- The Supreme Theft of Liberty - Part 3

Colonial Americans understood how to prosper. By the time the Revolution came around, colonial infant mortality and life expectancy were far better than in Europe. The American population grew rapidly, while unemployment was low. British exports to the colonies increased 360% between 1740 and 1770, supported in part by generous credit terms.

Colonial life allowed a “reboot” of nearly all European style governmental systems, which colonists remade in simple and efficient forms. They demanded and secured the right to collect their own taxes needed to fund local administration. The American colonial prosperity took place with effective tax rates of about 1%. 

On the other hand, Mercantilist “partnerships” with the crown paid for the Royal Navy, while driving hard money out of the colonies. In part to pay for the Seven Years War, the Currency Act of 1764 prohibited Colonial paper money for private debts. Let's just say the Currency Act favored established British interests and the expense of the colonial margins. In summary, colonials viewed the taxing power of their local governments as legitimate, while taxes levied by the command and control "mercantilist" crown as oppressive. 

After the colonies became states, and the Confederation failed, the proponents of the U.S. Constitution sought to convince the states to approve of a federal power to tax. The colonials did not want a federal power anything like the all powerful crown.  James Madison makes the case in The Federalist 41 that a federal power to tax is the only sensible means to finance national security in a time of war. Without a united defense, he reasoned that the States will devolve into their European counterparts, where liberty will be crushed by standing armies and perpetual taxes.

Madison acknowledged the fear of many that Congress had a blank check taxation power, with the Article I, Section 8 language granting power "to lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare of the United States;" Madison asked the states to put aside their fears of such an expansive interpretation he called an “absurdity,” because the power to tax for “general welfare” was limited by 17 specific permissible reasons to tax, which appear after a semicolon:

But what color can the objection have, when a specification of the objects alluded to by these general terms immediately follows, and is not even separated by a longer pause than a semicolon? If the different parts of the same instrument ought to be so expounded, as to give meaning to every part which will bear it, shall one part of the same sentence be excluded altogether from a share in the meaning; and shall the more doubtful and indefinite terms be retained in their full extent, and the clear and precise expressions be denied any signification whatsoever? For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power? Nothing is more natural nor common than first to use a general phrase, and then to explain and qualify it by a recital of particulars. But the idea of an enumeration of particulars which neither explain nor qualify the general meaning, and can have no other effect than to confound and mislead, is an absurdity, which, as we are reduced to the dilemma of charging either on the authors of the objection or on the authors of the Constitution, we must take the liberty of supposing, had not its origin with the latter.

Let’s roll forward now to 1937, and the time of “national emergencies,” NRA Blue Eagles and AAA requirements that growing crops be plowed under. In U.S. v Butler, the government argued that Article I Section 8 gave Congress the power to tax "to promote the general welfare," without the ability of the Court to second guess its determination about what the general welfare was. As a matter of first impression, the Butler Court found that the general welfare language, “confers a power separate and distinct from those later enumerated, is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States.” 

The only limitation to the tax and spend powers of Congress from that day on was a judicial test, and not the language of the Constitution: “the powers of taxation and appropriation extend only to matters of national, as distinguished from local, welfare.”

The federal regulatory state was born January 6, 1936, the day the Supreme Court stole our liberty in the midst of a never ending emergency.