Public Finance and Community Power Structure

Distinct bifurcation of the public and private sectors becomes evermore blurred. While it was never a clearly defined distinction in practice, it is critical to the Hamiltonian model of power and political economy to maintain a binary system of power in theory because bivariate systems can practically operate with monolithic authority while giving the appearance of pluralistic freedom of choice--the phenomenon of false choice.

Bifurcating the power structure--a two-party system orperationalized with the organized bifurcation of the public and private sectors--provides a practical means for elitist control of the political economy with a free-market legitimacy. Where legitimacy of the outcome of one is called into question, Hamiltonians (elitists) can conveniently argue the maintenance of pluralism both in theory and practice, justifying their command and control as the operation of a pluralistically organized means of a popular consent. That consent, which is the most basic, the most natural, legitimacy of power and contained within our Constitution as the manifestation of the fundamental "natural" rights of humanity, was at first applied to limiting the power of the royal, "ruling" class and to expand the power of the business elite as the "ruling class."

The power of the King (government) is inept, wasteful and burdensome. It is to be limited to promoting the welfare of the business elite. Ensuring the welfare of the rich is fundamental to the general welfare and is the utilitarian aspect of the Hamiltonian model that gives it arguable strength, or virtue.

The phrase "some people are more equal than others" refers to the supposedly "natural," Nietzche-like superiority-of-elits argument. It does not contradict the bourgeoise argument for displacing the power of royalty, but confirms it with, paradoxically, the argument for a more pluralistic form of power. The free market, according to the argument, provides a constant format, an environment, that allows for a "natural" change of elits if necessary without bloody revolution. This "natural" selection of the fittest to rule is what the Hamiltonian concept of the "natural rights of man" largely refers to. It is the foundation of the Hamiltonian model of power and political economy and the bifurcated system of public and private sectors Alexander Hamilton and the Federalists generally favored at the inception of our nation to the very strongest objection of Jeffersonian Republicans.

We now see the people that organized, that engineered, the current economic crisis being rewarded with huge bonuses. They are not being rewarded for failure. They are being rewarded for organizing and operating within the Hamiltonian model with the "successful" result of deflating the economy and very clearly defining the class distinction of just exactly who is "more equal than others," or the ruling class.

The mostly Ivy-League educated MBA elite that have foisted our economy into the greatest crisis since The Depression are not being rewarded for failure. They are being rewarded for success and, as Hamiltonians know all too well, nature tends to replicate success, and this model for success is replicated across all jurisdictional boundaries, right down to the community level.

A significant difference between the Federalists and Republicans among equal elits was, and is, the power to issue currency for legal tender. Striving to be superior among elits is to entrepreneur your capital (your property) across jurisdictional boundaries. The bigger you are the better because it is the key to gaining power and keeping it, and controlling the money supply is as big and powerful as you can get--all of what Jeffersonians so strongly objected to. Understand, for example, that derivatives--the primary tool of MBA's to make themselves and their underwriters rich at the expense of everyone else--are a private sector expansion of the money supply, and having more money than anyone else--having the ability to command the bid--makes for more power than anyone else; hardly the model of a free-market economy. While the total GDP of the world is around $50 trillion, derivatives recently totaled over $500 trillion before becoming unwound, causing the monumental economic crisis we now have (an accumulation of wealth and consolidation of power that Jeffersonians warned of).

The 500 trillion was used to gain and consolidate the capital (the liquidity crisis we are now experiencing). Converting all that leverage into as much capital gained as possible has to come from somewhere that is considered legal tender (the official money supply), and that would explain where the $1 trillion of Federal Reserve funds reported mysteriously unaccounted for probably went--to make the value of the derivative instruments liquid. It also defines where the tax code needs to be progressed to quickly and effectively pull us out of recession with strategic reinvestment and reduction of the budget deficit.

The money supply and who controls it is at the heart of the public sector's current effort for economic recovery and reinvestment. It reverberates right down to the community level of power where states and municipals maintain the means of power--the bond and tax authority.

Since a state or municipality cannot print its money, bonds are floated, paid with the tax authority, and what we see now is, of course, all manner of regressive taxation to balance the budget.

Regressing the tax code is fundamental to the return-on-investment value of the bonds. It is antithetical to tax the people that can afford to buy the vast majority of the bonds in order to pay for them. Regressive taxation maximizes the value of the bonds to the holder and so are tax exempt, perfectly fitting the Hamiltonian model in which the "little people" pay the taxes, local government agents collect the taxes and distribute the funds to the ruling class busily legislating government projects and contracts that require floating bonds. The process takes on a decidedly feudal form.

While the regressive tax burden gives the bonds their value, the inherently elitist model of power it supports is ultimately deflationary, just as it is at the national level. The value of the regressive tax burden, the sacrifice, since it is no sacrifice for the elite of power (assuring the welfare of the rich in priority), bonds tend to be issued till the value of the bonds experience a falling rate of profit, or deflation (the inability to pay the value, or collect the tax). Not only is the bond process deflationary, but the means of public finance to support the private sector contracts (the profits) is also deflationary because it relies on regressive taxation. The public has less money to spend because it has been taxed to finance the profit and support the value of the bonds that diminish in value due to the deflationary tendency. The result is to tax the poor even more to make the rich richer: that is, to maintain the elite of power--the Hamiltonian model.

As we look to "shovel ready" projects for Federal funding we must keep in mind that it supports the Hamiltonian model that causes crisis and rewards it as "success." This is why President Obama is saying he will "call out" the agents of corrupt practices at the community level of power where the Federal government is expanding its money supply and enhancing the deflationary tendency of the tax/bond authority. Deflation is the problem to be solved here, providing the means of enhancing it is clearly not the solution.

For example, the Commonwealth of Kentucky recently legislated a huge tax increase on alcohol and tobacco. Despite that the governor was elected on a platform of not raising these taxes, of not balancing the budget with regressive tax measures, he pushed it hard and eventually got it. The incentive to commit such a blatant fraud is the "success" of working within the model of power. In the private sector this kind of fraud is a crime. In the public sector it is pragmatism with the sanction to be exacted in the voting booth. The governor and his legislative accomplices will not go to jail but will be rewarded with a firm station within the power structure, within the private sector if not public. Instead of providing for the commonwealth, the government was applied to regressively tax its citizens to finance making the elite rich, and even more ignominous, claim it to be the general welfare and falsely confirm the Hamiltonian hypothesis that the operation of government is the problem by causing the apparent evidence for it--operation of the regressive tax burden and its deflationary tendency by means of government authority.

The elite beneficiaries are not just the brick and morter contractors, real estate developers, brokers and agents, but healthcare professionals. Doctors in particular.

Kentucky's lieutenant governor is an M.D.. The chief legislative proponent for the regressive tax on tobacco, not alcohol, curiously, is an M.D.. Among the wealthiest citizens within the state are medical doctors. They every bit consider themselves to be the elite of society and should be the beneficiary of the primary means of Hamiltonian power--regressive tax policy.

Healthcare costs well exceed the rate of inflation, even with gas prices over four dollars a gallon, because the healthcare sector is feeding at the public trough, utilizing third-party billing practices to bilk the taxpayer and always needing tax increases to stay ahead of inflation that it is causing. Fat healthcare incomes factor prominently into the deflationary trend of our economy in true Hamiltonian fashion. Funding healthcare with regressive tax vehicles is entirely deflationary. Rather than reducing costs, it just provides the funds for price increases. The result is less money for the consumer to spend and small businesses to invest, a high debt-equity ratio and a cohort of wealthy doctors with the time and money to legislate big tax (income) increases.

Supposedly, the funds collected with Kentucky's new regressive tax increases will allow funding to be more available for healthcare, like the SCHIP. It is an argument non sequitor. Providing for the health and welfare is not accomplished with a regressive tax burden, by taxing the least able to pay, because it is deflationary. Even if fewer people drink and smoke, there will be the detriment of declining revenue and the need to increase taxes. It makes no sense because it is not intended to provide for the health and welfare of the citizenry, but to provide for the means of power--the regressive mode of taxation--Hamiltonianism, the fundamental source of the problem across all jurisdictional boundaries, not the solution.