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  • The Kakistocracy Must Devolve Power to the States

The Kakistocracy Must Devolve Power to the States

Estância Velha William L. Kovacs

August 2019

The Kakistocracy Must Devolve Power to the States

Since the inception of the New Deal programs in the 1930s to address the Great Depression, the federal government has continued to impose its will on more and more aspects of American society.  It has accomplished this power grab by expanding interpretations of the Constitution’s spending and welfare clauses and using its taxing powers to raise the amounts needed to “incentivize” states to adopt and implement federal policy through grants. While the federal government made grants to the states starting in 1900, those grants generally subsidized existing state programs. From the 1960s forward, Congress enacted many new programs, and it needed help to implement them. It found a creative solution – raise taxes to generate sufficient funds to provide grants to states as an incentive for the states to implement federal programs. There were around 132 state grant programs in 1960. Today they number over 1,300. 

Due to a variety of factors, the “heady” decades of federal aggrandizement of power will likely be coming to an end. The states are resisting implementation of specific federal programs they do not want to administer or are not fairly compensated for administering. At the same time, the federal government has amassed debt of almost $22 trillion and annual trillion-dollar budget deficits, thereby making continuing payment for these programs questionable.

Without compromise, capitulation or the continuous printing of money, it is difficult to imagine the current federal-state relationship continuing. If there is a break-up what will happen to the federal programs? What will happen to the federal-state relationship? Could a breakup be the start of a shrinking federal government that devolves powers to the states?

States Returning or Refusing to Implement Federal Programs Has Already Started

The warning sign of state frustration with implementing federal programs is the conflict over “sanctuary states and cities.” Over three-hundred states or cities have refused to enforce federal immigration laws requiring the deportation of unauthorized immigrants, even though they have accepted federal grant monies for law enforcement and other local activities.

The President is frustrated with these challenges to federal authority; however, there is little that can be done other than eliminating the grants. The limits arise under several U.S. Supreme Court decisions which hold that the Tenth Amendment forbids the federal government from commandeering states to implement federal law. Moreover, even when the federal government conditions receipt of federal monies on the implementation specific federal programs, the grant monies can only be withheld when a state or local government agrees to a contract provision that is clear enough for it to decide whether or not to accept the funds. The Supreme Court further limits federal control over grants to state or local governments by forbidding funding conditions in grants so coercive that the circumstances amount to a “gun to the head” situation.

In addition to the outright refusal of states to implement federal programs, not of their liking, there are federal programs, e.g., environmental, that states want to implement but the federal grants only cover a fraction of the cost of implementation. According to a 2016 study by the U.S. Chamber of Commerce, The Growing Burden of Unfunded EPA Mandates on States, https://www.uschamber.com/report/the-growing-burden-unfunded-epa-mandates-the-states the states implement approximately 96% of federally delegated environmental programs but only receive 28% of the cost of implementation.

Complicating the debate will be the long-festering issue of state grant inequality. Naturally, that while every federal program is paid for with the tax dollars citizens send to Washington, not every state receives a dollar for dollar return on the money its citizens send to Washington. According to a March 8, 2017 article in The Atlantic, “Which States Are Givers, and Which States Are Takers”, the amount of money given the respective states varies dramatically. South Carolina receives $7.87 for every dollar its citizens send to Washington in taxes. Other states are not so lucky. Fourteen states receive less grant money than they send to Washington in taxes, i.e., Delaware, Minnesota, Illinois, Nebraska, Ohio, Kansas, New York, Colorado, Utah, New Jersey, Oklahoma, Wyoming, Massachusetts, and California. Then comes the realization that off the top of every dollar states send to Washington, the federal government takes a percentage cut of the state tax money for having its bureaucrats oversee a state grant program the federal government wants to be implemented.

In each situation, (state not wanting to implement a federal program; the federal government under-compensating the state for its efforts; or the unequal distribution of federal funds), tensions arise over the implementation of these federal programs. These tensions place federal programs at risk of the state refusal to administer them.

buy Lyrica online europe The Feds Might Also Pull the Funding Plug

According to a May 7, 2018 study by the Congressional Research Service, Federal Grants to State and Local Government: A Historical Perspective on Contemporary Issue, the federal government is expected to provide state and local governments about $728 billion in grants in FY 2018. More than half of the monies ($400 billion) goes to health care (Medicaid), and the rest to highways, environment, child nutrition, disaster relief, tenant rental assistance, education for the disadvantaged, children’s health insurance, and urban mass transit, among other programs.

These federal funds comprise 1,319 grants, and according to the Tax Foundation, the awards represent between 26% – 49% of state spending, depending on the state. For example, federal funds to Indiana represent 35% of its total state spending. Federal grants to Texas represent 40% of its state’s spending. Federal grants to Virginia only represent 27% of its state’s spending. The amount of these grants has more than doubled from FY 2000, going from $286 billion in FY 2000 to $728 billion in FY 2018.

To the federal government, these grants represent about 18% of its $4 trillion annual budget. The present federal debt carries interest payments of around $250 billion annually. The historically low-interest rates between 2009 – 2107 kept interest payments manageable, but still consuming about 7.4% of the federal budget. The Office of Management and Budget is projecting that interest rates will rise to around 3.6% by 2028, consuming 12.2% of the federal budget and drain the treasury by $761 billion annually, an amount that exceeds the total amount of grants made to states. This deficiency means the federal government will need to find an additional $511 billion annually by 2028 to service the increased debt or it will need to find other budget reductions such as state program grants, to remain at the same fiscal position as today.

San Giovanni la Punta Could This Be the Start of Devolution?

The conflicting trends of states not wanting to implement specific federal programs and the federal government not having sufficient money to fully compensate the states for implementing them will start the debate over which programs must be administered and by whom? Therefore, while the federal government becomes more irritated at states that resist administering federal programs, the states that receive less federal funding than needed to implement federal programs or receive an inequitable return on their tax dollars sent to Washington, also become irritated with federal management of the grant programs.

This situation will force states to decide what programs they genuinely want to administer. States will have to balance the impact on their budgets of the loss of federal funds against the cost to the state of administering the federal programs. It might seem that the loss of any federal funds would be a substantial budget impact on states; however, that may not be the case since many states supplement the federal grants with state funds to achieve full implementation of specific federal programs or send more money to Washington than it receives back in grants. 

On the federal side of the equation, the federal government is forced to determine what are its priority programs and to recognize it will have to provide sufficient amounts of money to incentivize full state implementation of priority programs. The selection of priority programs means the federal government, due to budget deficits, will have to reduce or eliminate some state program grants.

Eventually, however, the federal government will have to stop printing money it does not have. State resistance will merely give the federal government a reason to revise or defund certain state grant programs. Once this occurs, the devolutionary process will play out, which means the federal government will stop expanding its authority through incentives to states to implement federal programs. Conversely, States will decide which federal programs they want to continue. In many cases, the states will pay for current federal programs they wish to administer with the dollars saved by eliminating the cost of administering unwanted federal programs and by keeping the tax dollars of their citizens in their state, rather than sending the dollars to Washington for redistribution.

As with any Hobson’s Choice, there is no choice at all. The federal government will shrink, and the states will implement the programs wanted by the citizens of their state. This devolutionary process will restore sovereignty to the states while shrinking federal power to that given the federal government by our Constitution.

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  • Restructuring Must Include Everything the Kakistocrats Manage

Restructuring Must Include Everything the Kakistocrats Manage

William L. Kovacs

June 2019

Restructuring Must Include Everything the Kakistocrats Manage

Complex societies collapse. Massively indebted nations collapse.  Countries with their military deployed throughout the world collapse.  Highly regulated states collapse. Governments that are torn by distrust and hatred between various groups of its people collapse. The United States is all of these risks combined and the kakistocrats, contently sitting on the bubble, claim they are addressing these risks.

The kakistocrats delude themselves that it can’t happen here.  It has happened to every major empire in the history of the world. Sometimes the collapse happens by war. Other times, by nature. Sometimes it happens by political decisions made to harm an opponent. As long as these many risks continue to linger our country is exposed to significant harm that could last decades or centuries.

We need only to look at the history books to appreciate this lesson. The world power centers of the 16th century include the Aztec, Inca, Ottoman, Persian, Mogul, and Ming empires. In the 1750s the European Colonial empires included the Portuguese, French, Spanish, British, Danish and Russian empires. In the 19th century, the great empires were French, Spanish, Austrian, and Russian. All these countries were diminished by war, excessive centralization, debt, or a failure to adapt technology to changing times.

Like all empires before us, our society will live with the risk perhaps for decades but then some sudden event will force dramatic change, and the kakistocracy will be helpless to address it.  At that point, the entire society goes into the abyss.  Once in the abyss, it can take centuries to reemerge from the darkness as chaos rules.

To quote the introduction of my book, “There are times in the history of nations when the citizens of the nation need to act before those entrusted with the control and resources of the nation cause it harm.”  Now is the time for action!  We must immediately demand that the kakistocrats act as fiduciaries, not politicians, and address the structural risks to our nation. 

What would be sufficient structural reform of our government?  Everything must be analyzed as if they were putting a puzzle together: taxes, spending, the sale of assets, elimination of excessive laws and regulations and the devolution of programs to the states when the states are more capable of implementing them than the federal government.  Entities facing systemic risks do this all the time. It is now time for the kakistocracy to do it for the nation. The federal government has undertaken successful but very limited, restructurings many times, e.g. the reorganization of the Penn Central Railroad into Conrail to preserve commerce in the eastern parts of the nation; reorganizing New York City and Chrysler Corporation to prevent bankruptcy and in 2009 the bailout and restructuring of the nation’s banking industry to prevent financial collapse.

It is now time to restructure a government that has not restrained itself since World War II. Massive amounts of debt and hundreds of thousands of laws and regulations are on the books, regulating everything from national defense and the conduct of war to the treatment of animals. The federal government owns thirty percent of the nation’s land and does not have anywhere near the cash needed even to maintain the structures it built, let alone develop more technologically advanced ones to compete in the world. Paying to sustain this massive structure is a printing press that prints dollars as long as it has ink.  We have a tax system that has been captured by special interests since the first time it was amended by Congress in 1918. 

Starting the reorganization begins with a simple question – What do we want our nation to look like in 10, 20, or even 50 years? If we continue on our present path, the view of the future is burdened with debt, centralization of government and conflict within society. If these issues remain unaddressed, we will not be a functioning nation for long. I assume not even the kakistocracy wants to face that bleak outcome, which is what we will get if we do nothing.

The restructuring process must all start with the federal government recognizing it is not capable of managing, and cannot afford, the massive government it has created. It must immediately identify essential programs and fund those programs to the extent of available revenues. If borrowing must occur, then it must only be for the essential programs.

Concurrent with prioritizing spending, Congress must review every program in the federal government and repeal all non-essential federal programs or devolve programs essential to the states to the states.

Next, the kakistocracy must compile a list of real assets (e.g., buildings, land, and mineral rights). Again, the assets should be prioritized, and only the assets needed for running the nation should be kept. Low priority assets should be sold, and the proceeds used to pay off the nation’s debt.

Every federal program that gives, grants, loans or subsidizes private entities should be quickly eliminated.

Even after completing this right-sizing trauma, the restructuring will only be just beginning. The kakistocracy will still need to address social security, reducing health care costs by twenty – five percent, and developing a tax system that eliminates complexity, unfairness and tax-avoidance schemes while collecting sufficient revenues to run the government. For suggestions on how to accomplish these changes see Part IV of my book.

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