Everyone is now aware of the U.S. housing bubble and what it has done to our economy. Spurred by several factors, including the availability of cheap money and credit, lax lending standards, Wall Street sell-side analysts and credit rating agencies, and a decades-old government policy of encouraging commercial banks and savings associations to provide mortgages to low-income buyers who might otherwise not qualify to buy a home. What the housing bubble suffered from interminably was a lack of discipline: recognizing that housing prices could not increase forever and that valuation for the assets (pricing) was far out of whack with intrinsic value. Add to that the fact that many buyers simply did not understand the impact of adjustable-rate mortgage resets at higher rates. And let us not forget the bottomless pit that such government-sponsored entities (GSEs) as Fannie Mae and Freddie Mac represented, backing and buying all of those mortgage loans that were based on buyers that couldn’t pay even if the prices weren’t as inflated as they actually were.

We now find ourselves in the same situation with government. Consider this: have we ever known a government, be it federal-state-local, that has scaled back in scope and spending? As of this writing, the federal deficit is at an all-time high (>$1.2 Trillion) and many state and local governments are straining under their own debt. Are we in danger of a catastrophic event, such as government debt default? Whom would we blame, our legislators or ourselves or both?

Inaction usually comes at a high price, such as with the housing bubble, whereby all responsible parties ignored all the warning signs – as far back as 2004-5, mind you, and perhaps even earlier in the case of subprime mortgages. When the signs became quite obvious in early 2006, with the sharp decline in the market price of subprime mortgages and securitized packages of such mortgages (collateralized debt obligations, or CDOs), few at the Treasury and Federal Reserve stood up and proclaimed a problem. Meanwhile, during 2007 the shorts were making money on the fall of ABX (an index of subprime CDOs), and rightly so. The rest is history, as they say – complete and replete with government bailouts and an economic correction that has put us in greater danger of – even more government.

Not all bubbles need to end this way – certainly not our government bubble. Can you imagine a similar situation with what we have now: a federal government that seeks to make promises to every living constituent, to secure their sought-after vote and ensure continued authority and control? State governments that are given federal stimulus and grant money and put on the hook to keep the run-rate going even with a risk of default? Local governments that continue to spend and raise property and sales taxes, even in an economic slowdown? Sound familiar?

What we need is a clarion call. One that shouts for a major reversal of the growth and scope of government at all levels, but particularly the federal level. Do we really need career Congressmen and Senators that live their life spending increasingly more of our money for increasingly less value delivered? Is the majority not unlike shady mortgage lenders that sign up buyers (voters) by making promises with someone else’s money?

Surely this is not the scenario the Constitutional Framers had intended. The Constitution is clear regarding the role of the federal government in providing security for country and citizens, as well as protection of certain inalienable rights – but not much else. There is little accounting for the growth of monetary control (through the Federal Reserve), endless and many times toxic regulation (through various federal agencies), and the rise of public entitlement programs (social security, Medicare, nationalized health care), all of which threaten to reduce our freedoms and devalue our currency and assets, not to mention put our government at high risk for default.

Though we have had prosperous growth in the past, with an ever-rising gross domestic product (GDP) that approaches $14 Trillion on a nominal basis and $11 Trillion on a real basis, the growth of one component of GDP – government expenditures (G) – is almost twice that of another component of GDP – private investment (I). We now have a government that believes that increasing G to throttle the largest element of GDP, consumer spending (C), is sustainable and will lead to solid jobs and long-term prosperity. Government, and not the private sector, is increasingly perceived by partisans as the generator for everything from economic growth to social justice, providing for the span of what any citizen might need or want – per government specification. There is little care given to the fact that an increasing G crowds out I, and that individual freedoms are siphoned away. The rubric is a mounting campaign to discredit and destroy free markets, individual freedoms and choices, and the charity of the prosperous private sector.

Partisanship has not been the answer but the problem in the growth of government. Both national parties have supported big government largesse and spending for decades. The issue is not always individual party members – a few are dedicated and principled, championing fiscal discipline. The dilemma arises when such individual legislators are at odds with the ‘party line,’ which can be anything but principled – a means to the end of maintaining party control, to heck with fiscal discipline and limited government. The current American political system rewards the growth of governing power, no matter which party is in power – and government spending is the prime route to increasing that power.

The direction for those looking for less government, fiscal discipline and free markets will likely not be found in playing by the rules of the current American political process. Our nation was founded on the revolutionary notion that self-governing individual states would unite against a British parliament and monarchy, rejecting the authority of the parliament to govern them without representation. Yet today we can make the strong argument that elected representation in the House and Senate has become akin to a parliamentary process, whereby representation of constituents has been replaced by cloistered partisan politics and the inflationary government spending that fetches evermore power. Career partisan politicians are the antithesis of ‘less government.’ The Framers never intended that such beasts would become the rule – a rule that has meant a dramatic distortion of the spirit of the revolution, the Declaration of Independence and the Constitution. A return to the Constitutional concept of a ‘citizen-legislator’ is a crucial step. Instead of sending career partisans to seal our fate, the alternative is to send citizens that know their term is limited and will return to their district and chosen profession.

The growth of government has been synonymous with the elevation of social issues onto the national stage. As a corollary, the trend toward less government is met with the sensibility of a reduction of social issues in politics – Americans are more concerned about fiscal/trade and security issues and look at social issues as something that ought not to be on the federal legislative agenda but left to individuals and local governments. Many may argue that redress of inequalities of inalienable rights are a valid concern on a national political level – and this is supported by the Constitution – but the distortion of this redress to mean everything from entitlements to welfare to corporate bailouts has grown far out of control. The solution is to promote personal responsibility, accountability and social charity, all of which preserve the human notion of individual freedoms and choices that defined us as a great nation from the beginning and throughout our historic civil struggles.

What did the Constitutional Framers Say?

James Madison, the principal author of the Constitution and the Federalist Papers, clearly regarded partisanship power as a detriment in Federalist 10 and viewed States’ rights as a check against unbridled federal control over the Union in assuring the inclusion of the 10th Amendment to the Constitution. However, a careful reading of Federalist 10 tells us that Madison did not believe we would ever arrive at the circumstance we now find ourselves in: that partisan power could corrupt and assert the type of federalist control that his present-day Anti-Federalists warned about. Madison’s laudable optimism in a strong Union republic was clear at the time: “A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.”

Those who debate or doubt Madison’s implicit support of the 10th Amendment need only read the following from Federalist 45: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.”

Of crucial importance is the fact that originally, state legislatures were to appoint Senators, to ensure representation of state legislatures, and as a reinforcement of the 10th Amendment. As Madison declared in Federalist 45: “The Senate will be elected absolutely and exclusively by the State legislatures. Even the House of Representatives, though drawn immediately from the people, will be chosen very much under the influence of that class of men, whose influence over the people obtains for themselves an election into the State legislatures. Thus, each of the principal branches of the federal government will owe its existence more or less to the favor of the State governments, and must consequently feel a dependence, which is much more likely to beget a disposition too obsequious than too overbearing towards them. On the other side, the component parts of the State governments will in no instance be indebted for their appointment to the direct agency of the federal government, and very little, if at all, to the local influence of its members.” This original intent was thwarted by the addition of the 17th Amendment, ratified by states in 1913, which dictates that Senators not be appointed by legislatures but by popular election. It was because of “partisanship and strife” that state legislatures fell under the pressure to ratify the 17th Amendment, having failed to appoint Senate representatives in many cases.

A path to less government clearly rests on the enforcement of the 10^th Amendment and a move away from polarized partisan politics. The latter would be aided by a repeal of the 17th Amendment, which can be accomplished via the process set forth in Article V. Federal courts, including the Supreme Court, have repeatedly assaulted state and local governments for relying on the 10th Amendment to fight against the application of federal mandates and regulations, or essentially most of the impositions on states by an out-of-control federal government in scope and spending. This issue must also be addressed, as it signifies a serial usurp of states’ rights via federal power, sanctioned by federal courts that have no Constitutional authority to make law.

Furthermore, federal courts have continually misrepresented the Commerce Clause in Article I, particularly “to regulate commerce…among several states…,” or interstate commerce to mean that Congress has unlimited authority to impose unchecked regulatory power over commerce everywhere domestically, period. Madison enumerated the limits of this clause very clearly in Federalist 42: “A very material object of this power was the relief of the States which import and export through other States, from the improper contributions levied on them by the latter. Were these at liberty to regulate the trade between State and State, it must be foreseen that ways would be found out to load the articles of import and export, during the passage through their jurisdiction, with duties which would fall on the makers of the latter and the consumers of the former.”

A call to action for ‘less government’ could mean a good old-fashioned revolution. In his first inaugural address, Abraham Lincoln advised us: “This country, with its institutions, belongs to the people who inhabit it. Whenever they shall grow weary of the existing government, they can exercise their Constitutional right of amending it or their revolutionary right to dismember it or overthrow it.” These sobering words weigh heavily on those looking for a “lawful, peaceful, bloodless revolution to restore our Constitutional republic.” Grass roots efforts to push for the enforcement of the 10th Amendment and Constitutional mettle, and a concerted action to vote out all career partisan politicians are but a beginning.

This is a first in a series of articles planned on the growth of government, our political system and guidance provided by the Constitution and the Federalist Papers.
This article is dedicated to Publius and modern-day descendants. Keep up the good fight.