Federalist Nos. 21 – 22

Federalist No. 21 and Federalist No. 22 close the enumeration of the deficiencies of the United States under the Articles of Confederation. The argument that the federal government was impotent under the articles is well known but I did pick up two important points here. From Federalist 21:

It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. . . If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. (emphasis added)

This is still true today of taxes on consumption, but especially the part I emphasized can be applied to our income tax (which is not a consumption tax for those who are not familiar with that term). When we look at the lengths that people will go to in their efforts to avoid paying their income taxes it indicates that the rate of taxation, especially at higher levels of income where more efforts are made to elude the taxes, is outside the appropriate bounds. Those who would argue that those rates are necessary (or even insufficient) tofund our government might want to consider the possibility that this truth might be an indication that our government spending itsself is also outside the bounds of moderation or necessity.

In Federalist 22 I see the arguments that lead to the Electoral College and a bicameral legislature taking shape and I also find the less common argument against the Articles of Confederation – namely that the Articles of Confederation did not provide any kind of judiciary system to interpret the laws. Today that would be inconceivable.

After reading about the necessity of forming a new government rather than simply trying to modify the existing confederation I was left to wonder if it might not be time again for us to convene a convention of people representing their fellow citizens for the purpose of examining our Constitution and determining if our government and Constitution as presently constituted are still consistent with the principles of good government and if either or both of them should be reformed. Personally, I would expect an answer from such a convention to be that the Constitution is fine, but might need to be updated for the purpose of bringing the government organization back into alignment with the law that it is designed to support.


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6 responses to “Federalist Nos. 21 – 22”

  1. Reach Upward Avatar

    At least one candidate in the presidential race has said on national television that it doesn’t matter that government revenues would go down and the economy would suffer in the face of higher tax rates because the resulting system would meet his definition of fairness.

  2. David Avatar

    I take it his definition of fairness is that everyone is equally destitute.

  3. Obi wan liberali Avatar

    In my reading of the federalist papers, it was that there are diminishing marginal returns on taxes and duties on consumption because the price of those goods becomes prohibitive and therefore reduces demand.

    A moderate tax increase on the wealthy is likely going to bring in more revenue than their tax avoidance strategies can muster. The variables behind the “laffer rurve” have long been discredited and as I’ve pointed out in previous tax related posts, even under the current system, those with higher incomes pay a higher amount of taxes.

    For the record, I oppose any more tax cuts on anyone until we get our deficit under control. For every dollar of tax cut, $.60 may go to consumption and $.40 may go to investments, but 100% of the $1.00 lost revenue will be taken from the capital markets as the government has to borrow the money and compete with businesses looking for the least expensive capital possible.

    For those who want to cut taxes, I suggest you pass the budget cuts that will pay for it prior to, not after, the tax is cut. It’s the only prudent and wise thing to do.

  4. David Avatar

    I saw nothing about the price of goods becoming prohibitive in the Federalist papers that I was commenting on here – perhaps I will something about that in other federalist papers or if you have a specific paper in mind I would go take a look.

    I will say that I agree with you on the need for budget cuts – we need them whether we are considering tax cuts or tax increases because we can’t tax or grow our way out of our massive overspending.

  5. Reach Upward Avatar

    Obi Wan, how about opposing all spending increases until we get our deficit under control?

  6. […] Related Blogs: Pursuit of Liberty > Federalist Nos. 21 – 22 […]

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