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1 The Rise of the Insane State – What is happening to the U.S. Economy? Copyright © 2009 by Kenneth R. Szulczyk All rights reserved Cover design by Kenneth R. Szulczyk More information at www.ken-szulczyk.com Edition 6.0, December 2013 2 Table of Contents Table of Contents .......................................................................... 3 Forward ........................................................................................ 6 1. The Purpose of Government .................................................. 7 Government Creates the Legal System ..................................... 8 Economic Systems ................................................................. 12 Rapidly Expanding Government ............................................. 15 The Optimal Size of Government ........................................... 21 2. Crazy Laws .......................................................................... 26 Above the Law ....................................................................... 31 Corruption and Government ................................................... 33 Dividing the People ................................................................ 36 Complicated U.S. Laws .......................................................... 40 3. Frivolous Lawsuits............................................................... 46 Torts ...................................................................................... 50 Festering Growth of Attorneys ............................................... 54 The Parasitic Class ................................................................. 56 4. Regulating Excessively ........................................................ 61 Parkinson’s Laws ................................................................... 66 Government, Technology, and Urbanization ........................... 67 Problems of Regulations ......................................................... 72 Society’s Costs of Regulations ............................................... 75 5. Taxes Destroy Wealth .......................................................... 79 Taxes Alter Behavior.............................................................. 83 The Laffer Curve .................................................................... 87 Instability in State Government Financing .............................. 90 Property Taxes versus Income Taxes ...................................... 92 3 6. Corrupt Police and Kangaroo Courts .................................... 99 The Race to Incarcerate ........................................................ 102 Administrating Justice .......................................................... 106 State Protection of Children.................................................. 111 7. Eroding the Bill of Rights .................................................. 116 Amendment I ....................................................................... 117 Amendment II ...................................................................... 119 Amendment III ..................................................................... 121 Amendment IV ..................................................................... 121 Amendment V ...................................................................... 123 Amendment VI ..................................................................... 125 Amendment VII ................................................................... 128 Amendment VIII .................................................................. 129 Amendment IX ..................................................................... 133 Amendment X ...................................................................... 133 8. Repeating History – The Roman Empire ............................ 138 The Roman Republic Rises .................................................. 139 Birth of the Roman Empire................................................... 141 Roman Empire Begins Declining ......................................... 145 9. The 2007 Great Recession versus the Great Depression ..... 152 Prospering 1920s .................................................................. 152 The 1929 Stock Market Crash .............................................. 154 The Banking System ............................................................ 155 Deflation .............................................................................. 157 Farmers ................................................................................ 158 Employment ......................................................................... 160 Rising Taxes ........................................................................ 162 Growing Government ........................................................... 164 4 10. Dissecting the 2008 Financial Crisis .................................. 171 Pushing for Homeownership ................................................ 172 Mortgage Asset-Backed Securities ....................................... 174 Collateralized Debt Obligations (CDOs)............................... 176 Credit Default Swaps (CDS)................................................. 179 11. A Grim Future ................................................................... 189 Perpetual Bear Financial Markets ......................................... 190 Fleeing Businesses ............................................................... 193 Excessively Enforcing the Laws ........................................... 195 Growing Crime and Black Markets ...................................... 198 Declining Civic Loyalty and Growing Political Corruption .. 199 Collapsing U.S. Dollar ......................................................... 201 Hyperinflation ...................................................................... 203 5 Forward This book examines self-interest. Politicians, attorneys, bureaucrats, businessmen, and people do not look at government and think how to improve our laws, rules, and regulations. Instead, they analyze our legal system, devising and scheming how to benefit personally from the legal system. Under a capitalistic system, profits drive self-interest. Thus, a person can use this simple rule to predict outcomes. A person just asks one question - how does one profit from this situation? On the other hand, government and public institutions rarely follow a profit motive. Whims, notions, beliefs, and prejudices guide their self-interest that constantly changes. If government evolves in a large controlling institution, it opens the doors to an insane asylum. Unfortunately, those doors flung violently opened in the 1990s in the United States as Americans witnessed the death of common sense. Hence, we arrive at the title of this book, “The Rise of the Insane State.” Ideas in this book are universal. As I travel more, I identify the same struggle between government and its people, which I find quite eerie. Although the names and places change, all governments behave similarly as all government officials control and dominate their people. 6 1. The Purpose of Government “In this present crisis, government is not the solution to our problem, government is the problem...” -Ronald Reagan Since the dawn of civilization, humans gazed upward into the stars and heavens to search for the almighty God. God embodies the all-powerful being, who was the grand architect of the universe and created all life on Earth. From the heavens, God watches over his creation. Then men and women kneel down before God and whisper prayers. People believe God is listening. That God will intervene in their lives and answer their prayers with miracles. Another powerful entity exists in society and lies at heart of our civilization. This entity has evolved into the second most influential force in nature. Answer should not surprise you because that entity is government. A government has immense power over its people. A government can imprison or execute its citizens, expropriate property, or send its army and navy to invade another country. A government intervenes in the daily lives of its citizens. It imposes laws, rules, and regulations over everyone in its domain while it collects taxes from its citizens. No other entity in our society has that power. People place too much faith in their government. They ask government officials and politicians to save them, make our society better off, or correct an injustice. Unfortunately, our political leaders and government officials comply happily. Now, all levels of government in the United States meddle in all society's affairs. Our government shackled all our businesses, industries, and markets with numerous and confusing laws, regulations, and taxes. U.S. economy remains stuck and mired in a perpetual recession. Unemployment rate remains frozen at nearly 10%, and experts predicted a new recession in 2012. Many Americans believe capitalism failed them. Our political leaders remain in a state of denial as they keep fueling the size of our government. They refuse to reduce government spending in line with revenues, 7 or reign in their crazy rules and regulations. They believe government must step in order to stop the economic decline. Government cannot be a savior, and a government solution can never work. Only the American people can lift themselves out of this perpetual depression. However, Americans first need to remove the shackles of government control. One premise you will get from this book that it is a terrible idea to keep expanding government.
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