The Taxpayer Frog In the IRS Pot



April 21, 2008
The Taxpayer Frog In the IRS Pot
By Randall Hoven

You know the story. Put a frog in hot water and he'll jump out, but put him
in cooler water and slowly raise the heat and he'll stay in even as he boils
to death. Are we frogs starting to boil in government stew? In the midst
of a Presidential campaign where we seem to be deciding who's universal
health care is more universal and who's global climate policy is more
global, maybe it's time to check the temperature of the pot we're in.


The nature of the slow boil is that short-term changes are not detectable.
So let's look at a longer term to see just how much hotter it's become.
Let's look at the last century and compare its beginning with its end and to
current time.


Federal spending. In 1900 federal spending was $0.5B. In 2000 it was
$1,789B . Those amounts translated to 2.5% of GDP in 1900 and 21% in 2000.
Government spending at all levels in the U.S. was 36.5% of GDP in 2006. That
2.5% of GDP that could sustain the entire federal government in 1900 is not
even enough to cover the Medicare program today.


The Medicare program, by the way, did not exist in 1900; it was established
in 1965.


Federal taxes. A federal income tax did not exist in 1900; it was
unconstitutional, and would remain that way until the 16th Amendment was
ratified in 1913. The first 1040 form included one page of instructions,
and appeared to apply to both individuals and businesses. Today's 1040
instructions for individuals runs 155 pages, with no guarantee that you
won't have to fill out other forms and consult other instructions.


Federal regulation. There were few enough federal regulations in 1900 that
the government did not do anything special to keep track of them. That
changed in the middle of the New Deal. The Federal Register, the master
list of federal regulations, came into existence in 1936. In that year it
had 2,620 pages of regulations. The next year it had 3,450. In the year
2000, it had 83,294 pages.


Cabinet Departments. There were seven cabinet level departments in 1900:
State, Treasury, War, Navy, Justice, Interior and Agriculture. All but
Interior (1849) and Agriculture (1889) were established prior to 1790.


In 2000 there were 14 cabinet departments, including 9 created after 1900:
State, Treasury, Justice, Interior, Agriculture, Commerce (1903), Labor
(1913), Defense (1947), Health & Human Services (1953), Housing and Urban
Development (1965), Transportation (1966), Energy (1977), Education (1979),
and Veterans Affairs (1988).


In 2002 the Department of Homeland Security was established, making the
current total 15 departments. If the "cabinet level" positions are included
(excluding the Vice President), the total is 20. The cabinet level positions
(excluding VP) are White House Chief of Staff, Office of Management and
Budget, U.S. Trade Representative, the Environmental Protection Agency, and
the Office of National Drug Control Policy.


Constitutional Amendments. The first 10 Amendments (the Bill of Rights) and
the 11th were passed prior to 1800. The 12th was passed in 1804. In the
next 109 years, only three more Amendments were added to the Constitution;
all three were passed in the five years between 1865 and 1870 and related to
ending slavery and establishing the rights of ex-slaves. The last 12
Amendments were all passed between 1913 and 1992. There are now 27
Amendments.


Federal Bureaucracy. The following sampling of government agencies did not
exist in 1900. (The years given are when the agency was established. When
a range is given, it includes the related pre-cursor agencies.)


a.. FDA, Food and Drug Administration (1906-1930)
b.. FBI, Federal Bureau of Investigation (1908-1935)
c.. Federal Reserve (1913)
d.. IRS, Internal Revenue Service (1913)
e.. FTC, Federal Trade Commission (1914)
f.. BATF, Bureau of Alcohol, Tobacco and Firearms (1920-1972)
g.. FCC, Federal Communications Commission (1934)
h.. SEC, Security and Exchange Commission (1934)
i.. Social Security (1935)
j.. Medicare and Medicaid (1965)
k.. EPA, Environmental Protection Agency (1970)
l.. OSHA, Occupational, Safety and Health Administration (1971)
m.. DEA, Drug Enforcement Administration (1973)
n.. FEMA, Federal Emergency Management Administration (1979)


Crime and Punishment. In 1900 there were no Federal laws against drugs .
None. In fact, you didn't even need a prescription for medicine. Now, of
course, the Federal government outlaws marijuana even where a state
government has made it legal (over the dissent of Justice Clarence Thomas,
by the way), and has the FDA, DEA and other departments of armed men ready
to enforce those laws and regulations. More generally, the federal
departments we normally associate with law enforcement, the FBI and BATF for
examples, did not exist at all in 1900.


In 1900 there were about 100,000 people (1 in 760) in U.S. prisons. In 2000
there were about 2 million (1 in 140). The incarceration rate increased
over 400%.


In 1900 there were 1.2 murder victims for every 100,000 people. The rate
has been over 10 per 100,000, and in 2000 it was 6.1 per 100,000, an
increase of over 400% compared to 1900.


Generally, the federal government has stepped into law enforcement in a big
way since 1900. Unfortunately, we did not become safer, either from
criminals or from zealous prosecutors and lawmen. More of us get locked up.
More of us get murdered. Four hundred percent more of us.


Property. Owning property used to mean something; it meant you could do
pretty much what you wanted with it and on it. Now it's not even yours if
the government at any level decides it could be put to better use by someone
else (again, over the dissent of Justice Clarence Thomas). Don't let your
kids build a tree house; you need a building permit for that and no city
would ever approve such a thing. I wouldn't even say I own my house; I rent
it from the county for about $450 per month in property taxes, on a house
assessed right around the U.S. median.


Personal. The above examples might seem too abstract or impersonal. Even
the high overall tax rate (over one third of every dollar) can seem removed
from our personal life either because we never see the money (due to
withholding, which started in World War II) or the tax is relatively hidden
(e.g., gas tax is paid at the pump). Here are just a few examples of a more
personal nature, none of which would have been conceivable in 1900.


An eighth-grade honor student was strip-searched by school officials for the
suspicion of having Ibuprofen, a common over-the-counter drug for pain . No
Ibuprofen was found on her, by the way. On the other hand, behavior
modifying drugs such as Ritalin can be forced on students over the objection
of parents. The 9th Circuit Court of Appeals has already ruled that
"parents have no due process or privacy right to override the determinations
of public schools."


A one-year-old girl was decapitated by an airbag in a low-speed parking-lot
collision that would have involved little or no injury were it not for the
airbag. The government now mandates airbags in all cars despite the data
showing airbags "kill more children than they save". The government's
answer is to recommend that children be put in the back seat.


Atlanta police shot and killed a 92-year-old woman after a no-knock entry to
her home, based on an informant saying a large stash of cocaine would be
there. No cocaine was found, although a small amount of marijuana was.
According to Radley Balko of Reason magazine,


"beyond Atlanta, the beat goes on. All across the country, narcotics units
and SWAT teams are still kicking down doors in the middle of the night and
still deploying flash grenades and using aggressive, paramilitary
tactics--and they're still doing all of this to apprehend people suspected
of nonviolent crimes. And they're still making mistakes."


Assessing the Heat. The last century wasn't all bad, of course. Life
expectancy for men, for example, went from 46 to 74. But even there, the
biggest jump occurred in the first half of that century: from 46 in 1900 to
66 in 1950 -- all before Medicare, Medicaid, OSHA, and the Department of
Health and Human Services. (Personally, I attribute much of that extra life
expectancy to engineers who got clean water to us and dirty water away from
us.)


We also got richer and life got better in other ways. But I would argue, as
in the case of life expectancy, that the improvements came in spite of
government growth, not because of it. Ronald Coase, winner of the 1991
Nobel Prize in Economics, summarized it quite well in a 1997 interview with
Reason magazine http://www.reason.com/news/show/30115.html.


"the government now operates on such a massive scale that it had reached
the stage of what economists call negative marginal returns. Anything
additional it does, it messes up." [Emphasis added.]


At the beginning of last century, communism was considered so bad by our
liberal and Democratic President Woodrow Wilson and the Democratic Congress
at time that they passed the Espionage and Sedition Acts and authorized
Attorney General A. Mitchell Palmer to conduct the "Palmer raids" to fight
it - the original "Red Scare". I would say that was equivalent to frogs
jumping out of the water because they felt the heat immediately.


But the heat has been turned up slowly so that today communism is not even
feared. In fact it is taught in our best universities by communists. By
the end of the 20th century, a third of the voting age population in the
U.S. thought the phrase "to each according to his needs, from each according
to his abilities" was in the U.S. Constitution, and another third were not
sure. (The phrase came from Karl Marx, author of The Communist Manifesto.)
The Communist Party USA openly advocates to "defeat McCain and strengthen
Democratic majorities in Congress" and to elect either Barack Obama or
Hillary Clinton in 2008.


The CPUSA itself says electing more Democrats helps the Communist cause.
And we frogs think it's comfortable in here.





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