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Our Founding Principles, Class 8 Wrongdoing is the result of false beliefs…. ― Plato, Cave Dialog “The price good men pay for indifference to public affairs.

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Presentation on theme: "Our Founding Principles, Class 8 Wrongdoing is the result of false beliefs…. ― Plato, Cave Dialog “The price good men pay for indifference to public affairs."— Presentation transcript:

1 Our Founding Principles, Class 8 Wrongdoing is the result of false beliefs…. ― Plato, Cave Dialog “The price good men pay for indifference to public affairs is to be ruled by evil men.” ― PlatoPlato “Ignorance, the root and stem of every evil.” ― PlatoPlato “Human behavior flows from three main sources: desire, emotion, and knowledge. ” ― PlatoPlato

2 Definition of Economics Economics is the study of the use of scare resources that have alternative uses. From Thomas Sowell’s book “Basic Economics”, the definition is the classic one given by the distinguished British economist Lionel Robbins

3 Free Market System – “Capitalism” All exchanges are made freely between buyer & seller, therefore each party does so to promote their own self interest It creates a “spontaneous order”, e.g., language Money is a medium of exchange Price is the information system The concept is based on morality – freedom of choice It is the only market system compatible with our form of government (Republic vs. Democracy)

4 Efficiency of Use of Money You Are The Spender Who’s $ Yours Someone Else’s For You Someone Else I II III IV

5 Wealth Principles 1.What any group (family, community, state, country, etc.) has to share (wealth) is equal to the sum of what each (person, family) contributes, that others are willing to spend their “fruits of labor” for. 2.Wealth and Freedom are twins, and opposite of egalitarianism (equality of things) – the more you have of one, the less you will have of the other. 3.Only with the generation of wealth can an ideal society be established. If people cannot take care of themselves, they are helpless to care for others.

6 Labor Wage $ Government TD Printed $ IRS Tax $ Lend $ to Banks Interest $ to FR Int. $ Tax$ Bonds, etc. Buy $ Federal Reserve QE Stimulus $ Employee Family Cost $ Goods & Services Investment $ Profit $ Cost $ Goods & Services Entrepreneur Family Business Entrepreneur Family Savings $$$$ - Pay bills, Federal & FR Employees, Businesses

7 Impact of “Engineered” Taxes Graduated taxes remove money that would otherwise be used to seed business growth, thus tend to reduce business activity, jobs and wealth for all Tax deductions tend to be used for political purposes and cause societal and economic disruptions, e.g., allow tax avoidance by rich Our economic system depends upon entrepreneurs being able to predict outcome of investments – thus tax law needs to be stable and fair Entrepreneurs work in the world market, so our taxes must be competitive in the world market in order to keep their money working for the benefit of US citizens Only a flat tax system without deductions would be (FS) constitutional, IMO, due to requirement of law to treat everyone the same (5 th and 14 th Amendments)

8 The Miracle of Low Taxes The Theory, Lower Rate, More $ – 1920’S Experience – 1960’s Experience – 1980’s, 1990’s Experience The Lower The Rate, the more the rich pay Over time, the rich pay a higher % of the tax Lower taxes, higher income Lower Taxes, Higher Household Net Worth The poor keep getting “richer” Lower Taxes attracts more investment capital High Taxes and Regulation stifle business


10 Why We Need Government We Need Government because men are not angels “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.” James Madison

11 The Purpose of Government To Protect our Lives, Liberty and Property “Government is instituted to protect property of every sort …. This being the end of government, that is NOT a just government,… nor is property secure under it, where the property which a man has … is violated by arbitrary seizures of one class of citizens for the service of the rest.” James Madison “The moment the idea is admitted into society that property is not as sacred as the laws of God … anarchy and tyranny commence. PROPERTY MUST BE SECURED OR LIBERTY CANNOT EXIST” John Adams “Government … should be formed to secure and enlarge the exercise of the natural rights of its members; and every government which has not this in view as its principal object is not a government of the legitimate kind.” James Wilson "Government being for the preservation of every man's right and property, by preserving him from the violence or injury of others, is for the good of the governed". John Locke

12 Democracy Flawed Majority Rule – can take away Natural Rights of the Minority – Creates Factions & Decay Democracies Never Last Long

13 Founder’s Solution – Natural Law Federal Government Must Follow Natural Law the same as Citizens must to have a civil society Implemented by Features – Limit Powers Three Branches, each with defined roles & responsibilities Federalism, Federal/State & Citizens, each with separate roles – System of Justice – Written Constitution with means to change A/R, and defined rights – Only the Federal Government can Print Money

14 Freedom Citizens Democracy F. Constitution F. Government Government Minority Citizens Majority Citizens 50% Natural Law S. Constitution S. Government L. Government Republic 80%

15 It Worked! Since Then, Greatest Progress in the History of Mankind! More of the World adopted civil governments Slavery Abolished Life Expectancy doubled Agriculture: 95% to 5% Poor people today live like kings of yesteryear! Horse and carriage to Walking on the Moon!

16 What Went Wrong? Darwinism, Roots of……….. Communism – See Quotes by: – Marx – Stalin – Mao Fascism – See quotes by Hitler Progressivism – See Quotes by Woodrow Wilson

17 Communist Manifesto Author: Karl Marx Published: 1863

18 Vladimir Lenin Joseph Stalin

19 Mao Tse Tung

20 “Living political constitutions must be Darwinian in structure and in practice. Society is a living organism and must obey the laws of life, not of mechanics; it must develop. All the progressives ask or desire is permission—in an era when “development,” “evolution,” is the scientific word—to interpret the Constitution according to the Darwinian principle.” “ No doubt a great deal of nonsense has been talked about the inalienable rights of the individual, and a great deal that was mere vague sentiment and pleasing speculation has been put forward as fundamental principle.” “Political liberty consists in the best practicable adjustment between the power of government and the privilege of the individual. And the freedom to alter the adjustment is as important as the adjustment itself for the ease and progress of affairs and the contentment of the citizen.” Woodrow Wilson, “Constitutional Government in the United States”, (1908) “….Politics in their [the founders] thought was a variety of mechanics. The Constitution was founded on the law of gravitation. The government was to exist and move by virtue of the efficacy of “checks and balances.” “The trouble with the theory is that government is not a machine, but a living thing. It falls, not under the theory of the universe, but under the theory of organic life. It is accountable to Darwin, not to Newton. It is modified by its environment, necessitated by its tasks, shaped to its functions by the sheer pressure of life. No living thing can have its organs offset against each other, as checks, and live. On the contrary, its life is dependent upon their quick co-operation, their ready response to the commands of instinct or intelligence, their amicable community of purpose.” Woodrow Wilson, 1912 campaign speech published in 1913 as chapter 2 of ”The New Freedom” “We are a democracy, where the majority are the masters……….” Woodrow Wilson, “7 th Annual Message”, December 2, 1919. Online by Gehard Peters and John T. Woolley, The American Presidency Project.

21 Ascent of Man Author: Charles Darwin Published: 1871

22 Darwin: “ At some future period, not very distant as measured by centuries, the civilized races of man will almost certainly exterminate and replace throughout the world the savage races. At the same time the anthropomorphous [i.e., most human-looking] apes … will no doubt be exterminated. The break will then be rendered wider, for it will intervene between man in a more civilized state, as we may hope, than the Caucasian, and some ape as low as a baboon, instead of as at present between the negro or Australian and the gorilla.”


24 Hitler Mein Kampf 1925

25 Root Cause of “Left Turn” Progressive thought has the same roots as Communism & Fascism – Darwinism If there is no higher power, then the most intelligent entity in the universe is Man Therefore, there is no “Natural Law” or “Natural Rights” – all law comes from man Evolution and Natural Selection are the true “Laws of Nature” Man should be guided by the winners of “Class Struggle” – The Majority or the Strongest Should Win – This line of thought always results in factions among men leading to continual struggle and decay, because there never is “Fixed Law” that all men can agree upon. (MVS)

26 Darwinism New Science is PROVING DARWINISM TO BE WRONG! Science – Paleontology – Biology – Physics – Mathematics

27 “Going Wrong” Events 1880 190019401920 1980 1960 22002000 -1887, Interstate Commerce Act (ICC) to regulate railroads - 1912,Woodrow Wilson elected President, openly rejected Constitution - 1913, 17 th Amendment, blow to Federalism, Fed. Gov. loses accountability to States - 1913, 16 th Amendment, Levy Income Taxes, now interpreted for any purpose - 1913 Federal Reserve Act, Monetary Policy exported to unaccountable entity - 1936, AAA ruled Constitution based on “General Welfare Clause” - 1937, FDR asks Congress to allow him to “Pack the Court” - 1937, Court switches, rules SS Constitutional based on Tax +General Welfare clause+ - 1942, Wickard v. Filburn ruling changed meaning of Commerce & to mean “in State” - 1964, Medicare added to Social Security Act - 2003, Prescription Drugs Added to SS Act - 2012, Affordable Care Act ruled Constitutional as a Tax, & gov. can force purchase

28 Lessons Learned Since Founding It worked – Slavery Removed, Horse Buggies to Walk on Moon Our Constitution works, and we have made some good changes through the Amendment as our founders envisioned…….but The advent of Darwinism has given rise to the idea that Natural Law does not exist, resulting in…….. The idea of “Societal Evolution” in the forms of Communism, Fascism, Progressivism, and Socialism….. These have all been tried and have resulted in loss of freedom, hundreds of millions of deaths, and democratic states failing financially…… Our Country has been seduced by the Progressive urge, subverting the Constitution without Amendments, resulting in our Republic changing to a Democracy and majority rule with resulting National Debt and move towards bankruptcy, because the FG can print money, unlike states……… To stay on this course means we are no longer making history, instead, repeating history; taking a step backward instead of forward. To save our country, all we need to do is retain what we had To do that, we, as individuals need to learn the founding principles, otherwise we cannot be citizens capable of understanding who to put in office to get us back on course and save us from going over the fiscal cliff

29 Description: Date: Source: Author: Federal Debt Held by the Public (as a percentage of gross domestic product) from 1790 to 2013, projected until 2038 under CBO’s Extended Baseline 24 September 2013 The 2013 Long-Term Budget Outlook, Page 10, Figure 1-1 Congressional Budget Office


31 Defense Spending as % of GDP Total Federal Spending as % of GDP % Defense vsTotal Federal Spending Defense Spending

32 Implication of Wealth Principles Things/services produced/provided that others do not need or want does not increase wealth (except maybe to oneself) The wealth pie is all about productivity of the group as a whole, and is not fixed in size Increasing the size of the pie benefits everyone, because there is more to share. The size of the wealth pie is independent of the amount of money in circulation, so theoretically, the cost of living will stay the same if the money supply is increased exactly in proportion to the increase in productivity The size of the pie, in terms of standard of living, is also impacted by how efficiently the money is used, which is enhanced by investment in all manners of efficiencies. People serve each other by producing things they need and want, even though they are not doing it out of “benevolence” Spending for yourself preserves your power, independence and freedom to insure your “fruits of labor” are spent to improve/insure your self interest Our Republic provides more “democracy” than a Democracy because of the freedom to “vote” with how we spend our $, where we work, the additional choices and opportunities we have, etc.

33 Reasons You (shouldn’t) Want the Federal Government to “provide things” For You 1.The Federal Government is not fiscally responsible 2.Government provided G&S will tend toward minimal options & choices 3.Federal Government is not aware of local conditions/situations & will “normalize” wherever possible 4.The only role Federal Government is set up to do (WRT helping individuals) is to redistribute income, but people need human supplied help and support – something that can only be supplied locally 5.The amount of information exchange necessary to “help each individual” is too massive to be done centrally – it needs to be done locally (think cell wrt brain in our bodies) 6.Decisions are made for political & politicians needs as opposed to individual’s needs/desires 7.Government solutions take freedom away from the individual 8.It removes competition and failure that insures innovation and constant improvement in price, quality and choices 9.Governments use bureaucrats to administer “programs” as opposed to businesses which, by necessity, must find ways to satisfy customers 10.To fix a problem, one does not have to “fight harder” to get their way, one only has to use another source – one votes with choices instead of using the ballot box to get a majority decision for one choice 11.Government has no way to implement new product innovation that springs from inside knowledge of products, marketplace, etc. 12.Government can never benefit from individual entrepreneurs with ideas, dreams and ambitions and from money being used at personal risk for personal gain – the primary engine of the US economy

34 2009, 2013 CBO Projection, extended CBO 2009 projection extended, w/2013 alternative added

35 FDR’s TS Comments re Deficit Spending “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!” - Henry Morganthau, Jr., FDR’s Treasury Secretary, May 1939, Source: Blum, John Morton (1970). Roosevelt and Morgenthau. Boston, Massachusetts: Houghton Mifflin Harcourt. p. 256.LCCN 75096063. OCLC 68158Blum, John MortonLCCN75096063OCLC68158

36 Debt Clock

37 2009, 2013 CBO Debt Projections Source, CBO :

38 The Productivity Multiplication Principle Assume a starting point of a person producing something alone – think of an automobile, then think of: Refining the design to make it easier to assemble, and parts are changed to subassemblies Building a factory with an assembly line Tooling that makes assembly quicker & better Robotics Auto testing that assures everything works before next step JIT parts delivery right to the work station Each improvement provides a multiplier of productivity, resulting in many cases, orders of magnitude lower cost…….

39 Business Labor Wage $ Cost $ Goods & Services Investment $ Profit $ Cost $ Goods & Services Earning $ Business Mgt Business Dir Earning $ Employee Family Savings Entrepreneur Family Savings Entrepreneur Family Savings Entrepreneur Family Savings

40 Employee Family Entrepreneur Family Business Labor $ $ Goods & Services Investment $ Profit $ $ Goods & Services Entrepreneur Family Business Entrepreneur Family Savings

41 “Mangled” Policy Assumptions?? Source: John Taylor -

42 Civilian Force Labor Force Participation Rate, BLS, Updated 11/13/2013 Seasonally adjusted, %, 16 years & older. Data from

43 HUD Approved To Issue Subprime Loans HUD became GSE Regulator Freddie Approved $18.6 B SP Loans, Fannie ?? Freddie & Fannie SP Loans increased by 10X Crash dyn/content/article/2008/06/09/AR2008060902626_2.html Source of Info & Dates:


45 Source: Prudential Insurance




49 Laffer Curve Concept 20 0 406080 100 TAX RATE, % TAX REVENUE, % GNP











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