependent. Under such a system, a family of four making $54,000 a year would owe no tax. A family of four making $74,000 a year would owe tax amounting to 0.20 × (74,000 − 54,000) = $4,000, as under a flat tax with deductions. But families of four earning less than $54,000 per year would owe a "negative" amount of tax (that is, it would receive money from the government). For example, if it earned $34,000 a year, it would receive a check for $4,000. The NIT is intended to replace not just the USA's income tax, but also many benefits low income American households receive, such as food stamps and Medicaid. The NIT is designed to avoid the welfare trap — effective high marginal tax rates arising from the rules reducing benefits as market income rises. An objection to the NIT is that it is welfare without a work requirement. Those who would owe negative tax would be receiving a form of welfare without having to make an effort to obtain employment. Another objection is that the NIT subsidizes industries employing low cost labor, but this objection can also be made against current systems of benefits for the working poor.”

Consider this. A family of four making $60,000 will pay $4,490 (7.5%) in payroll taxes ($3,720 for Social Security and $870 for Medicare). The employer will pay a similar 7.5% amount. (The maximum earnings for Social Security is $113,700 and there is no limit for Medicare)

Now let’s look at the same family of four with a flat tax rate of 20%. That family of four making $60,000 would pay 0.20 x ($60,000 -$54,000) = $1,200. But the same family will have saved $4,490 in payroll taxes. If the family’s income were $100,000 the tax amount would be $9,200 and the payroll tax savings would be $7,650 for a total tax of $1,550. For $200,000 it would be $29,200 -$9,949 for payroll taxes for a total tax of $19,251.

Keep in mind that these commutations also apply to small businesses that create two-thirds of the jobs in the United States.

(These figures have been calculated using the Payroll Tax Calculator for 2013 from the Tax Policy Center.)

You will no doubt ask: Isn’t this going to reduce the amount of money the federal government will collect? The answer is yes, but isn’t that the point. Reduce the money, reduce the power.

In a 2012 article in Forbes Magazine by Addison Wiggin: “Flat Tax Is Fantasy In U.S. But Works Fine Behind Old Iron Curtain” Wiggin writes:

“The first comprehensive proposal for a U.S. flat tax came in the 1985 book The Flat Tax, by economists Robert Ernest Hall and Alvin Rabushka.

“Today, the flat tax idea is perhaps even more politically remote, in the United States, than it was in 1985,” Mr. Lewis says. “However, the rest of the world caught on to the idea. Today there are at least 40 governments with flat tax-type systems, most of which made the switch in just the last decade.”

A sizeable number of these countries used to lie behind the Iron Curtain. Messrs. Hall and Rabushka served as consultants to many of those governments as they implemented a flat tax.

The flat tax a panacea? Hardly. Central bankers can still muck up the works; thus, many of these countries were swept up in the Panic of 2008.

But “we could take 2007 as a representative pre-crisis year,” Mr. Lewis suggests. “How did the flat tax countries do then?

“For 13 countries for which information was available from the IMF, the average GDP growth rate was 10.0%, ranging from 6.2% (Slovakia) to 23.1% (Ukraine).”

Lewis further studied 10 countries from which International Monetary Fund data are available, examining the flat tax’s impact on overall revenues. Revenues rose an average of 17.7%… and that’s after throwing out Estonia’s outlier increase of 81%. Only the Czech Republic saw revenue fall — by a minuscule 0.5%, as crisis encircled the globe in 2008.

How about revenue as a percentage of GDP, a favorite measure of policy wonks? That looks good too. On average, the ratio was virtually unchanged in those 10 countries, down 0.1%.

“Most of the seemingly impossible promises of the flat-taxers–higher growth, stable revenue/GDP ratio, rising government revenue–are, in fact, common and repeatable,” Mr. Lewis concludes.

Meanwhile, back in Washington, the politicians argue about how to prevent automatic tax increases and spending cuts totaling $607 billion, which would barely cut the deficit in half.”

Theo Caldwell writes in the Daily Caller: Fair Tax or Flat Tax:

“But for all the hullabaloo around the IRS of late, with some claiming complaints against the agency are overwrought, and others going so far as to question the motives, intelligence, and parentage of those of us who have called for its abolition, there has not emerged any kind of reasoned argument in favor of keeping the tax authority just the way it is.

What has come to the fore, however, is a healthy competition between two credible, if not complementary, alternatives to America’s current tax system. That is, should we move to a Fair Tax or a Flat Tax?

Simply put, would a consumption tax on goods and services (Fair Tax), or a single, small rate of tax on income (Flat Tax) be a better way to fund our government? The short answer is that either would be preferable to the Byzantine, corrupt tax system America has now

Folks are fond of saying you can’t replace something with nothing. This is, of course, complete rhubarb, and if the U.S. government could learn to replace something with nothing, it would go a long way toward solving its monumental debt and deficit problems. But in this case, we do need to pay for our public sector somehow, and since it would defeat the purpose to replace something with two things, it behooves us to consider which of these worthy ideas would work best.

First, the Fair Tax: There is legislative support for this approach, as the Fair Tax Act of 2013 works its way through Congress, sponsored by Rep. Rob Woodall of Georgia as H.R.25 in the House, and by Sen. Saxby Chambliss, also of Georgia, as S.122 in the Senate.

The gist of the plan is to phase out the IRS over three years, replacing income taxes with a sales tax on new goods and services, excluding necessities, of 23 percent. This figure is reached by combining the 15% income tax bracket with 7.65% employee payroll taxes, both of which would be eliminated. As to that last, fairtax.org stresses that its plan eliminates the payroll tax, and this is not an insignificant feature.

Many workers, particularly those with lower earnings, feel the bite of payroll taxes when they collect their paychecks, even if they do not end up with a federal income tax liability for the year. If we mean what we say about simplifying the tax code, then whatever system and rates we settle on ought to be straightforward and clear, and should account for whatever effect, if any, payroll and Social Security taxes will have on take-home wages.

A Flat Tax of, say, 10 percent should mean exactly that — not 10 percent, plus additional levies for retirees, unemployment, etc., that are not normally part of the income tax conversation.

If that can be accomplished, there is much to be said for the simplicity and transparency of a Flat Tax. Sen. Ted Cruz of Texas and The Heritage Foundation are among those calling for this approach. Americans spend billions of hours and hundreds of billions of dollars trying to comply with the country’s impossibly complex tax code. The opportunity cost to the productive economy is extraordinary.

Something that is often lost in income tax discussions is that these rates also apply to small businesses, which create two-thirds of the new jobs in America, and almost all of which file at individual rates. If a Flat Tax can eliminate the expensive and time-consuming task of tax preparation, not only for individuals but for job-creators as well, that would be a boon to America’s beleaguered employment market.

…

The primary question of whether to abolish the IRS having been answered in the affirmative by both sides, disagreement between Fair Tax and Flat Tax proponents is akin to the quarrels of the Yooks and the Zooks in Dr. Seuss’ Butter Battle Book (to whatever extent Seuss intended the tome as a moral relativist metaphor for the Cold War, it was misbegotten — but it actually works here). In that tale, both sides enjoy toast, but are at loggerheads as to whether it should be buttered on the top or the bottom. The applicable lesson here is, having agreed on the big issue, residual differences can be worked out over breakfast.

And so they should be, with the American people as arbiter (though if everyone’s coming to the breakfast, making a reservation seems sage). Politics being the art of the possible, if there is an appetite in the land for a Fair Tax, and political leadership able to make it happen, Flat Tax folks should sign on, perhaps keeping personal lists of I-told-you-so’s, in case the system falters. Likewise, if the Flat Tax finds a market and effective champions, Fair Taxers should offer support.

Whichever option prevails, let us seize this opportunity to reform America’s tax system and change the country for the better.”

This reflects the heart of conservative reform: Level the playing field by getting government out of the game. If we can’t learn from the recent scandals and abuses of federal power and overreach such as the IRS targeting the Tea Party, the DOJ taping in to reporter’s e-mail and phone records, gun-running to Mexico, and the NSA’s data mining we will be doomed as a free society. The only true remedy is to close the taxpayer’s checkbook.

The Problem with the FAA and Sequestration

“The world runs on individuals pursuing their self-interests. The great achievements of civilization have not come from government bureaus. Einstein didn't construct his theory under order from a, from a bureaucrat. Henry Ford didn't revolutionize the automobile industry that way.” — Milton Friedman

As lines grew at airports and passengers began to fume, Congress lumbered into action, holding hearings on furloughs and sequestration, and, ultimately tweaking the law to allow the Federal Aviation Administration (FAA) to add more manpower at the nation’s air traffic control towers. The only silver lining to the whole calamity may be that some small part of the government actually had a real discussion about spending. Not that it solves the underlying problem or averts mounting complaints about flying. If Congress was serious about improving air travel, they would have moved forward with plans to modernize our aviation system with new technologies that would render many of the existing towers redundant and obsolete, while allowing private entrepreneurs to play a larger role in airport management.

Airlines were deregulated in 1978, saving consumers billions of dollars and opening air travel to a much larger public. But as anyone who has flown recently knows, air travel is far less enjoyable than it was in the days of regulation and pampered passengers. It’s not just the TSA security checks; airlines have restructured their routes to keep flights as full as possible while trimming back on amenities. And airport facilities lag far behind the growing demand for air travel. In short, air travel is a no frills experience that leaves many passengers dreading the trip to the airport.

A large part of the problem is that while airlines have been deregulated, airports remain mired in red tape and bureaucratic sclerosis that make expansion and modernization difficult. The FAA relies on antiquated technologies to regulate increasingly congested skies. An upgrade is sorely needed, and the technology exists to more accurately monitor planes in the sky with significantly fewer facilities on the ground. In fact, a study by the Reason Foundation finds that over 100 air traffic control centers could be closed if new technologies are adopted for a smaller set of modern facilities that can manage flights “from anywhere-to-anywhere.” These changes would generate a one-time windfall of $1.7 billion as well as annual savings of $1 billion a year.

In addition to obsolete technologies, airport infrastructure improvement projects are hampered by bureaucratic oversight and politically powerful interests — from the air traffic controllers union, to monopolistic airlines with virtual veto power over new gates, to politicians seeking to divert federal dollars to favored projects. Delays and cost overruns plague airport improvement projects, leaving passengers in crowded and dilapidated waiting areas.

A better solution would be to harness the power of entrepreneurship by allowing the private sector to manage airport facilities and the ATC system. The deregulation that began in 1978 needs to be extended to airport facilities and air traffic control as well. The United States is a straggler in this respect, with many countries around the globe already shifting airports and airport management to private companies. From the U.K. to Australia, airports have been shifted towards private management, funded by aviation users. Canada has completely privatized its air traffic control system and is a model for other countries, including the United States. A shift to the private sector would provide access to capital markets to fund the necessary improvements that are fast outstripping the capacity of the Airport Trust Fund and the federal government’s ability to pay.

Unfortunately, the United States has a long way to go before air travel is on solid operational and financial ground. Despite the obvious flaws of the current system, the political interests that have congealed around the status quo make change difficult. Much of this can be explained by what economist Gordon Tullock called the transitional gains trap. That is, the current system bestowed substantial benefits on particular groups, such as the air traffic controllers who continue to man the control towers that would become obsolete in an upgraded system. Or the politicians who see dollars and jobs in airport improvement projects. Tullock notes that over time these benefits dissipate and the programs may become ineffective. Yet change will impose significant costs on these groups, creating a powerful coalition opposing reform.

Federal involvement in air traffic control has a long history. The 1926 Air Commerce Act tasked the Department of Commerce with issuing and enforcing air traffic rules, licensing pilots, certifying aircraft, establishing airways, and operating aids for air navigation. In the mid-1930s, the federal Bureau of Air Commerce took over the initial air traffic control centers for en route tracking created by the airlines, which complemented the operation of local control towers by municipal authorities. During the 1940s, the federal government began taking over the operation of local control towers, and following World War II all aspects of air traffic control became federal.

Airport development took a different path. In the early years of commercial aviation, some private airports (e.g., Burbank, California) existed alongside those established by state and local governments. Today, virtually all U.S. commercial airports are owned by state and local governments. The federal government's role has been to regulate and subsidize those facilities. Federal financial aid to airports began with work relief programs in the 1930s, and was followed by the Federal Airport Act of 1946, which provided $500 million in airport grants to state and local governments over seven years.

The coming of jet aircraft and the large number of aviation accidents spurred Congress to pass the Federal Aviation Act of 1958, which created the Federal Aviation Administration. The new administration replaced previous federal agencies involved in air traffic control and airport development.

Congress started taxing the commercial aviation industry soon after it was established. It passed an excise tax on gasoline and aviation fuels in 1932 and an excise on airline passenger tickets in 1941. The revenue from these levies went into the federal government's general fund. That changed in 1970 when Congress passed legislation creating an Airport and Airway Trust Fund, which had dedicated streams of revenue to be used for air traffic control and federal aid to airports. Trust Fund revenue sources included ticket taxes on domestic and international flights, taxes on fuels, and various fees.

The Airport and Airway Trust Fund currently raises more than $12 billion annually from a 7.5 percent tax on domestic airline tickets, a tax on each segment flown, taxes on gasoline and jet fuel, international departure and arrival taxes, and half a dozen other fees. Trust Fund revenues pay for almost four-fifths of the FAA's $16.4 billion budget, with the balance coming from general federal funds covering the FAA's safety regulatory and miscellaneous other activities.

While air traffic control is an increasingly technology-intensive industry, labor union issues have long played an important role in the ATC system. A period of labor unrest began in the late 1960s as FAA controllers pushed for job improvements and official status as an employee union. In 1969, about 500 members of the Professional Air Traffic Controllers Organization stayed home "sick" causing air service interruptions. The following year, 3,000 PATCO members took part in another "sickout" or illegal strike, which caused chaos for the nation's air traffic.

Labor problems continued during the 1970s, with various work slowdowns and union protests over contract issues. Then in 1981, PATCO declared a major system-wide illegal strike after negotiations on a new contract broke down. That prompted President Ronald Reagan to order controllers to return to work within 48 hours or else face termination. More than 11,000 controllers refused to return to work and were fired by Reagan and initially banned from federal service. PATCO was dissolved and a new controllers union was created in 1987, the National Air Traffic Controllers Association (NATCA).

Today, an important aspect of the federal ATC system is the high labor costs. In 2010, the operations portion of FAA had about 43,000 workers who earned a total of $6.5 billion in wages and benefits, or about $151,000 per worker. Just looking at controllers, a 2005 FAA study found that compensation packages averaged $166,000 annually. Labor costs account for two-thirds of the cost of FAA operations.

While organized labor has created management challenges for the FAA, so has the implementation of new technologies. Delays and cost overruns on major technology projects have been common. For example, the Advanced Automation System project was launched in the early 1980s and was originally expected to cost $2.5 billion and be completed by 1996. But by 1994, estimated project costs had soared to $7.6 billion and the project was seven years behind schedule. The FAA terminated some parts of the AAS program and restructured others, but $1.5 billion of spending ended up being completely wasted.

More recently, a 2005 study by the Department of Transportation's Office of Inspector General looked at 16 major air traffic control upgrade projects and found that the combined costs had risen from $8.9 billion to $14.5 billion. The cost of the Standard Terminal Automation Replacement System project had jumped 194 percent to $2.7 billion and was seven years behind schedule. The OIG said that the STARS project was "facing obsolescence" even before it was completed. Meanwhile, the cost of the GPS controlled Wide Area Augmentation System (WAAS) project had jumped 274 percent to $3.3 billion and was 12 years behind schedule. A Government Accountability Office analysis in 2005 found similar cost overruns and delays in these projects.

Many experts are predicting major problems with U.S. aviation infrastructure in coming years as large demand growth outstrips the capacity of available facilities. In addition to a rising number of airline passengers, the average size of planes has fallen, which increases the number of planes in the sky that the ATC system needs to handle. On the supply side of the aviation equation, the FAA has long had problems with capital funding, high labor costs, and an inability to efficiently implement new technologies. Major changes are needed because the increased air traffic will soon bump up against the limits of the current air traffic control system.

In 1999 I received a consulting contract from the U.S. Trade and Development Agency to provide precise geodetic GPS surveys at 10 airports in Central America. The surveys were needed for the implementation of GPS navigation and approach to the airports. We were also contracted to provide training in the establishment of the Global Navigation Satellite System (GNSS) for airport approach systems.

When this contract was announced at an aviation conference in Miami I gave a presentation to the audience on the purpose of the contract and what we would be providing through USTDA and with the cooperation of FAA. During the dinner I sat at a table with Jane Garvey, the then FAA Administrator and gave her a more detailed explanation of what we would be doing and how the GNSS would be a tremendous benefit to civil aviation in the region. Ms. Garvey was quick to grasp the technology and its benefits. When I asked her why the United States was not moving forward with this less labor intensive and less expensive technology her answer was simple and direct — “it’s the unions.” She explained that any new technology introduced into the ATC system had to be approved by the NATCA. The approval was not for the viability of the technology or the safety of the airways but for the impact the technology would have on the union jobs of the air controllers. This did not bother the aviation officials in Central America as they were more concerned with implementing an ATC system they could readily afford and one that would satisfy the airlines serving the region.

Virtually all commercial airports in the United States are owned by state and local governments. But around the world, airports are becoming viewed more as business enterprises, and less as monopoly public services. Governments in both developed and developing countries are turning to the private sector for airport management and development.

The benefits of a more entrepreneurial approach to running airports include increased operating efficiency, improved amenities, and more rapid and efficient expansion in capacity to reduce congestion. Airlines, passengers, private-plane owners, and taxpayers can all benefit from this new commercial approach to airport management.

For existing state and local airports, the simplest form of privatization is to contract out management of the airport on a short-term basis. But long-term leases can shift much greater responsibility and entrepreneurial incentive to the airport company, while liberating much of the city's previous investment in the airport. To create new airport facilities, the private sector can be brought in as a partner and granted either a long-term or perpetual franchise to finance, design, own, and operate the new facility. Full private ownership and management of airports is also possible and is becoming fairly common in Europe.

Airports have been fully or partly privatized in many foreign cities, including Amsterdam, Athens, Auckland, Brussels, Copenhagen, Frankfurt, London, Melbourne, Naples, Rome, Sydney, and Vienna. Britain led the way with the 1987 privatization of British Airports Authority, which owns Heathrow and other airports. Other countries followed with a wide range of commercialization reforms under which private firms own or operate various aspects of airport facilities.

Since 1987, more than 100 airports have been partly or fully privatized worldwide. A recent survey found that there are about 100 companies around the world that own and operate airports, finance airport privatization, or participate in projects to finance, design, build and operate new airports or airport terminals.

Many aviation experts predict serious trouble in coming years as air travel demand grows faster than the ability of the U.S. air traffic control system to expand capacity. In the 2003 reauthorization of the FAA, Congress acknowledged the seriousness of the problem by creating the Joint Planning and Development Office (JPDO) to coordinate the transition to a Next Generation Air Transportation System (NextGen). NextGen will be a major redesign of the ATC infrastructure, as described by the Congressional Budget Office:

“The new system is designed to accommodate up to three times the volume of current air traffic by making more efficient use of both the national airspace and airport facilities. The new air traffic control system would be more decentralized than the one currently in place in the United States. Guidance systems on planes would work in conjunction with satellites of the Global Positioning System (GPS) to supplement direct supervision by ground-based controllers and radar stations. As a result, each plane would depend less on instructions from an air traffic controller and more on its own resources for maintaining a safe flight pattern and would be better able to adjust to the particular air traffic conditions in its vicinity.”

The JPDO has estimated that not expanding the ATC system's capacity will be costing the U.S. economy $40 billion per year by 2020 because the overburdened system will force significant rationing of flights. That rationing would increase prices and eliminate some trips entirely. To avoid this crisis, JPDO has called for restructuring the ATC system to safely and efficiently handle the heavier demand.

One problem is the mismatch between the growth in air traffic and the projected growth in FAA revenue. The FAA will need about $1 billion more per year over the next 20 years just to implement NextGen. In 2007 the FAA proposed a user-fee-based funding reform that could provide a more efficient and growing revenue source. The idea was to make each air transportation user's burden on the ATC system more closely match that entity's cost for using the system. That approach has thus far been ignored by Congress.

However, the challenge ahead for the ATC system is more complex than just financial. NextGen will be a major paradigm shift — from 20th-century (manual) air traffic control to 21st-century (semi-automated) air traffic management — and it will be more complex and riskier than any other challenge the FAA has previously attempted. Given the FAA's management and cost overrun problems in the past, simply fixing the funding problem for the ATC system without dramatically reforming its governance poses risks of larger and more dramatic failures and greater congestion down the road.

Here are three key problems with the current government-owned and operated system of air traffic control:

Inflexible Funding. Government funding sources tend to be static and subject to political considerations, and they are decoupled from changing market demands. Changes in aviation over the past decade have hurt the FAA's funding base. A large part of the FAA budget comes from aviation excise taxes, especially the 7.5 percent tax on airline tickets. As average ticket prices have fallen over time, ATC funding has been squeezed. Payroll costs of the current labor-intensive ATC system consume most of the available budget, leaving less funding for capital investment.

Making the transition to NextGen will require billions of dollars of new investments in advanced technologies. The FAA's capital budget is still focused mostly on patching up the existing system, such as replacing antiquated display consoles. Such investments are needed in the short-term, but won't add very much capacity to the system. But that is nearly all the FAA can afford under the current funding structure.

Some people argue that Congress could solve the funding problem by appropriating a larger amount of general federal revenue for the ATC system. But given the giant federal budget deficit, federal discretionary spending is going to be severely squeezed in coming years. The solution, as discussed below, is to create a commercialized ATC system that can flexibly respond to changing conditions and access private capital markets for investment.

Technology Implementation Risks. The FAA has been attempting to modernize its system, expand capacity, and increase its productivity for decades. But dozens of reports over the years from the Government Accountability Office and the Office of Inspector General in the Department of Transportation have faulted the FAA for poor management of major projects, which are often delayed and over budget. The Advanced Automation System, Wide Area Augmentation System, and other major projects have had large cost overruns and been years behind schedule or cancelled, as discussed above.

In 2005 two OIG researchers presented an overview of the FAA's failed efforts over the years to modernization the National Airspace System.25 In reviewing what went wrong, they concluded that FAA modernization efforts had neither reduced costs nor increased productivity:

“NAS modernization plans have been consistently subverted by requirements growth, development delays, cost escalations, and inadequate benefits management. All these things were symptomatic of the fact that FAA didn't think it needed to reduce operating costs.”

Many experts are greatly concerned that the FAA's institutional culture is poorly suited to implementing anything as dramatic as NextGen. In 2004, the National Academy of Sciences convened an expert panel to assist the GAO in understanding the cultural and technical factors that have impeded previous ATC modernization efforts. It found that "the key cultural factor impeding modernization has been resistance to change, which is characteristic of FAA personnel at all levels" and that "the key technical factor affecting modernization has been a shortfall in the technical expertise needed to design, develop, or manage complex air traffic systems."

As a government agency, the FAA is not designed to judge risks, aim at the most efficient investments, manage people to produce results, reward excellence, or punish incompetence. It is therefore not equipped to fundamentally reform the ATC system. Thus, major institutional change is probably a prerequisite for implementing the advanced ATC system the nation needs to meet rising aviation demand. This echoes Jane Garvey’s comments to me in 1999.

Political Constraints. A third impediment to ATC reform is political. The redesign of the ATC system foreseen in NextGen could potentially deliver major cost savings and greatly expand ATC capacity. However, realizing those gains would require retirement of large numbers of costly radars and other ground-based navigation aids and the consolidation of ATC facilities. One current proposal would replace 21 en route centers and 171 terminal radar approach control (TRACON) facilities with just 35 air traffic service hubs in a redesign of U.S. airspace. 28 Physical control towers located at many smaller airports would gradually be phased out as "virtual tower" functions are built into the new super-hubs.

However, Congress tends to resist consolidating ATC facilities because of concerns about job losses and the like, which is similar to the political resistance to closing post offices and military bases. A major 1982 proposal for consolidating ATC facilities was quietly dropped after it became clear that getting it through Congress would be very difficult. Similarly, Congress came extremely close to forbidding the FAA's recent success in outsourcing its Flight Service Station system, which involved reducing the system from 58 facilities to 20. The prohibition was defeated only by a credible veto threat from the Bush White House. In sum, as long as ATC remains government-owned and controlled, making the needed reforms to improve efficiency and implement NextGen will be very difficult.

In 1999 and 2001 I spent a great deal of time at the FAA headquarters in Washington, D.C and in offices of Representatives Don Young (R-Alaska) the then Chairman of the House Transportation and Infrastructure Committee and John Mica (R-Florida) the then Chairman of the Committee on Aviation. During one meeting with Rep. Young I explained what we were doing in Central America with GNSS and he was flabbergasted that he was not aware of this project. He was more annoyed that ate the current time Congress was holding hearings on the cost overruns of Lockheed-Martin’s STARS system. That’s the last I ever heard of GNSS implementation. Evidently Lockheed Martin had way more political and financial clout than one obscure consultant.

The way to address all three of these organizational problems is to take the ATC system out of the federal budget process and make it a self-supporting entity, funded directly by its customers. Variants of this commercialization approach have been recommended by a series of federal studies and commissions over the past 15 years.

As part of Vice President Al Gore's efforts at "reinventing government" in the 1990s, for example, the Clinton administration proposed turning the ATC system into a separate, self-funded, nonprofit government corporation within the Department of Transportation. The 1997 National Civil Aviation Review Commission, which was chaired by Norman Mineta, similarly proposed moving toward a self-supporting air traffic control organization.

Commercialization would entail shifting from aviation-related taxes paid to the U.S. Treasury to fees for ATC services paid directly by customers to a new self-supporting Air Traffic Organization (ATO). This change would allow fees to grow in proportion to the growth of flight activity, rather than being tied to a less-stable variable, such as fuel prices or airline ticket prices. Moreover, a predictable revenue stream that was not subject to the federal budget process would provide the basis for the ATO to issue long-term bonds for funding capital investments.

Commercialization would also address the management problems that have plagued the FAA's efforts to modernize. A non-civil-service ATO could attract the best private-sector managers and engineers skilled at implementing complex technology projects. Such an ATO could hire, fire, and compensate its employees as other high-tech businesses do. Private sector managers would have an incentive to ask tough questions about whether new investments offered real value for the money, a process that often doesn't occur at the FAA or in Congress.

In addition, a separate, self-supporting ATO—no longer part of the FAA—would be overseen at arm's length for aviation safety by the remaining FAA. Numerous studies have pointed out that the FAA's air-safety role is compromised when it comes to the ATC system, since that system is operated "in-house" by a different branch of the same FAA. All other players in aviation—pilots, mechanics, aircraft manufacturers, airlines, and so forth—are regulated at arm's length for safety by the FAA. This separation of ATC operations from safety regulation is especially critical given the major changes entailed by shifting to the semi-automated NextGen, where numerous safety versus capacity questions will need to be addressed in a rigorous and transparent manner.

Finally, a self-supporting ATO would address the political obstacles to improving system efficiency, such as making decisions to close facilities. By passing the enabling legislation for ATC reform, Congress would delegate such contentious issues to the customer-oriented ATO organization.

During the past two decades, nearly 50 governments have commercialized their air traffic control systems. That means they have separated their ATC activities from their transport ministries, removed them from the civil service, and made them self-supporting from fees charged to aircraft operators. These new air navigation service providers (ANSPs) are usually regulated at arm's length by their government's aviation safety agency.

Britain's ATC system has been commercialized by means of a "public-private partnership." National Air Traffic Services (NATS) is a jointly owned company, with British airlines owning 42 percent, airport company BAA owning 4 percent, employees owning 5 percent, and the government owning the remaining minority stake. NATS is operated on a not-for-profit basis.

Canada's ATC system has been fully commercialized. In 1996, Canada set up a private, nonprofit ATC corporation, Nav Canada, which is self-supporting from charges on aviation users. The Canadian system has been widely praised for its sound finances, solid management, and its investment in new technologies.31 The Canadian system is a very good reform model for the United States to consider.

Nav Canada's corporate board is composed largely of aviation stakeholders. It has 4 seats for the airlines, 3 for the government, 2 for employees, and 1 for the non-commercial aviation industry. Those 10 stakeholders select 4 directors from outside aviation, and then those 14 select the company president, who becomes the 15th board member. To further strengthen governance, neither elected officials nor anyone connected with suppliers to Nav Canada can serve on the board. Nav Canada also has a 20-member outside Advisory Committee.

A number of studies have found that ATC commercialization has generally resulted in improvements to service quality, better management, and reduced costs. At the same time, air safety has remained the same or improved in the countries that have pursued reforms to set up independent ANSP organizations.

A thorough 2009 report by Glen McDougall and Alasdair Roberts compared the performance of 10 commercialized ATC systems and the FAA during the 1997 to 2004 period. They looked at large amounts of performance and safety data from the systems in the various countries and conducted over 200 interviews with managers, workers, and users of the different systems. The researchers found:

“ANSP commercialization has generally achieved its objectives. Service quality has improved in most cases. Several ANSPs have successfully modernized workplace technologies. The safety records of ANSPs are not adversely affected by commercialization and in some cases safety is improved. Costs are generally reduced, sometimes significantly. Other risks of commercialization—such as erosion of accountability to government, deterioration of labor relations, or worsened relationships between civil and military air traffic controllers—have not materialized.”

For the United States, a commercialized ATC organization would be more likely than the FAA to efficiently implement the major aviation infrastructure advances that the nation desperately needs. Air traffic control is more complex and dynamic than ever, and it needs to be managed in the sort of efficient and flexible manner that only a commercialized environment can offer. Countries like Canada have shown the way forward for air traffic control, and U.S. policymakers should adopt the proven organizational reforms that have been implemented abroad.

As you can see from this long report sequestration did not have a damn thing to do shutting down ATC control; towers and furloughing civil service employees. This was merely Obama’s way of creating pain for the air travelers so he could get the public behind him in his fight with Congress. It was petty, childish and mean. But like the scorpion in Alsop’s fable of he scorpion and the frog Obama was merely being a scorpion and reverting to his Saul Alinsky playbook on politics.

Air travel has become an inconvenience, and it will only get worse in the future. Congress rescued the flying public from the burden of sequestration, but has done little to address the more serious concerns about the future of aviation. The federal budget — with a debt ceiling looming and a growing entitlement problem — is hardly up to the task of bringing air travel into the 21st century. The United States should take its cue from the countries around the world that have turned to the private sector to build the air transport systems of the future. We have the technology and we have the skills. If Costa Rica, Nicaragua, Guatemala, and Honduras can do it we certainly can if we have the political will. Next we need to privatize the TSA!

Tribute to a Great Leader

“Europe will never be like America. Europe is a product of history. America is a product of philosophy.” — Margaret Thatcher

During the 1990s I spent a great deal of time in Great Britain working with a firm in Swansea, Wales. During this period I got to know something of the British economy and medium-sized businesses. The one thing that sticks in my mind from this experience is the tremendous admiration these professionals had for Margaret Thatcher. While the international press called her the “Iron Lady” these colleagues of mine referred to her as the savior of the British economy and nation. Some of them admitted that they had been members of the Labor Party for years, but constantly supported the Conservative Thatcher. In that sense she drew support from left-leaning voters in the same manner Ronald Reagan pulled support from Democrats.

Margaret Hilda Roberts was born on 13 October 1925 in Grantham, Lincolnshire, the daughter of a grocer. She went to Oxford University and then became a research chemist, retraining to become a barrister in 1954. In 1951, she married Denis Thatcher, a wealthy businessman, with whom she had two children.

Thatcher became a Conservative member of parliament for Finchley in North London in 1959, serving as its MP until 1992. Her first parliamentary post was junior minister for pensions in Harold Macmillan's government. From 1964 to 1970, when Labour were in power, she served in a number of positions in Edward Heath's shadow cabinet. Heath became prime minister in 1970 and Thatcher was appointed secretary for education. Throughout her political life she was greatly influenced by political works such as Friedrich von Hayek's "The Road to Serfdom", which condemned economic intervention by government as a precursor to an authoritarian state.

After the Conservatives were defeated in 1974, Thatcher challenged Heath for the leadership of the party and, to the surprise of many, won. In the 1979 general election, the Conservatives came to power and Thatcher became prime minister. It is reported that during one of the Conservative conferences where there was debate over whether to take a more moderate position closer to Labor so they could garner more votes Thatcher stood and held Hayek’s book above her head and proclaimed in frustration that the Party should follow more the ideology espoused by the Austrian School of Economics than the Keynesian policies that were leading Great Britain down the road to socialism and destruction. She was also an advocate of the writings of the French Economist Frederic Bastiat.

She was an advocate of privatizing state-owned industries and utilities, reforming trade unions, lowering taxes and reducing social expenditure across the board. Thatcher's policies succeeded in reducing inflation, but unemployment dramatically increased during her early years in power as she privatized many of the government owned businesses and utilities making them more efficient and profitable.

Victory in the Falklands War in 1982 and a divided opposition helped Thatcher win a landslide victory in the 1983 general election. In 1984, she narrowly escaped death when the IRA planted a bomb at the Conservative party conference in Brighton.

In foreign affairs, Thatcher cultivated a close political and personal relationship with US president Ronald Reagan, based on a common mistrust of communism, combined with free-market economic ideology. Thatcher was nicknamed the 'Iron Lady' by the Soviets. She warmly welcomed the rise of reformist Soviet leader Mikhail Gorbachev.

In the 1987 general election, Thatcher won an unprecedented third term in office. But controversial policies, including the poll tax and her opposition to any closer integration with Europe, produced divisions within the Conservative Party which led to a leadership challenge. In November 1990, she agreed to resign and was succeeded as party leader and prime minister by John Major.

In 1992, Thatcher left the House of Commons. She was appointed a peeress in the House of Lords with the title of Baroness Thatcher of Kesteven and continued giving speeches and lectures across the world. She also founded the Thatcher Foundation, which aimed to advance the cause of political and economic freedom, particularly in the newly liberated countries of central and Eastern Europe. In 1995 she became a member of the Order of the Garter, the highest order of knighthood in England.

Margaret Thatcher was the not only the first woman Prime Minister of the United Kingdom she was the longest serving PM during the 20^th century serving from 1979 to 1990. When she left office the UK had a ratio of 39% of GDP for spending and 35% of GDP in tax revenue. By 2000 with the continuation of her policies by John Majors and Tony Blair the ratio had flipped to spending at 34.5% of GDP and tax revenues at 36.2% of GDP.

Of all the possible ways to remember Prime Minister Margaret Thatcher — victorious cold warrior, pioneering woman politician, resolute American ally — the one that’s probably most relevant today is the way she transformed Britain’s domestic policy and economy.

The numbers tell the story. As the Telegraph reports, when she took office in 1979, the top British tax rate on earned income was 83 percent, on “unearned” income, 98 percent. By the time she left office in 1990, the rate had come down to 40 percent.

It was a classic supply-side success story. The growth encouraged by the lower rates (along with an increase in the value-added tax that shifted the tax burden to consumption rather than income) caused government revenues to more than triple, to 187 billion pounds in 1990 from 57 billion in 1979. Yet because the private sector grew faster than government spending, even during a Cold War military buildup and a war in the Falkland Islands, government spending as a percentage of GDP in Britain shrank during Thatcher’s administration, to 39 percent from 47 percent. Britain had annual real GDP growth of 4 percent in 1986, 4.6 percent in 1987, and 5 percent in 1988.

As if that weren’t enough, the Telegraph’s summary continues, she privatized government-owned gas, electric, coal, telephone, and airline companies, and she sold the “council flats” housing projects to the tenants who lived in them:

“The proof that the Trades Unions were tamed was seen not merely in better industrial relations and improved performance of the economy, but also in the way the once-mighty National Union of Mineworkers, led by Arthur Scargill, was defeated in a year-long strike in 1984-85. With that dragon finally slain, Mrs. Thatcher could now unpick what she considered one of the most wasteful legacies of state socialism, the nationalized industries. A succession of privatizations — of gas, electricity, coal, telecommunications and airlines — created a nation of shareholders and raised a fortune for the Treasury, enabling taxes to be cut at the top rate to 40 pence in the £ in 1988. A similar drive to spread prosperity as widely as possible was seen in the sale of council houses to their owners. By the end of the second Thatcher term in 1987 the British economy had been transformed, by these and by other important deregulatory measures, into one of the strongest in the western world.”

How did she do it? There are all sorts of possible explanations, including the fact that Britain in the late 1970s, like America, had sunk to such a sorry state that there was a market for solutions that were alternatives to the big-government conventional wisdom. But the point that seems most salient from this distance is Thatcher’s steadfast confidence in the basic principles behind her policies. It was, as she put it in her “Iron Lady” speech, “my defense of values and freedoms fundamental to our way of life.”

She explained those values in her 1988 Bruges Speech, speaking of how “From classical and mediaeval thought we have borrowed that concept of the rule of law which marks out a civilized society from barbarism. And on that idea of Christendom, to which the Rector referred — Christendom for long synonymous with Europe — with its recognition of the unique and spiritual nature of the individual, on that idea, we still base our belief in personal liberty and other human rights.”

She went on:

“The lesson of the economic history of Europe in the 70's and 80's is that central planning and detailed control do not work and that personal endeavor and initiative do. That a State-controlled economy is a recipe for low growth and that free enterprise within a framework of law brings better results. And that means action to free markets, action to widen choice, action to reduce government intervention. Our aim should not be more and more detailed regulation from the center: it should be to deregulate and to remove the constraints on trade.”

Even The New York Times obituary, beneath a home-page headline characterizing the heroine of the Cold War as “divisive,” seemed to grasp what it describes as “the principles known as Thatcherism — the belief that economic freedom and individual liberty are interdependent, that personal responsibility and hard work are the only ways to national prosperity, and that the free-market democracies must stand firm against aggression.”

But it probably seemed remote in the late 1970s, too, that Britain’s first woman prime minister, who had grown up in an apartment above her father’s grocery store, would reshape a failing post-colonial power into an exemplar of liberty. And who would have thought then that, 30 years later and an ocean away, she would be inspiring those of us who believe that even after Thatcher’s (and Reagan’s) Cold War victories and tax cuts, there yet remains room for another political leader with the conviction and skill to redefine the possibilities for growth and economic freedom?

At the height of the Cold War in 1980 when the United States and the Soviet Union were at the brink of nuclear war and all of Eastern Europe suffered under the oppressive yoke of tyrannical communism four people came together who changed the world and liberated millions of people while drastically reducing the threat of a nuclear exchange. Those four leaders were Ronald Reagan, Margaret Thatcher, Pope John Paul II, and Mikhail Gorbachev.

John O’Sullivan, who was a special adviser to former British Prime Minister Margaret Thatcher and part of her inner circle of speechwriters, on Monday credited her with restoring Britain’s world reputation and its economy.

In an interview with Newsmax TV, O’Sullivan said Thatcher, who died Monday at 87, played a key role, in putting Great Britain back on the world stage.

“She is the woman who managed to restore Britain’s reputation much in the same way that Ronald Reagan restored America’s,” he said.

“She was his partner in the victory over the Cold War, but domestically she reversed failures spanning about 30 years and turned Britain into a significant country globally and economically,” he said.

On March 3, 1995 Margaret Thatcher gave an address at Hillsdale College where the only statue of the Iron Lady in the United States resides. In her speech entitled "The Moral Foundations of Society" Mrs. Thatcher stated:

“History has taught us that freedom cannot long survive unless it is based on moral foundations. The American founding bears ample witness to this fact. America has become the most powerful nation in history, yet she uses her power not for territorial expansion but to perpetuate freedom and justice throughout the world.

For over two centuries, Americans have held fast to their belief in freedom for all men—a belief that springs from their spiritual heritage. John Adams, second president of the United States, wrote in 1789, “Our Constitution was designed only for a moral and religious people. It is wholly inadequate for the government of any other.” That was an astonishing thing to say, but it was true.

What kind of people built America and thus prompted Adams to make such a statement? Sadly, too many people, especially young people, have a hard time answering that question. They know little of their own history (This is also true in Great Britain.) But America’s is a very distinguished history, nonetheless, and it has important lessons to teach us regarding the necessity of moral foundations.

John Winthrop, who led the Great Migration to America in the early 17th century and who helped found the Massachusetts Bay Colony, declared, “We shall be as a City upon a Hill.” On the voyage to the New World, he told the members of his company that they must rise to their responsibilities and learn to live as God intended men should live: in charity, love, and cooperation with one another. Most of the early founders affirmed the colonists were infused with the same spirit, and they tried to live in accord with a Biblical ethic. They felt they weren’t able to do so in Great Britain or elsewhere in Europe. Some of them were Protestant, and some were Catholic; it didn’t matter. What mattered was that they did not feel they had the liberty to worship freely and, therefore, to live freely, at home. With enormous courage, the first American colonists set out on a perilous journey to an unknown land—without government subsidies and not in order to amass fortunes but to fulfill their faith.

Christianity is based on the belief in a single God as evolved from Judaism. Most important of all, the faith of America’s founders affirmed the sanctity of each individual. Every human life—man or woman, child or adult, commoner or aristocrat, rich or poor—was equal in the eyes of the Lord. It also affirmed the responsibility of each individual.

This was not a faith that allowed people to do whatever they wished, regardless of the consequences. The Ten Commandments, the injunction of Moses (“Look after your neighbor as yourself”), the Sermon on the Mount, and the Golden Rule made Americans feel precious—and also accountable—for the way in which they used their God-given talents. Thus they shared a deep sense of obligation to one another. And, as the years passed, they not only formed strong communities but devised laws that would protect individual freedom—laws that would eventually be enshrined in the Declaration of Independence and the U.S. Constitution.

…

They would do well to look at what has happened in societies without moral foundations. Accepting no laws but the laws of force, these societies have been ruled by totalitarian ideologies like Nazism, fascism, and communism, which do not spring from the general populace, but are imposed on it by intellectual elites.

It was two members of such an elite, Marx and Lenin, who conceived of “dialectical materialism,” the basic doctrine of communism. It robs people of all freedom—from freedom of worship to freedom of ownership. Marx and Lenin desired to substitute their will not only for all individual will but for God’s will. They wanted to plan everything; in short, they wanted to become gods. Theirs was a breathtakingly arrogant creed, and it denied above all else the sanctity of human life.

The 19th century French economist and philosopher Frederic Bastiat once warned against this creed. He questioned those who, “though they are made of the same human clay as the rest of us, think they can take away all our freedoms and exercise them on our behalf.” He would have been appalled but not surprised that the communists of the 20th century took away the freedom of millions of individuals, starting with the freedom to worship. The communists viewed religion as “the opiate of the people.” They seized Bibles as well as all other private property at gun point and murdered at least 10 million souls in the process.

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It is important to understand that the moral foundations of a society do not extend only to its political system; they must extend to its economic system as well. America’s commitment to capitalism is unquestionably the best example of this principle. Capitalism is not, contrary to what those on the Left have tried to argue, an amoral system based on selfishness, greed, and exploitation. It is a moral system based on a Biblical ethic. There is no other comparable system that has raised the standard of living of millions of people, created vast new wealth and resources, or inspired so many beneficial innovations and technologies.

The wonderful thing about capitalism is that it does not discriminate against the poor, as has been so often charged; indeed, it is the only economic system that raises the poor out of poverty. Capitalism also allows nations that are not rich in natural resources to prosper. If resources were the key to wealth, the richest country in the world would be Russia, because it has abundant supplies of everything from oil, gas, platinum, gold, silver, aluminum, and copper to timber, water, wildlife, and fertile soil.

Why isn’t Russia the wealthiest country in the world? Why aren’t other resource-rich countries in the Third World at the top of the list? It is because their governments deny citizens the liberty to use their God-given talents. Man’s greatest resource is himself, but he must be free to use that resource.

In his recent encyclical, Centesimus Annus, Pope John Paul I1 addressed this issue. He wrote that the collapse of communism is not merely to be considered as a “technical problem.” It is a consequence of the violation of human rights. He specifically referred to such human rights as the right to private initiative, to own property, and to act in the marketplace. Remember the “Parable of the Talents” in the New Testament? Christ exhorts us to be the best we can be by developing our skills and abilities, by succeeding in all our tasks and endeavors. What better description can there be of capitalism? In creating new products, new services, and new jobs, we create a vibrant community of work. And that community of work serves as the basis of peace and good will among all men.

The Pope also acknowledged that capitalism encourages important virtues, like diligence, industriousness, prudence, reliability, fidelity, conscientiousness, and a tendency to save in order to invest in the future. It is not material goods but all of these great virtues, exhibited by individuals working together, that constitute what we call the “marketplace.” [“Reprinted by permission from Imprimis, a publication of Hillsdale College.”]

In American eyes, or at least in the eyes of those on the center and center-Right, she represented a set of ideals: freedom, anti-communism and the transatlantic alliance. She stood by Ronald Reagan in his battle against the Evil Empire. She used the same language as he did – free markets, free people – and entered into a unique public partnership with him. There has been nothing like it since: Clinton-Blair, Blair-Bush, Obama-Cameron, none of them endorsed one another with the same mutual enthusiasm. They saw one another’s flaws and they differed on small and large issues – as is normal between politicians of very different countries – and in public, these differences sometimes did show.

But Thatcher-Reagan was possible because they both understood the value of political symbolism, and each saw how useful that quality could be in the other. If Reagan wanted to pull away from whatever domestic mistakes and scandals absorbed him, he could appear with Thatcher on a podium. If Thatcher wanted to enhance her status on the world stage and escape Arthur Scargill, she could appear with Reagan at the White House.

Outside of Britain and America – and outside of Western Europe – their partnership had enormous force. All across communist Europe, and even in the Soviet Union, they came to represent a set of very real and very clear ideals. When Reagan lit candles in the White House windows in honor of the Polish Solidarity movement, eyes rolled in Washington. But in Warsaw, people took heart. When Thatcher arrived in Gdansk in 1988, dressed in Tsarina boots, a full-length fur coat, and a fur hat, ready to meet Lech Walesa, everyone thought something important would soon happen – and it did. Not accidentally, the most successful nations in what used to be called Eastern Europe are the ones that most admired the old Thatcher-Reagan agenda: Poland, Czechoslovakia and Estonia have all been led at various times in the past two decades by politicians who would describe themselves as “Thatcherite”.

Can the British appreciate this side of Margaret Thatcher? Probably not fully: they remember her mistakes, her errors and her arrogance all too well. But Americans can, and do, remember what she stood for on the world stage, and that is a part of her legacy too. No politician is a saint — that honorific is left to Popes and God. Madison, Jefferson, Lincoln, Churchill, Reagan, and Thatcher were no saints, but they did saintly things. They all had a deep respect for individual freedom, free markets, and property rights. Like all politicians they worked within the framework of their times while looking back on the great thinkers and philosophers of the past for guidance. In many ways they were pragmatists realizing that they could not change the world overnight, but needed to convince their citizens that the course they were taking was a correct one towards life, liberty and the pursuit of happiness. The great leaders of history are able to do just that without the club of tyranny.

Margaret Thatcher, the most dominant British prime minister since Winston Churchill in 1940 and a global champion of the late 20th-century free market economic revival, died on April 8, 2013 at the age of 87 from a stroke. She was a leader who understood the values of life, liberty and the pursuit of happiness as well as our Founders and governed under those values. May she rest in peace and be remembered for her major accomplishments and not the “diversity” expressed by small-minded statists intellectuals and masterminds.