The Power of the Purse and the Fed

A significant part of the struggle for government that is both limited and run by the people was waged on our behalf by our English forerunners.  The most significant aspect of this battle was English citizens gaining the power of the purse over the Monarchy in a struggle that lasted hundreds of years.  As the monarchy lost the power of the purse, the king became a servant of the People.

In our day, we are risking not giving the government the power of its own purse, but the power of the purse over the people.  This would naturally make the people servants of the government.

Indeed, we have already taken long strides in the direction of government financing of peoples’ lives through Social Security, Medicare, various Federal grants, and earmarks.  Now with national health insurance on the horizon (don’t call it healthcare – it is just health insurance and it doesn’t mean the care will be there), we are preparing to give the government another chunk of control over us.

We must reverse the flow of money in order to gain independence.  The Congress should not be controlling state or local government policy via its grant money.  Instead local governments should be funding themselves.  The states (not the people) should be directly funding the federal government.

In fact, the states are a significant way that the people can stand up to the federal government.  If the government taxed all states according to their GDP, it would be feasible for states to stand up to the government and limit it’s funding in a crisis of liberty.  This would be hard under the current system of taxing individuals.

Taxation of the states would incidentally allow different states to use a flat, progressive, regressive or digressive income tax, or a sales tax, to raise federal tax money.

Another way for states to have more direct influence on the federal government would be returning the election of US Senators to the State Legislature (yes – I’m still thinking this one through).  This would greatly increase the power of the states.  The Senators would be accountable in a different way than Representatives, which would increase the thought going into federal legislation.  Perhaps in this scenario, they should face re-election every two years.  One problem is that a vast amount of money would start flowing into local races, but I’m not sure that is a good reason to ditch the idea.

A great step in repositioning the power of the purse in American government would be prohibiting any distribution of money from the federal government to individuals or local governments (after existing obligations are met).  I’d be glad to hear reasonable exceptions to this, but in theory, it makes sense. If the federal government is distributing money to local governments or individuals, it shouldn’t have that money in the first place.

P.S.  A related article can be found here.  I must confess to only skimming it, but it did help my thoughts along these lines.