Income Redistribution? Blame Henry Clay, John C. Calhoun

Income Redistribution? Blame Henry Clay, John C. Calhoun

President Obama will probably be remembered as the great proponent of income redistribution. But income redistribution was really the unintended offspring of two of America's "outstanding senators" Henry Clay and John C. Calhoun!

I use the term "outstanding senators" advisedly because in 1957, a special Senate committee, chaired by John F. Kennedy, identified Henry Clay and John C. Calhoun as one of the nation's "five outstanding deceased senators."

You will probably ask how the committee could possibly name Calhoun -- the leading proponent of slavery -- one of the five greatest senators. It happened because the committee had agreed to judge candidates "for acts of statesmanship transcending party and State lines" and had defined statesmanship to include "leadership in national thought and constitutional interpretation as well as legislation."

But Calhoun was the proponent, not of one, but two lost causes. And while no American would espouse his views on slavery in the 21st century, his mature views on income redistribution are as relevant today as they were when he made them in 1828.Indeed Calhoun's views are alive and well in the tenets of the Republican Party.

Calhoun's first great lost cause was not slavery. It was the tariff -- a tariff Calhoun had strongly espoused in his early years in Congress -- during his nationalist period (c. 1816) when he served as one of Speaker Henry Clay's principal lieutenants, and worked to enact Clay's "American System."

It called for a protective tariff, first, to insure profitable home markets for the American manufacturers and, second, to finance "internal improvements." It was Calhoun's belief that a system of road and canals would appeal to the self-interest of farmers desirous of moving their produce to market as well as merchants engaged in commerce, and would thus bind them all to the national government.

But what Calhoun didn't foresee was that manufacturing would take hold only in the North (New England primarily) and not in the South. He did not foresee that the tariff would benefit only New England by keeping English manufactured products out of the country.

The tariff had the effect of denying cheaper English manufactured goods from entering the South, thus forcing the South to buy more expensive goods made in New England. It was this, that led to Calhoun to do a 180, abjure his earlier tariff position, and develop his doctrine of "nullification."

Calhoun came to believe that without states having power to nullify Congressional actions which they deemed unconstitutional, the majority in the North would bleed the minority in the South dry.

In 1791, Alexander Hamilton, the first secretary of the Treasury, in his Report on Manufactures to the House of Representatives, had written, "The power of Congress to authorize the expenditure of public moneys is not limited by the direct grants of legislative power found in the Constitution, but is in addition thereto."

Mr. Hamilton further asserted that it belonged "to the discretion of Congress alone" to determine which "objects ... concern the General Welfare, and for which an appropriation of money is proper."

In 1828, Calhoun, in his South Carolina Exposition and Protest, assailed Hamilton's position. Calhoun did not deny the Constitution gave Congress power "to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States."

But he argued the Constitution gave Congress the power to "lay imposts and duties" only for the purpose of raising revenues for the "general" welfare, and not to raise revenues to benefit one section or class at the expense of another.

"The act of Congress of the last session, The Tariff of 1828 ... imposing duties on imports, not for revenue, but the protection of one branch of industry at the expense of others, is unconstitutional, unequal, oppressive, and calculated to ... destroy the liberty of the country. ...

"The opposing interests of the community would engender ... hostile parties, organized on this very diversity of interests, the stronger of which -- if the Government provided no efficient check -- would exercise unlimited and unrestrained power over the weaker."

He clearly saw the danger of the majority using the taxing power to enriching itself at the expense of the minority. He saw no difference between the majority using tax laws as a weapon to take from the minority and a highwayman using a pistol to despoil the occupants of a sumptuous coach.

But Calhoun was helpless to undo what he had done. The majority in the North fell in love with the benefits of the Calhoun/Clay tariff of 1816. Thus, as strange as it seems, President Obama walks in the shoes of Alexander Hamilton and John C. Calhoun!

Posted Online:  Feb. 28, 2013 at 3:03 pm - Quad-Cities Online
by John Donald O'Shea

Copyright 2012
John Donald O'Shea

So, When Exactly is "Lawful Plunder" Appropriate?

In some of my earlier op-eds, I have argued that a just society "redistributes income" only in amounts sufficient to help people who are incapable of providing for their most basic needs.

But I have also argued that "income redistribution" when misused can quickly degenerate into "plunder."

(Note: I am not unmindful of the danger of all income in the nation gravitating into the hands of just a few. I plan to address this issue in the near future. But I am limited in space.)

I have argued that there is nothing "fair" about people who pay no federal income taxes, while insisting that tax rates be increased only on their "rich neighbors" who already pay most of the taxes, so that the "rich" will pay their "fair share."

Today I would argue that there is nothing "fair" about two large corporations, Sears and the Chicago Mercantile Exchange, getting tax breaks amounting to $330 million per year, not available to all other Illinois corporations.

Gov. Pat Quinn justifies them saying, "You have to defend yourself. If Ohio is offering $400 million to Sears (to relocate) ... we will defend ourselves."

Translated, that means, that since Ohio is about to plunder Illinois, Illinois will allow Sears and the CME to plunder Illinois -- it will allow Sears and CME to escape the recent increase in the state income tax to 9.5 percent, while leaving the tax in place for all other corporations not threatening -- as yet -- to relocate.

If 9.5 percent is too high for the big boys to pay, and was a lousy idea in their cases, why don't the governor and legislators admit the increase in the state income tax was a lousy idea, and repeal it?

If there is something unseemly about the poor plundering the rich, there is something more unseemly about the rich plundering the poor.

In 1850, a French economist, Frederick Bastiat, wrote a pamphlet titled, "The Law."

In this age, when Congress gives a $500 million to Solyndra, and bails out Wall Street and GM with taxpayer dollars, does Bastiat look like a prophet?

"If every person has the right to defend -- even by force -- his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly.

"The law is the organization of the natural right of lawful defense. It is the substitution of a common force for individual forces. And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all.

"But there is ... another tendency that is common among people. When they can, they wish to live and prosper at the expense of others... Man may live and satisfy his wants by seizing and consuming the products of the labor of others.... Now since man is naturally inclined to avoid pain -- and since labor is pain in itself -- it follows that men will resort to plunder whenever plunder is easier than work.

"Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter -- by peaceful or revolutionary means --into the making of laws. Either they may wish to stop lawful plunder, or they may wish to share in it.

"As soon as the plundered classes gain political power, they establish a system of reprisals against other classes. They do not abolish legal plunder .... They emulate their ... predecessors by participating in this legal plunder, even though it is against their own interests.

"In order to make plunder appear just and sacred to many consciences, it is only necessary for the law to decree and sanction it. Under these circumstances, then certainly every class will aspire to grasp the law, and logically so. The excluded classes will furiously demand their right to vote — and will overthrow society rather than not to obtain it.... They will say to you: since everyone else uses the law for his own profit, we also would like to use the law for our own profit.

"As long as it is admitted that the law may be diverted from its true purpose -- that it may violate property instead of protecting it -- then everyone will want to participate in making the law, either to protect himself against plunder or to use it for plunder.

"Sometimes the law defends plunder and participates in it. Thus the beneficiaries are spared the shame, danger, and scruple which their acts would otherwise involve. Sometimes the law places the whole apparatus of judges, police, prisons, and gendarmes at the service of the plunderers, and treats the victim -- when he defends himself -- as a criminal.

"But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

"Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole -- with their common aim of legal plunder -- constitute socialism."

Posted Online: Jan. 04, 2012, 2:09 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2012, John Donald O'Shea

Awful Return on Q-C Investment

On Sunday, The Dispatch/Argus ran a laudatory front-page article: "Q-C Cashes in." The lead to that article crows. "Stimulus put $164M into area." With that "$164M in spending, 191 jobs were created or retained" in the 17th Congressional District.

That means each of those jobs cost the American taxpayers $858,639! It looks to me, like you and I just got fleeced.

To help you make up your own mind, here are some figures.

-- There are about 310 million Americans.

-- As of 2010, the population of the Quad-Cities metropolitan area was 379,690.

-- Therefore, one of every 810 Americans live in Q-C Metro area.

In 2009, Congress (then controlled by the Democrats) passed at President Obama's request the $840 billion American Recovery and Reinvestment Act, commonly referred to as the ARRA, or as the Obama Stimulus Act.

So, if one out of every 810 Americans lives in the Q-C Metro area, and if the Q-C Metro area had received its proportionate share of stimulus funds -- one out of every 810 stimulus dollars -- we should have received $1,037,038,037. Instead we got a lousy $164,000,000! What happened to our other $873,000,000?

Again, if there are 380,000 people in the metro area, and if we received $164 million ARRA funds, we each got an average of $431. I don't recall getting my $431. Do you recall getting yours? Or did Washington decide somebody needed the money more than you or I did?

Of course, there is good news, as well as bad news. Washington didn't tax us to raise the $840 billion in ARRA funds.

Had Washington taxed all 310 million Americans equally, every American would have seen a new tax bill for $2,710. That's the good news! The bad news is that Washington borrowed the $840 billion, instead. So every American -- man, woman and child -- now owes an additional $2,710.

So the bottom line is this: for a $431 Washington handout that you and I didn't get, we each have been left with a bill for $2,710 -- which we did get!

So who got the $164 million? Those lucky people who the brilliant bureaucrats in Washington decided were worthier in all likelihood, than you or I.

Isn't "income redistribution" wonderful? The likelihood is that you didn't get a penny of stimulus money. And for that you -- and every member of your family -- each have been left with a debt of $2,710!

Of course, there are the "fortunate few" who Washington has deigned to enrich.

The owners of dilapidated Illinois Oil Co. building in Rock Island, and the Washington Square Apartments in Moline (or their successors in interest) have to be dancing in the streets. It's a wonderful thing to have your neighbors renovate your building at their expense. Those of us who have maintained our properties, it seems, have made a disqualifying mistake, for which we deserve to be punished -- by having our income redistributed.

So if these renovations are such "great investments," why weren't they undertaken by private sector investors with private funds? Or are the guys in Washington who gave us Solyndra the only ones smart enough to recognize a "great investment?"

My mother used to say "God helps those who help themselves."

Washington calls that old-fashioned, and says, "We'll help those that don't -- with your money!"
John Donald O'Shea of Moline is a retired circuit court judge.


Posted Online: Sept. 21, 2011, 3:10 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

The IRS: America's Income Redistriction Service!

Senate Majority Leader Harry Reid, D-Nev., recently said, "we must simplify and streamline our broken tax system ... so everyone pays his or her fair share -- including corporations."

President Obama never tires of calling for "shared sacrifice."

At roughly the same time, Neil Cavuto of Fox Business News reported that "More than half of American households (51 percent) pay no income tax."

His guest, Neal Boortz, added that many of the "poor," rather than paying federal income tax, instead receive checks from the federal government. So, in effect, the government is paying a reverse "tax" to the poor. Is this "shared sacrifice?"

So, what is the fair share that the "rich" should be paying? What is the fair share that corporations should be paying? What is the fair share the "poor" should be paying? But perhaps, more importantly, who gets to say what amounts to a fair share? And who gets to label someone as "rich" or "poor?"

Let's take a simple example. A single man makes $1 million a year on a device that he spent 10 years of his life inventing. What is the fair share he should pay in federal income tax: 20 percent; 40 percent; 60 percent; 90 percent?

And who gets to say so? People with comparable incomes? The 51 percent who pay no federal income tax? Congressmen who are elected by the 51 percent who pay no federal income tax?

Let's take a second simple example. A single man earns $10,000 a year? What is his fair share: 0 percent; 5 percent; 10 percent; 15 percent? And who gets to say so?

At the outset, I don't think it is possible for one who pays no tax to claim he is paying any "share," much less his fair share. When a person "shares" he gives a portion of what he has to another.

Giving your neighbor nothing is not "sharing." It's doing nothing. In Mark's Gospel, we have the story of a poor widow who put two coins worth a few cents into the temple treasury. Christ praised her because she gave from her livelihood, rather than from her surplus. Would He have done so if she had walked by and given nothing? Would that have been "shared sacrifice?"

Is a fair share nothingmore than a percentage? Or, does it take account of the efforts that the wage earner expended to earn his income? Does it take account of the fact that nobody else lifted a finger to help him earn his income? Does it take account of how hard the wage earner worked? His genius in earning the income? What he spent to educate himself to be able to generate the income he has achieved?

What is fair about a married couple earning $250,000 paying 35 percent of their income as federal income tax? Is it more or less fair to say they should pay 50 percent? Where is the line between "fair" and "arbitrary?"

And is it "fair" that someone who earns $10,000 a year, and receives a free public education, medical care and food stamps, should have a right to vote to increase his neighbor's income tax, if he pays no income tax himself. Is it "fair" for someone with "no skin in the game" to have a vote to raise taxes on whoever he labels "rich" without voting to raise his own taxes -- at least a little?

By the way, when does one become "rich?" Or is "rich" like "fair share" in the eye of the beholder?

In a democracy, the majority rules. And that is precisely what bothers me. Since the passage of the 16th Amendment, which authorizes Congress to lay and collect taxes, the courts have never deemed any income tax to be a Fifth Amendment "confiscation of private property for public use," so as to require the government to pay "just compensation" for the "taking" (via taxation).

With the passage of the 16th Amendment, the only "check" upon the government setting income tax rates on the "rich" at 75 percent or even 99 percent, or determining that anyone with an income as small as $25,000 was "rich," has been the fact that everybody paid some tax, and that nobody liked paying more taxes.

Now that 51 percent of "taxpayers" pay no taxes, it is not going to take long before they figure out that it is in their best interest to elect congress and a president who will tax the "rich" at higher and higher rates, and who will insure that those who pay no taxes will be left alone.

The income tax will clearly be shown to be what it is fast becoming: a legal system for plundering your neighbor. As long as everybody is adversely affected by tax increases, there is a practical, if not constitutional, "check" on taxes being raised: self interest. But once 51 percent of the people believe they are unaffected by tax increases on their "wealthy" neighbors, that "check" is gone.

So, as the Internal Revenue Service morphs into the Income Redistribution Service, there is at least some good news:

We will still be able to call the tax collector the IRS.


Posted Online: July 20, 2011, 2:51 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea