Last week Congress did something fiscally responsible. Its not very often I can say that. Granted, it was small in the grand scheme of things, but I was glad to be an original cosponsor, along with Congressman Harry Mitchell of Arizona, of a bill to block the automatic pay raise that Congress otherwise receives every year. Every Member of Congress gets this raise unless it is expressly voted down. For the second year in a row Congress has voted to freeze its own pay, which, in a time of skyrocketing deficits and high unemployment, is the very least Congress can do.

The country is in a serious recession, bordering on depression. Unemployment is grossly underreported, and not likely to get better anytime soon. American citizens and businesses are overtaxed, yet tax revenues still fall far short of our governments voracious appetite for spending. This is no time to raise taxes. And since congressional salaries come from tax revenue, allowing ourselves a raise would fly in the face of economic reality.

Of course, Congress ignores economic reality all the time. But if Congress can freeze salaries as a first step towards fiscal sanity, it can freeze- if not drastically cut- a vast array of federal expenditures.

At the very least, Congress could freeze current spending levels, instead of constantly increasing them. We could stop increasing the debt ceiling every few months, as has become our habit. We could freeze regulations that add to the burden on our struggling small businesses. We could freeze intrusive bailouts that upset the balance of the market and cost us billions billions we could instead use to eliminate the oppressive income tax! We could freeze the money supply and stave off the tsunami of inflation the Fed has been generating for years.

Furthermore, we could address the mismanagement and waste in foreign affairs which adds immensely to our budget. Like entitlements, militarism is expensive. We need to reject sanctions as a precursor to military action, and embrace free trade as the most effective method for spreading liberty. After all, as the great economist Frederic Bastiat said – when goods dont cross borders, armies will. It is time to bring our troops home, instead of instigating expensive new wars when were already hopelessly mired in several conflicts already. We need to rethink the whole idea of pre-emptive war- not only because its wrong and counterproductive, but because we literally cannot afford it!

We could do much to restore fiscal sanity to this country simply by stopping the madness and bringing our troops home from Iraq, Afghanistan, Korea, Japan, Germany, and so many other places. This costly global empire does not serve the interests of the American people and we should end it peacefully and voluntarily now, lest it end in chaos later.

Though it may be wishful thinking on my part, Im encouraged by the small step taken by Congress last week. Fiscal sanity can begin with a small step, and I want to encourage Congress to move in this direction.

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Hopefully, the Commission’s work can help rebuild the American people’s belief in a financial system that puts Americans to work, fulfills their goals and provides the foundation for a new era of broadly shared prosperity.

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With passage of last weeks bill, the American people are now the unhappy recipients of Washingtons disastrous prescription for healthcare reform. Congressional leaders relied on highly dubious budget predictions, faulty market assumptions, and outright fantasy to convince a slim majority that this major expansion of government somehow will reduce federal spending. This legislation is just the next step towards universal, single payer healthcare, which many see as a human right. Of course, this right must be produced by the labor of other people, meaning theft and coercion by government is necessary to produce and distribute it.

Those who understand Austrian economic theory know that this new model of healthcare will cause major problems down the road, as it has in every nation that ignores economic realities. The more government involves itself in medicine, the worse healthcare will get: quality of care will diminish as the system struggles to contain rising costs, while shortages and long waiting times for treatment will become more and more commonplace.

Consider what would happen if car insurance worked the way health insurance does. What if it was determined that gasoline was a right, and should be covered by your car insurance policy? Perhaps every gas station would have to hire a small army of bureaucrats to file reimbursement claims to insurance companies for every tank of gas sold! What would that kind of system do to the costs of running a gas station? How would that affect the prices of both gasoline and car insurance? Yet this is exactly the type of system Congress is now expanding in health insurance. In a free market system, health insurance would serve as true insurance against serious injuries or illness, not as a convoluted system of third party payments for routine doctor visits and every minor illness.

While proponents of this reform continue to defy all logic and reason by claiming it will save money, I worry about cataclysmic economic events. Already investors are more reluctant to buy US Treasuries, fearing that the healthcare bill, along with other spending, will cause government debt to explode to default levels. I had the opportunity last week to address my concerns with both Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, especially about the potential for the coming serious inflation. I am not optimistic that these important decision makers truly understand what is coming, why it is coming, and how best to deal with it.

The Federal Reserve finds itself in an unprecedented and unenviable position. To keep up with government spending and corporate irresponsibility, it has increased the monetary base by nearly $1.5 trillion since September of 2008. Excess bank reserves remain at historically high levels, and the Fed’s balance sheet has ballooned to over $2 trillion. If the Fed pulls this excess liquidity out of the system, it risks collapsing banks that rely on the newly created money. However, if the Fed fails to pull this excess liquidity out of the system we risk tipping into hyperinflation. This is where central banking inevitably has led us.

The idea that a handful of brilliant minds can somehow steer an economy is fatal to economic growth and stability. The Soviet Union’s economy failed because of its central economic planning, and the U.S. economy will suffer the same fate if we continue down the path toward more centralized control. We need to bring back sound money and free markets- yes, even in healthcare- if we hope to soften the economic blows coming our way.

Duration : 0:4:10

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With a faltering economy, multiple wars, and the approaching demise of the dollars reserve status, there are more than enough problems to keep politicians in Washington working day and night. In between handing out cash for clunkers and nationalizing healthcare, the administration is busy sending more troops overseas, escalating existing wars, and seeking out excuses to start new wars. Congress is working on urgent legislation to address crises like healthcare reform and climate change. The reforms are so very urgent that legislation must pass swiftly with no time to read the bills even though the new laws wouldnt take effect for several years! Meanwhile, the Federal Reserve is busy dealing with our dollar crisis by printing up more dollars.

Yes, there certainly is a lot for Washington to do these days. Most, if not all, of what Washington is doing however, is more of what created the problems in the first place. Capitol Hill is filled with politicians running around putting out fires but with gasoline. The truth is that all these fires keep so many powerful people employed and wealthy that it is not truly in many decision makers interests to be very effective problem-solvers. If Washington ran out of problems, think how many lobbyists would be out of a job, and how many special interest groups would just disband? Sadly, whatever is bad for the greater economy is good for the economy and job market in DC.

Of course, no form of government, not even one that respected its Constitutional restraints, would magically create a problem-free society. The question is: how should a society deal with its problems? The form of government that our founders envisioned, in which the federal government was strictly constrained by the Constitution, allows private citizens and communities to solve their own problems. The role of the government should be to protect contracts, punish fraud and violence through appropriate laws, law enforcement and the courts. Not a whole lot of laws or bureaucrats are really necessary to work on just that. Instead, new laws are constantly needed to fix the problems that previous unconstitutional laws created. We have ended up with an incomprehensible maze of laws and regulations that severely constrains the people and expands the government the exact opposite of what our founders intended.

This is all because the Constitution is treated like a suggestion manual instead of the supreme law of the land. Under the Constitution, politicians hands are supposed to be tied in most of the areas they involve themselves in today. But somewhere along the line, politicians stepped out of Constitutional bounds and started pretending to solve our problems for us. All we have to show for it is more problems.

Today, Washington politicians can busily solve one problem, knowing that unintended consequences from that solution will keep them and their friends all very busy tomorrow. The people are ultimately left suffocating under the burden of Washingtons helping hands. It is coming to a point where our economy, our dollar, and indeed, the rest of the world have had about all the help from Washington that they can stand. The United States is headed the way of Rome and the Soviet Union, for the same reasons, unless we reverse the trend.

I continue to hope that enough Americans will realize that the true strength of our country doesnt come from Washington, but rather the limitations placed on government in the Constitution. We must resolve to reverse the destructive course that we are on and then never again let big government problem-solving take over our lives and our country.

Duration : 0:4:5

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Last week marked the one year anniversary of the American Reinvestment and Recovery Act, or the stimulus bill, passing into law. While the debate over its success has been focused on whether or not it is stimulating the economy and on various questionable uses of funds, in my estimation this legislation is accomplishing exactly what it was intended to accomplish grow the government.

Those of us concerned about the ever increasing level of government debt gasped at the astonishing $787 billion cost estimates for this bill. True to form it has actually cost 10 percent more at $862 billion. We heard over and over that government could not sit around and do nothing while people lost their jobs and houses. The administration claimed that unemployment would not go above 8 percent if the stimulus bill passed. Now, a year later, the government estimates that unemployment is over 10 percent. The real number is closer to 20 percent. It appears that those promises were total fabrications in order to close the deal.

In any case, the American people know that more government spending obviously equals more government. If the goal was to strengthen the private sector, Congress would have allowed businesses and individuals to keep more of their own money through meaningful tax cuts. Outrageously, the administration claims that they did cut taxes by reducing withholding, and that they have stimulated the private economy by increasing the amount of money in every workers paycheck. What they fail to mention is they did not change the total amount of taxes due. This means that all that money not withheld from paychecks will add up to a big unpleasant surprise when returns are filed this year. Many tax preparers are already seeing shocked taxpayers having to come up with big checks to the government when they normally expect a refund. Stimulus, indeed!

The administration also claims that thousands of jobs have been created or saved by this massive spending bill, but these are just more government jobs, and counterproductive in the long run. Funding for the public sector necessarily comes at the expense of an overtaxed private economy. But, it makes sense that government would seek to expand its payroll since every new bureaucrat becomes a likely advocate for big government, when an increasing number of Americans are demanding the opposite. But the more the burden, the closer the government parasite comes to killing its host.

Rather than learning the lessons of the past year, the administration is moving full-speed ahead to do even more economic damage. With the stimulus bill set as a precedent and victory declared, another jobs bill is in the works. And, in order to address the unavoidable issues of our massive deficit, the administration has named a bi-partisan commission to find ways to decrease it. Tax increases on the middle class are notoriously back on the table, exposing that campaign promise as another instance of merely saying what the people wanted to hear. If the obvious solution to our spending problems was seriously put forth, that is, getting back to the constitutional limitations of government, I would be shocked. More likely, this will be a tactic to increase taxes and spending in a way that passes the political buck.

Duration : 0:3:40

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Last week we were reminded that ours is not the only country suffering from severe economic turmoil. The Greek government is the latest to come close to default on their massive public debt. Greece has insufficient funds in their treasury to make even the minimum payments that are now coming due. Their debt level is about 120 percent of their gross domestic product and their public sector absorbs what amounts to 40 percent of GDP. Any talk of cutting costs and spending is met with violent protests from the many Greeks heavily dependent on government payments. Mounting fears of default have sent shockwaves through their creditors and all of the eurozone countries.

But there have been statements made by the European Central Bank to calm fears and give assurances that Greece will get the aid it needs. Details of agreements are not forthcoming.

Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we dont know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels. Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.

This global financial crisis is a predictable result of secretive central banking and unsound fiat currency. Governments are entirely committed to this system of fiat money and fractional reserve banking for obvious reasons: it enables them to do what they love most, namely, spend hoards of money with near impunity. Without the limitations of sound money, governments will spend without limit. They will spend money to hire their cronies, pay off special interests, give out favors, create dependence and generally distract from the terrible job they do at their chief mandate, which is to protect the liberties of the people. Fiat money is a blank check to government, which is very dangerous, and we are witnessing the death throes of the system as the bills come due and the underlying capital is squandered away.

Because of our globe-straddling empire and lingering reserve currency status, perhaps no one has a more vested interest in keeping this system cobbled together than our own government and the Federal Reserve. The agreements that Iceland and Dubai and Greece have negotiated can amount to little more than kicking the can down the road, as their overall spending habits remain largely intact, fiat currencies are still legal tender and more debt is issued on top of unsustainable debt. The American people have the right to know if they are going to be the ones holding the bag in the end because the Federal Reserve secretly put them on the hook for it. This knowledge would be a key factor in peacefully dismantling this immoral and unconstitutional system.

Duration : 0:4:1

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This past week we celebrated the end of what most people agree was a decade best forgotten. New York Times columnist and leading Keynesian economist Paul Krugman called it the Big Zero in a recent column. He wrote that there was a whole lot of nothing going on in measures of economic progress or success which is true. However, Krugman continues to misleadingly blame the free market and supposed lack of regulation for the economic chaos.

It was encouraging that he admitted that blowing economic bubbles is a mistake, especially considering he himself advocated creating a housing bubble as a way to alleviate the hangover from the dotcom bust. But we can no longer afford to give prominent economists like Krugman a pass when they completely ignore the burden of taxation, monetary policy, and excessive regulation.

Afterall, Krugman is still scratching his head as to why no economists saw the housing bust coming. How in the world did they miss it? Actually many economists saw it coming a mile away, understood it perfectly, and explained it many times. Policy makers would have been wise to heed the warnings of the Austrian economists, and must start listening to their teachings if they want solid progress in the future. If not, the necessary correction is going to take a very long time.

The Austrian free-market economists use common sense principles. You cannot spend your way out of a recession. You cannot regulate the economy into oblivion and expect it to function. You cannot tax people and businesses to the point of near slavery and expect them to keep producing. You cannot create an abundance of money out of thin air without making all that paper worthless. The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever. You cannot live beyond your means indefinitely. The economy must actually produce something others are willing to buy. Government growth is the opposite of all these things.

Bureaucrats are loathe to face these unpleasant, but obvious realities. It is much more appealing to wave their magic wand of regulation and public spending and divert blame elsewhere. It is time to be honest about our problems.

The tragic reality is that this fatally flawed, but widely accepted, economic school of thought called Keynesianism has made our country more socialist than capitalist. While the private sector in the last ten years has experienced a roller coaster of booms and busts and ended up, nominally, about where we started in 2000, government has been steadily growing, because Keynesians told politicians they could get away with a tax, spend and inflate policy. They even encouraged it! But we cannot survive much longer if government is our only growth industry.

As for a lack of regulation, the last decade saw the enactment of the Sarbanes-Oxley Act, the largest piece of financial regulatory legislation in years. This act failed to prevent abuses like those perpetrated by Bernie Madoff, and it is widely acknowledged that the new regulations contributed heavily not only to the lack of real growth, but also to many businesses going overseas.

Americans have been working hard, and Krugman rightly points out that they are getting nowhere. Government is expanding steadily and keeping us at less than zero growth when inflation is factored in. Krugman seems pretty disappointed with zero, but if we continue to listen to Keynesians in the next decade instead of those who tell us the truth, zero will start to look pretty good. The end result of destroying the currency is the wiping out of the middle class. Preventing that from happening should be our top economic priority.

Duration : 0:4:15

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Last week, the House approved another increase in the national debt ceiling. This means the government can borrow $1.9 trillion more to stay afloat and avoid default. It has been little more than a year since the last debt limit increase, and graphs showing the debt limit over time show a steep, almost vertical trend. It is not likely to be very long before this new ceiling is met and the government is back on the brink between default and borrowing us further into oblivion. Congressional leaders and the administration acknowledge that the debt limit will need to be increased again next year. They are crossing their fingers that the forecasts are correct and they will not need another increase sooner, even before the 2010 midterm elections.

Continually increasing the debt is one of the logical outcomes of Keynesianism, since more government spending is always their answer. It is claimed that government must not stop spending when the economy is so fragile. Government must act. Yet, when times are good, government also increases in size and scope, because we can afford it, it is claimed. There is never a good time to rein in government spending according to Keynesian economists and the proponents of big government.

Free market Austrian economists on the other hand know that times are bad because of the size and scope of government. The economy is fragile because of the overwhelming stranglehold of bureaucracy and taxation of Washington. Any jobs Washington might create through these endless spending programs are paid for through more taxation and debt put on the productive sectors of the economy. Just as insidious is the hidden tax of inflation caused by the Fed and its ever-expanding credit bubble. When the Fed steps in with its solutions, it only devalues the dollars in everyones pocket while encouraging more reckless waste on Wall Street. All of this leads to a worsening economy, not an improved one.

And so the downward spiral continues. The worse things get, the more politicians want to spend. The more they spend, the heavier the debt load becomes and the more we have to spend just to maintain our interest payments. As our debt load becomes unsustainable, the alarm of our creditors increases. It is becoming so serious that our credit rating, as a nation, could be downgraded. If this happens, interest on the national debt will increase even more, leading to even higher taxes on Americans and inevitably, price inflation.

Still, Washington is full of talk of more regulation, more taxation and more spending. The Senate is still struggling to pass a massive regulatory increase on the financial sector, even as the stock market suffers more shockwaves. Pay-as-you-go rules give the appearance of fiscal responsibility, but in truth these rules are only used as a justification to raise taxes. Spending programs like healthcare reform, increased military spending, and a recent doubling of destructive foreign aid are viewed by Washington as necessary and reasonable, instead of foolishness we absolutely cannot afford.

The people understand this, which is why there is so much anger directed at politicians. Washington needs to change its thinking and adopt some common sense priorities. The Constitution gives some excellent limitations that would get us back on the right path if we would simply abide by them. The framers of the Constitution understood that only the ingenuity of the American people, free from government interference, could get us through hard times, yet Washington seems bent only on prolonging the agony

Duration : 0:4:6

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Last week politicians in Washington made a few things clear about how they really feel about the state of the union. First, they are beginning to hear the growing discontent with the size and scope of government and the broken promises that keep piling up. Certain events in Massachusetts recently made that statement loud, clear and unavoidable. In the face of those events, the powers that be made the determination that some populist rhetoric was in order, and the idea of a spending freeze in Washington was proposed, albeit with several caveats. These caveats to the proposed spending freeze ensure that we are not at any real risk of actually doing anything about spending.

First of all is timing. It wouldnt go into effect until 2011, which allows plenty of time to increase spending levels quite a bit before they are frozen. If the administration really understood and cared about our spending problems they would not freeze spending a year from now, but cut spending immediately and significantly. But, spending cuts almost never happen in Washington, and they are not likely now or a year from now if the politicians have anything to say about it.

The second caveat is the huge areas of the budget that are shielded from this freeze. The entire State Department budget is exempt, as are all entitlements, all military industrial spending and almost all foreign aid. Fully 7/8 of federal spending is excluded from this freeze, and some areas to be frozen were actually set to decrease, which means a freeze actually guarantees a higher level of spending.

Especially insulting is the idea that in spite of our own fiscal problems at home, taxpayer dollars will continue to be sent overseas in the form of foreign aid where it often does more harm than good. When need is demonstrated to Americans and they can afford it, they can be counted on for a tremendous outpouring of private, voluntary charity to worthy aid organizations, as we recently saw in Haiti. By contrast, government-to-government aid is taken from the poor by force and too often enriches the corrupt. It is counterproductive and wasteful. But the idea of eliminating, freezing, or reducing foreign aid is not up for serious debate any time soon.

The third caveat is what is included in the freeze that would make it politically impossible to pass Congress, for example air traffic controllers salaries, education, farm subsidies and national parks.

I do not necessarily want a cut in spending in this country – I just want to change who does the spending. The spending should be done by the people who earn the money, if they choose, and on what they choose, without any government interference. That is what makes the economy work. Politicians should stick to the very limited roles given them by the constitution instead of allocating such a sizeable portion of our capital and intervening through regulations and tax policy. But because politicians have disregarded the constitution, and the people have no idea what rule they will break next, there is already a very real spending freeze underway in this economy, by the people. If government would stick only to what it was authorized to do, and leave the rest to the people, most of these problems would resolve themselves.

Duration : 0:3:45

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Much has been made recently about the supposed economic recovery. A few blips in a few statistics and many believe our troubles are all over. Of course, they have to redefine recovery as jobless to account for the lack of improvement on Main Street. But the banks have money, Wall Street is chugging along, and the administration would like to get on with other agendae.

They have even set up a commission to investigate the crisis as if it were all in the past.

The truth is that Americans are still losing jobs, the Fed is still inflating, and more regulations are in the works that will prevent jobs and productivity from coming back. We are on this trajectory for the long haul. The claim has been made many times that this administration has only had a year to clean up the mess of the last administration. I wish they would at least get started! Instead of reversing course, they are maintaining Bushs policies full speed ahead. They are even keeping the Bush-appointee in charge of the Federal Reserve! They are not even making token efforts at change in economic policy. And for all the talk of transparency, we hear that some powerful senators will do all they can to block a simple audit of the powerful and secretive Federal Reserve.

We have been on a disastrous course for a long time. The money supply has doubled in the last year, our debt is unsustainable, the value of the dollar is going to continue its drop, and those Americans who understand where we are headed feel helpless and held hostage by foolish policy makers in Washington. When the bills finally come due and the dollar stops working we are in for some real social, economic and political chaos. That is, unless we take some major steps now to allow for a peaceful transition in the future. These steps are laid out in my legislation to legalize competing currencies.

First of all, no one should be compelled by law to operate in Federal Reserve notes if they prefer an alternative. We should repeal legal tender laws and allow Americans to conduct transactions in constitutional money. Only gold and silver can constitutionally be legal tender, not paper money. Instead, it is illegal to conduct business using gold and silver instead of Federal Reserve notes. Simply legalizing the Constitution should be a no-brainer to anyone who took an oath of office. Consequently, private mints should be allowed to mint gold and silver coins. They would be subject to fraud and counterfeit laws, of course, and people would be free to use their coins or stay with Federal Reserve notes, as they see fit. Finally, we should abolish taxes on gold and silver, which puts precious metals at a competitive disadvantage to paper money.

The Federal Reserve is a government-sanctioned banking cartel that has held far too much power for far too long and is in the end stages of running the dollar into the ground, and our economy along with it. The very least Congress can do, if they are not willing to abolish the Fed, and perhaps not even conduct a serious audit of it, is to allow citizens the freedom to defend themselves from being completely wiped out by their monopoly power.

Duration : 0:3:33

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