Separation of Business and State

Yea, I know this one is not in the Constitution either. But maybe it should have been. The US has a long history of government interference in business and, perhaps even more so, business influence over government. It is one of the main areas of corruption in our government, and while it is worse than it used to be, it is not new. As in the previous article, the main philosophical reasoning for keeping business and state separate is the separation of power. Wealth is power, so is authority. Combining those two is a major magnification of power, and as we all know, power corrupts. Even if an individual can resist the corruption, the fact that a position of such power is available will attract corrupt people to it like flies to syrup.

Our government handed out land to rail companies nearly two centuries ago, they initially backed corrupt CEOs by sending troops to put down worker strikes rather than have the companies be forced to deal with worker demands. More recently they have abused imminent domain to hand out land to companies and handed over billions in taxpayer funds to bail out companies deemed “too big to fail”. All that in addition to consistent subsidies to various companies like the modern railroad companies and corporate farms, massive overspending by the military and other government agencies, and a host of other handouts and tax breaks done with backdoor deals in exchange for campaign support, perks, and perpetuation of power.

And that is not even the worst of it. the worst is the destruction of the economy led by a few companies that want to make a lot of money without having to compete in the market, and by a lot of politicians, some motivated by money, but most by power and control. The restrictions placed on business in this country, combined with the massive taxation has made for a faltering economy that is continuing to lose the foundation of any successful national economy: Production.

Some of the restrictions are, by design, made to prevent entry to the market by competitors. These are things that existing companies support because it makes sure they do not have to compete with up and coming businesses, or even have to survive innovation. This ensures economic dominance for them, while stagnating innovation and the economy as a whole. Some restrictions are government power tripping, wanting control over everything possible, thus they meddle in the affairs of individuals in this country, especially business owners. Some are restrictions in place to make the government appear to be solving problems, even the problems they are supposedly solving continue and law abiding business owners are further squeezed and restricted. Finally, some of the load on business is just government chasing money. They want more funds, more of the taxpayers wealth, to cover their massive spending. They know they cannot just take it in broad daylight, so they sneak in and take it behind the scenes. It is a “business tax”. They get away with it because they use class warfare to keep people in the mindset that soaking business is ok, and when the costs of the taxes are passed to the consumer, it makes the business look like the bad guy.

Businesses are, ultimately, made up of people. Those people should be liable for their bad decisions every bit as much as they should reap the benefits of their good decisions. The key to making this a reality is the abolishment of the corporation. The corporation is not a free market construct, it is a construct of the government, and it grants legal removal of people from the consequences of their actions. It creates a false entity for the government to tax without the average person realizing that they are the ones being taxed. It allows a company headed overseas to remain a US identity, when for all intents and purposes, they no longer are. The corporate entity should be removed.

Essentially, when business and government get together, it invites corruption. Corrupt business leaders will bribe government for favors and exceptions. They will seek government help to become and remain powerful, and to ward off competition. Corrupt government leaders will seek the additional funds and perks of business bribes. They will welcome the collaborative joining of authority and wealth to wield even greater power over the population. It is a vile pairing.

I can accept the need for government involvement with business disputes, contract negotiations and breaches, etc. I can accept the need for law enforcement in cases of theft or intimidation or other corrupt business practices. I can accept enforcement of willful negligence in cases of businesses that engage in practices that are harmful to people. Anything beyond that, and you invite corruption, you invite a consolidation of power, even if your intent is the opposite.

Separation of power is essential.

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Comments

  1. Common Man says:

    Jon;

    OK, for the most part I agree, however shouldn’t we address who is the root cause? Which came first the business or the government? I think if we look at things we will see that government started the whole mess and businesses, in general, reacted to controls, taxing, mandates and stipulations.

    The problem is that this practice has evolved into a standard for transacting business within a tyrannical government. It is kind of like security and theft. The security industry develops ways to prevent theft and the the thieves develop ways to defeat security; a vicious circle.

    I think this all dates back to individuals deciding to ‘not buck the system’ because it is easier to join em then fight them and lose.

    As BF proclaimed in yesterday’s post, we can’t beat the 900 pound gorilla setting in Washington, but we can start to influence the local authorities in our own home towns.

    We need to ‘buck the system’ at the lowest level and secure a home front in preparation for the collapse.

    CM

    • CM

      The BEGINNING goes back much farther and is rooted, in my view, in the European experience with Kings and then the Monarchy.

      Our ancestors grew up recognizing the power of govt could enhance favored economic interests.

      So it was carried to America with the Europeans. The colonies were both religious and commercial ventures sanctioned by Govt in hopes of expanding world power and commerce.

      Then we come to the founding of America itself. I need go no further than Alexander Hamilton. So right from the start there was an effort to use govt to create economic infrastructure and thus enhance growth.

      So perhaps in a sense Govt did start it, but it was not as thought Govt was ever divorced from it to begin with. Granted the mixing was somewhat minor in our beginning but it did still exist.

      I offer this so that we realize our goal requires overcoming thousands of years of human history and culture.

      Best to you and your family this fine day.
      JAC

      • Precisely, JAC

        Part of this comes down to the whole “it’s never been properly tried” argument that a lot of free market thinkers use. A lot of socialists use it, saying that the USSR and China and other communist and socialist countries did not really implement the concept properly or in the way the philosophy calls for. Similarly, the free market, at least on a national scale, has not been implemented properly either, at least not in recent centuries.

        Government has been following the money for a very long time, we have enough conflation of government and business in our own history, even when we were far more free than now, to see that there has been corruption there from the start. It is the thing that pro-regulators use against capitalism the most. It has always favored those who were already powerful.

        What pro-regulators do not see is that the middle class grows the more free things are, and that those with the most money, while they will always have advantages, will also have to fight like everyone else in a free market, take risks like everyone else, compete like everyone else. The middle class grows in that environment, the percentage of rich people increases, and the poorest ride the rising tide of economic growth.

        But the rich don’t want to have to compete and take risks, so they do back-door deals with regulators. They secure their wealthy positions and then they seek other kinds of power. They do not need protecting, they need to be in the same ocean as the rest of us. When the big ships have to weather the same storms as the little ships, instead of being in the shelter of the harbor, there is more growth for everyone.

  2. Not sure if I agree with this. My parents never had the business incorporated. When I purchased from my parents our bookkeeper suggested I incorporate for my own safety. A longtime family friend, I trusted his judgement even though I didn’t understand all the rules completely. I’m the sole stockholder.

    I hired a woman who had a knee problem. She worked for me for ~3 years..even got on company insurance. We always begged her to get the knee surgery she needed. She never did. She ended up quitting and moved from the city.

    Two years after quitting she sued my company on the grounds that her employment her led to her knee problem worsening. She sued for 5k..We ended up settling with a “shut her up” fee of 1500. That also prevented her from any more suing me.

    What if the suit had been for $5mil? and I was not incorporated. I’d have been personally sunk. Being incorporated prevented her from getting to my personal savings.

    • Anita,

      I’m with you. I think Jon has a great point on how business frequently used the government, but that does not mean all corporations are bad and must be outlawed. Somewhere in there, I blame all the lawyers (sorry Buck). The US sue without consequence invites abuse. Your former employee may have hurt her knee skiing or such, but can go after you because she has no negatives to make her be fair or honest. Play the legal lottery, sue and maybe get some money.

    • Anita

      Your example is a perfect representation of how one distortion leads to others and others and others, until we have corrupted our very souls.

      People have been taught to despise and resent “big corporations”. This eventually leads to resentment of all businesses and then to business owners. The systems has taught that taking from others is good as it is “justice”.

      So we get people willing to sue others for money and nothing else which feeds the need for “protection”, so we perpetuate the “corporate veil”, which in turn feeds the growing envy and anger.

      This is why I do not think we can destroy the “corporate” structure without also addressing the other ailments that make corruption and immoral behavior acceptable.

      • JAC,
        You are correct, there are spillovers and chains of distortion and consequences. I would also say, however, that even without the idea of despite for “corporations” there are two other causes. One is the concept of freeloading itself. The idea that a theft is ok, that getting money for nothing is ok, just because you “need” it (or want it), regardless of how or from who. The other is the dehumanization of society. We are not more social, we are, in fact, more inclined to think we are islands than ever. We are more willing to steal and sue and take advantage because we don’t see each other as human. We see groups and classes and care not for the man that might be our neighbor. Why should that lady care about Anita? She is not a person, she is an “employer”. There is a loss of humanity when there is a loss of individualism. Individualism does not make people more selfish, it makes them more understanding of the human struggle.

        Anita
        The thing is, the “corporate structure” is a big part of the dehumanization of the “employer”. You are not a person, you are just a company, and companies have money, and are not hurt if they get sued. Even if they don’t have money, you are not hurting a person, right? Of course you are, but people don’t look at it that way. If that lady’s lawsuit had said “Anita” instead of “Anita’s biz, LLC” would she have been as quick to sue? Maybe in her case, maybe not, but I know in many people’s cases it would matter. People will sue a corporation in a second, but if you listed the names of the people paying, they would not be so quick to do so.

        Also, as JAC mentioned about how one distortion leads to another, so does one bit of safety and security. You were possibly saved from personal liability by the corporate umbrella. Likewise a nasty manager/business owner that actually did treat their employees so badly that they suffered injury is protected from the consequences of their nasty actions by a corporate umbrella. As long as the coporation makes enough, that person will not be hurt, no matter how many others that person is hurting.

        There are other ways to reduce liability. Employment contracts, investor/stockholder contracts, etc. that can accomplish the majority of what you are seeking in pretection from lawsuits without requiring corporate structure. We need to get rid of these collossus companies that steamroll everything in their path, including product quality, employees, customers, customer service, and the economy in general. Not all of the evil things done in this country are done by government. Much of it is done with government protection tho.

        Also, you said the two most evil words in our modern culture, the two most destructive to the human spirit and the American way: “What if”. I know that is a brazen statement, but it is the basis for the support of the vast majority of all we hate in government from the massive military to the Patriot Act to every social program and safety net we have. We are a fearful, insurance poor, risk-averse society. Risk comes with freedom, you cannot have one without the other. As long as we are risk-averse we will be freedom-averse too.

    • Anita,

      Whether you were incorporated or not, the root of the problem did not change.

      I agree a person must avail themselves of whatever protection they can achieve to guard themselves, such as incorporating.

      But equally, do not believe that incorporating – because it exists – is a good thing.

      It is a terrible thing.

      It’s existence creates massive distortions throughout society, which responds by creating other distortions to avoid the former distortions, and so on.

      Corporations warp the moral fabric of society – because they exist is why you got sued.

      Follow:
      1. Your immoral employee knows you have money. She targets you.
      2. Society holds an immoral understanding that one can attack those that are defenseless
      3. Society holds that there are tools to avoid the immoral basis that society has conjured.
      4. If you fail to use the perverted tools to avoid the perverted immoral basis, society deems you the ignorant fool.
      5. That makes you a legitimate target, in the immoral eyes of perverted society.

      • Right! so what’s a good guy supposed to do? Never even TRY to run a business?

        • Use slaves instead of employees……………. 🙂

          • Whoops careful there cowboy.. This woman was already black..don’t get me in any more trouble… 🙂

        • Anita,

          No, just realize the game.

          “Hate the game, respect the players”

          I, personally, divested myself of operating corporations, but I happen to have a job that allows independence. If I was not so lucky, yet held the same philosophies – would I avail myself of all the protections necessary? Of course! If I play the game, you use all the tools. You don’t play hockey without a hockey stick. I would be rather foolish to play hockey with a paint brush.

          But I would still rage against the game, and where I was able to accomplish the same thing without the need of corporations, I would choose to do so, even if it was more difficult.

  3. Ray Hawkins says:

    @Jon – thanks for a nice article.

    Question is YBH – “Yes but how?”

    An example I draw on is one sure to draw the ire of anyone who has believed in right-sized government regulation – Matt Taibbi wrote for Rolling Stone not long ago on the revolving door between Wall Street and the Alphabet Soup of agencies that are supposed to regulate them (including DOJ). The net is you seem the same 100-200 faces that rotate between the regulator and the regulated – basically a guarantee that any half-assed regulations there are will never get enforced or prosecuted.

    An argument is often made that subject-matter-expertise is needed in government to help keep business honest – problem being that SME comes from the very industry (or vice versa).

    This may not have been the specific intent of your article, but its an angle no less.

    • Ray

      The other option is equally bad. Take the EPA where the regulators have little knowledge of the workings of business, or other agencies for that matter, and are dominated by the crusaders. Another on this side would be National Marine Fisheries Service and the US Fish and Wildlife Service. Although the learning curve of the last two has increased greatly the past 20 years.

      So perhaps eliminating the vast majority of the regulations and laws would eliminate the need for the swinging door.

      Or perhaps, we should investigate the honor and integrity issue of the individuals a little bit more.

      The revolving door exists because BOTH sides need expertise on the other sides operations.

      • Right, so Ray, I would think that, since it is a bad idea to have the same faces in government and business, due to the obvious opportunity for corruption, and a bad idea to have people who know NOTHING about business being put in place to regulate it, then perhaps the position needs to be eliminated altogether.

        There are other ways to handle businesses that do bad things. We don’t need an EPA to tell business not do dump chemicals in the river. We need law enforcement to back up landowners affected by such things. The company will be required to clean the property to the owner’s satisfaction, and the owners and managers of the company will be personally responsible for the decisions made to damage other people’s property. That is just one example of many. We don’t need corporate structure, we don’t need heavy regulation. We just need basic enforcement of simple law.

  4. Jon

    Good topic for the day and well done.

    I believe we have come to far under the old ways to make the complete break many of us would like to see.

    The density of our populations and arrangement of existing infrastructure makes it impractical to expect a complete privatization of all commerce activities. I am thinking primarily of infrastructure such as roads, railways, power line corridors, and the like.

    I offer this proposition for consideration as part of our discussion. Perhaps not ALL things should be individually owned. While my native and some of my European ancestors held individual freedom sacred, their hunting grounds were viewed as the “community’s” property. So if we assume certain human nature as the root of our common law, then it would follow that there is a place for community property relative to our well being and “general welfare”.

    I am also not stuck on destroying the “corporation” entirely. If we focus on the primary issue, that of personal liability, I think we can develop a solution that moves us in the right direction without destroying the benefits associated with this business form. Of course if we do that, then it really becomes something else and is NOT a corporation any longer.

    • I take your point on infrastructure. I have long been a proponent of leaving the ownership of roads in the hands of government. I am not as certain about some other aspects of infrastructure, but many, especially those you mention, are too difficult to “spin off” properly to private corporations without significant problems and potential for horrid favoratism and other corruption.

      While I am certainly no fan of Teddy Roosevelt, I have enjoyed a great many of our state and national parks. I understand the potential need for common property, and the good ways it can be used. I know that removal of regulation and of corporate protection will likely need to be gradual, unless we are in a revolution situation and starting from scratch anyway. Still, a move in that direction would be a very good thing. And even the existence of government owned infrastructure, while it might cause some issues that would violate a separation of business and state, the risks of such could be minimized.

      As far as corporate structure, could you be more specific? What benefits exist in that structure that you want to preserve specifically? The ability to invest is the only one I can think of, and that can be managed through contractual arrangements.

      • Jon

        It is primarily the investment side I am considering. Liquidity and the ability to raise large amounts of capital, and to allow the regular folks to participate.

        So……….liability protection for the general investors but NOT the primary owners and/or Operators of said business.

        The LLC and LLP structures address much of the old Corporation protection for shareholders and are already replacing the INC for the most part. These forms allow separate liability for operator/owners vs the limited partners.

        So liquidity and investor protection against lawsuits are the two biggest I see. But then the investor protection needs to be limited also, to the truly uninvolved shareholders.

        • Stock ownership that did not carry with it an ownership role, meaning no vote or association with a business you invest in. This does not prevent one from being held socially liable. If I purchase stock in a bad company and am known as a major holder, despite having no vote in the operations of that company, I could still suffer some consequence, but that is no different than now. A contractual arrangement between true “owner” and “investor” could handle what you are talking about without the business being it’s own entity. It would be similar to a business loan, except that the payment terms would be in perpetuity and the liability would not exist in the case of business failure.

          • Jon

            I agree there are ways to skin this cat.

            But I think it would require re-working much of our business and tort laws to make it happen properly.

            You can not negate liability via contract for example. The courts will look to the “nature” of the contract and the “ownership vs. hands off investor” relationship to determine if liability should exist.

            There is also an argument that investors should be held liable, especially when they are the ones who are supposed to “ELECT” the BOD and OFFICERS.

            • If you want to be distanced from liability, you would have no control over BOD or OFFICERS. This increases your financial risk in some ways because you have no say in how business is run or who is running it, and the wrong decisions can be a disaster to your investment.

              If, however, you want to have a say in order to make your investment more sound, or if you want to have more involvement then you will be held partially liable for the actions of the business and its operators. Greater risk, greater potential for payoff, lower risk, lower potential. I would even say that a distanced investor would have a lower profit share for the same investment as a liable investor.

              As for changing the business and tort laws, that is sort of the point. I want to change the structure of business to stop what is currently happening. I did not say it would be easy, and it may not even be investment friendly in some ways, but those seeking investment will find a way to make it investor friendly, and those seeking to invest will find a way to mitigate their risk to acceptable levels. Investment is a transaction just like anything else. I just want the government out of this particular type of transaction just like, well, everything else.

        • JAC, Jon:

          “Shares” are ownership, so attempting to build a structure where you are an owner YET avoid responsibilities of ownership will always lead to some bizarre distortion that will manifest contradictions, and eventually, evil.

          Free market:
          If you own shares, you are an owner, and better realize that and take the responsibility. No ifs ands or buts.

          Otherwise lend your capital to the owner, and organize the lending properly.

  5. On one side, I have been reading about Bank of America’s leaks that show they were deliberately defrauding some of their customers with foreclosures. On the other hand, I’m not sure more gov. is the answer…

    http://www.newsbusters.org/blogs/tom-blumer/2011/03/15/how-long-will-ap-and-establishment-press-downplay-consumer-czar-liz-warr#ixzz1GljR53VO

    The new federal Consumer Financial Protection Bureau … is trying to extend its reach by extorting billions of dollars from private mortgage servicers, regulating their business by fiat, and stalling a U.S. housing market recovery.

    This brouhaha started last year when mortgage servicers—J.P. Morgan Chase, Wells Fargo and other banks—were accused of mishandling foreclosure documentation. The feds have been investigating, and it turns out that most of the infractions were technical while very few borrowers lost their homes without cause. But state Attorneys General and White House special assistant Elizabeth Warren have spotted a political opening to smack the banks one more time and dole out $20 billion to potential voters in 2012.

    They’ve sent a proposed 27-page “settlement” to the banks that would, among other things, force mortgage servicers to submit to the bureau’s permanent regulatory oversight; impose vast new reporting and administrative burdens; mandate the reduction of borrowers’ mortgage principal amounts in certain circumstances; and force servicers to perform “duties to communities,” such as preventing urban blight. We warned during the Dodd-Frank debate that the new consumer bureau would become a political tool for credit allocation, and here we already are.

    The legal language is so vague, and the potential liabilities so vast, that no CEO could in good conscience sign the agreement as it stands. The settlement includes, for instance, “unfair and deceptive business practice” clauses that would expose servicers to lawsuits for any “material” violation of the agreement, whatever “material” means. Homeowners and bank shareholders will ultimately pay for the compliance burden and the $20 billion to reward delinquent borrowers, as servicers pass on the costs. Never mind that these banks didn’t originate many of those loans and typically don’t own them now.

    • NEW YORK — The Obama administration is seeking to force the nation’s five largest mortgage firms to reduce monthly payments for as many as three million distressed homeowners in as little as six months as part of an agreement to settle accusations of improper foreclosures and violations of consumer protection laws, six people familiar with the matter said.

      Described as a “shock and awe” approach, the deal would accomplish the four goals set out by state and federal policy makers and regulators as part of their multi-agency investigations into abusive mortgage practices by the nation’s largest financial firms: punish banks for violations of state law and federal regulations; provide much-needed assistance to distressed borrowers; stabilize a deteriorating housing market; and dissuade firms from abusing homeowners in the future.

      The modified mortgages could cost the five financial behemoths — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial — as much as $30 billion, according to sources. Combined, the five firms handle three out of every five home loans, according to newsletter and data provider Inside Mortgage Finance.

      It also could lead to reduced mortgage payments or lowered loan balances for nearly two-thirds of the 4.7 million delinquent homeowners who have yet to fall into foreclosure, according to data provider Lender Processing Services.
      http://www.huffingtonpost.com/2011/03/16/obama-administration-modify-mortgages_n_836350.html

    • A Puritan Descendant says:

      While this topic as a whole is over my head, I will make one comment pertaining to the mishandled mortage documentation by the mortgage lenders.

      While it is my understanding mortgages can be sold ( I sold one myself), if during a mortgage sale, the required recording of the sale is not made which results in a ‘cloud’ being placed over the homeowner’s/borrower’s Title, then the responsible party should be liable.

      The part I never could understand, is how could a bank be taking mortgage payments from a homeowner, when the bank no longer holds the mortgage or even knows who does hold the mortgage. These mortgages can be sold over and over and apparently bundled together and lost track of when they fail to record them as required by law.

      And, No Charlie, the solution is Not communism, LOL.

    • As far as I am concerned, as bad as this stuff is, the banks made themselves into prostitutes. You take the money (taxpayer bailout) you get screwed (bank settlement and regulations and fines). I dont have a lot of pity, my only real concern with all of this is that it is just more of a ploy to consolidate money and power and have the money bounce back and forth between the same people, picking up some from taxpayers in one direction, borrowers in another, and small competitors in another, continuing to enrich the corruption at the top. It is all a shell game and a false battle.

      I pity not the banks. I would not shed a tear to see the whole thing collapse under its very prodigious weight.

  6. Canine Weapon says:

    Is it too early for a daily dose of off-topic gun humor?

  7. A Puritan Descendant says:

    The picture above of the internet on the power pole brings something to my mind.

    I live in the boonies. Years ago, all I had was dialup internet. Then Satellite, which was fast but often not reliable (it sucks). Also available is fast wireless internet which is a tad expensive and has limits on monthly usage and is a bit glitchy.

    Now at the present time Obama’s stimulus plan is bringing in Fiber Optic cables over the power poles. Don’t know the user monthly cost yet, but it should be a FAST internet speed.

    No doubt would allow Netflix for cheap movie downloads which was not practical with previous monthly usage allowances.

    Two private wireless internet companies will lose business. Two Private Satellite will lose internet business. Two Private Satellite television companies will take a hit. Even dialup services will suffer. Maybe even some cable tv will be hurt . The local phone company can forget about bringing in high speed internet themselves ‘someday’.

    The company that was granted the Obama money came out of nowhere. They started up during the grant application process. http://www.mainefiberco.com/history.html

    BUT, I will have Netflix!!! LOL.

    So, is this a good thing?

  8. Netflix rocks … you’ll need some foreign movie reviews:
    http://temporaryknucksline.blogspot.com/2011/03/nurse-annie-knucksline-manuscript.html

  9. A news story on topic for a change.

    As we evaluate the linkage between Govt and business, Congress is arguing over whether to dictate debit card fees to the banks.

    If you read this, please note Dick Durbin’s comments accusing the banks of getting a “subsidy” at the “expense of taxpayers” because the Fed does not impose a PRICE for the fees charged by the bank. This is a U.S. Senator spouting this garbage. Further evidence of how much we need a highly educated political class to lead our nation.

    http://www.huffingtonpost.com/2011/03/16/bank-lobbyists-swipe-fee-crackdown_n_836315.html

    By the way, this issue came up many years ago over credit card transactions. The merchants solved that by offering 5 to 10% discounts for cash payments. The bank transactions fees were reduced to a more acceptable level.

    But this time both sides are fighting for Govt intervention on their behalf.

    • The merchants solved that by offering 5 to 10% discounts for cash payments.

      I patronize several small businesses that do just that if you’ll pay by cash or check. I’m more than happy to pay a bit more in price to support their businesses.

  10. I would like to raise a point made by one of my friendly lefty antagonists regarding the proposition that businesses pass on their tax burden to the consumer.

    The proposition goes like this: Corporate taxes, all business taxes, are based on the “profits”. Therefore “income taxes” are not passed to the consumer as they are extracted “after” the consumer has paid for the goods/services.

    I will not post my argument for now as I am interested in the comments by others, especially those with business experience.

    SUFA, what say you on this notion?

    • A Puritan Descendant says:

      It’s buried in the price of the product in advance…. yes? no?

      • A Puritan Descendant says:

        Why am I asking? I had a business and that is exactly what I did.

        • Precisely, claiming that the tax is not affecting the cost and being passed to the consumer anyway is very one-dimensional thinking. Anyone who runs a business could outthink this taxing process without out even blinking.

          Typical of modern education to produce someone who would actually think this makes any sense at all.

    • Common Man says:

      JAC;

      I would fall in with Puritan and bet that if not prior too, prices would go up after the first reporting quarter in order to absorb the expense. And how would this work if a company never made a profit?

      CM

      • A Puritan Descendant says:

        Profit is the goal, so the price is raised ‘as much as possible to cover the expected taxes’. However there are limits before you either can no longer compete in an uneven market or people simply will not pay your asking price.

    • JAC, Puritan:

      The test – would the price of the product go down if there was no tax on the sale while all other things remain equal?

      Price + tax > Price (no tax)

      Why would the removal of the tax lower the price?

      • A Puritan Descendant says:

        “Why would the removal of the tax lower the price?”

        My costs would be lower without the tax. I could sell at a lower price and make the same profit. If I keep my price high, I lose to competition or even risk business failure.

        • Puritan

          The point made with the proposition is that you do NOT pay tax on your costs, only your profits.

          So WHY would you need to pass the tax cost to the consumer? ONLY your PROFITS are taxed.

          As for your example, you could keep the price the same and increase your profit if the tax is reduced.

          • A Puritan Descendant says:

            income taxes on profit are not a ‘cost’ I can deduct, But they are a ‘cost’ to my expected/desired profits. Therefore I need to raise my price as much as “feasible” to obtain my goal of my desired profit.

            • APD

              Profits…………….margin or total?

            • APD

              Why would you need MORE profit?

              Your salary was included in the COSTS deducted from the revenue and thus are not taxed.

              • A Puritan Descendant says:

                I was not a corporation. I did not get final payment until all the smoke/taxes cleared.

                If I was a corporation, I need to make enough profit after projected taxes to keep shareholders happy. But now I am getting in over my head.

                It can confusing and hard to articulate indeed, but simply put a business is not blind to expected taxes when making price considerations.

          • JAC,
            If your business makes a million dollar profit in a year and you need most of that to replace or upgrade machines, technology etc. you are able to do that. When the government takes half via taxes then you need to raise prices so you can have a two million dollar profit for the same result.

            • Pretzel

              Your tack was the one I tried to explain. It was like talking to the wall. The extension was this:

              OR…………. you need to borrow money or issue more stock.

              In either case you just raised the Cost of Capital to your company.

              Borrowing also increases long term cost due to interest. So the tax indirectly reduced operating profits, thus reducing future tax revenues. That is if you can’t raise prices accordingly.

              The Corporate Income Tax has historically caused companies to live on debt financing. This is in turn counter productive to a healthy economy. One that can respond to down turns.

      • BF

        Actually, I think that is only part of the question. In fact it might be the test of whether a reaction to the tax is “feasible”.

      • BF

        Sorry, I didn’t answer your question.

        Because demand can not support the tax inflated price, once the tax is removed.

        This of course requires that the price includes the cost of the tax in the first place. Which is the argument presented.

        So the corresponding question is:

        Why would the price include the tax?

  11. Bottom Line says:

    Jon – ” I can accept the need for government involvement with business disputes, contract negotiations and breaches, etc. I can accept the need for law enforcement in cases of theft or intimidation or other corrupt business practices. I can accept enforcement of willful negligence in cases of businesses that engage in practices that are harmful to people. Anything beyond that, and you invite corruption, you invite a consolidation of power, even if your intent is the opposite. ”

    BL – In other words, you accept giving up personal responsibility and support coercion and violence against nonviolent people…SOMETIMES?

    Sometimes leads to more often, and eventually all the time…like it is today (pseudo-fascism).

    …just sayin’

    GREAT article by the way.

    • What? So LE stepping in when a business steals something is somehow supporting coercion sometimes? I get that you are saying that we need no government at all and blah blah blah, but that is a separate discussion. 🙂 In your world vigilantism would take the place of LE, but it would be the same effect, only more violent.

      • Jon,

        Why do you believe local vigilantism is more violent than government?

        I’ve never heard of a vigilante group slaughter a million people.

        • Not more violent than government, BF, more violent than Law Enforcement, a specific arm of government. Vigilantism is more violent than a system of legal trial and law enforcement and varied penalties.

          Such an organization could be set up on a local level and without a specific need for a true government, but in many definitions, it still would be considered one.

          • Jon,

            Vigilantism is more violent than a system of legal trial and law enforcement and varied penalties

            I do not agree.

            Law Enforcement is violent all the time, and more laws must lead to more violence.

            Vigilantism only occurs when there is a perceived failure to deal with injustice. Where this perception does not exist, vigilantes do not exist (or renamed to be criminals)

            • BF

              That may be true but so is this reality.

              Crime doesn’t take the day off.

              I could see, and have seen, basically a part time LE presence in small communities.

              The larger the more crime and the greater the need for a full time LE presence. Whether your private or public.

              But once it goes to full time, you will have a problem regardless of which you use. Unless perhaps they are NOT paid.

              • JAC,

                I do not agree that LE reduce crime. I believe the perception of defense reduces crime.

                Example: Security guards reduce crime at stores.

                In society, People infer that a police presence is a protective force, including crooks. In reality of any significant test, it is not – but the perception is powerful enough.

                You can replace the perception with something else other than LE (private Security) and get the result.

            • LE is not violent all the time. Perhaps the funding of LE and lawmaking, etc. could be considered violence/coercion if it is funded through taxation, but that is a general statement, not a trait of LE itself.

              LE holds, perhaps, the threat of violence if you do something illegal. However, if you do something unjust, the retribution of society (or in the absence of that, of a vigilanti), also has the threat of violence. It is, as you say, a perception. It is a perception of consequence, which involves a threat, typically one of violence, tho it could be simply one of shunning. Even LE often involves more of a “shunning” threat than the violence itself. Many do not fear a night in jail, they fear the “record” of crime.

              I do agree that LE’s ability to “reduce crime” is a perception, but it is not just a perception of defense, but a perception of consequence. Meaning a right to keep and bear arms creates a MORE EFFECTIVE perception of defense, as well as a MORE EFFECTIVE and available defense capability than LE. However, it is not just the perception of defense, that a person could fend off an attack or that the attack would carry an immediate risk. It is also a perception that punishment could follow, that one will be found out and sought out to accomplish this punishment, AND that the benefits gained from a criminal act, i.e. theft, will be removed. In this I believe LE does a better job than general society or the market in some cases because it has an investigative arm that will seek the criminal.

              Now, certainly, such an investigative arm could and does exist in the free market, and it is, in many ways, more effective. The costs, however, tend to restrict the use of such a thing to larger crimes, or to those who can afford the costs. Thus, some things go unanswered.

              Granted, LE in many cases does little to help in small cases of crime in practice, but I still think there is a place for LE in a community.

              I do agree that vigilantism only occurs in cases of perceived injustice. Like unions were supposed to be, they appear and disappear as needed. I also do not like that vigilantes are made illegal because of some need for monopoly on enforcement by LE. I understand the perceived need for that monopoly, and the fact that perceived injustice can also lead to the perceived guilty being punished when they are, in fact, innocent. That, however, is a matter of trust. LE needs to trust people more, people need to trust LE to do their job more (a trust that must be earned).

      • Bottom Line says:

        Jon – ” So LE stepping in when a business steals something is somehow supporting coercion sometimes?”

        BL – ANY time law enforcement steps in, it is coercion and violence. Supporting it in this or that instance and not the rest is supporting it sometimes.

        Jon – “In your world vigilantism would take the place of LE, but it would be the same effect, only more violent. ”

        BL – Who says it has to be vigilantism instead of LE? Who says the third party has to use coercion and violence to achieve compliance.

        Ever made a bet where a third party holds the money?

        I could see a third party contractual insurance service type thing easily happening in the absence of government.

        • BL – ANY time law enforcement steps in, it is coercion and violence. Supporting it in this or that instance and not the rest is supporting it sometimes.

          Jon – If they are stepping in to apprehend violent persons, then they are not perpetrating coercion or violence against the non-violent unless you are referring to the costs involved. If LE was voluntarily paid for, which it could be (and has been in history, such as in some cases in the western US before infrastructure allowed for government provided LE or the taxation that goes with it), then there is no coercion at all. You act as though only defense of self is legitimate, as if defense of another is not.

          BL – Who says it has to be vigilantism instead of LE? Who says the third party has to use coercion and violence to achieve compliance.

          Ever made a bet where a third party holds the money?

          I could see a third party contractual insurance service type thing easily happening in the absence of government.

          Jon – Who says it would not be vigilantism. The fact that there is potential for a non-coercive, non-violent solution does not mean that it will always be so. I could see a third party being used for many things, like contract disputes, but not so much for criminal activity.

          A bet is a voluntary transaction. I am talking about nefarious business activity such as violence against a competitor, dumping of waste on the property of another, engaging in fraud, etc. There is more at stake than just amicable transactions. And don’t pretend that a business would not make a profit via fraud. At least short term profits could be made.

          As for a third party contractual insurance, I could see that too. I could also see that being what paid for LE in a locality. I could also see a community that refused to do business with anyone that failed to pay into a system that covered the cost of courts and LE and even a military or militia. I could even see that escalated to national scale. No coercion through violence, just not many people willing to do business with a freeloader. I could see a lot of things. That does not mean that is the way things will play out.

          You will not remove violence from humanity just by removing government. It will still exist. That does not mean that government is the best solution, but don’t make the mistake of painting some fairy tale of peace and love and Cumbaya to convince yourself or others that the free market is the solution to everything. It may be the best path, I tend to think it is, but it is by no means an easy one, or even a peaceful one.

  12. Remember this truth:
    Economics is the mother of Politics.

    Politics is economics by another means.
    War is politics by another means.

    These things are not separate, but manifestations of the other.

    Men must obtain resources to live – this is a universal truth.

    A man can obtain resources for his life by only two broad ways:
    – earn.
    – steal.

    This will never change. All that can change is man’s moral stance which to guide his decisions.

  13. Dee, LOI, Puritan, everyone else

    Repost, due to the importance of correcting a misunderstanding::

    WHOA! Hold that wagon up!

    I did not say to sell your gold! We are NOT in a depression, nor are we approaching it.

    We are approaching INFLATION, and you need to hold your gold.

    I was explaining that you should not marry your gold! – that there will come a time that you must sell it to achieve your advantage.

    But now is not the time!
    I will tell you when that time comes~!

    • Was wondering if you caught that yesterday.

    • A Puritan Descendant says:

      understood

    • I’m holding a lot of metals and miners in my 401k at the moment.

      And I’m watching the hemorrhage money.

      I am not enjoying this.

      • Mathius,

        (1) Do not fret – this is merely temporary and short term.
        (2) What the hell do you have a 401K for???

        The government WILL take it from you.

        401K is GOVERNMENT money held for your benefit. They can change their mind on a whim. You will lose every cent of it, should you carry this past reckoning.

        • I have no doubt the gov’t will tax the bejesus out of it, but take it away entirely? No, sir. It is not government money, it is MY money. Mine. It’s not like social security which is a Ponzi scheme – my money pays for someone else. This is my money placed in my account for my use, invested by me. If the government decide to take away people’s 401k’s, there will be all kinds of hell raised.

          Now, of course, the question is why have one? That is simple: Aside from the pre-tax interest multiplication mathematics, there’s a bingo bonus. My company matches 50% of what I put in. So if I max it, I get a free 8k. That 8k, compounded over time means a lot more money for me when I cash out.

          Then again, if these metals/miners don’t start performing, there isn’t going to be anything left for the government to take away – I’m down more than 4% YTD, and it’s almost entirely driven by those losses.

          I’m tempted to move my money to US large caps. I typically like EMEA, but it’s been tanking too. Maybe now’s a good time to go long Japan..

          Lots to think about.

          • PeterB in Indianapolis says:

            Mathius,

            If the metals/mining stocks are not performing in your portfolio, you are in the wrong metals/mining stocks, or you got into them too late, one or the other (or perhaps both).

            By the way, due to the Japan factor, DEMAND FOR METALS is going to PLUMMET for probably 6 months, and then it is going to SKYROCKET!

            What happens to price when supply is relatively fixed and demand skyrockets? Even a not-so-free-market-quasi-capitalist like yourself can figure that one out!

            Buy the dips. Platinum is down about $125 per ounce from the recent high. Gold, Silver, and Copper are also down, but not as much.

            Platinum is used extensively in semiconductors, 20-25% of which are manufactured in…. Japan.

            Japan is also going to need Copper and Silver, and to some extent Gold to get rebuilt from the current mess.

            Early projections I have seen say that there is 0.25 TRILLION in damage, and of course, the reality will be much greater than that. All of that will have to be “paid for”, and it will be paid for by FIAT MONEY from the US, Europe, and Japan itself, which will cause further massive global currency devaluation.

            Combine more “quantitative easing” with a big jump in metals demand 6 months from now, and you may well have global currency collapse with metals prices at levels never even imagined before.

          • Mathius,

            re:401K

            You make a serious err.

            The money is there by grant of government. They make the rules, not you.

            The rules are coming that will say “Thank you, you cannot withdraw it, it shall be used to “invest” in government bonds, now go away”.

            If you do not believe this will happen, hold on to your 401K.

            For everyone else, rest assured that day is coming soon.

            • Buck the Wala says:

              Mathius:

              Hold on the 401(k). Keep investing in it.

              Your 401(k) is not in any jeopardy of being stolen by the government. Yes, there are terms to your access to the money, which you have agreed to by starting a 401(k). Worst case scenarios:

              a) You need the money and get stuck with a penalty for early withdrawal or
              b) You wait and take the money out later in life and find it is being taxed at a higher rate than you originally anticipated due to changing tax rates and brackets.

              Either way, if you can afford to invest in it now, DO IT, as much as is possible up to what your employer will match.

    • “you should not marry your gold!”

      Too late, consummating it was kinda interesting though! LOL

      • I could never marry gold.. I’m just not a one precious-metal kind of guy, and I’ve got a thing for platinum..

  14. Charlie

    Thanks for the correction. My bad

    No sweat.

    It is a fundamental mistake the vast majority of Americans make, and it is a sad one.

    Americans believe in the words of Jefferson in the Declaration.

    The Constitution unravels all of it – but the Americans still believe Jefferson’s words run the Constitution – when indeed, Constitution confounds those words.

    This is probably the most successful bait-and-switch in history, and the root of the current American disaster.

    . Now answer the question.

    Ah…what question?
    America does not operate on Jefferson
    It operates on Hamilton.

    By the way, you won’t find the word capitalism in either document … but an awful lot of reference to the common good, welfare, etc.

    Capitalism is NOT a thing – it is a DESCRIPTION of a thing.

    Example: you trade with your neighbor. You do not trade with your neighbor because you “invented” Free Market.

    But we can describe what you did – voluntary trade of value – as a “Free Market system”.

    Jefferson envisioned freedom. He did not invent freedom.

    One (of many different) manifestations of freedom is the free market.

    One (of many different) manifestation of the free market is “Capitalism”.

    CS: Revision: The term is most often used by those Marxists who believe that such revisions are unwarranted and represent a “watering down” or abandonment of Marxism.

    I do not argue that Communism is corrupt just because every attempt at its implementation has slaughter millions of people. This is a good argument, though.

    I argue that Communism cannot work because it will always collapse economically – and with all economic collapse, will undo whatever society carried it.

    Economically, Communism cannot survive.

    In economic-speak, it has no methodology to price goods, and as such, cannot allocate goods effectively. In Communism, there will be a growing shortage of things that are necessary, and a growing surplus of things that are not necessary. This cannot be avoided. The best Communist thinking economists in the world have admitted this to be so.

    The communist party preaches non-violence … much like you (unless you’re protecting what you’ve appropriated immorally–then it’s fine, I guess).

    …yet, in the same breath, says that theft is the best way to allocate resources.

    And that is another of my complaints about it – it is self-contradictory (like you, Charlie! 😉 )

    As I’ve often pointed out: “communism”, at its simple roots – commune – is not a “bad thing” – you live it successfully within your own family. The reason: you allocate family resources, not by trade, but by emotional attachments.

    You do not give me your care and food – because you do not love me. You give your wife and children your care and food – because you love them.

    Communism cannot scale because your emotional attachments cannot scale. You cannot “love” everyone.

    Free Market – voluntary trade – does not dominantly operate on your immediate family scale (it can – you sell your car to your kid) – but most usually it does not. You do not trade with your kid for his daily resources.

    But what communism cannot do, but what Free Market systems can do is scale infinitely because it does not depend on emotion…. “its just good business”….

    The greatest horrific error: attempting to apply what does not scale to a very large scale.

    CS: Laws are interpreted and reinterpreted over and over; see U.S. Supreme Court.

    I do not disagree – but you must reflect on what “law” they are interpreting.

    It is not the laws of murder, theft or violence of citizens upon citizen. These are cut and dry – the only debate is the extent of “punishment” or consequences on the perpetrator – not whether the law applies.

    The “law” they muddle about the most are the “false” laws – how to inflict evil upon the non-violent. By the nature of false law, it is wholly subjective because those that inflict violence on the non-violent do not want that violence inflicted on them

    “I get to steal from you, but you do not get to steal from me” – will always create massive contradictions and whimsical ideas and arguments to enforce this.

    Imagine the loops and hoops I have to create to justify my stealing your car, but not allowing you to take it back….

    Understanding LAW – the use of violence to enforce an edict – is critical to understanding where it is JUSTIFIED and where it is EVIL

    CS: Now that’s funny. The corporations you rail against were born of man made law. Capitalist man made law.

    Capitalist man did not make corporations. He rages against them.

    But, this, corrected, is a truth:
    Man made law.

    CS: the word morality is defined; individuals determine for themselves what is moral.

    Whew!

    1,412 laps around the same block, and finally, you got it exactly right!

    BF: Illegal does not equal violence – jaywalking is illegal but non-violent.
    CS: Interesting, American Indians killed off by the score you find analogous to jaywalking.

    Wow! I actually can see light bulbs bursting in your head!

    You’re starting to get it.

    YES!
    LAW -the use of violence to enforce an edict- is the same for jaywalking and for murder.

    The government has the ultimate power to kill you for jaywalking – as evidenced by a popular youtube video where a woman jaywalking was attempted to be ticketed. She refused the ticket, the cop attempts an arrest, she refuses the arrest, and it escalates from there. Ultimately all law enforced by government -if resisted- will end in death

    That is why understanding the difference between “false” law and True Law is vital Charlie.

    True law – use of law to protect the non-violent FROM violence
    False law – the use of violence to enforce an edict on the non-violent.

    While you’re at it, check out Ward Churchill’s stance on the American Indian and how they were killed off after an original $24 “Lease” for Manhattan (Manhattan, not the entire country).

    Churchill was a mass murdering SOB.

    BF: America was appropriated legally but unjustly.

    CS: And that’s why your entire vision is immoral; you justify anything and everything (including violence) so long as rests on the side of accumulation.

    You apply your own confusion upon me, and you cannot link arguments together.

    Legal = what government says so.
    BF = government is bad, wrong, evil.

    Charlie’s thinking “BF says this is legal so BF thinks it is good”.

    Try thinking a bit higher than the superficial – try linking arguments together and you find yourself far more successful in promoting your own arguments.

  15. Hamilton’s Curse:

    The great debate between Hamilton and Jefferson over the purpose of government, which animates American politics to this day, was very much about economic policy.

    Hamilton was a compulsive statist who wanted to bring the corrupt British mercantilist system — the very system the American Revolution was fought to escape from — to America. He fought fiercely for his program of corporate welfare, protectionist tariffs, public debt, pervasive taxation, and a central bank run by politicians and their appointees out of the nation’s capital.

    Jefferson and his followers opposed him every step of the way because they understood that Hamilton’s agenda was totally destructive of liberty. And unlike Hamilton, they took Adam Smith’s warnings against economic interventionism seriously.

    Hamilton complained to George Washington that “we need a government of more energy” and expressed disgust over “an excessive concern for liberty in public men” like Jefferson. Hamilton “had perhaps the highest respect for government of any important American political thinker who ever lived,” wrote Hamilton biographer Clinton Rossiter.

    Hamilton and his political compatriots, the Federalists, understood that a mercantilist empire is a very bad thing if you are on the paying end, as the colonists were. But if you are on the receiving end, that’s altogether different. It’s good to be the king, as Mel Brooks would say.

    • Alexander Hamilton…………America’s first Fascist.

      I made that statement loudly and publicly, standing in front of his statue at the the Treasury building.

      It certainly did raise some eyebrows and turned some heads. Spousal Unit Leader was just embarrassed enough to make a comment to the affect that “oh, that’s just JAC being JAC”.

      If Burr hadn’t shot him I am not certain Jefferson wouldn’t have. Well, yes I am. Jefferson would have convinced a third party to do it as a necessity of Liberty.

  16. Of course “separation of business and State” IS in the Constitution. Remember, anything that is not SPECIFICALLY authorized for The State to do by the Constitution is automatically forbidden.

    There also needs to be a separation of science and state, medicine and state, school and state, and finally LIFE and state.

  17. As far as the Native Americans plight. We moved in and took their land just like they had moved in and taken it from others before them. That doesn’t make it right. Just the way it is and always has been. And this has taken place wordwide. Always has. So Boo Hoo if your native lands were taken away from your ancestors. Ancient History, get over it.

    Have your heard about Dayton “dumbing down” their civil service tests so more Blacks can pass it? WTF? Are blacks just naturally stupider than whites so that everything has to be simplified for them to do it? The Head of the NAACP in Dayton didn’t think it should be that way, that is, until he was slapped down by his “betters” nationally.

    This sounds like more of that “Social Justice” Horsedookey from the Obama Admin, Liberals, Progressives and the White Apologists who believe we must apologize for being White and the way “we” treated the poor black since Jesus was a small tyke in Nazereth.

    Maybe from the 50’s and 60’s during segrgation they might have a point. But those folks are already for the most part retired. So I throw the Bullshit flag. They go to the same damn schools and take the same damn classes that the white kids take. They have the same opportunities the white kids do.

    This bullshit that we must “dumb down” everything so that the blacks have an equal opportunity is ….let’s just say “special needs thinking”. I mean, an equal opportunity for what, to all be stupid?

    • Here is one source I get my information from. this is refrickindiculous!

      http://video.foxnews.com/v/4588921/doj-forces-dayton-police-dept-to-lower-test-standards-/

    • EsomHillNation,

      As far as the Native Americans plight. We moved in and took their land just like they had moved in and taken it from others before them. That doesn’t make it right. Just the way it is and always has been. And this has taken place wordwide. Always has. So Boo Hoo if your native lands were taken away from your ancestors. Ancient History, get over it.

      So, if I take YOUR land by force, Boo Hoo for you, it will someday be Ancient History, get over it…

      • Todd

        This is where you make a mistake.

        The RULES have changed as man has become more “civilized”.

        We now hold title and taking by force is immoral.

        • Wow JAC, That’s pretty convenient – change the RULES to fit your needs.

          So can I change the RULES back to “uncivilized”, take your land, and then change the RULES back to “civilized”?

          This is the problem I see JAC – instead of acknowledging past mistakes, you make up excuses to justify them. And then you piss-n-moan about the horrible progressives and how they are destroying freedom.

          But you have no problem with government force/violence, as long as it’s used to your benefit.

          It’d be nice to see some consistency JAC.

          And what does the GOVERNMENT giving you a piece paper have to do with Morality?
          It that where you get your morality from?

          • I have no problem saying that what the government did to the Native Americans is attrocious. There have been attrocities throughout history. I also do not think that mere death of the original owner should absolve the theif.

            However, I do not subscribe to the “reperations” concept, nor to the return of property to “a people”. I consider people to be individuals. The Native Americans that are alive today are no more the owners of US land than the Europeans and Americans that took it from the Native American ancestors. To apply ownership to a people is, to me, racist. It is a combining of individuals into a group or class. That is now how ownership of property works.

            Do the current owners have a right to the land? As long as they did not steal it, yes. If it is taken from them and they worked for it, we are punishing them for the crimes of another. Also, who is to say who has the right to take it this time, on what authority is it being taken and given to another?

            Some wrongs cannot be righted. It does not mean that they are not wrongs, it just means that “justice will prevail” does not always work in real life.

  18. PeterB in Indianapolis says:

    http://joannenova.com.au/2011/03/the-green-tape-jobs-we-dont-want/#more-13721

    How’s that for turning productive societies into giant waste-pits of usless human activity that someone (err… EVERYONE) VASTLY overpays for????????

    We don’t MAKE a goddamn thing anymore, yet we spend billions and billions of dollars on this nonsense. The sheeple have become incredibly stupid.

  19. PeterB in Indianapolis says:

    Need I remind you…

    Big Government, Big Corporations, Big Military, Big Banking, IT IS NOW ALL THE SAME.

    Eisenhower warned us about it 50 years ago because he knew it was coming. We let it come and welcomed it with open arms.

    And now we bitch about it, and pretend that they are somehow seperate entities with separate interests even though we KNOW it is all one thing, and the goal of that one thing is to consume all individuality and regurgitate us all as passive and blindly obedient sheep. Far to many people have already assumed that status. It is gonna take a lot of work to get any of them back from the individual (mental and emotional) suicide they committed in the name of serving “the greater good” as now defined by the military-industrial complex. (Actually, had Eisenhower known, he would have realized that American Industry was already descendant from its glory days when he gave that speach, and he would have called it the “Governomilitarfinancial” complex.)

  20. 😉 for comments

  21. PeterB in Indianapolis says:
  22. Jon, just read your entire article. While I agree with corporations being a major culprit, I don’t see how one looks beyond how and why they were formed–as an extention of what entrepreneurs wanted to protect themselves. I’ve read BF’s thesis on this (a few times now), but it doesn’t address the why of it. Mercantilism or any other ism, the bottom line, it seems to me, is some capitalists saw the great benefit of expanding and consolidating via corporations. How do you write that out of the script? I’m all for it, don’t get me wrong, but if we’re expecting to do away with government regulation (and I agree the waste is abysmal in just about every area), are we really expecting businesses to run on the honor system? USW and I debated this way back and probably still feel our side of the argument is right. I found his argument no less idealistic than socialism. And I’m not promoting socialism here. I’m simply asking how does one expect businesses in a competitive environment/world to not want to cheat their way to the top? Isn’t that basically the game; to have more than the next guy?

    • BF already answered this better than I can. I concur with his analysis, and with the idea that regulation cannot be just taken away overnight without a LOT of people getting screwed over by people in business who do not play fair.

      That said, if we take too long to remove them, the game continues as it has been, and the people in business who do play fair are unfairly punished with costs and restrictions, while those who do not find nefarious deals with government that keep them from having these disadvantages. An overnight removal would do a suprising amount of good for the economy and the market as a whole, and many of the big players would suddenly be opened up to real competition, shaking them from their positions of power. I am afraid it might not be considered a success overall because of the number of people who would also be hurt by those suddenly granted what amounts to largely free reign, but there is definitely motivation to move as quickly as possible and find ways to help people learn to look out for themselves.

  23. Charlie,

    I don’t see how one looks beyond how and why they were formed–as an extention of what entrepreneurs wanted to protect themselves. I’ve read BF’s thesis on this (a few times now), but it doesn’t address the why of it.

    Why…what of it?

    The original corporation was created as an artificial person to suffer the “death” that was required when a Captain lost his merchant ship at sea. Thus, it was a way to punish a “person” for a loss, without having to kill an otherwise veteran, experienced sea captain who had some bad luck.

    As with all things that attempt to deflect consequences, it was extended to any issue where people wanted to deflect negative consequences that come from risk.

    It becomes no surprise that men of means, wishing to enjoy the benefits and reward of risk wished for away to mitigate the negative consequences should they occur.

    “Heads I win, Tails you lose” is a game anyone would love to play. It makes “gambling” rather easy.

    How do you write that out of the script?

    By returning to first principles – that is, to enjoy the reward you must risk suffering the consequences.

    are we really expecting businesses to run on the honor system?

    If business does not have access to legitimized violence, then they are at the mercy of the consumer.

    A business sells the excess of its products to consumers for their money.

    The king is the consumer, for they hold the most desired good – money – in their hand.

    Without the power of violence, business is completely beholden to the consumer.

    • BF, I do understand your argument, but it is ignoring the motive (I think–and I say that respectfully). If the game is to gain, expand, multiply profit, what would stop business (even those free of corporate structure) from cheating (whether price fixing or otherwise). If your answer is the consumer (for he/she is king), then I’m skeptical. Consumers, it seems to me, are way too easily manipulated, tricked and/or abused by the mechanisms of business. In an ideal situation, yes, consumer would be king, but we aren’t living in an ideal world. Do you think (again, a serious question) removing regulations, etc. could create such a fair structure? At this point, assuming your argument is correct, it would require toppling governments worldwide, no?

      • Charlie

        BF, I do understand your argument, but it is ignoring the motive (I think–and I say that respectfully). If the game is to gain, expand, multiply profit, what would stop business (even those free of corporate structure) from cheating (whether price fixing or otherwise).

        If we agree that a business cannot use violence (including government) …..

        …I ask this of you? Do you do business with cheaters and scumbags?

        A business exists for one reason: to trade what they have for money.

        They have the goods.
        You have the money.

        They want your money.

        If they cannot force you to buy (by threat or government), how can they get your money?

        They must solve YOUR PROBLEM.

        This is Adam Smith’s “Invisible Hand” – to get what THEY want (your money) they have to give you what YOU want first.

        If your answer is the consumer (for he/she is king), then I’m skeptical. Consumers, it seems to me, are way too easily manipulated, tricked and/or abused by the mechanisms of business.

        Again, you and I agree on most of the basics – yes, consumers are amazingly stupid because….

        ….they can afford to be.

        Bear with me here –

        Because the consumer believes Big Brother is protecting them, consumers fail to do their own due diligence of merit on businesses. This is why so many are so gullible…”Well, if he cheats me, I can go to government to beat him up”.

        The problem occurs when that business has bought off the government. (See Banking Cartel)

        Without Big Brother, the consumer -instead of abdicating their own responsibility – would necessarily reassert it

        In an ideal situation, yes, consumer would be king, but we aren’t living in an ideal world. Do you think (again, a serious question) removing regulations, etc. could create such a fair structure? At this point, assuming your argument is correct, it would require toppling governments worldwide, no?

        Your point is taken, and agreed.

        Wholesale removal of regulation would create unbearable chaos. It was applied slowly and piecemeal, and I would suggest its removal be likewise.

        It takes time for people to realize that they are now responsible for themselves, and in the meantime of that education, guardians need to be in place.

        Whether it is more focus on consumer groups, like BBB and Consumer Reports being highlighted and empowered … I’m sure we can think of a few good ideas.

        I suggest we need to move that direction, not invoke more regulation (designed by the Corporations anyway) to fix the problem of regulation.

        • That’s a hell of a good answer, BF. And difficult to argue with.

        • Charlie,
          PS: On the gullibility of consumers.

          You lose this very quickly when you do international business – often, you have little recourse if you get cheated, even if you have a contract.

          The contract tends to stipulate a court for dispute resolution – and here I am in Caribbean, and the other guy selects some court in Singapore…. yeah, right. I’m going to fly to Singapore, find a lawyer, get all my documentation out of the Caribbean, move to Singapore for a year to fight this guy there in court…. yeah, sure thing…. 😉

          Toss the contract …. and measure the man. Instead, I spent a few grand on private investigators, and did a through background check. Yeah, I could afford it (I couldn’t afford NOT doing it), and the deal was incredibly important – would I do the same thing for a nickel and a dime?

          Probably not, but the risk isn’t there either.

          The point: I could not afford to be lazy in my due diligence. No, its not perfect, but I could only blame myself if I got screwed.

  24. Buck, Mathius, and the rest who are not Buck and Mathius:

    Chapter 3 of the Annual Report on the Middle Class released in February by Vice President Biden and the White House Task Force on the Middle Class, the Obama administration calls for enhancing the “retirement options” for the middle class by imposing “new regulations to improve the transparency and adequacy of 401(k) retirement savings.”

    The plan, as sketched in the 43-page document, calls for the creation of something called “Guaranteed Retirement Accounts” (GRAs). … which would give workers a simple way to invest a portion of their retirement savings in an account that was free of inflation and market risk, and in some versions under discussion, would guarantee a specified real return above the rate of inflation.”

    The ONLY way an investment is immune to inflation and risk is from the completely monetization by government and the FED.

    There would be no risk because the funds would no longer be moored to the free market and subject to the fluctuations thereof. Rather, the retirement funds of every hard-working American dependent on a 401(k) for their retirement security would be nationalized and made subject to the whims.

    Coinciding with the publication of the report described above, the Obama White House, together with the Departments of Labor and Treasury, issued a so-called “Request for Information” calling for a detailed analysis of the pros and cons of the “annuitization” of individual 401(k)s. The scheme was set forth in a set of “Proposed Rules” published on February 2, 2010 in the Federal Register.

    The document reads in part, “While defined contribution plans have some strengths relative to defined benefit plans, participants in defined contribution plans bear the investment risk because there is no promise by the employer as to the adequacy of the account balance that will be available or the income stream that can be provided after retirement.” And furthermore, “The Agencies are considering whether it would be appropriate for them to take future steps for them to facilitate access to, and use of, lifetime income or other arrangements designed to provide designed to provide a stream of income after retirement.”

    In other words, roll up all the 401K’s and place them into Social Security Administration.

    The Republican response to Obama:

    Dear Secretaries Solis and Geithner:

    As members of the Republican Savings Solutions Group, we write today to express our strong opposition to any proposal to eliminate or federalize private-sector defined contribution pension plans, such as 401(k)s, or impose burdensome new requirements upon the businesses, large and small, who choose to offer these plans to their employees.

    In the Annual Report of the White House Task Force on the Middle Class, Vice President Biden discussed at length the creation of so-called “Guaranteed Retirement Accounts, (GRAs)” which would provide for protection from “inflation and market risk” and potentially “guarantee a specified real return above the rate of inflation” — presumably at taxpayer expense. In the Report, the Vice President recommended “further study of these issues.”

    The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary — again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.

    In light of these facts, we write today to express our opposition in the strongest terms to any effort to “nationalize” the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.

    Similarly, and more recently, the Departments of Labor and Treasury have jointly issued a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options.” While we appreciate the Departments’ seeking guidance and information from all parties and stakeholders in advance of regulatory activity, we strongly urge that the Departments not proceed with any regulation in this area before they have carefully and thoroughly considered all of the information received.

    More specifically, we urge that the Departments take no action to mandate that plan sponsors — often, small businesses — include a “lifetime income” or “annuitization” option if they choose to offer a 401(k) plan to their employees, or that beneficiaries take some or all of their retirement savings in such an option. Data shows that 70 percent of Americans oppose the concept of a mandated annuity or government payout of their 401(k) plan. On a more fundamental level, Congress should not be in the business of choosing “winners” and “losers” among retirement security stakeholders. Instead, we urge the Departments to make it easier for employers to include retirement income solutions in their savings plans and to help workers learn more about the value of their retirement savings as a source of retirement income. Finally, to the extent new mandates and bureaucratic red tape from Washington push small employers out of the business of offering these plans to their employees, we would submit such an effort weakens, rather than strengthens retirement security.

    We appreciate your consideration of our views in these important matters and stand ready to work with you and the Administration to promote secure and adequate retirement savings for all Americans.

    Sincerely,

    House Republican Leader John Boehner (R-OH)
Rep. John Kline (R-MN) 
Rep. Dave Camp (R-MI) 
Rep. Sam Johnson (R-TX) 
Rep. Dean Heller (R-NV) 
Rep. Brett Guthrie (R-KY) 
Rep. Michele Bachmann (R-MN) 
Rep. Pat Tiberi (R-OH) 
Rep. Bob Latta (R-OH) 
Rep. Erik Paulsen (R-MN) 
Rep. Lynn Jenkins (R-KS) 
Rep. Ed Royce (R-CA) 
Rep. Buck McKeon (R-CA)

  25. Buck, Mathius, and everyone else

    Further to the GRA

    <i.But the bill has reportedly already been written and last Thursday, October 7, 2010, Congress held a recess hearing on the matter. The push to bailout union pensions and give more control of individual wealth to the U.S. government is underway.

    Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.

    Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous “Guaranteed Retirement Account” (GRA) authored by Theresa Guilarducci.

    In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a “fair” pension to everyone using that confiscated money coupled with the mandated contributions. This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.

    • Buck the Wala says:

      BF,

      Not gonna happen, sorry to burst your bubble.

      IF (and its a pretty enormous if), the gov’t creates GRA’s, it would be a new retirement vehicle and quite possible eliminate 401(k)s going forward. There would be no seizure of existing 401(k)s, though admittedly if this were to happen I’m sure there would be some interesting provisions thrown in there for the taxation of distributions from existing 401(k)s.

      But again, big, gigantic IF attached to all of this.

      • Buck,

        Well, as they say in the Big Game, its your money and your risk.

        • gmanfortruth says:

          Come on BF, the government would NEVER steal for the people. They have way to much integrity 😆

      • From a post on another site I pay to listen:

        Re: 401K

        I am 61 so I would not incur a 10% penalty if I took the money out of one of our 401ks to buy the gold, but since we are both still working, the taxes would kill us and with that I am not sure it would be worth the investment losing a good chunk of it to stupid taxes. I would like to buy $50K of gold to “have in my possession”. Any ideas how I could do this and avoid the taxes. I know I could roll it over to a gold IRA, but I was told it was better to have it my possession.

        This man is trapped.
        The trap was laid by Congress.

        When the idea of tax-deferred (not tax-free) retirement plans became law, the government ensnared millions of Americans.

        Here is what the government got.

        1. Annual reports to the IRS on what Americans own.
        2. Regulatory control over what constitutes an authorized investment.
        3. A huge asset base that it can confiscate at any time in an emergency.
        4. Citizens who are afraid to make their own decisions.
        5. The right to change the law and collect more money when people retire.
        6. Inflation bracket creep to extract a higher percentage when boomers retire.
        7. Induced paralysis that prevents escape before the trap is sprung.

        This strategy is based on the principle of present-orientation.
        [People would rather have a short-term benefit now then a long-term benefit later -BF]

        The government promises to reduce the taxpayer’s pain now — deferred taxes — for the sake of promised future returns, discounted by the rate of interest.

        Then, once in the box, the taxpayer defers the pain again and again. How?

        By not withdrawing his money, paying the tax (and maybe a penalty), and doing what he wants to hide his wealth: put it where he reports to no one.

        The government buys citizens’ privacy, cheap.

        Once Americans succumb to the promise of deferred income taxation by putting their money in an IRA or other retirement program, they almost never pay the tax to get it back. They let it ride.

        They want both: privacy and tax-deferred wealth. They want the latter far more than the former. The government cooperates. It knows that it will get the money eventually.

        It’s a savings plan for Congress. Congress persuades Americans to sell their privacy for the promise of deferred taxation.

        A man wants to own gold coins. Why? Protection against mass inflation. Privacy. Mobility.

        He also wants a government promise.

        He believes the government.

        He knows it lies, which is why he wants gold coins.
        But he believes the government, year by year.

        Here is the test. Write down what you would do with your retirement money if you did not have to report it to the Feds unless you traded it after your initial investment.

        Then decide: What is it worth to get that money with no strings attached?

        The government is Lucy. You are Charlie Brown. The football is your retirement portfolio.

        • Buck the Wala says:

          This man is trapped.
          The trap was laid by Congress.

          Absolutely not. He set up a 401(k) knowing full well this was to be tax-deferred until he received his distributions at a (much) later date. He argues that he is losing money because of taxes, but he had never paid taxes on that money when contributing it to his plan. Further, the reason for the ‘higher than expected’ taxes in this case is because he is still working. If he were to retire the taxes would be less as he would probably be in a lower tax bracket.

          This is not about being ‘lied to’ or ‘tricked’.

          • Buck

            Your math fails by the application of the factor of time.

            You are trapped.

            You put money in, and 30 years later, inflation has put you into a higher tax bracket.

            I ask you this:
            When do you think you will earn the most money in your life – when you are young, or when you are older?

            He is losing a lot of money in taxes as he described.
            He is working now – at the peak of his earning and at the highest tax bracket.
            He wants money from his 401K put into the plan when he was at the valley of his earning.
            He is a big loser if he takes his money out.
            So he won’t and sometime in the future he will face the same problem.

            By the time he retires, he will be at the top tax bracket, and at the top inflation rate.

            I say “good luck”

            • Buck the Wala says:

              You miss the purpose of a 401(k). This is a retirement plan. Sure, some distributions may come out while still working and at a higher tax bracket. But the majority of distributions are taken out when you are not working and, generally speaking, at a lower bracket.

              You also neglect the fact that money is put in over time; not all of it is put in while at the “valley of his earning”. Generally you begin to put money in while at the valley and continue putting in as you climb and while at the peak.

              You don’t like the idea, don’t invest in a 401(k). That’s your own personal decision to make.

  26. For those that are a bit more risky:

    With the nuclear power in Japan on hold, and with the global splash of anti-nuclear energy news – with Germany, etc. actually turning off the power plants….
    …energy demands will not go away.

    Oil will rise in price quickly over the next few months. If you’re a speculator, an oil buy is not a bad idea.

    Gold will rise after this – with $700 billion more money dumped into the Japanese economy in 3 days – expect inflation.

  27. BF’s argument is a strong one, but … it does not address my concerns about inequities that exist either from past bad faith (i.e., unfair/illegal) capital gains and/or current one (i.e., the profits of corporations today that came from any number of unfair advantages including the bailouts). I understand the playing field can never be leveled all at once, but taking away what the government has granted to corporations, etc., it seems to me, would require an enormous shakeup — something corporations (those behind them) would fight tooth and nail (rather than concede).

    Is the answer (serious question again) to the issue of unfair advantage akin to “they’ll have to handle it over time”? If gov’t was completely removed and competition were in fact legit and free, I can see where some born into disadvantage would actually have a fair shot at climbing, but I don’t think it’s possible to get to that place (what they did with the bailouts–they just won’t permit themselves to lose). Those, by the way, are the 2%’s I feel never really “earn” what they have (not all, but a substantially powerful number who control the entire gov’t).

    • Existing inequalities cannot be rectified without violence. I am not so sure that it would work even then. Even if it could, however, there is still the problem of using evil means to accomplish some supposed good. There is also the problem of who controls distribution of what is taken? The violent people, the ones who engaged in the violence to take it. Those are not the kind of people you want controlling wealth. That is essentially what happened in Russia, violence was used to take from the rich and powerful, but then the violent people who did that never really relinquished control of that wealth. Furthermore, there were many cases where those with wealth also had expertise, but when they were removed and the resources were given over, the “workers” did not have the needed expertise and the resources were wasted, the means of production did not function properly. Many of the rich and powerful, while they may not seem to work as hard to do as much as the average laborer, do actually work, and they do actually have expertise. The final problem with using violence to fix inequality is that it is impossible to distinguish between the deserving and undeserving both on the wealthy side and on the poor side. Equalization of resources is not fair, not when some of the “haves” did indeed earn their wealth and some of the “have nots” have nothing because of laziness or stupidity.

      So the only thing is to have the market correct over time. Now, in a free market system, resources are a huge advantage, so those with capital will still have it easier. As far as not “permitting” themselves to lose, however, that is another matter. If they engage in violence in order to maintain what they have, or engage in corruption as they did with the bailouts, then there is justice in their resources being taken. This is where BF and I disagree. I still find a need for government to enforce freedom. To protect the rights of individuals from those who have enough power to perpetrate violence with impunity. As my article mentions, wealth is power, and so is authority. The two must not be allowed to join. What sometimes is necessary is for authority to be used against the power of wealth.

      The difficulty is how do you keep the two apart. If BF is right, then no constitution, no matter how strong, will prevent this. In that case, the only way to prevent consolidation of wealth and authoritative power is to not have the power of authority at all, have a system where all have authority only over themselves. In such a case only unionizing will stop a super-rich violent person from succeeding in their prepetration of violence.

      Either way, you are correct that the so-called 2% will fight tooth and nail to prevent loss of power, so will government. The implementation of a separation of business and state will require a lot of consistent, unified, concerted effort over a long period of time. This is not an easy task, but it is a necessary one.

  28. O’Doc is all over Eric Holder and the President today:
    http://temporaryknucksline.blogspot.com/2011/03/odoc-says.html

    • Obama’s going on another vacation-are you kidding me-at first I thought the talk of all his off time was silly-but this is getting ridiculous-and just looks disrespectful and uncaring with all that’s going on right now.

  29. Black Flag

    Black Flag Says:
    March 16, 2011 at 12:53 pm

    JAC,

    I do not agree that LE reduce crime. I believe the perception of defense reduces crime.

    Example: Security guards reduce crime at stores.

    In society, People infer that a police presence is a protective force, including crooks. In reality of any significant test, it is not – but the perception is powerful enough.

    You can replace the perception with something else other than LE (private Security) and get the result.

    BF…You misunderstood my comment. I agree with your assessment of “prevention”, although having police walking the neighborhoods would have the same effect as paid security guards. It is really only a matter of who pays.

    My comment was in regard to “catching” the bad guys. As the crime rates increase, which they do with population, I think the problems with using “volunteers” to catch the cooks increases.

    I see no way to prevent the potential conflicts without something we call Govt, even a very small one. Standardized rules, aka laws, that govern the operation of those who “catch” bad guys, for example.

    A govt “police force” is the most efficient way. Yes it carries risk of abuse. That is why rules are needed, whether public or private. But as this force is “locally” chartered it should have to maintain the public support for its continued existence.

  30. Buck

    You miss the purpose of a 401(k). This is a retirement plan.

    No it is not.

    It is a tax-defer plan. It is run by the government. The government knows they will make more money out of you then you get back. It is a “plan” for those that want short-term, immediate gain (or pain relief) and are willing to trade in the long-term future for it.

    You also neglect the fact that money is put in over time; not all of it is put in while at the “valley of his earning”.

    The problem with your theory here is the ‘cap’ – the day you earn the highest income, you are ‘maxed’ out on your contribution – which means you cannot protect your excess income when the excess is at its highest amount.

    You don’t like the idea, don’t invest in a 401(k). That’s your own personal decision to make.

    I do not play in sandboxs filled with quicksand.

  31. Charlie Stella

    BF’s argument is a strong one, but … it does not address my concerns about inequities that exist either from past bad faith (i.e., unfair/illegal) capital gains and/or current one (i.e., the profits of corporations today that came from any number of unfair advantages including the bailouts).

    Your comment is accurate. I do not think there exists a way to “right” wrongs long past.

    The effort is probably futile, and would probably make matters worse by increasing the levels of violence to enforce retribution while at the same time incapable of providing any method of identifying and protecting the innocent.

    This is the problem with all violent political revolutions that overthrow tyranny.

    The violence does not stop at the overthrow – it continues into retribution, which leads to revenge which leads to terror which often enough leads back to tyranny.

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