Chicago PM Friday 1 July 2011
Editors, The Wall Street Journal
Gentlepeople:
The Wall Street Journal OpEd “The Fiscal Pledge We Need” of Tuesday 21 June proposes a clear approach to solving the country's current federal spending problem: First, demand that federal spending is cut; second, demand enforceable statutory caps to return federal spending to 18% of gross domestic product, and last, insist on passage of a balanced budget amendment.
The amendment sure makes a lot of sense, unless you consider the two biggest spending problems we have, Social Security and Medicare, have no justification at all in the US Constitution. Anyone who thinks they're justified by the 'General Welfare Clause' should read the last 647 words of James Madison's Federalist Number 41. Recent Constitution evaders have fallen back on the constitution's Commerce cause, but if you can justify anything you want with the Commerce Clause, why even have a Constitution? Considering all this, what confidence can we have that a Balanced Budget amendment would be followed?
Conundrums like these can often be solved by looking at ther sources, and also at all the tools available to solve them:
The primary source of federal income since the passage of the 16th amendment has been the personal income tax. For its first 30 years of existence it required citizen voters to annually compute how much their tax would be, and sending a personal check to DC to pay it. Voters' choices for federal office were directly influenced by the size of that personal check.
The 1943 passage of the Current Tax Payment act permenently broke this crucial link. The checks were written on employer bank accounts, not citizen voters'. The employee gets a printed statement from the employer saying “you earned and your employer paid” but that's the closest they ever get to actually writing a check to the feds to pay it. If the checks don't reach the feds, the employer goes to jail, never the wage-earner.
The employer does have an out not available to the wage earner: since all employers must send in this money, there is no competitive reason to do anything other than pass on the cost to customers in higher product prices. Thus 90% of personal income taxes end up as an invisible national sales tax. To see the significance of this look at the 2011 Statistical Abstract of the United States table 478 showing 37% of the total 2009 federal income of $2.345 trillion coming from employer bank accounts, not wage earner's.
Fixing this scam would not need a Constitutional Amendment, only a majority of the House of reps, 60 Senators, and a President with backbone enough to change the US Tax code from "every employer making payment of wages shall deduct and withhold upon such wages a tax..." to "every employer making payment of wages shall pay all of those wages to the employee...." The employer would still calculate the tax, including a note: "Here is how much the feds are expecting you personally to send in within 30 days"
The OpEd admits that ratification of a Balanced Budget amendment “will take time” and moving the actual direct paying of federal income taxes from employers back to employees could not be done overnite. Randomly choosing a single letter every quarter, and requiring all voters with names beginning with that letter to submit to the new pay as you go tax system would get the whole thing done in 9 years. This period would include two Presidential elections, 4 house elections, and a complete rebuild of the Senate.
Returning the responsibility of actually writing checks to the federal government to fund it to voters would force them to face how much all these entitlements are actually costing and encourage election of legislators who would be less likely to support federal vote-buying giveaways. Also, what would employers do with all that money they are sending in now? Stop adding it to their prices? Hire more workers? Recovery, here we come!
Arnold H Nelson in Chicago
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